Colorado providers call an array of funding woes a ‘perfect storm’

Mental Health Weekly | October 21, 2024

Colorado’s community mental health providers say they are experiencing many of the downsides that can come with a period of dizzying change. Facing declining Medicaid rolls, a shifting payment model and no prospects for new state funding to support restructuring, the state’s provider community is calling the current environment a “perfect storm” of crisis that could engulf patient care.

Revenue losses, brought on partly by the effects of the Medicaid unwinding that began nationally after last year’s lifting of the COVID-19 public health emergency, have led Colorado’s community mental health providers to pare back some services and reduce staffing. Other payment changes that took effect in July are placing further strain on providers’ budgets. The provider community expects more issues next year when the state plans to end direct contracting with community mental health centers for treatment services to low-income residents.

All of these changes have left the state’s community mental health providers doubting whether they can adequately respond to the enhanced attention mental health needs have received as a driver of community well-being.

“At a time when behavioral health is so desperately needed, to be reducing capacity now feels like not being able to meet the needs of the community to the extent we hope to,” Kiara Kuenzler, Psy.D., president and CEO of the Jefferson Center for Mental Health, told MHW. The Jefferson Center, which serves residents of three counties outside of Denver, announced 25 staff layoffs earlier this month.

The reality of having no easy answers to these issues at the state level came clear this month at a hearing held by the state General Assembly’s Joint Budget Committee. “At the hearing, a committee member said, ‘This is a crisis, and we don’t have any money,’” Carl Clark, M.D., president and CEO of community mental health organization WellPower, told MHW.

Colorado legislators in the coming months will be grappling with a projected $900 million deficit in the state budget, a shortfall brought on in part by several tax cuts recently enacted at the state level.

Unwinding hits hard

Mental health providers in all states knew to expect that some of their patients would be losing Medicaid coverage once the lifting of the COVID-19 public health emergency allowed states to resume assessing client eligibility (see “States prepare to avert problems as Medicaid rolls stand to be pared down,” MHW, April 24, 2023; https://doi.org/10.1002/mhw.33611). But Colorado arguably has experienced the greatest impact from the Medicaid unwinding, to a surprising degree.

According to the latest tracking data from the Kaiser Family Foundation, Colorado is one of only five states with Medicaid/Children’s Health Insurance Program enrollment levels currently below what they were before the pandemic. Leaders in Colorado’s mental health provider community attribute this largely to an onerous application process, under which many individuals who should qualify for Medicaid are slipping through the cracks.

Clark said some clients have hesitated to complete a lengthy reapplication process because the applications include intrusive questions, such as whether any undocumented individuals are living in the applicant’s household. Kuenzler said there have been eligibility denials based on a misread of the applicant’s history; she knew of one applicant’s lifetime history of seven part-time jobs being interpreted by the state inaccurately as holding all of these jobs at the same time, thus making the person ineligible for Medicaid.

“Back in December I started hearing stories from our treatment team, about patients saying they were having to make choices between paying rent and paying for health care,” Kuenzler said. “One of our clients delayed having a mastectomy.”

The reductions in Medicaid covered individuals mean that community mental health providers are seeing an increasing share of uncompensated care. “We won’t turn people away,” Kuenzler said.

She said the Jefferson Center has seen an increase of 50% in the number of individuals with no insurance coverage that it serves, numbering around 6,000 clients in all. Clark said the effects of the unwinding have resulted in a loss of around $6 million in revenue at WellPower (formerly the Mental Health Center of Denver).

The 25 staff layoffs that took effect at the Jefferson Center on Oct. 2 followed a period of around six months in which the organization had reduced its full-time staff by about 50 by leaving vacant positions unfilled. Clark reported a similar response at WellPower, where the cutting of around 100 positions without layoffs has reduced the organization’s workforce by around 10% this year.

Programs have also been affected. WellPower decided to end a virtual “walk-in clinic” that was available to any individual during weekday business hours. Once its original federal grant funding had expired, the program was not operating at enough volume to justify its continuation, Clark said.

In discussions among the state’s community mental health administrators, a consistent theme has centered on the inability to continue to provide innovative services under the expanded vision of what it means to be a safety-net provider, said Edie Sonn, senior director of external affairs at the Colorado Behavioral Healthcare Council.

“Providers are having to pullback to offering core safety-net services,” Sonn told MHW, with services that address the important social determinants of health (employment, education, etc.) taking a back seat.

Clark said these non-core services, such as in-home services for pregnant women with mental health needs, have been important to keeping individuals in the community and out of hospitals. “We’ve said this is going to cost the state more money in the long run,” he said.

Payment restructuring
Other changes that took effect in July are placing an additional burden on the community mental health sector. The state is transitioning from a capitated payment system under Medicaid to a prospective payment system being implemented under fee-for-service reimbursement. Community mental health providers have supported this change in principle, Sonn said, but it has come with additional requirements for safety-net providers and managed care organizations that have contributed to payment delays.

Kuenzler said the new payment model is based on historical costs of care that do not reflect the reality of today’s costs. Providers do not expect to see a reconciliation of payment until 2026, she said.

“The administrative burden on providers is greater than it’s ever been before,” Kuenzler said. She added, “This is the most transformational time in behavioral health, and potentially the most disruptive.”

Clark said that while a capitated payment system allowed providers to offer a wider range of beneficial services to maintain patient wellbeing, the new payment structure is taking some of these services away.

In addition, the state intends next summer to end its longstanding practice of contracting directly with mental health centers for the provision of multilevel services to low income and uninsured individuals. Placing these services under managed care administration will remove around 15% of funding from patient care, Clark estimated.

Sonn summarized the current landscape by saying, “Squeezes are coming from all over.”

Members of the mental health provider community believe the challenges they’re facing are beginning to gain the attention of state policymakers. However, in the face of a huge state budget deficit, options for remedial action may be limited. Kuenzler said one potential area for optimism would involve Colorado successfully moving into a Certified Community Behavioral Health Clinic model of service that would open up expanded federal funding for mental health care in the state.

Mental Health Weekly. (2024). About Mental Health Weekly. John Wiley & Sons, Inc. Retrieved from http://ordering.onlinelibrary.wiley.com/subs.asp?ref=1556-7583