State officials have said it's a system used in most other states that will allow the money to stretch further.
TRENTON -- In January, Gov. Chris Christie pledged more than $100 million in state and federal funds to boost New Jersey's meager reimbursement rates for addiction and mental health treatment providers who serve the poorest patients.
But a month into the new fiscal year with the infusion of $124 million in mostly federal funds, mental health and addiction treatment providers warn the state's new payment structure could actually eliminate services for thousands of patients.
The controversy stems from the state Department of Human Services' plans to switch to a new payment method in 2017. Instead of signing a contract with a mental health provider and paying a set fee every month, the state Medicaid program will pay for each therapy session, consultation with a psychiatrist, hospital visit and other services after they are provided. It's a system used in most other states and will allow the money to stretch farther, state officials have said.
The community agencies object because this new "fee-for-service" payment structure won't provide a cushion like the existing payment system does to pay the electric bill and the rent or fix a busted roof. If patients don't show up for a service -- which is not unusual given the erratic nature of their illnesses -- the state won't pay.
And the reimbursement rates are not uniformly higher, and for some services, the state is paying less or still not enough to cover the bills, said Debra L. Wentz, president and CEO of the New Jersey Association of Mental Health and Addiction Agencies a lobbying group.
"We are getting the message: we have to live within our budget, that is true. But if the goal was to increase the population you can serve, (these concerns) have to be addressed," Wentz said. "People keep going back to the drawing board to see how they would make it work. No one can serve thousands of people at a loss."
Wentz surveyed her members about the impact of the new payment system.
"They predicted 29 outpatient programs would close, (placing) 20,000 at risk of losing services," Wentz said. If people cannot be maintained outside the hospital with medication and counseling, "it will end up in a more costly system."
The anticipated payment change has already disrupted a 17-year arrangement and launched a legal battle last month involving two mental health providers that had overseen 40 people who live in nine group homes on the grounds of Greystone Park Psychiatric Hospital in Parsippany.
Comprehensive Behavioral Healthcare, an agency that manages the care for the group home residents, examined its books in light of the new pay schedule and decided it would run a $1 million deficit. To cope, it abruptly ended a contract with Community Hope, a subcontractor that provided direct-care staff at the homes, according to court records and attorneys for both companies.
The Morris County Freeholders objected to Comprehensive's decision to drop Community Hope without warning, and on July 28, voted to terminate Comprehensive's contract, court records show. Community Hope Executive Director Michael Armstrong said his organization is suing to make Comprehensive pay the $160,000 remaining on the contract.
State human services officials are not getting involved in the dispute, spokeswoman Nicole Brossoie said. "The residents remain in their homes. Our interest in the situation is limited to assuring their health and safety," she said.
Dying for help: Treatment options don't meet demand
Medicaid rates -- funded by an infusion of $108 million from the federal Medicaid program and $17 million from the state budget -- have risen for approximately 100 services, Brossoie said. The rates were adjusted higher in select circumstances after repeated meetings with Wentz and some of the lobbying group's members.
Once the agencies switch over to the new payment system, they will receive two months of "bridge" funding to ensure that there are no cash-flow problems "that might impede their service to clients," Brossoie said.
"It is a significant business model change for providers, but a necessary one and one that we've approached thoughtfully, collaboratively and generously," Brossoie said. "The state needs a system in which there's equity in what we pay for, a system in which our resources are being expended on the actual provision of services and one in which individuals have greater choice."
Addiction treatment providers, after decades of getting the smallest reimbursements in the nation, saw some of the most dramatic rates increases.
Under the rate changes that took effect July 1, weekly methadone treatments went from $13.55 to $91.15, according to the latest fee schedule. Short-term residential addiction treatment rates went from $147 a day to $201.60.
The state wasn't as generous with some outpatient mental health services. Medication management -- a critical service that enables many people to remain stable and avoid institutionalization -- pays $42 a visit, the same as it had before. Partial hospitalization care, a daily program offered at a hospital with no overnight stay, will pay less, going from $33.08 a session to $17.82.
State contracts were low to begin with, as community social service agencies have not received a cost-of-living increase since 2008, when they received 1 percent hike, Wentz noted.
Wentz wants the state to delay the phase-out of the existing contracts until 2018 so no agency has to eliminate services it can no longer afford. State officials have declined to do so.
By Monday, mental health providers must let Human Services officials know whether they want to accept the new payment system Jan. 1, or maintain the current contract payments through July 1, 2017.
Robert L. Parker, CEO for NewBridge Services, Inc. a housing provider for clients with mental illness since the 1970s, said he is delaying the switch to the new payment system until next summer.
"NewBridge is not convinced that the fee-for-service implementation plan will keep existing services in place -- much less expand services as many are hoping," according to an email Parker sent to the state last week.
"NewBridge is deeply mission-driven to provide desperately needed mental health services to those in need for as long as possible. Without focused, additional modifications to the implementation plan, we are not convinced will be able provide current levels of service," Parker wrote.
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio. Find NJ.com Politics on Facebook.