Good afternoon, Councilmember Catania, Councilmember Fenty and members of the Council. I am Martha B. Knisley, Director of the Department of Mental Health. Thank you very much for this opportunity to state our case for the release of pay-as-you-go funds to DMH for FY 2005.

Section 1002(a)(3) of the Fiscal Year 2005 Budget Support Act of 2004 provides that $11 million shall be made available to the Department of Mental Health for Medicaid-related expenses, “provided that the CFO certified that improvements in the cost-reimbursement process have been made and that Medicaid revenue projections indicate that the requested funds remain necessary.”

DMH’s budget must remain at the original amount, $220 million, which can only be achieved in FY05 by access to the $11 million Pay-As-You-Go Fund. Without this amount, DMH will not be able to provide the anticipated level of services and achieve our Medicaid revenue projections.

DMH has established a new community mental health delivery system to meet basic community mental health service needs for persons with serious mental illnesses and children with severe emotional problems. The system is entitled MHRS—Mental Health Rehabilitation Services. DMH began this program in late FY 2002. Today DMH is successfully billing Medicaid for services for these populations.

DMH utilizes local funding for match for these services, for the full cost of services for persons who are not eligible for Medicaid and for infrastructure necessary to support this program.

At the time we began this program, approximately 6,000 persons were on the rolls as outpatients at Saint Elizabeths Hospital but we were not receiving any Medicaid funds for those services. Since then, DMH has certified 28 mental health provider agencies as eligible to bill Medicaid and we have worked successfully with providers to assure that they maximize billing. DMH has hit its target of 70 percent of all billings being Medicaid reimbursable.

Since the inception of the program, DMH has enrolled over 24,000 persons in services. Approximately 21,400 persons are now enrolled in the MHRS program. Without the $11 million in Pay-Go funds, DMH would be forced to scale back the Medicaid State Plan, reduce the number of persons served and not offer services to any new clients except crisis services. Given that a large portion of the funds are used for match, we anticipate that we would have to reduce the number of persons served in MHRS by at least 6,000 persons for the remainder of the fiscal year. This would also result in at least a $16 million reduction in federal Medicaid funds.

DMH has made other significant improvements as it has developed this program. These improvements have been carefully monitored by the OCFO and Deputy Mayor’s office, which I will outline below. However, first I would like to explain the basis for the DMH Medicaid Plan.

The 2001 Court-ordered Plan in Dixon v Williams provides the overall policy framework for the new Department of Mental Health. A key tenet of that Plan is that DMH “will utilize Medicaid as a major funding source for community-based services and administrative levels. DMH will administer—via written agreement with the Medical Assistance Administration (MAA) – those portions of the state Medicaid program relating to mental health.”

The Plan required those services to be established under the Medicaid Rehabilitation Option in order that the Department could best meet its obligations for assertive outreach and other community-based services.

The Plan further required the Department to develop specific services, establish rates, establish eligibility criteria and methods to verify eligibility, establish payment systems, including the ability to accept and adjudicate claims, certify providers, conduct audits and impose sanctions when necessary.

Hence a key developmental task for the new Department of Mental Health was to create the infrastructure to establish the required the DMH Mental Health Authority to become a health plan to establish Mental Health Rehabilitation Services that meet Medicaid standards. DMH did this and through the Medical Assistance Administration secured a State Plan Amendment in 2002 for nine services under the Medicaid Rehabilitation Option.

The DMH Mental Health Authority (MHA) obtains Medicaid reimbursement only as the result of services provided by public and private community providers who provide Medicaid covered rehabilitation services to Medicaid enrolled consumers. The DMH MHA does not directly “earn” Medicaid revenue. Rather DMH MHA is responsible for establishing and monitoring the structure within which private providers can earn that revenue.

As stated above, the DMH began this program in FY 2002 and has made steady improvement in the following processes, which has led to increased Medicaid reimbursement as follows:

• DMH has established a comprehensive process by which private providers become certified as Medicaid providers. Until providers are certified, they cannot earn any Medicaid revenue, thus an improved certification process allows for additional opportunities to earn Medicaid revenue.
• DMH has enhanced its support to current and prospective providers through Provider Relations. Provider Relations provides technical assistance to providers in connection with virtually every aspect of their obligations as DMH certified providers. Therefore, this increased technical support better allows providers to earn Medicaid revenue.
• DMH has improved its claims processing efficiency and accuracy. This improvement has occurred in many areas, two of which merit mention. First, DMH MHA is processing provider claims more promptly. (See July Court Monitor’s Report, page 29 [“The DMH multi-year progression shows that the percentage of claims processed within 30 days has gone from 37 % (2002) to 69% (2003) to 82% (2004 year to date].”). Second, DMH has improved the accuracy of its Medicaid eligibility determinations through a renewed agreement with MAA to provide that data. Improved eligibility determinations increase reimbursement by ensuring that DMH seeks federal dollars for all Medicaid enrolled consumers. Accuracy in this process is essential to Medicaid revenue because it is through DMH MHA billing MAA that Medicaid revenue from private providers is “earned” by the Department. One tangible measurement of this improvement is the increasing percentage of Medicaid paid dollars as a percentage of MHRS services billed to Medicaid. In FY 2002, this figure was 71.36 percent, in 2003, 75.90 percent and as of September 2004, it was 76.62 percent. 

DMH has increased its oversight over providers:

For example, in FY04 DMH has successfully audited providers and disallowed claims that do not meet federal requirements. As DMH continues to improve its oversight, it will ensure that the District obtains the maximum value for its dollar in connection with Medicaid-related mental health services.

Beginning in January 2004, DMH began a quarterly audit process for all certified providers. Each quarter a sample of claims is pulled and providers have to submit documentation supporting the claims in the sample. This process is ongoing. Providers who score below 90 percent are required to provide corrective action plans.

Beginning April 2004, DMH implemented the fidelity audit process. The process involves an on-site visit to review clinical records and practices to verify compliance with the service definitions in the MHRS standards. The purpose of this process is to ensure the quality of the services provided.

In conclusion, for the first time in its history, District residents with mental illnesses have a viable network of community-based services. We need the FY 2005 budget to be whole to continue to achieve the results sought by this Mayor and Council and to end the Dixon suit. Thank you for this opportunity to come before the Council. I will be happy to answer your questions.