Iowa Medicaid billing change could slash payments for pediatric therapy, Linn County provider warns

HIAWATHA — When Kari Martin first brought home Ashtyn — a 19-month-old foster child — he was barely speaking at all, communicating mostly through sounds rather than words.

Over the next three years, weekly speech therapy and occupational therapy through ProActive Pediatric Therapy in Hiawatha helped transform what Martin, from Marion, calls the hardest parts of his early days: the frustration of knowing what he wanted to say but not being able to say it, and the isolation that came with being difficult to understand.

Now 4, Ashtyn “is talking all the time” and working on fine-tuning specific sounds, said Martin, a schoolteacher and single mother who later adopted Ashtyn. With clearer speech, she said, his frustration has “waned a lot,” and he’s connecting with peers and teachers in ways that once felt out of reach.

Martin, 32, worries the progress her son made — and the early help other kids still need — could be jeopardized by an Iowa Medicaid billing shift the state says is required to comply with the federal Affordable Care Act, but providers say amounts to an immediate, de facto cut.

The Linn County pediatric rehabilitation agency where Ashtyn receives therapy says the billing change will slash reimbursements by up to two-thirds, threatening its financial viability and access to therapy for children.

What’s changing — and why providers say it’s a cut

Iowa Medicaid notified providers Nov. 14 that it was changing billing rules for certain rehabilitation and speech therapy claims, with the change taking effect Dec. 1.

State officials have framed the shift as aligning Iowa Medicaid billing with long-standing federal requirements under the Affordable Care Act, ensuring fair and consistent billing practices and protecting the integrity of the Medicaid program while maintaining access to quality care — not lowering rates.

Iowa Department of Health and Human Services spokesperson Danielle Sample, in a statement, said the change “simply limits providers to billing one unit of service per patient visit, rather than multiple units (three or four) for a single visit,” arguing that billing multiple units per visit is out of compliance with federal rules and is expected to generate about $480,000 in annual state savings.

“Iowa Medicaid strives to reimburse providers at a level that reflects the cost of delivering services, while ensuring payments remain consistent with typical commercial rates,” Sample said in response to emailed questions from The Gazette.

But Lisa Dolphin, an occupational therapist and co-owner of ProActive Pediatric Therapy in Hiawatha, said the change forces certain speech therapy codes that had long been billed in timed, 15-minute units to be reimbursed as a single per-visit “encounter,” no matter whether a child is seen for 15 minutes or 45 minutes.

Best practices typically require 30- to 45-minute sessions to build rapport and address complex developmental needs, especially for infants and young children, Dolphin said. Under the new policy, those longer visits would be reimbursed at the same rate as a 15-minute session. That effectively cuts payments per typical session by roughly 58 percent to 66 percent, Dolphin said.

Agencies say shortening sessions to match reimbursement would compromise care, and continuing standard-length visits would push payments below the cost of delivering services. Dolphin said that pressure is compounded by the fact that pediatric rehabilitation agencies have not seen Medicaid rate increases in more than 15 years, even as staffing and overhead costs have climbed.

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Beyond the dollars, agencies argue pediatric care is fundamentally different from adult therapy. Children often need dozens of visits each year — sometimes 50 to 100 — along with more frequent prior authorizations and documentation, making the model far more resource-intensive.

“Billing multiple units of speech therapy enables us to provide more intensive services that lead to faster progress, especially for infants and children in early intervention,” Dolphin said. “We have families driving over an hour for care, and limiting therapy to just 15 minutes simply does not make sense for children who need meaningful, effective treatment.”

‘They’re my lifeline’

One of those traveling families is that of Wendy Dayton, a 41-year-old mother from Malcolm near Grinnell. Dayton says the early therapy her son Harrison receives at ProActive Pediatric Therapy has been “life changing.”

Harrison, who turns 3 this week and has Down syndrome and complex medical needs, has received weekly speech, physical and occupational therapy since he was released from the NICU at about 9 weeks old. It’s a routine that requires Dayton to drive about 70 miles, more than an hour each way, every week because there are no specialized pediatric rehabilitation services near her home.

Dayton said therapists helped Harrison progress from tube feeding to drinking from cups, and from limited movement to sitting, crawling and walking. She worries the Medicaid billing change will potentially force providers to scale back or stop accepting Medicaid — leaving families with few options and long waitlists.

“We simply would not be where we’re at with Harrison without ProActive and without these services being available,” she said. “They’re my lifeline.”

While the state says federal law drives the change, providers counter that Medicaid rules allow states flexibility in setting billing methods. They warn the shift could reduce access to therapy for Medicaid-enrolled children, especially in rural areas, and ultimately drive higher long-term costs if developmental needs go unmet — even if the reimbursement rate itself is unchanged.

Dolphin said ProActive’s clinic serves children from birth to 18 and draws families from more than a dozen surrounding counties — with many driving one to two hours each way because there is no comparable pediatric clinic closer to home. She said about half ProActive’s current caseload is Medicaid patients.

“We’re trying to figure out the financial impact and how to survive as a small business,” Dolphin said, including whether the clinic can remain in network with Medicaid managed care organizations.

If clinics drop out of network, Dolphin said, Medicaid families may be left with fewer options — or longer waits — in a system she says is already strained. ProActive has a list of more than 200 children waiting for therapy services, Dolphin said, and other pediatric providers face similar backlogs.

“We want to serve every child, yet under these changes we would be providing services at a financial loss to families covered by Medicaid,” she said. “As a small business, we don’t have access to the grants or supplemental funding available to hospitals or larger organizations.”

Families stress importance of early intervention

Martin’s son receives weekly speech therapy and previously occupational therapy through ProActive. She described the services as not just improving speech, but changing day-to-day life: fewer meltdowns rooted in communication breakdowns, more age-appropriate play, and more successful connections at preschool.

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Her fear is that tighter billing rules will ripple outward — fewer providers willing or able to see Medicaid patients, fewer covered visits, shorter sessions and more pressure on schools to fill gaps even as districts face their own budget constraints.

In her view, early intervention isn’t optional — it’s time-sensitive.

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“I just want them to take into consideration … how important the early intervention is, while their brains are so pliable and just ready to take in so much,” she said. “That’s the time to do it. We can’t wait.”

Ashley Richey, 32, of Cedar Rapids, says Medicaid-funded therapy has transformed life for her 4‑year‑old son, Knox, who has cerebral palsy and is non-verbal.

Since starting at Proactive Pediatric Therapy in 2023, Knox has learned to communicate using a tablet, say “Mom,” eat a wider range of foods and move with the help of an assisted gait trainer.

“My son’s only 4 years old, and he’s gonna need services the rest of his life,” Richey said.

Richey fears the Iowa Medicaid rule change could force ProActive, where about half their caseload relies on Medicaid, to drop Medicaid entirely or cut session times to 15 minutes. Either scenario, she says, would be devastating.

“If Proactive were forced to drop Medicaid … I would honestly not know if we have any options. I would not know what the next steps would be,” she said. “I feel like we would have no options, to be honest.”

Even if the clinic tries to stay in the program, she worries shorter visits would gut the quality of care.

“You’re cramming as many things as possible in that 15 minutes,” she said. “The child is going to be overwhelmed, confused.”

State: Compliance issue, not a policy choice

Iowa Medicaid Director Lee Grossman has told lawmakers the change is driven by compliance with the Affordable Care Act — not by an effort to reduce payments. During a Dec. 8 Administrative Rules Review Committee meeting, Grossman said Iowa had an obligation to align with federal standards when compliance issues are identified, and he emphasized reducing the risk of potential federal “claw back.”

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HHS officials have also pointed to the scale of the program — hundreds of thousands of Iowans relying on Medicaid each year — as reason to act quickly when federal alignment issues are found.

Providers, however, question why the state is acting now, after years of the existing billing framework. They also argue federal law gives states flexibility in how they design Medicaid payment systems so long as they use compatible methodologies.

Dolphin and other pediatric rehabilitation agencies say the state effectively implemented a substantive change through an informational letter rather than through formal administrative rulemaking.

They contend the policy conflicts with Iowa Administrative Code language that defines a unit of treatment for rehabilitation agencies as 15 minutes — and that under Iowa law, the administrative code must be followed unless it is formally amended.

DHHS cites federal law, which requires states to apply compatible national coding standards to Medicaid claims. HHS says its authority to administer Medicaid and bring Iowa into compliance is laid out in Iowa Code Chapter 249A.

Because the policy reflects an existing federal requirement rather than a new state policy, HHS argues it can implement the change through guidance rather than formal rulemaking, and says it is keeping providers informed as the transition unfolds.

Providers also say DHHS officials have referenced a small-business impact analysis showing no financial harm, but rehabilitation agencies say they have repeatedly requested the documentation and have not received it, raising questions about how the state assessed the change’s effect on small pediatric providers.

Seven pediatric rehabilitation agencies are affected statewide, Dolphin said, serving 38 counties — a footprint that includes rural areas where alternatives are scarce.

What happens next

The billing shift has already taken effect, but the broader rules process still is unfolding.

The Administrative Rules Review Committee is next scheduled to meet Jan. 12 at the Iowa Capitol. Providers say they plan to continue pressing state officials to pause implementation, produce a small-business impact analysis and engage with rehabilitation agency stakeholders to assess the impact on pediatric, rural and home-based Medicaid services.

“Without meaningful dialogue, these decisions risk leaving vulnerable children without the services they need to succeed,” Dolphin said.

Gazette Des Moines Bureau Chief Erin Murphy contributed to this report.

Comments: (319) 398-8499; tom.barton@thegazette.com