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Colorado lawmakers aim to protect mental health therapists from billing headaches, clawbacks after a rough year

Two bills with bipartisan support would help therapists in private practice who are fed up with the convoluted Medicaid payment system. They follow investigative reporting by The Sun and Colorado News Collaborative.

Carla D’Agostino-Vigil, clinical director at Ignite Counseling Colorado, goes through her thoughts while speaking during an employee meeting Feb. 23, 2022, in Westminister. (Hugh Carey, The Colorado Sun)
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It’s been a rough year for Colorado mental health therapists willing to care for low-income patients on Medicaid. 

Some were ordered last fall to pay back thousands of dollars to a middle-man contractor the state hires to handle billing for therapy they’d already provided, so-called “clawbacks” that threatened to close small clinics. Others quit taking Medicaid patients because they couldn’t keep up with the burdsomesome paperwork requirements or waited more than a year to even get approval to treat them. 

Now, state lawmakers are looking for a reckoning.  

Two pieces of legislation sailing through the state legislature with bipartisan support take aim at the opaque and convoluted process of reimbursing independent clinics that take on Medicaid clients. Both bills are expected to pass as the legislature heads into its final three weeks.

One bill attempts to crack open the payment system, requiring an audit of the reimbursement rates paid to independent mental health and substance abuse providers as well as community mental health centers. This follows investigative reporting by the Colorado News Collaborative showing that reimbursement rates are far lower for providers in private practice than for Colorado’s 17 community mental health clinics. 

The Mental Health Center of Denver, for example, receives $592 in Medicaid reimbursement for an hour of counseling, compared to $91 for an independent clinician. The Denver center receives $818 for an hour of crisis intervention compared to $47.50 for an hour paid to the private provider. One reason for the stark difference is that community mental health centers provide other services, including help finding housing and 24-hour crisis care.

House Bill 1268 would require that the Colorado Department of Health Care Policy and Financing, which includes the Medicaid division, use the audit to “create equitable payment models.” It says the department must present an action plan by Nov. 15. 

The prime sponsors of the measure are Rep. Richard Holtorf and Sen. Cleave Simpson, both Republicans, and Rep. Judy Amabile and Sen. Joann Ginal, both Democrats. It’s already passed the House and last week won unanimous approval from the Senate health and human services committee. 

“The information from this audit and the General Assembly’s continued eye on this issue is what will make the difference,” said Lauren Snyder, a lobbyist with Mental Health Colorado, speaking up for independent counselors. She called the system fraught with inequity and said a lack of transparency “creates a distrust” between independent therapists and large community mental health centers.

Jefferson Center for Mental Health served about 28,000 people last year at its various offices, including in Wheat Ridge. (Kathryn Scott, Special to The Colorado Sun)

The mistrust stems in part from the way the system is set up. 

Colorado is divided into seven regions, each run by the agencies that contract with the state Medicaid division to handle billing and reimbursement for behavioral health providers. Independent mental health and substance abuse providers who want to take Medicaid patients must enroll first at the state Medicaid division and then with one of the regional contractors, called Regional Accountable Entities. Providers submit all claims to the regional entities, which then dispense payment. 

The state Medicaid program contracts with the regional agencies and gives them a lump sum to spend. The contracts mandate that 85% of the funding is spent on patient care, while the other 15% can go toward administrative costs and services such as data-tracking for providers. 

The regional entities decide which mental health providers to allow into the network and can reject providers based on complaints of poor service or if the region already has enough of that type of provider. The regional agencies also set reimbursement rates, and can base them on supply and demand. 

The system — in some regions more than others — is rife with administrative burdens and delays in payment, according to providers. 

Last fall, frustration among independent therapists and psychologists hit a breaking point when providers in eight Front Range counties received emails from Colorado Community Health Alliance — the regional entity that processes their Medicaid claims — warning they had 60 days to pay back money for services they had already provided or the agency could withhold future payments. Some letters sought up to $18,000. 

After stories in The Colorado Sun and on 9News, the regional contractor backed off. The debacle was blamed on a software error. 

A bill with broad support at the state Capitol would protect therapists in private practice from such “recoupment” demands. Senate Bill 156 says the regional entities could no longer ask therapists to return money they’d already been paid for counseling that already occurred, particularly when the regional entity was the one that made the paperwork error. 

Rep. Amabile, also one of the prime sponsors on this bill, said she was appalled to hear about the recoupment efforts late last year. And even though the clawback was called off after media scrutiny, she said, “It did open all of our eyes that they still can.” 

We have a crisis happening in Colorado and people aren’t able to access care. The treatment of our independent providers is making the situation worse.

Rep. Judy Amabile

“I have a constituent who runs one of these small practices and he’s hopping mad all the time,” she said. “And he’s not wrong. We have a crisis happening in Colorado and people aren’t able to access care. The treatment of our independent providers is making the situation worse.” 

The bill, co-sponsored by fellow Democrats Rep. Mary Young and Sens. Chris Kolker and Stephen Fenberg, would also end the requirement that therapists and counselors get prior authorization before providing outpatient psychotherapy services, a process the providers say can delay care for months. 

The legislation has already passed the Senate and is awaiting a final vote in the House. The state Medicaid division supports the measure, though the state’s contractors — the regional entities that handle the billing — have stayed quiet during recent Capitol hearings. 

Meanwhile, as lawmakers have worked to protect the small business owners from getting hurt in the reimbursement process, independent therapists have reported to The Sun that they are still getting hassled about the recoupments. 

Steffanie Stecker, who owns Mountain Vista Psychology in Englewood, received notice from her regional entity this month saying that she still had not taken care of the recoupment. But the office dealt with the matter back in December, after the regional entity demanded that the clinic either resubmit claims data or return $8,000. 

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Four months later, the regional contractor said it still hadn’t received the data. Stecker’s practice wasn’t the only one that received the notice, according to COMBINE, a coalition of independent providers. 

“They are saying we are out of compliance,” said Tara McConnell, office manager for Mountain Vista. “For all of us to supposedly not turn in the information when we knew they were going to come after us?”

McConnell resubmitted the information last week, and the regional entity backed off. But the experience was just the latest billing headache, Stecker said. 

Mountain Vista, which provides therapy to children in foster care and other children with trauma, started taking Medicaid patients four years ago because there were no other Medicaid providers who offered a specialty therapy called neurofeedback. Now, about 60% of their patients are Medicaid clients.

“It’s pretty mind-blowing,” Stecker said, thankful that McConnell, her sister, handles the office’s billing. “I don’t know how someone in solo practice can engage in the fight and still see patients.” 


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