NC Medicaid Behavioral Health Services Rate Increases

The North Carolina General Assembly appropriated $220 million in recurring funds in the Current Operations Appropriations Act of 2023 (SL 2023-134) to increase Medicaid reimbursement rates for providers of mental health, substance use disorder (SUD) and intellectual/developmental disability (I/DD)-related services. The Divisions of Health Benefits (DHB) and Mental Health, Developmental Disabilities and Substance Use Services (DMH/DD/SUS) analyzed which services were priorities for the increases and what forms the increases might take, and calculated them at the service level to fully allocate the available funds. The rate increases will be effective Jan. 1, 2024.

 Analysis and Allocation

 To move North Carolina toward an optimally functioning public behavioral and I/DD healthcare system, DHB and DMH/DD/SUS used the following priorities to guide decisions related to distribution of the new funding across services:

• Support more behavioral health providers working in the public behavioral health system.
• Support access to inpatient psychiatric care in community hospitals.
• Ensure adequate alternatives to emergency departments for behavioral health crises.
• Ensure upstream services are incentivized to promote early intervention.
• Support living wages for direct support professionals, including peer support professionals.
• Support Transitions to Community Living (TCL) to promote community-based and inclusive care for individuals with serious mental illness (SMI).
• Invest in evidence-based practices.
• Operationalize rate increases as rate floors for managed care programs wherever possible:
  • To support uniformity and payment parity across the state
  • To support lower paid providers given variability in managed care contracts
  • To align with the approach used for many medical services in the Standard Plans
• Consider differences in timing of latest fee schedule updates and other initiatives where applicable
• Support equitable increases for Innovations waiver-like services, including 1915(i) and Traumatic Brain Injury (TBI) waiver services

Applying these priorities to the full current array of Medicaid behavioral health and I/DD services sorted the services into lists of “those receiving increases” and “those not receiving increases.” Those lists are as follows:

 Services Receiving Increases:

• Inpatient behavioral health services
• Behavioral health residential (levels I-IV)
• Outpatient behavioral health, including psychotherapy, crisis psychotherapy, family/group therapy, diagnostic evaluations, developmental/psychological testing, and various evaluation and management E&M office visits/consultations performed by psychiatrist or psychiatric nurse practitioner
• Diagnostic assessment
• Research Based Intensive Behavioral Health Treatment (RBI-BHT)
• Crisis Services, including Mobile Crisis Management and Facility-Based Crisis
• Community Support Team (CST)
• Assertive Community Treatment (ACT)
• Multi-Systemic Therapy (MST)
• Intensive In-Home Services (IIHS)
• Partial hospitalization
• Child and adolescent day treatment
• Psychosocial Rehabilitation (Psych Rehab)
• Peer Support
• 1915(b)(3) and 1915(i) services
• TBI 1915(c) waiver services
• In lieu of services (ILOSs)

The two tables near the end of this bulletin summarize each of the services receiving increases (excluding CPT codes in Clinical Coverage Policy 8C, which will be updated in the Medicaid Fee Schedule) by procedure code, as applicable, along with key assumptions considered as part of this analysis. Links are provided to both resource tables.

These listed services are offered to Medicaid members enrolled in NC Medicaid Direct and receiving behavioral health services through the Local Management Entity/Managed Care Organizations (LME/MCOs) and future Tailored Plans. A subset of these services are also offered under the Standard Plan Prepaid Health Plan (PHP) programs; included codes are based on historical State Fiscal Year (SFY) 2022 utilization. Additional modifier combinations may exist beyond what is presented in this bulletin’s tables. In those instances, the LME/MCOs and PHPs will need to work with DHB to determine whether the service is eligible for the reimbursement increases presented in these summaries. NC Medicaid will update Plans and providers through addenda to this bulletin, as needed, regarding any additional codes that are determined to be eligible to receive increases.

Services Not Receiving Increases as Part of this Initiative:

Many of these services not receiving increases have recently received material rate increases or will be subject to a reimbursement review through other processes.

• Intermediate Care Facilities for Individuals with Intellectual Disabilities (ICF/IID)
• SUD-specific services (withdrawal management, enhanced, and residential
• Emergency room behavioral health services
• Outpatient Evaluation and Management (E&M) visits and consultations performed by a provider who is not a psychiatrist or psychiatric nurse practitioner
• Virtual communication E&M services
• Innovations 1915(c) waiver services
• 1915(b)(3) and 1915(i) services categorized as a “good” (e.g., community transition one-time payments)
• TBI 1915(c) waiver services categorized as a “good” (e.g., home or vehicle modifications, assistive technology)
• Psychiatric Residential Treatment Facilities (PRTFs)

Rate Floors

Rate floors are the Department-established minimum rate at which PHPs and LME/MCOs are required contractually to reimburse Medicaid providers (“no less than 100 percent of the applicable rate”), unless the PHPs and LME/MCOs and the provider mutually agree to an alternative reimbursement agreement.  

For purposes of capitation rate setting for the PHPs and LME/MCOs, provider reimbursement rates with an implied unit cost below the rate floor in SFY 2022 will be repriced up to the applicable rate floor. Capitation rates will also account for reimbursement rates that are above the rate floor. Capitation rates were developed with the assumption that plans would not reduce any provider reimbursement rates as part of this initiative.

Description of Rate Increases

The priorities that guided DHB and DMH/DD/SUS decisions regarding distribution of the funding across services receiving increases through this initiative, along with general variation in the reimbursement structure of the impacted services, resulted in different methodologies by service for the planned reimbursement increases. These methodologies, including the services to which they apply, are addressed in the explanations below.

The services receiving rate increases fall into five categories that are defined by the type of increase:

1. Rate floors based on Medicare reimbursement
2. Rate floors based on inflationary increases to the State fee schedule
3. Rates receiving a uniform dollar increase to negotiated rates
4. Rates receiving a uniform percentage increase to negotiated rates
5. Maintained rate increases for which prior specific recurring funding was eliminated by the General Assembly

 Each of these categories is described below.

Rate Floors Based on Medicare Reimbursement

 For services that have a corresponding Medicare-covered counterpart in the published Medicare fee schedules, DHB will update the State fee schedule and implement contractual rate floors (i.e., minimum rate) with Standard Plans and LME/MCOs based on those Medicare-based reimbursement levels.  

For applicable outpatient behavioral health services, DHB updated the Medicaid fee schedules based on a percentage of the calendar year (CY) 2023 Medicare Physician Fee Schedule (PFS)1. As priority areas for the State, rates for psychiatric diagnostic evaluation and developmental/psychological testing services were developed at 120% of the Medicare PFS level, while the remaining applicable services were updated to 100% of the Medicare PFS. The LME/MCOs and PHPs will be required to reimburse providers at or above the minimum rate established in the updated State Plan Medicaid fee schedule.

Applicable Services – 100% of Medicare PFS:

• Interactive Complexity Add-on – 90785
• Psychotherapy – 90832-90838
• Psychotherapy for Crisis – 90839-90840
• Brief Interventions (Tobacco Cessation and SBIRT) – 99406-99409
• Family/Group Therapy – 90846-90853
• Electroconvulsive Therapy – 90870
• Therapeutic, Prophylactic or Diagnostic Injection – 96372
• Evaluation &Management (E&M) visits and consultations (psychiatrists and psychiatric nurse practitioners only) – 99201-99255, 99304-99337, 99341-99350

Applicable Services – 120% of Medicare PFS:

• Diagnostic Evaluation – 90791-90792
• Developmental/Psychological Testing and Evaluation – 96110-96146

For inpatient behavioral health services, the rate floor will be established based on Inpatient Psychiatric Facility (IPF) Prospective Payment System (PPS)2. In particular, LME/MCOs and PHPs will be required to pay at or above the Federal Per Diem Base Rate published in Addendum A of the IPF PPS. The federal fiscal year (FFY) 2024 IPF PPS Federal Per Diem Base Rate, effective October 2023, is $895.63. The LME/MCOs and Standard Plan PHPs will be required to reimburse providers at or above this minimum per diem beginning Jan. 1, 2024. This rate floor is applicable to all Inpatient behavioral health services, including Institutions of Mental Disease (IMDs). Provider rates already higher than the rate floor are not required to be changed.

Due to the volume of codes, affected provider combinations, and the size of the number of affected fee schedules, providers should refer to the applicable fee schedules at the NC Medicaid Fee Schedule and Covered Code Portal for evaluation and management code updates, now aligning with Medicare 2023 rates. Note that some of these schedules may still be pending updates that will be made available prior to the Jan. 1, 2024 effective date for rate floor rates based on Medicare reimbursement.

Rate Floors Based on Inflationary Increases

The second major subset of services impacted by the behavioral health reimbursement changes are those that do not have Medicare-covered service counterparts but are included in DHB State Plan Medicaid fee schedules. State Plan reimbursement levels for this group of services are documented on the Enhanced Mental Health Services and RBI-BHT State Plan Medicaid fee schedules. Updated State Plan rates were developed based on estimated inflationary impacts since the last fee schedule update. The LME/MCOs and PHPs will be required to reimburse providers at or above the minimum established in the updated State Plan Medicaid fee schedules. Though many of these services are Medicaid Direct/Tailored Plan-only services, contract requirements will apply to the PHPs for services that may be covered through EPSDT.

Annual inflationary trend factors based on the Medicare Economic Index (MEI)3 for the period between SFY 2010 and SFY 2024 were used to estimate needed inflationary increases for rates. These annual trend factors were used to develop aggregate adjustment factors for each service code based on a trending period from the initial effective date of the service rate to SFY 2024. These aggregate factors were then applied to the State Plan Medicaid fee schedules to establish updated rates.

The effective date of each service rate is different as the recent reimbursement updates varies across the services. Some services have received reimbursement changes recently, while others were last established in 2009. Several of these services were impacted by the home- and community-based services (HCBS) direct care worker (DCW) wage rate increases that were effective in March 2022. Given the HCBS DCW increases effective in March 2022 did not cover the full extent of inflationary trend suggested by the MEI data, the analysis relied on the rates and corresponding effective dates preceding the HCBS DCW increases to develop the rate floors. This approach ensured providers impacted by the HCBS DCW rate increases were not at a disadvantage due to the incremental increases that went into effect in March of 2022.

The resulting rate floors were then evaluated for reasonability and alignment with priority areas. Some rate floors were further increased based on clinical input from Department experts, as well as feedback from stakeholders. As a result of this review, additional adjustments were made for crisis services, including mobile crisis and facility-based crisis, to support a higher rate floor that reflects a 10% increase from the current Medicaid fee schedule which was updated in 2021. To further support the cost needs of facility-based crisis for adults, the clinical team reviewed the clinical coverage policy (8A) and determined available funding be used to increase the maximum cap on units per day from sixteen (16) to twenty-four (24), as this is a 24/7 service. The Department will adjust the clinical coverage policy by Jan. 1, 2024, to reflect this change. Additionally, DHB chose to further increase the rate for facility-based crisis for children, which can already bill 24 units per day, to align the rate level with emerging costs. Peer Support and ACT services were also adjusted to support higher increases as priority areas for the Department based on stakeholder feedback, utilization of evidence-based practices to support community integration through Transitions to Community Living (TCL), and to help ensure living wages for all types of direct care workers. Please see Table 1 for a summary of the inflationary impacts and updated provider rates that will be published in the State Plan Medicaid fee schedule.  

For services that are heavily impacted by alternative payment arrangements, such as case rates for MST, the Department performed the rate floor analysis on the subset of services reimbursed consistent with the unit definition published in the State Plan Medicaid fee schedule. The impact observed in this subset of services was than applied more broadly to the alternative payment arrangements under the assumption that the establishment of a rate floor for the ‘standard’ unit definition will also positively impact the reimbursement levels for the alternative payment arrangements.

Applicable Services:

• BH-LTR – H0019, S5145, H2020
• Diagnostic Assessment – T1023
• RBI-BHT – 97151-97157
• Mobile Crisis Management – H2011
• Facility-Based Crisis – S9484
• CST – H2015 HT
• ACT – H0040
• MST – H2033
• IIHS – H2022
• Partial Hospitalization – H0035
• Child and Adolescent Day Treatment – H2012
• Psychosocial Rehabilitation – H2017
• Peer Support – H0038

Rates Receiving a Uniform Dollar Increase

North Carolina House Bill 259 also included separate funding for reimbursement increases for Innovations 1915(c) waiver services to support increases for DCW wages. A separate analysis was performed for Innovations services to determine a uniform dollar increase of $1.13 per fifteen-minute unit equivalent for eligible services. For more information on the development of these rate increases, please see the pending  “North Carolina Innovations Waiver Rate Increase” Medicaid bulletin that will be released soon. The latest updates can be found at the NC Medicaid bulletin webpage.

In order to maintain equity in reimbursement across providers for the same or similar services, the behavioral health reimbursement funding will support similar uniform dollar increases for TBI 1915(c) waiver and 1915(i) State Plan services, as well as the corresponding 1915(b)(3) services during the transition period from 1915(b)(3) to 1915(i). Please see Appendix B for the uniform dollar increases for eligible TBI waiver and 1915(i) services. Contract amendments are in development that will be released requiring PIHPS to increase reimbursement levels by the summarized uniform dollar increases relative to February 2020 pre-COVID reimbursement levels plus the HCBS DCW rate increases effective March 2022. Discretionary rate increases made by the PIHPs since pre-COVID levels (in addition to the March 2022 increases) may be considered in the fulfillment of this requirement. These services are not applicable to the Standard Plan program.

Applicable Services:

• 1915(i) Respite – H0045 U4, S5151 U4
• 1915(i) Supported Employment – H2023 U4, H2026 U4
• 1915(i) Community Living and Supports – T2012 U4, T2013 U4
• 1915(i) Individual and Transitional Support – T1019 U44
• TBI Community Networking – H2015
• TBI Residential Supports – H2016, T2014, T2020, H2016
• TBI Support Employment – H2025
• TBI Adult Day Health – S5102
• TBI Personal Care – S5125
• TBI Respite – S5150
• TBI Life Skills Training – T2013
• TBI Day Supports – T2021
• TBI Supported Living – T2033

Uniform Percentage Increases

The LME/MCOs and PHPs also offer a variety of behavioral health ILOS that provide cost-effective alternatives to State Plan services. DHB will also support provider rate increases for the behavioral health ILOS array. Due to the optional nature of ILOSs and variation in offerings across PIHPs, rate floors or uniform dollar increases are not a viable option for these services. Alternatively, DHB will support a 10% uniform increase to current behavioral health ILOS reimbursement levels, excluding ICF-IID ILOS which is described in the following section.

Applicable Services – 10% uniform increase:

• Behavioral health ILOSs (excluding ICF ILOS)

Prior Rate Increases That Will Be Sustained

Medicaid Direct behavioral health capitation rates for the LME/MCOs, effective Dec. 1, 2022, included funding to support a 31.6% rate increase for ICF ILOSs and 1915(i) Individual and Transitional Support. As part of North Carolina House Bill 259, the General Assembly defunded this Group Homes Stabilization and Transition budget item. Consistent with legislation, DHB intends to use the behavioral health reimbursement initiative as a source for sustaining the funding for these provider rate increases.

 Applicable Services:

• 1915(i) Individual and Transitional Support – T1019 U4
• ICF ILOS, including Community Living and Facility Supports (CLFS) and Long-Term Community Supports (LTCS) – T2016 U5 U1-U5

Rate Increase Amounts

Table 1: Inflation-Based State Plan Fee Schedule Updates

This table summarizes the inflationary analysis used to develop the updated State Plan Medicaid fee schedules that will serve as a minimum payment level (rate floor) for PIHPs and Standard Plan PHPs. The prior state plan fee schedule rates are shown for comparison purposes. Note that the LME/MCOs and Standard Plans may have contracted rates with providers that differ from the fee schedules below.

⁵Current fee schedules and their effective dates reflect those preceding the HCBS DCW wage rate increases effective March 1, 2022. The DCW rate increases were excluded for the purposes of the analysis to ensure the inflationary increases were equitable across services.

⁶As described earlier in this document, crisis service, peer support, and ACT impacts were increased beyond the implied inflationary increase level based on clinical review and stakeholder feedback.

Table 2: Uniform Dollar Increases

This table summarizes the uniform dollar increases for eligible TBI 1915(c) waiver and 1915(i) State Plan services, as well as legacy 1915(b)(3) services during the transition period, that are required to be added to a baseline composed of February 2020 pre-COVID-19 level plus the HCBS DCW increase that was effective March 2022.

Retroactive Dates of Service Claims That Require Reprocessing:

Rate increases will be effective Jan. 1, 2024. If applicable, for each fee schedule increase listed above, NC Medicaid  will systematically reprocess all Medicaid Direct claims with dates of service occurring between and including the retroactive effective date and the actual NCTracks rate implementation date for all affected programs. NC Medicaid will provide additional communication to advise affected providers once more detail is known regarding reprocessing schedules.  
For rate floor programs , PHPs will be required by contract to pay no less than the rates in the updated fee   schedule published by NC Medicaid for the Medicaid Direct program. To reflect the changes noted in this bulletin, PHPs are required to adjust rates for services covered in their plans and reprocess affected claims, if the service is currently reimbursed lower than the updated rate floors.  

For rate floor programs, LME/MCOS will be required by contract to pay no less than the rates in the updated fee   schedule published by NC Medicaid for the Medicaid Direct program. For the uniform dollar increases for TBI, 1915(i), 1915(b)(3) services, LME/MCOs will be required by contract to implement the rate increases relative February 2020 pre-COVID reimbursement levels plus the HCBS DCW increases effective March 2022. Uniform percentages increases for ILOS are not contractually required, but heavily encouraged as they will be supported in capitation funding. 
To reflect the changes noted in this bulletin, PHPs and LME/MCOs are required to adjust rates for services covered in their plans and reprocess affected claims, as applicable.

Contact

Medicaid.ProviderReimbursement@dhhs.nc.gov 
Standard Plan PHP contact information is available on the NC Medicaid Health Plan Contacts and Resources webpage.