Behavioral Health Payment Reform

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• What is Behavioral Health Payment Reform under CalAIM?

  CalAIM is a multi-year initiative by DHCS to improve the quality of life and health outcomes of Californians by implementing broad delivery system, program, and payment reform across the Medi-Cal program. In 2021, the following language was added to the Welfare and Institutions Code (WIC) outlining CalAIM and payment reform:

  WIC Language: Division 9, Part 3, Chapter 7, Article 5.51, 14184.00: CalAIM Act

  (b) The implementation of CalAIM, as set forth in this article and in the CalAIM Terms and Conditions, shall support all of the following goals:

      (1) Identify and manage the risk and needs of Medi-Cal beneficiaries through whole-person-care approaches and addressing social determinants of health.

      (2) Transition and transform the Medi-Cal program to a more consistent and seamless system by reducing complexity and increasing flexibility.

      (3) Improve quality outcomes, reduce health disparities, and drive delivery system transformation and innovation through value-based initiatives, modernization of systems, and payment reform.

  Under BHIN 23-017 Specialty Mental Health Services and Drug Medi-Cal Services Rates, DHCS will transition counties from a cost-based reimbursement methodology to a fee for service reimbursement payment structure to enable counties and providers to deliver value-based care and to simplify payments structures. These are the first steps toward value-based payment models that will incentivize outcomes and quality over volume and cost. 

• How are Medi-Cal specialty behavioral health services reimbursed today?

  As managed care plans, counties are responsible for administering covered Specialty Mental Health, Drug Medi-Cal, and Drug Medi-Cal Organized Delivery System services. Unlike other Medi-Cal managed care plans, counties do not receive per-member-per-month capitated payments but rather federal reimbursement for specialty behavioral health services is limited to the cost incurred by counties. Counties claim payment for each service on an interim fee-for-service payment basis and are later subject to a cost reconciliation process. 

• What are the challenges under the existing reimbursement process?

  Under the existing reimbursement model for Medi-Cal funded programs, ongoing challenges are as follows:

  • The cost-based reimbursement model is administratively burdensome for the State, counties, and providers (contractors).
  • The complexity of the cost settlement process creates significant audit risk.
  • Long delays in audits due to statutory requirements causes audits to fall years in arears creating substantial financial risks for counties that carries over multiple years.
  • Opportunities for value-based payments and system reinvestment are limited.
• Behavioral Health Payment Reform Implementation and Timelines

  On July 1, 2023, CalAIM Behavioral Health Payment Reform began shifting how county behavioral health plans claim federal reimbursement. As managed care plans, counties will continue to contract with specialty behavioral health providers and negotiate provider payments under those contracts.

  CalAIM implementation was originally scheduled to begin in January 2021, but was delayed due the impact of the COVID-19 public health emergency. As a result, implementation was delayed.  Timeline for implementation of the first reforms began in January 2022, and additional reforms will be phased in through 2027. See below for key activities related to Behavioral Health Payment Reform.

  Behavioral Health Payment Reform Timeline of Key Activities:

  Action	Go-live date:
  CalAIM Framework: Executive Summary and Summary of Changes	Feb 2021
  Department of Health Care Services Milestones Calendar	Feb 2023
  BHIN 23-017 Specialty Mental Health Services and Drug Medi-Cal Services Rates	Apr 2023
  BHS Rate Development and System Impact Analysis to Inform Implementation Plan	Mar – Jul 2023
  San Diego County Board of Supervisros: Authorizes Intergovernmental Transfer Agreement and Amendments to Medi-Cal Contracts for BH Payment Reform (5/13/23 MO #6, Recommendation #4)	May 2023
  Behavioral Health Payment Reform Began	Jul 2023
  The County of San Diego is implementing a phased approach to transition from a cost reimbursement system to a fee-for-service (FFS) payment structure for current and future contracts providing Medi-Cal eligible services beginning October 2023. The transition to a FFS payment structure is expected to be completed by July 2024.	July 2023 – Jul 2024

• What specific changes will occur under Behavioral Health Payment Reform?

  The three distinct changes that began July 1, 2023, include: 

  1. Reimbursement Structure: Counties will shift from Cost-Based Reimbursement to a Fee-For-Service payment structure to county behavioral health plans. 

  Goals:

  • To simplify the reimbursement process.
  • To reduce administrative burden for the State, counties, and providers.
  • To provide county behavioral health plan reimbursement rates sufficient to sustain adequate network capacity.

  Previous Process Cost-Based Reimbursement	Effective July 1, 2023 Fee-For-Service Reimbursement
  County behavioral health plans claim federal reimbursement on an interim basis for each service rendered.  Counties and their contracted providers submit annual cost reports subject to audit, reconciliation, and cost settlement.  County behavioral health plan reimbursement is limited to cost. Provider payments are negotiated with County behavioral health plans.	County behavioral health plans claim fee-for-service reimbursement at rates established in a behavioral health plan fee schedule.  County behavioral health plans negotiate payment terms and rates with subcontracted providers.  County behavioral health plan reimbursement for each service is final, with no additional settlement to cost for county behavioral health plans.

  2. Financing Mechanism: Transition to Intergovernmental Transfers (IGTs) to finance Medi-Cal County Behavioral Health Plan Payments.

  Goals:

  • Enables county behavioral health plans to continue providing the non-federal share of cost for Medi-Cal services without certified public expenditures and cost-based reimbursement.

  Previous Process Certified Public Expenditures (CPEs)	Effective July 1, 2023 Intergovernmental Transfers (IGTs)
  County behavioral health plans purchase specialty services and attest to expenditures of non-federal share under a Certified Public Expenditure (CPE) protocol.  CPE-based financing is based on actual costs incurred and requires cost reporting, audit, and settlement to finalize federal reimbursement to county behavioral health plans.	Reimbursement is claimed via the fee schedule with the county share transferred by the county to the State.  Sources of non-federal share available to county behavioral health plans and eligible for use as IGTs (including Realignment and MHSA funds) do not change.

  **Note the change in reimbursement structure does not impact providers**

  3. Shift in Provider Billing: Implement CPT Coding Transition

  Goals:

  • Improve reporting and support data-driven decision making by disaggregating data on specialty behavioral health services. 
  • Align with other healthcare delivery systems and comply with Centers for Medicare & Medicaid Services (CMS) requirements for all state Medicaid programs to adopt CPT codes where appropriate.

  Previous Process HCPCS Level II - All Services	Effective July 1, 2023 CPT/HCPCS Level I - Where applicable
  Health Care Common Procedure Coding System (HCPCS) Level II codes are highly flexible; a variety of activities may be captured by the same code, making detailed analysis of services rendered a challenge.  HCPCS Level II codes can be used by any provider (licensed or non-licensed).	Current Procedural Terminology (CPT) codes: more detailed and nationally standardized definitions for each code. Some HCPCS Level II codes will be retained, for those behavioral health providers and services not captured by CPT codes.

• How will cost reporting change under Behavioral Health Payment Reform?

  Per the BHIN 23-023 Elimination of Cost Reporting Requirements for Counties and Providers effective July 1, 2023, MHPs, DMC-ODS/DMC counties are no longer required to submit an annual Medi-Cal cost report. This policy change will eliminate the need for counties to collect and submit cost reports from subcontracted network providers for purposes of Medi-Cal reimbursement. 

  Counties may still need to collect cost information from subcontracted network providers for a variety of reasons, including, but not limited to:

  • MHPs and DMC-ODS/DMC counties are required to continue to collect cost reports from network providers in compliance with DHCS cost reporting policies for services rendered prior to the date Behavioral Health Payment Reform was implemented.
  • MHPs and DMC-ODS/DMC counties may reconcile payments to providers to actual cost for services rendered prior to the date Behavioral Health Payment Reform was implemented.
  • When cost reporting is required by state or federal law.

  DHCS does not recommend the use of reconciling providers to actual costs or the requirement of cost information in the negotiation of rates. MHPs and DMC-ODS/DMC counties may reconcile payments to a network provider based on actual costs and/or collect cost information from a network provider for services rendered after Behavioral Health Payment Reform is implemented if:

  • The financial arrangement advances the goals of CalAIM, and is mutually agreed to by the county and the network provider, or
  • The cost reporting is required by state or federal law.

  Except when required by state or federal law, a MHP or DMC-ODS/DMC County may not condition participation as a network provider on cost reconciliation and/or submitting cost information to the county. In the event that DHCS develops new financial reporting tools for counties under Behavioral Health Payment Reform, the department will provide further guidance to counties.

• Informational Links

  State Resources

  • DHCS CalAIM Behavioral Health Initiative
  • CalAIM Behavioral Health Payment Reform: Intergovernmental Transfer (IGT) FAQs
  • CalAIM Behavioral Health Payment Reform Fact Sheet
  • DHCS Specialty Mental Health Services and Drug Medi-Cal Services Rates (April 21, 2023)

  County Resources

  • County of San Diego CalAIM General Info Page
  • SDAIM Main Page
  • SDAIM Workplan (May 23, 2023)

  CalAIM for Behavioral Health Providers

  • Optum San Diego CalAIM for Behavioral Health Providers