Post-apocalyptic Therapy Rate Reductions

In our silence waiting for the Tx HHSC to release their “after 84th Texas Legislative Session” therapy reimbursement rate proposals, set to be implemented on 9/1/2015, we assessed that a more stable co-strategy for all players in this game of GOP-centric legislature, therapy providers, and Medicaid patients was an “evolving collaboration” – a type of step-wise cooperation in time.

It seems that the new proposal was instead the display of a “tit-for-tat” strategy by the Tx HHSC to back up therapy providers and Medicaid patients against the proverbial extinction wall. By now most have perused the rate proposal and come up with their own take on the numbers. Merely observing this rate reduction would be myopic. The effects of the reduction are broader than could have been anticipated. Raw patterns gleaned from the rate proposal point to several paths:

  1. OPT/CORFs suffered the greatest relative reductions (per ave unit serviced equivalent) – ave. CPT rate cut 31.1%, median rate cut 28.99%, 22.48% weighted ave rate cut (weighted by utilization rank in Texas Medicaid of each CPT). Not to be out done,  HH suffered from the largest straight ave rate reduction percentage at around 55%. The gaps in reimbursement between HH and ind HH and between OPT/CORFs and ind office were essentially eliminated for most codes. This last result basically placated the prior legislature’s attempt to equalize all therapy delivery models but without the use of a law!
  2. Speech therapy and evaluations codes were reduced the most of any most utilized treatment-evaluation combination of the therapy disciplines (14.16%-28.93% reductions).
  3. The ave ratio of HH-to-OPT/CORF rates (harmonized for 2.5 timed units per untimed session) is 1.04 with a weighted ave ratio of 1.104, (i.e., the predominant mode to use is now HH). The median ratio of ind-to-HH or ind-to-OPT/CORF is now 1.00, (i.e., for almost all codes, without regards to relative utilization ranking, therapy reimbursement is now equivalent among therapy delivery models). This will single-handedly change the landscape of how therapy will be served, if it even survives in the state. Individual therapists have had their own deep cuts and their respective GPMs (gross profit margins) would have been substantially reduced, but much more so for HHs and OPT/CORFs, where overhead reduces their respective margins significantly. We estimate that for the average Medicaid servicing therapy business in Texas, GPMs will be reduced by 2.5%, (i.e., for every $ in revenue, an additional 2.5 cents will be lost). This is in addition to the already average range of only 3 cent to 5 cent GPM per $ made. Individual therapists, however, cannot glee here as they are more sensitive to changes in their GPM. Once a healthcare business entity’s GPM is reduced to under 2%, its staying power, in a rapidly needed transition, has suffered to the point of economic exhaustion.
  4. HHSC went for the jugular in order to satisfy their legislatively-mandated budget cut for the entire 2016-2017 biennial and be met in one rather than 2 years because policy changes alone have not given them confidence it could be done sooner.
  5. HHSC made it known that the new rates would be based on a percentage of the median of paid Texas commercial rates as tabulated by the TAMU-SPH study of 2014. This turned out to be less than accurate as the disproportionate cuts to speech codes were in direct contradiction to the study results which displayed that CPT 92507 was under those rates and PT and OT rates were not. The truth lies closer to a strategy where the reductions that were made were done predominantly with utilization rankings in mind, (i.e., codes with higher utilization rankings in Texas were cut the most relative to others, while those with low utilization while still cut in some circumstances, would have a smaller impact on the overall savings to the Medicaid outlay). This presents with a real potential for service reduction with those most used codes for Medicaid patients.
  6. Notwithstanding Tx HHSC’s recommendation to legislators during the session, that a draconian single-cut proposal would lead to access to (therapy) care issues, even while utilizing the flawed TAMU-SPH study, the published proposal cuts were enacted to be a large single-cut rate reduction. The proposal turned out to be a carve-out of the therapy fee schedule, but the averaged/median numbers point to a similar across-the-board large cut as mentioned in the HHSC proposal to the legislation.
  7. In their analysis of the impact of rate cuts to therapists on access to care to Medicaid patients, TAMU-SPH and the followup HHSC interpretation disregard relative profit margins and instead focus on absolute net revenues with regard to type of delivery model, utilizing harmonization across regions. These assumptions lead to a faulty financial analysis of the therapy business landscape.
  8. Managed Medicaid discount rates to therapists and businesses were not fully utilized in the rate proposal since those discounts further reduce “real” payment portfolios for therapy providers. While TAMU-SPH claims to have harmonized the data across all payment types, stratification across payer types was not studied. In addition, MCO discount structures differ wildly among the HHSC regions. Region 11 (RGV) has the most variability and highest median discount rates among its therapy-provider networks, but suffers from harsher economic conditions that most. The same may be said, in smaller part, for the larger populated urban and ultra-rural areas of Texas.
  9. The post-proposal-release hearing held in Austin on 7/20/2015 produced effective semi-anecdotal testimony and some analysis and criticisms of the TAMU-SPH study and HHSC’s interpretation of it, but the soundbites given to those testifying minimize their effectiveness. Compare this to the year-long time given to TAMU-SPH to produce their agenda-based findings, the 6 months of legislative argumentation, and the two years since the last onslaught on therapy was made during the 83rd Legislative Session by some politicians who had regrouped to “take care of therapy this time.”

On this last note with respect to the rate hearing, we heard no testimony showing that those rate reductions would cascade outside of the Medicaid sphere and onto all payor models because therapists would fly and businesses would close. It would be a much larger effect on general Texas healthcare, superseding Texas therapy Medicaid by producing shortages of all types of ancillary therapy services in all types of payor models in Texas. Fewer ancillary therapy services in the state equate to a vital part of the healthcare spectrum missing and hence of the continuum of health care in Texas. That is the larger cause-and-effect of these reimbursement cuts. This is the apocalypse to be seen and prepared for and not just prognosticated.

So, while, in the past, we have crafted the give-and-take of the rate proposal situation with a game structure, games are only an adequate and eloquent way of displaying conflict in what are called fair semi-martingale processes – processes in which some memory is useful, some predictability exists and is computable to a degree, and each side has a chance to stabilize its status. Casinos are not fair games, as are some armed conflicts and many techno-socio-economic experiments.

Here we have the experiment in which one player’s actions are almost completely dictated by one group (the majority party of a state’s legislature and its hard-core voting minority) and a seeming opposition (although they should be serviced by those adversaries) whose actions are self-fulfilling and preserving with a wavering majority electorate and hence obfuscating legislative minority. The “evolve to collaborate” strategy only works when all sides realize long-term survival and optimization in the midst of confusion, noise, and misunderstanding in the interim. Five years of continual rate reductions do not display this propensity to, from time to time, stick your head out of the quagmire of political survival, and see a solution within your grasp that grabs the imagination of both sides – not being able to see the universe for the small rocks that simply swirl within it (not-being-able-to-see-the-forest-for-the-trees is simply too small scaled of a metaphor-phrase to use here).

We have thus heard the “other shoe drop” from one side. What will be the response from the other players? If the past is a prelude to the future, and as has been noted, Tx HHSC is only willing to listen to higher orders, the game-theoretic strategy for the opposition will be jurisdictive (precedents have been set, decrees are in place – Frew and Alberto in Texas and more recently, Utah’s Armstrong vs Exceptional Child Center this past March in SCOTUS depicting “equal access to care” vs “access to care”, and new data are coming in) and a collaboration with the federal government may develop (no present love lost between the two levels of political government).

This does not leave much to the imagination. Homing in again on the recent SCOTUS decision this past March 31, that while not allowing providers to directly sue states for low Medicaid reimbursement rates (albeit with a provider-friendly amicus brief from CMS and 5-4 split) left entirely open, the possibility of an “inequality to access to care” injunction against states’ Medicaid reimbursement policies that may dwindle down their respective Medicaid provider networks and of CMS “staking claim over a state” on issues of “equal access to care” inadequacy and actuarially unreasonable Medicaid reimbursement rates that place the state in noncompliance with the equal access to care clauses of the Medicaid amendments to the Social Security Act in 1965.

The most pressing issue will be having Tx HHSC come to grips with Medicaid provider adequacy as an “equal access to care” issue for Medicaid patients. Equal access  to care simply means that Medicaid recipients have equal access to medically necessary services as does the general population, regardless of medical service, including therapy services. Medical necessity will be defined equally for the general and Medicaid populations. If the Medicaid therapy provider network decreases to a point of inadequate access to therapy in Texas, it automatically creates an inequality to therapy care for Medicaid patients. The “equal access to care” bar is lower than the “access to care” one. Essentially, SCOTUS left it to the federal HHS to remedy a state’s possible inadequate equal access to care status in their respective Medicaid programs. Denying federal funds portion of Medicaid dollars to a state is therefore the teeth of HHS’s approach to the states and this was not blocked by SCOTUS, as it did in the case of the ACA’s expanded Medicaid mandate. Equal access to care then becomes the linchpin  for such demonstration of states’ inadequate Medicaid programs, with the cause and effect being proper enticement of providers to join the Medicaid network via adequate reimbursement.

One of our previous points was that, given conditions of a low Medicaid fee schedule for therapists in Texas, all payor Medicaid and Medicare discount provider and commercial contracts will decrease reimbursements because they are all based on Medicare and Medicaid fee schedules. This may then lead to an access to therapy care issue for all Texans. The equal access to care condition for Medicaid recipients will then be a precursor to a much more severe problem in Texas.