Office of Behavioral Health Services

Fee-for-Service Payments made
Directly by Clients and their Private
Insurers are not an Under-Utilized
Source of Revenue for Behavioral
Health Services


There are five bureaus within the West Virginia Department of Health and Human Resources (DHHR). Those bureaus are: Public Health, Children and Families, Behavioral Health and Health Facilities, Child Support Enforcement and Medical Services. Each bureau is administered by a commissioner who reports directly to the Deputy Secretary and Secretary. Since the Bureau for Medical Services (BMS) is the single state agency that administers the Medicaid Program and the Bureaus for Public Health, Children and Families and Behavioral Health and Health Facilities serve behavioral health consumers covered by Medicaid, it is essential that these agencies work closely together and have good communication and close coordination.

The Office of Behavioral Health Services

The focus of this report is the Office of Behavioral Health Services (OBHS) which lies organizationally under the authority of the Commissioner of the Bureau for Behavioral Health and Health Facilities. This report covers the period from fiscal year 1998 to fiscal year 2000. The OBHS is responsible for the development, coordination and monitoring of departmental policy for all behavioral health services in the state. It sets directions for clinical practice, evaluates the efficiency of services, ensures service quality, helps defray cost of indigent care and develops methods to ensure that other department funds are targeted to those most in need of services and used in the most cost-effective manner. The OBHS administers state and federal funds for the operation of community-based services. Services are provided in the home, the community, hospitals, residential facilities and long-term care facilities operated by the state or by contract agencies. The OBHS also contracts with the Bureau for Medical Services to manage the Mental Retardation/Developmental Disabled (MR/DD) Waiver Program.

Community Mental Health Centers

In West Virginia, there are 18 designated nonprofit, comprehensive community behavioral health centers (CBHC), each with its own catchment area. This includes four centers that serve only persons with mental retardation and/or developmental disabilities. The term CBHC is used interchangeably with the term Behavioral Health Center (BHC) in this report. The OBHS contracts with a CBHC in each of the Service Areas for the delivery of mental health, substance abuse and mental retardation/ developmental disability services. The Department also has the authority to contract with other service providers within a Service Area. There are approximately 90 licensed behavioral health providers in West Virginia. Contracts are performance-based and focus on attaining specific goals and objectives identified through negotiations between the providers and the Department.

Each of the contract CBHCs administers services in a geographic Service Area of two to eight counties. Although the main site of the CBHC is usually comprehensive in its service delivery, the sites it administers throughout its region are usually organized around the provision of one or more specific services which address the particular needs in the surrounding locality or community. The areas of focus for adult programming at the CBHC level includes case management, housing, employment and crisis services. Areas of service focus for children at the CBHC level include case management, family preservation, crisis services and assessment services. Although each CBHC is funded to provide a comprehensive array of services, it is the option of the CBHC to provide services directly or through a contract to a community-based agency.

As Table 1 illustrates, CBHCs consistently treat in excess of 91% of adult clients. Financial data for this report was gathered from a survey of these centers because they treat the overwhelming majority of adults. A survey of CBHCs, therefore, is highly representative of the ability of the total adult client population to pay for services.

Table 1: Sources of Behavioral Health Services

FY 1998 FY 1999 FY 2000
Adults Children Adults Children Adults Children
Comprehensive Community Mental Health Centers* 32,784 (91.9%) 11,038 (56.3%) 38,662 (91.4%) 13,147 (55.8%) 38,218 (91.3%) 13,689 (56.2%)
Other Behavioral Health Providers 2,881 (8.1%) 8,581 (43.7%) 3,634 (8.6%) 10,413 (44.2%) 3,649 (8.7%) 10,660 (43.8%)
Total 35,665 19,619 42,296 23,560 41,867 24,349
*Also includes the four centers serving only persons with mental retardation and/or developmental disabilities.

Issue Area 1: Fee-for-Service Payments made Directly by Clients and their Private Insurers are not an Under-Utilized Source of Revenue for Behavioral Health Services.

This study focuses on funding received by behavioral health providers from fee-for-service payments made by clients and their private insurers. Given the behavioral health system's dependence on Medicaid funding which was established in the first installment of this review, it is important for providers to make feasible attempts to collect payments from individuals who are not on Medicaid. Clients who are not on Medicaid are charged for services. This report analyzes the amount actually collected from those clients, as well as the potential ability to pay of the client population. Based on a survey of 14 of the 18 comprehensive behavioral health centers, revenue collected from non-Medicaid clients and their private insurance is a small percentage of total revenues (see Figure 1).(1) Over 90% of funding comes from other revenues which are mostly Medicaid funds and government grants. Payments collected from non-Medicaid clients and accounts receivable are less than 8% of total funding. However, 40% to 80% of accounts receivable typically become uncollectible and amounts to millions of dollars. Furthermore, the demographic characteristics of clients suggests they have a relatively low ability to pay. This suggests that client fees are not an under-utilized source of revenue.

As much as 70% to 80% of Private Pay Accounts Receivable are Written Off as Uncollectible

The writing off of accounts receivable is a standard procedure after fees are owed for a certain period of time. The percentage and the age of receivables written off varies from center to center according to their individual accounting practices. Data on write offs were obtained from seven CBHCs. Those seven centers fell into two categories with one exception: those that wrote off approximately 70%-80% of private pay receivables and those that wrote off approximately 40%. Once center wrote off an average of nearly 50% of private pay accounts during the period examined.

The Prestera Center writes off approximately 20% of total accounts receivable each year, although the percentage varies by funding source. The percentage of private pay receivables written off each year is much higher. During the three years examined, Prestera wrote off the following amounts of private pay debt: FY 1998: $1,492,742 (82%), FY 1999: $1,150,745 (76%), and FY 2000: 1,119,561 (72%). Prestera wrote off a total of $1,913,151 in bad debt from all sources during FY 2000. That means that private pay debt accounted for 58.5% of all write offs for FY 2000. Typically, Prestera sends a client's account to a collection agency after 3 or 4 months of unpaid billings. Medicaid, Medicare, and insurance debt are usually written off after 4 to 6 months.

The United Summit Center wrote off a similar percentage of private pay receivables during the three-year period from calendar year 1998 to 2000. Private pay write offs were: 1998: $1,449,273 (85%), 1999: $1,479,367 (78%), and 2000: $1,920,431 (88%). Accounting records are maintained by calendar year and 2000 data is for the first 10 months of the year. The United Summit Center immediately writes off some private pay receivables, while waiting up to a year for others.

Logan-Mingo Mental Health, Inc. writes off approximately 80% of all amounts billed to clients each year. Any amounts not paid by third party insurance are rebilled to clients. Clients can pay the bill, enter into a repayment plan, or if they are financially unable to pay, the balance is written off after six months. Amounts initially billed to insurance companies remain in accounts receivable for approximately four months before the amounts are rebilled to the respective private pay clients. Billings to private pay clients remain in accounts receivable for approximately six months before the balances are adjusted to amounts the client is financially able to pay. Logan-Mingo Mental Health, Inc. wrote off the following amounts: FY 1998: $567,443, FY 1999: $654,504, FY 2000: $761,307.

Westbrook Health Services wrote off the following amounts: FY 1998: $361,088, FY 1999: $137,199, and in FY 2000: $248,603. Private pay write offs amount to 40% each year. Amounts are not written off until they remain unpaid for at least 90 days, but usually much longer. Private pay write offs were equal to 10.8% of total write offs, from all sources, during FY 2000.

Northwood Health Systems writes off approximately 36% of private pay receivables each year. Northwood writes off accounts paid directly by clients after they remain unpaid for 120 days. Insurance balances are transferred to the clients themselves after 60 days. Private pay write offs for Northwood totaled $714,762 in FY 1998, $514,251 in FY 1998, and $434,565 for FY 2000. Private pay write offs accounted for 51.7% of all write offs during FY 2000.

Valley Health Care writes off 39% of private pay receivables each year. Accounts are written off after they remain unpaid for six months to a year. Valley Health Care wrote off the following amounts: FY 1998: $133,276, FY 1999: $178,353, and FY 2000: $405,018.

Healthways wrote off an average of 49.8% of private pay debt during fiscal years 1998, 1999, and 2000. If payment from private insurance is not received within sixty days an account will be considered self-pay and collected according to the client's ability to pay. Once an account is 180 days past due a decision regarding the proper collection procedure is made by the CEO. If the decision is made to write off an account without turning the account over for collection, all accounts over $500 should be approved by the CEO. Accounts greater than $500 that are to be turned over for collection should also be approved by the Administrator. The CEO reviews account under $500 to determine whether the procedure is appropriate. Accounts with small residual balances are written off routinely each month. All accounts 120 past due, with balances under $25 should be written off each month without prior approval. The CEO should review these write offs at least quarterly to determine whether they are appropriate. At various times, the CEO may approve "Administrative Adjustments" so that certain accounts can be written off on an individual basis due to the particular situation. Healthways wrote off the following amounts: FY 1998: $152,286, FY 1999: $143,648, and FY 2000: $206,116.

It is clear that a large percentage of private pay receivables are routinely written off by providers each year, although the percentages vary widely among providers. This further demonstrates the inability of many clients to pay for services rendered to them. In addition, it appears that write offs from private pay sources account for a disproportionate share of all amounts written off by CBHCs each year.

Additional State Funding Received By Centers

It is important to point out that while considerable portions of private pay debt are written off by CBHCs each year, the OBHS does provide uncompensated care funds to provide services for which centers are not otherwise reimbursed. The amount of funding provided to 14 centers is based on the population of the provider's catchment area, an estimate of the number of eligible individuals to be served and an estimate of the value of the eligible services provided to the population. The funding methodology gives an equal weight to each of the three factors. The four MR/DD centers are allocated uncompensated care funds based on program needs that are not otherwise funded. The Legislature appropriated $3,000,000 in uncompensated care funding each year during FY 1998 and FY 1999. During FY 2000, a further $3,000,000 was provided by a transfer approved by the Legislature of DHHR funds. A total of $9,000,000 has been made available for FY 2001.

Some state funds are awarded to provide support for core services, which are services required by law. The funds are allocated for the development and delivery of core services described in a grant agreement and are to be used by the provider to cover any services they provide that are not otherwise reimbursed. For FY 2001, $4,853,126 was allocated and includes $1,643,047 for developmentally disabled client needs.

Other OBHS funding to providers includes $1,878,482 allocated in FY 2001 for developmentally disabled targeted clients which includes unmet needs funding. There is an additional $3,433,963 for the community placement of individuals from the Colin Anderson Center. Nearly $13,000,000 in federal and special revenue funds are also available.

Analysis of Provider Information

The Legislative Auditor conducted a survey of the 18 comprehensive behavioral health centers in West Virginia. One of the 18 centers, Appalachian Community Center, did not fully respond to the survey and provided no data for FY 2000. Four CBHCs: Eastern Panhandle Training Center, FMRS Mental Health Council, Shawnee Hills and Southern Highlands Community Mental Health Center failed to respond and provided no data. The survey involved gathering data for private sources of revenue, accounts receivable from clients and third-parties, and total annual revenue for fiscal years 1998, 1999, and 2000. The private sources of revenue consist primarily of payments made by behavioral health clients and third-party payments. The data indicate that revenue from private sources constitutes a relatively small portion of total revenues for CBHCs. Centers serving only persons with mental retardation and/or developmental disabilities do not collect fees from clients.

The Legislative Auditor's analysis of the survey revealed that, overall, the amount of private source revenue and accounts receivable fluctuated from year to year but remained a relatively small proportion of total revenues for most responding centers. Total revenue levels remained rather stable for most centers with a few exceptions. Only two of the centers experienced an increase in private source revenue from FY1998 to FY1999 and from FY1999 to FY2000. Also, only two of the centers encountered a decrease in accounts receivable each fiscal year from 1998 to 2000. In addition, three of the surveyed behavioral centers saw their total annual revenue increase each of these fiscal years. Incidentally, all three of these centers serve only persons with mental retardation and/or development disabilities. Overall, four of these centers were contacted and three responded to the survey. Since these particular centers serve only persons with mental retardation and/or development disabilities, they have no private sources of revenue. It is highly likely that the same holds true for the one center which did not respond. According to a representative of Autism Services Center,

No Autism Services Center's clients are private pay. ASC does not bill any third parties for our services. All services are billed to the WV Medicaid program or reported internally as charity care.

Since the aforementioned centers do not have any private sources of revenue, they also do not have any accounts receivable. This is due to the fact that behavioral health clients and third-parties are the main contributors in determining the amount of private revenue and accounts receivable that a behavioral health facility encounters.

Analysis of the Client Population Served by Behavioral Health Providers

Beginning in fiscal year 1998 the OBHS, within the Department of Health and Human Resources, began to collect data from licensed behavioral health providers who are certified to provide services reimbursed by Medicaid and/or contracted for by the OBHS. The data are collected from demographic and assessment instruments filed for each individual served. Information is provided at the initial appointment, periodically afterward, and at discharge from treatment. During the first two years examined in this report, fiscal years 1998 and 1999, incomplete data collection resulted in large numbers of clients listed as unknown for many categories of demographic data. By FY 2000 data collection had improved, but problems with obtaining complete data for the previous years makes it difficult to draw clear conclusions regarding long-term demographic trends among clients.

Analysis of statewide adult client demographic data indicates clear patterns with respect to client characteristics (see Table 2). For FY 2000, only 55.96% of clients owned or rented their own house or apartment. Another 5.59% relied on subsidized rental. Other clients, constituting 20.15% of the total, lived in the home of a relative. Other smaller categories of living arrangements included living in a friend's home, group homes, supported apartments, foster care homes, halfway houses, adult family care facilities, and residential group treatment facilities. It is clear that a large segment of the client population does not live independently. The living status of 9.57% of clients was unknown for FY 1998 and FY 1999. This number had been reduced to 1.73% by FY 2000. The collection of more complete data could account for some of the changes in certain categories during FY 2000.

The fact that only approximately 56% of clients own or rent their own house or apartment contrasts with home ownership rates for the State as a whole. During both calender years 1998 and 1999, the home ownership rate in West Virginia was 74.8%. Given that such a large percentage of the State's residents own their own homes, the fact that just over half of clients own or rent their homes sets them apart from the general population.

Also, a correlation analysis was conducted on various client variables. The analysis indicated a relatively strong correlation coefficient of +0.64 between county poverty rates and the percentage of county population who are behavioral health clients. This correlation indicates that counties with high poverty rates usually have a high proportion of behavioral health clients. This also suggests a relatively low ability to pay of many clients of behavioral health facilities.

Table 2: Living Status of Behavioral Health Clients

Living Status FY 1998 FY 1999 FY 2000
Number of Clients % of Clients Number of Clients % of Clients Number of Clients % of Clients
Own or Rent House or Apartment 17,997 50.46 21,726 51.36 23,431 55.96
Subsidized Rental 2,011 5.64 2,465 5.82 2,341 5.59
Rooming House, Hotel, YMCA 367 1.03 178 .42 141 .33
Homeless Shelter 367 1.03 408 .96 412 .98
Homeless (Live on Streets) 234 0.66 197 .46 278 .66
Home of Relative 6,604 18.52 7,902 18.68 8,438 20.15
Home of Friend 1,019 2.86 1,289 3.04 1,394 3.33
Adult Family Care 310 0.87 341 .80 306 .73
Resident Group Treatment 529 1.48 512 1.21 570 1.36
Large Group Board and Care Home 72 0.20 99 .23 64 .15
Small Group Board Care Home 146 0.41 156 .36 164 .39
Rest Home 1 0.00 9 .02 5 .01
Nursing Home 249 0.70 242 .57 255 .60
Long-Term Psychiatric Hospital 9 0.03 24 .05 30 .07
Short-Term Acute Care Facility 19 0.05 14 .03 11 .02
Specialized Family Care Home 235 0.66 250 .59 297 .70
Foster Care Home 70 0.20 65 .15 102 .24
ICF/MR Group Home 513 1.44 503 1.18 500 1.19
Individualized Staff Setting (ISS) 182 0.51 195 .46 232 .55
Supported Apartment 192 0.54 229 .54 429 1.02
Personal Care Home 254 0.71 255 .60 286 .68
Correctional Facility 83 0.23 174 .41 220 .52
Dependent Living (Includes Halfway Houses) 308 0.86 404 .95 242 .57
Other 482 1.35 610 1.44 994 2.37
Unknown 3,412 9.57 4,049 9.57 725 1.73
Total 35,665 100 42,296 100 41,867 100

The examination of employment statistics (see Table 3) gives indications of patterns in adult client characteristics. During FY 1998, only 14.5% of clients were engaged in competitive, non-subsidized work. Another 33.5% were not considered involved in the labor force by the OBHS. Another 10.9% were categorized as not employed and were not looking for employment while 8.40% were not employed but were looking for employment. Given that 10.9% of those categorized as unemployed were not looking for employment, a total of 44.3% of clients were not actually part of the labor force. Another 9.3% were either physically impaired or retired. The employment status of 13.3% of clients was unknown. The other 10.2% of clients included those involved in supported work, sheltered work, employment training, homemakers, students, and volunteer employment. The data clearly indicate that only a small proportion of clients are currently employed. If homemakers, students, retired persons, and the disabled are added together with the 44.3% mentioned earlier, over half of clients were not active in the labor force.

The collection of more complete data during FY 2000 must be considered. While the employment status of 13.3% of clients was unknown in FY 1998, only 1.9% of clients were in this category in FY 2000. This means that the employment status of 11.4% more clients was properly identified during FY 2000 and would have had a resulting impact on various categories. If the total percentages for clients' not in the labor force and those not employed and not looking are combined, 52.6% of clients were not effectively part of the labor force in FY 2000.

Some conclusions can be drawn from the data. It is clear that at any given time approximately 1/5 of clients are employed in competitive work. Between 10 to 14% of clients are not employed and are not currently looking for employment. Another 7 to 8.5% of clients are unemployed and looking for employment. Around 7% of clients are physically impaired, while 2% are retired. This means that during FY 2000, nearly 70% of clients were either unemployed or were limited by age and physical impairment in their ability to become employed.

The unemployment rate for clients does not compare favorably with that for the State as a whole. The average unemployment rate for the State was only 6.7% in both fiscal years 1998 and 1999 while it fell to only 6% in fiscal year 2000. This contrasts strongly with the fact that a maximum of only 20% of clients were employed in competitive work during the three years examined. As was stated earlier in this report, over half of clients are routinely not a part of the labor force.

Table 3: Employment Status of Behavioral Health Clients

Employment Category FY 1998 FY 1999 FY 2000
Number of Clients % of Clients Number of Clients % of Clients Number of Clients % of Clients
Competitive Work 5,164 14.5 7,389 17.5 8,370 20.0
Supported Work 513 1.4 533 1.3 576 1.4
Sheltered Work 665 1.9 672 1.6 736 1.8
In Employment Training 204 0.6 252 0.6 194 0.5
Homemaker 1,188 3.3 1,200 2.8 1,107 2.6
Student 872 2.5 1,146 2.7 1,063 2.5
Retired 646 1.8 941 2.2 953 2.3
Physically Impaired 2,671 7.5 2,956 7.0 2,944 7.0
Not Employed, Not Looking 3,872 10.9 4,285 10.1 5,877 14.0
Not Employed, But Looking 2,996 8.4 3,360 7.9 2,873 6.9
Not in Labor Force 11,940 33.5 14,756 34.9 16,158 38.6
Volunteer 193 0.5 197 0.5 241 0.6
Unknown 4,741 13.3 4,609 10.9 775 1.9
Total 35,665 100 42,296 100 41,867 100

The OBHS separates client income data for those who make over $10,000 per month from clients who make less than that on a monthly basis. Income statistics are then calculated for those who make less than $10,000 per month. Data indicate that the average client belonging to the group making less than $10,000 monthly, makes just over $600 per month. The average income for FY 1998 was $611, for FY 1999 $606, and for FY 2000 it was $650. During this same period, approximately 2,000 to 3,000 clients each year reported no monthly income at all. This amounted to 7.5% of adult clients in FY 2000.

The percentage of clients with Medicaid as their insurance coverage (see Table 4) is another measure of their economic status. Approximately half of adult clients are covered by Medicaid each year, as are over 80% of children. This illustrates the behavioral health system's strong reliance on Medicaid funding as was discussed in the first installment of this review. This statistic also indicates that a large proportion of behavioral health clients are indigent. The proportion of behavioral health clients who are Medicaid recipients greatly exceeds the percentage of the State's total population who are Medicaid recipients. During FY 2000, out of an estimated population of 1,806,928 a total of 337,433 (18.7%) West Virginians were Medicaid recipients. In both fiscal years 1998 and 1999, 18.9% of the State's population were recipients.

Table 4: Percentage of Clients with Medicaid as Their Insurance

FY 1998 FY 1999 FY 2000
Adults Children Adults Children Adults Children
51.2% 85.7% 48.4% 84.1% 48.1% 82.8%

The duration of adult mental illness (see Table 5) indicates that a large portion have long-term treatment needs. Table 5 also includes data for those undergoing substance abuse treatment, therapy for relationship problems or who are otherwise not permanently mentally ill. Those who suffer from mental illness for less than one year accounted for only 21.2% of clients in FY 2000. Approximately 11% suffered from mental illness for one to three years. Clients who are mentally ill for four to six years generally make up 8-9% of the total. Those who are mentally ill for more than six years represent as many as half of clients. Finally, the duration of the clients' mental illness was unknown in 26.3% of the total for FY 1998. This was reduced to 6.2% in FY 2000. As has been mentioned earlier, more complete data for FY 2000 has affected the totals for some categories.

Table 5: Duration of Adult Client Mental Illness

Duration of Mental Illness FY 1998 FY 1999 FY 2000
Less than 1 Year 13.0% 11.8% 21.2%
1-3 Years 11.1% 10.7% 11.8%
4-6 Years 7.7% 8.1% 8.9%
More than 6 Years 41.9% 44.4% 51.9%
Unknown 26.3% 25.0% 6.2%


Taken as a whole, the available demographic data collected by the OBHS indicates that fee-for-service payments from the majority of adult clients are not a promising source of revenue due to low income and labor market participation levels as well as the long-term nature of many clients' mental illness. The average client has a monthly income of only $600-$650 per month. Only about 1/5 of clients are involved in unsupported employment. The duration of adult clients' mental illness indicates that a large portion have long-term treatment needs. Those who are mentally ill for more than six years represent as many as half of clients.

Factors affecting the demand for behavioral health services were analyzed in this report. The poverty level appears to be the most important factor in determining the demand for behavioral health services in a county. Given that tendency, the OBHS should pay particular attention to the quantity of services provided by providers in poorer counties.

The financial information provided by the surveyed behavioral health centers further demonstrates that client fee-for-service payments do not contribute significantly to a respective facility's overall revenue. Only one center had at least 10% of its total revenue account for private revenue each of the three fiscal years that were analyzed. Overall, the amount of accounts receivable for each of the facilities is small compared to their total revenue. Due to the factors mentioned above such as low income and high unemployment, the chances of significantly enhancing revenue are minimal.

1. For the figures of individual behavioral health centers that were surveyed, see Appendix B.