The Finances Behind Why Some People Get Little or Inadequate Treatment in NJ

Two weeks ago, I announced that I would be publishing the work of other individuals on my site. The first article was by Regina Diamond and detailed her addiction, incarceration, recovery and redemption.

This is the second article by a guest. Glenn Duncan is the Executive Director of Hunterdon Drug Awareness (HDAP), an outpatient treatment program located in Flemington, NJ. I worked there from 2005 through the end of 2010. I learned a lot from Glenn. He is a self-less leader, does an excellent job of delegating, is a funny and intelligent presenter, and he runs the best staff meetings I have ever attended (informative, humorous and most importantly, mercifully brief). Glenn will be co-presenting a course at the Rutgers Center of Alcohol Studies with me on January 21, 2016 on “The History of Reimbursement.”

At the beginning of the month, I appeared on the Brian Lehrer show on NPR to discuss Gov. Christie’s speech on addiction in New Hampshire that went viral. I spoke how the Governor has given this speech before and that while it sounds wonderful, he often doesn’t sign off on the policies that the NJ legislature puts in front of him that would better treat addiction (and mental health). Nor does the Governor provide adequate funding to the programs that he claims to support (he is not alone in this, many other politicians are guilty of this empty rhetoric as well). Mr. Duncan reached out to me with his experiences (and opinions) about how NJ does not adequately reimburse treatment providers that help poor and middle class people with addictions, and I asked him to write an expanded article about it. He exceeded my expectations. It is packed with details. It is best suited for politicians, advocates, policy makers, journalists, executive and clinical directors, and wonky nerds.


While politicians are quick to say that addictions treatment is a top priority and while they are expanding some treatment dollars (e.g., the drug court initiative) they are shrinking others. How are they shrinking others? They are in the process of doing away with slot based treatment contracts and replacing them with fee for service (FFS) rates. These rates do not match the cost expenditure to do business in NJ for those people who have an inability to pay. This is due to the low fee for service rates which they pay out. For example, in the current FFS payment structure, individual counseling is paid $49 per hour, group counseling is paid at a rate of $23 per hour and Intensive Outpatient Treatment (IOP) is paid at a rate of $71 per day. If you were to compare this rate of pay to private commercial insurance company rates of pay, it is roughly half of the price insurance companies pay for the same services provided to their clients. In other words if a client with Aetna, Horizon, Cigna or any other private insurance provider comes into my organization we will get reimbursed $90 for individual therapy, $50 for group and $125 for IOP.

As a case study to flesh out the actual cost of a given service versus the reimbursement rate, let’s use the example of 1-hour of individual counseling, which is reimbursed by the State of NJ FFS initiatives (Drug Court, Driving under the Influence Initiative) and Medicaid at $49 per hour. The average licensed clinician earns a salary of $55,000 per year, which breaks down their hourly rate (with a 35 hour work week) to $27. On this surface this looks to be a profit of $22 for that hour of service. Unfortunately we haven’t taken into account that this licensed clinician works in an organization that has a myriad of expenses to support that hour of therapy. Expenses that don’t seem to be taken into account when setting rates, and at the very least are certainly are not reimbursable. These are expenses such as rent, utilities, phones, supplies, liability insurance, maintenance and repairs, equipment rental, salaries and fringe benefits for support staffing (secretaries, bookkeeping, and other administrative staff, or what is commonly called “management and general”), clinical supervision, case management services (talking with, or writing reports for, probation, DCP&P, EAPs, family or anyone else involved with the client), and fringe benefits (health insurance, payroll taxes, etc.). To roll all these expenses into 1 hour of services you would have to take the annual cost of them all (for my organization this amounts to $350,000) and then narrow that down to an hourly rate of $192 per hour on top of the clinician’s rate of $27 per hour. Since the $192 is a shared hourly rate we would have to have 8 clinicians doing individual therapy (at $27 an hour each or a cost of providing those services of $408), while the reimbursement for those 8 clients at $49 an hour would be $392. Thus it would take 9 clinicians doing individual therapy each hour to start making a profit.

Thus individual therapy is a losing proposition, no matter who the payer is, so the money must be made elsewhere in an outpatient treatment clinic. This would include group therapy and IOP. Some organizations know this hourly individual therapy reimbursement rate is a money loser and make it less of a priority as there is higher potential for a profit in group therapy and even a better profit potential in IOP (group therapy is usually 1.5 hours at $23 per group which adds up to $46 for 3 hours, whereas IOP is reimbursed at $71 for the same 3 hours). However, IOP is a higher level of care, and clients are in this level of care for a shorter time as they stabilize and not need the intensive services. So with the same clinician running group, at a total hourly cost of $217 (salary and all other supportive costs), we would now need at least 10 people in group ($230) during that time to barely do better than breaking even.

Why are these services rates so low? When will the rates be changed to a more competitive level to match today’s costs for running a business of providing treatment to those who have no insurance or who have Medicaid? What will those new rates be? The Division of Mental Health and Addiction Services (DMHAS) have been “studying” this issue since 2013 and paying an independent firm to come up with what those new FFS rates should be. The provider community was first told that the new rates were coming in the first half of 2014, then this was pushed back to the second half of 2014, then late spring of 2015, then the fall of 2015, and this fall providers were told that these rates would be announced sometime in 2016.

How much the state has spent on the company responsible for studying the new rates is unknown or why new rates have taken nearly 3 years without any resolution is also unknown. For all this time, however, providers are supposed to take these lower rates … and survive. By the way Medicaid used to reimburse treatment at a cost of $8 per group and $16 for individual therapy and they didn’t pay for IOP until July 1, 2015 when they adopted the rates of the other DMHAS FFS rates. However, the new rates only apply for those Medicaid clients who are eligible for the affordable care act version of Medicaid, called the alternative benefits plan. In my organization this accounts for about 75% of all Medicaid clients with the other 25% still not having Medicaid pay for treatment. When will Medicaid do a “true-up” or make all clients who have Medicaid able to be reimbursed for treatment? The same day DMHAS changes their FFS rates … which, if you read this far, you know is now going on its 3rd year of no news.

So while those in power say addictions treatment is high on their funding radar for those clients who are either uninsured or underinsured, is not currently reimbursed at sustainable rates for non-profits to treat people with proper group size and qualified staff. This will lead to one of many possible options:

1) this could lead to non-profits either being unable to serve this needed population and close its doors;

2) this could lead to organizations servicing clients poorly (i.e., larger group size than should occur, or organizations where everyone suddenly needs IOP, under-utilization of the most expensive modality which is individual therapy, staffing patterns of less qualified staff who are not properly certified or licensed for the purpose of cheaper labor costs); or

3) this could lead to more organizations doing a total reorganization and changing their mission statement from one of helping anyone who needs treatment regardless of their ability to pay, to a for-profit treatment center model that takes only clients who can afford a much higher for-profit rate for similar services (individual, group, IOP) and pay cash and those clients with private commercial insurance.

What have we done at HDAP to not fall into one of these 3 options? We do 3 fundraisers per year, we attempt to get funding from corporations and foundations to help pay for services because the rates of pay are not sustainable by the State of NJ and Medicaid, we provide other unique services such as servicing inmates in the Hunterdon County Correctional Facility by getting eligible inmates out of jail and into treatment programs where they are better served. However, we also have recently had to lay off administrative staff, putting a larger burden on existing administrative staff so that we have fewer expenses while not cutting into clinical services. My staff have not gotten a pay raise in three years and I have personally cut my own salary by 12% for the past three years in order to help ensure I don’t have to cut staff salaries. That is how we are surviving in this current reimbursement climate without resorting to 1 of the 3 options listed above.

While I don’t have the statistics to back this up, anecdotally it appears (in the past 10 years) that for every 1 non-profit startup with a similar mission statement that Hunterdon Drug Awareness Program has (to treat any Hunterdon County resident regardless of their ability to pay), there have been 5 – 10 for-profit treatment centers starting up. If the State of NJ and our politicians are truly behind properly funding addictions treatment, they will make sure non-profit organizations don’t fade away as they are in serious danger of doing so in today’s FFS treatment reimbursement climate.

Glenn Duncan, Executive Director
Hunterdon Drug Awareness Program, Inc.
[email protected]

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