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Substance Use Disorder Services Level of Care Disputes

November 6, 2020

By: Becky Greenfield

Substance use disorder (“SUD”) services are generally performed on a continuum of care, as defined by the American Society of Addiction Medicine (“ASAM”). The five broad levels of care, from least to most intensive, are Early Intervention, Outpatient Services, Intensive Outpatient (“IOP”/Partial Hospitalization Services (“PHP”), Residential/Inpatient Services, and Medically Managed Intensive Inpatient Services.  

Performing services along the ASAM continuum of care allows SUD providers to address each individual’s unique risks and needs and the patient’s strengths, skills, and resources to determine what is the appropriate level of care for the individual.  

Although most health insurers require SUD providers to follow ASAM’s medical necessity criteria (“ASAM Criteria”), these payors have their own policies surrounding medical necessity and SUD programming. Thus,each interprets the ASAM Criteria differently.    

SUD providers develop their treatment programming to comply with ASAM Criteria and applicable state licensure requirements; however, their programming cannot meet 100% of each payor’s unique interpretations of the ASAM Criteria. This means that many SUD providers’ specialized programming may not fit within the payor’s definition of a particular level of care despite the program’s compliance with ASAM and applicable law.

These discrepancies between a payor’s and SUD provider’s interpretation of ASAM results in significant payment disputes.  In many cases these disputes occur after the payor has already authorized a particular level of care, and the provider has rendered services. What results is enormous overpayment demands and inappropriate recoupment efforts by the payor. This payment dispute scenario frequently occurs for PHP and IOP levels of care.  

For example, some SUD providers treat PHP and IOP patients in the same session.  We have seen payors demand repayment of PHP services because they interpret ASAM to state that patients at the PHP and IOP levels of care must be separated for treatment.  Although ASAM indicates that IOP and PHP are distinct levels of care, ASAM does not prohibit patients at these different levels of care to receive services separately at all times, so long as patients in PHP receive at least 20 hours of service and the program meets such other ASAM Criteria requirements. 

Additionally, payors seek recoupment for payment of PHP services where the SUD provider offers boarding located on the campus where treatment is provided, even though treatment is not performed where the patients board.  Again, while this may not entirely align with the payor’s PHP policies, these housing arrangements do not violate ASAM or state criteria.  As payors authorize less and less days of residential care, it is imperative that SUD providers offer housing as an alternative to discharging the patient back home for PHP treatment after the residential level of care.  This is because discharging a patient home where triggers exist can put the patient at a high risk of relapse.In many instances, PHP and IOP treatment are unavailable in the geographic location in which the patient resides.  

Payors regularly conduct post-payment audits and, where a conflict exists like the ones discussed above, payors attempt to recoup funds previously paid for medically necessary and otherwise covered services.  Payors regularly use extrapolation methods, using a handful of audited claims as the basis for a much more expansive recoupment effort, taking back every dollar that was initially paid for the services provided.  Payors also impose flags on the SUD provider, such that it no longer receives reimbursement for any services furnished to the payor’s members. This is especially egregious, where the SUD provider is in-network with the payor.Therefore, the provider was credentialed, and the programs were reviewed, by the payor prior to rendering services to its members.

Unfortunately, many SUD providers are small enterprises, as compared to mammoth insurance companies and lack the leverage needed to go head-to-head with the payors for their improper audits. Thus, many SUD providers are forced to enter into settlements and corrective action plans with the payors to ensure they can continue to provide care, and receive payment for services furnished to the payor’s members.  For others, these large-scale audits, takebacks, and flags have directly caused SUD providers to close their doors during a time where this country is experiencing an opioid epidemic.

One thing SUD providers can do to prevent these level of care disputes is to negotiate value-based or warranty managed care contracts. By negotiating value-based rather than traditional fee-for-service contracts, SUD providers can take back control of how their programming is developed and the level of care they provide to the patient. As an example, the parties can negotiate a single per diem rate consistent across residential, PHP, and IOP levels of care. This ensures the patient receives treatment at the most appropriate level of care, and the payor is not disincentivized to deny a higher level of care.  However, despite a trend in this direction, not all payors have entered into these types of value-based arrangements/

Payors are imposing their judgment as a substitute for the treating SUD provider’s best clinical judgment when it comes to what level of care the patient should receive. It is critically important that providers and payors get on the same page when it comes to caring for individuals struggling with substance use disorders so that they can get the best and most appropriate care available. 

1. What are the Levels of Care, ASAM, found at https://www.asamcontinuum.org/knowledgebase/what-are-the-asam-levels-of-care/
2. Id.
3. The ASAM Criteria: Treatment Criteria for Addictive, Substance-Related, and Co-Occurring Conditions (2020).
4. PHP is the step-down level of care after residential treatment, and IOP is the step-down level of care after PHP.