3 challenges facing addiction treatment centers fighting the opioid crisis

With the White House declaring the opioid epidemic a national public health emergency earlier this year, the discussion rages on across the country about how exactly to solve this growing problem. Much of that discussion is now shifting to the specialized drug treatment facilities that help those battling this deadly disease.

Some estimates say that America’s opioid epidemic currently sends more than 2 million people a year looking for treatment. By comparison, that’s about 300,000 more than the estimated total new cases of cancer diagnosed in the U.S. this year. As the number of people suffering from opioid addiction has ballooned over the past decade, so too has the number of treatment facilities opening across the U.S. There are now more than 14,500 such facilities in the country, and that number is continuing to grow.

{mosads}Unfortunately, as new facilities seek to help those in need, they face a number of potential risks that can impede and even bring down operations. Addiction treatment facilities also attract a range of different business interests, from physicians, psychiatrists, and psychologists, to Wall Street investors and diversified entrepreneurs, many of whom are recovering addicts themselves or close to someone who has battled addiction. Each type of facility operator and investor brings a different set of perspectives and experiences, and may or may not understand the common pitfalls that can derail their efforts.

As a firm that works with addiction treatment facilities across the country, we have helped clients deal with a number of issues specific to these types of centers. Here are three common challenges addiction treatment facilities face as they open and operate, and some ways to approach solving each of them.

Not Setting Up an Appropriate Network of Payers

One of the first questions any addiction treatment facility should ask before opening its doors is what it’s payor mix is going to look like. Like other health-care providers, such as ambulatory surgical centers, many treatment facilities have in the past preferred to operate on a so-called out-of-network model. This means they do not enter into comprehensive services agreements with any insurers and as a result get the benefit of higher, out-of-network insurance payments.

The out-of-network model, however, has become increasingly problematic. Insurers don’t want their members to go out-of-network, which costs the insurers more, and as a result pursue various strategies to avoid paying out-of-network claims, including “flagging” providers, conducting pre-payment medical audit reviews, and seeking frequent refunds of past-paid services.

Going in-network, however, presents its own problems. Many networks are closed to new facilities. Those insurers that will add new participating providers often seek to pay bargain-basement rates and may not offer a sufficient increase in patient volume to offset those lower payments.

Likewise, setting up a full network of payers isn’t as easy as calling up an insurer, asking to be in its network, and receiving approval. The credentialing, contracting, and negotiation process, especially for an addiction treatment center, can be arduous and time-consuming. Working with an outside expert to have contracts in place with insurers from day 1 (and renegotiating them regularly) is critical to operating a successful business.

In short, striking the right balance between participating in some insurance networks and staying out of others can be done, but it takes careful planning and strategy.

Not Collecting Enough Money from Patients

Insurance companies want their members to use in-network providers because those providers have agreed to accept lower rates as payment in full from the insurers. The companies create incentives for their members to do this by requiring them to pay higher patient cost share amounts (i.e., copayment, coinsurance, and deductibles) when they go out-of-network. Additionally, they can prohibit in-network providers from “balance billing” their members for the difference between the provider’s full-billed charges and the rate paid by the insurer to the provider for the service under the network agreement.

Addiction treatment facilities, as well as other health-care providers, can get into trouble with insurers when they try to give out-of-network patients a break on their out-of-pocket costs. For example, a facility might charge an out of-network patient the lower co-insurance percentage that a patient would pay to an in-network provider. Or they might agree not to balance bill the patient for the difference between the insurance payment to the provider and the provider’s full-billed charge.

This may seem reasonable, given that people often come to facilities when their addiction disease is at its worst and they’re already suffering. But out-of-network insurers feel otherwise. To them, giving these discounts disincentivizes members from going to cheaper, in-network providers, and thus costs the insurance plan money. This often leads to insurers trying to recover payments they made to facilities who offered such discounts, leading to plenty of legal battles.

Similar issues arise with respect to the amount of care a facility provides. Some facilities may feel strongly that it is in the best interest of the patient to receive care in a more intensive setting (like a residential versus a partial hospitalization setting) or a longer period of care than what insurance providers are willing to pay for.

It is not uncommon for these facilities to offer that additional care but seek reimbursement from the insurer only for the lower intensity or shorter term of care the insurer has authorized. While this might seem like a noble gesture, insurance companies tend to target facilities that provide services for which they are not making an insurance claim.

Even though the intentions of the facility may well be purely benevolent, insurance companies view this type of behavior suspiciously — as a way to “gift” services and by doing so, incentivize patients to seek more insurance-covered treatment at the facility. Insurers will often try to recapture coverage payments they had made previously, if they find out a facility was offering what the insurers deem as excessive care.

To ensure there are no surprises when it comes to receiving insurance reimbursement, addiction treatment providers should take care to follow an appropriate out-of-network billing and align their protocols for obtaining insurance authorization with the services they actually render.

Not Knowing the Differences Between State Laws

The Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (often referred to as the federal parity law), which was amended by the Affordable Care Act in 2010, prevents health insurers from providing mental health or substance use disorder benefits that are less favorable than medical/surgical benefits. Along with the rising opioid crisis, this law has had a significant effect on the industry’s growth. Unfortunately, many states were not prepared for the explosion of addiction treatment centers that have popped up over the last decade and have had to scramble to put new regulations in place to monitor these facilities.

As a result, larger treatment providers that operate in multiple states may have to deal with dramatically different state requirements. For instance, some states require that health plans cover mental health conditions, even though the inclusion of mental health benefits is optional under the federal parity law. Vermont, for example, requires comprehensive parity, while Wyoming and Alaska do not. This affects the amount of coverage insurers in each state must provide and can limit the amount of reimbursement facilities may receive in each state.

Additionally, some states can be more stringent when it comes to who can legally open an addiction treatment facility or what technically constitutes an addiction treatment center versus a so-called “sober home.” Florida, for example, has much less oversight than New York, which requires any potential facility to obtain a “certificate of need” before opening its doors. Knowing each state’s laws is key to running a facility lawfully and in a way that makes it financially successful.

Addiction treatment centers truly are on the front lines in the battle against the opioid crisis. However, running such an important business comes with big challenges. Working with experienced counsel who know the ins and outs of this complex industry best enables these facilities to provide hope and help to the millions of Americans suffering from the devastating disease of opioid addiction.

Salvatore G. Rotella, Jr.  J.D. is an attorney and shareholder at Buchanan Ingersoll & Rooney’s health-care section, handling a wide variety of health law litigation, contracting, and regulatory matters.