The leading practice resource for behavioral health providers — since 1974

Volume 37, No. 6, Issue 446
June, 2011

MEDICARE:  Report recommends smoothing regional provider pay differences

Therapists who treat Medicare patients see a wide variation in reimbursement depending on where they practice.  For a 90806, for example, clinical social workers might receive anywhere between $60 and $90 per session-- the gap gets bigger when you consider that many providers are waiving their Medicare co-pays.

But some of the discrepancies will start evening out if recommendations by the Institute of Medicine, a private think tank that does extensive research in the health care field at the request of Congress, are enacted by the Centers for Medicare and Medicaid Services (CMS).

Loosely speaking, the Medicare payment system is based on how much it costs to run a medical office locally.  In areas where overhead is more expensive, reimbursement rates are higher.  That’s typically in urban areas--so rural practitioners typically earn less.  (Oddly enough, the opposite is sometimes true with managed care reimbursement.  Managed care companies will sometimes pay more in rural areas simply because providers are few and far between, and have the nerve to say no to low-ball rates.)

There’s a strong institutional bias in favor of the status quo.  A 2007 report by the Government Accountability Office (GAO) argued that in fact, urban practitioners were underpaid by Medicare while rural clinicians were overpaid.  Focusing on physicians, investigators said that Medicare was overpaying in one out of every eight counties--by as much as 5%.

Government officials have their sights set on taming hospitalization costs and many of the Institute of Medicine recommendations are aimed at that slice of the market.  One suggested change, though, would hit all providers in private practice: how rental costs are estimated for offices and clinics.

Currently, Medicare bases those estimates on the cost of renting government- subsidized two-bedroom apartments for the poor.  That doesn’t necessarily reflect commercial rental costs, the Institute of Medicine noted.

Laura Groshong, director of government relations for the Clinical Social Work Association (CSWA), believes the payment formulas will change--but that it could take several years.  “There’s the complexity of it--mental health professionals are only a small percentage of the Medicare-reimbursed providers in all these regions.

“Standardization will definitely affect mental health care providers,” she adds.  “The question is what standards are they going to use?”

Groshong tells us she’s heard of LCSWs drawing payments $25-to-$30 less than CSW colleagues in neighboring counties--for the same service.  “Maybe somewhere in the middle is more reasonable.”

Groshong predicts that CMS will find more savings on the medical side, “especially the high-end medical side.”

On the other hand, Jean Thoensen, a billing professional in Centreville, VA, doesn’t see the Medicare gap for mental health care providers as strange or controversial.

“It actually does cost a different amount of money to run a practice in the middle of Kansas than it does to run a practice in Miami,” she points out.

Thoensen works primarily with psychologists and psychiatrists.  She notes that among her big-city clients, rates are very even.  A psychologist client in Dallas gets $89.73 for a 90806, she says, compared to $88.74 in Austin, TX; and $97.01 in Washington, DC.  (Under Medicare, CSW fees are fixed at 75% of psychologists’ rates.)

Thoensen notes that there’s more than real estate costs involved in the regional payment schedules.  Malpractice costs also come into play, she points out.

Spokespeople for the American Psychological Association and CMS have issued cautious statements in response to the Institute of Medicine report, saying they would work with Congress to help iron out inconsistencies in the Medicare payment system.

Contacts: 1) Laura Groshong, CSWA, Seattle, WA (206)524-3690,; 2) Jean Thoensen, PsychBiller, Centreville, VA, (703)266-8612,