(p. 265) The Basics of Managed Care and Its Impact on Private Practice
The earliest approach to group healthcare purchasing and delivery in the United States is reported to have occurred in 1928 in Elk City, Oklahoma, created by a physician named Michael Shadid (Potter, 2010). Dr. Shadid established a “cooperative” in which farmers and their families paid a monthly fee to obtain care at his clinic, also supporting his effort to develop a hospital and encourage medical specialists to come to this rural area. Within five years, it is reported that there were 600 subscribing families, along with several recruited medical specialists. Similar prepaid group plans were subsequently established in other locations, the names of which will sound familiar (e.g., Group Health, Kaiser), reaching increasingly larger numbers of enrollees.
In a theme that will seem very familiar and current, in 1973 the federal Health Maintenance Organization (HMO) Act attempted to “restrain the growth of health care costs and also to preempt efforts by congressional Democrats to enact a universal health care plan” (National Council on Disability, 2016, para. 4). The law included $375 million in “seed money” to establish HMO companies, overrode state laws that restricted prepaid plans, and required employers with 25 or more employees to provide an HMO option if workers were covered under employer-based health plans. “For profit” corporations that would focus on cost containment were born into a previously relatively nonprofit industry.
Two other noteworthy events occurred that continue to reverberate throughout healthcare in ways that directly impact mental health professionals. In the context of efforts to encourage the development of health insurance companies toward the end of World War II, the McCarran-Ferguson Act of 1945 was passed to specifically exempt insurance companies from federal antitrust scrutiny—which health professionals do not enjoy (Anderson, 1983). And, in Goldfarb v. Virginia (p. 266) State Bar (1975), the “learned professions” were determined to have no antitrust exemption under the Sherman Antitrust Act of 1890. Even seemingly “independent” health professionals could be found liable if acting in an anticompetitive way, such as by restraining others’ trade or promoting monopoly-like control in markets. This definitely extends to acting together to influence reimbursement.
These events created structural tensions between for-profit health insurers and health professionals that continue to this day, most directly in a “managed care” environment. The Patient Protection and Affordable Care Act of 2009 (ACA) and other reforms, such as federal mental health parity (Wellstone-Domenici Mental Health Parity and Addiction Equity Act, 2008), may have leveled the field to some extent.
Understanding Managed Care
The definition of managed care depends to a great degree on one’s perspective in relation to its pluses and minuses. Beyond the clinician/insurer/patient arrangement, with the intermediary functions by the insurance company, other companies evolved primarily to manage benefits, performing such activities as vetting, credentialing, and contracting with providers; determining “medical necessity”; paying, denying, or “repricing” claims (according the individual enrollee’s policy); and monitoring clinician and patient adherence to policy requirements and, ostensibly, the “quality” of care. Generically, the companies are “managed care organizations” (MCOs) and, when focused on mental/behavioral health more specifically, “managed behavioral health organizations” (MBHOs). These are also known as “carve-outs,” as they focus specifically on administering mental health benefits, carving out these particular benefits from each individual’s overall healthcare insurance benefits. Over the years, mental/behavioral health benefits have been much more tightly controlled and managed than general medical health benefits, particularly with downward pressures on reimbursement and utilization (Herz, 2009).
Perhaps a most straightforward dictionary definition of managed care is apt, with a minimum of bias: a system of providing healthcare (as by a health maintenance organization [HMO] or a preferred provider organization [PPO]) that is designed to control costs through managed programs in which the physician accepts constraints on the amount charged for medical care and the patient is limited in the choice of a physician (Merriam-Webster, 2016). Insurance companies, of course, would emphasize patient choice and access to vetted and highly qualified professionals. Patient advocacy and professional groups would tend to emphasize limitations in access and intrusions into the doctor–patient relationship that could compromise treatment choices and privacy.
The U.S. National Library of Medicine articulated that managed care plans are:
a type of health insurance. They have contracts with health care providers and medical facilities to provide care for members at reduced costs. These providers make up the plan’s network. How much of your care the plan will pay depends on the network’s rules. (U.S. National Library of Medicine, 2016, para. 1)
(p. 267) Three types of plans are identified: HMOs, PPOs, and point of service (POS). Each of these pays for varying levels of in-network versus out-of-network care. Plans with greater restrictions typically cost the purchaser less. Medicare has a “managed care” option called Medicare Advantage, described on its website as a type of Medicare health plan offered by a private company to provide hospital and doctors’ services, including HMO, PPO, fee-for-service, and other structures, typically with prescription drug coverage (Medicare.gov, 2016).
The basic formula is an arrangement between three parties: patients (and often the employers who purchase policies for their employees) who purchase the coverage and receive healthcare; healthcare practitioners, who provide the services; and the insurance company, which contracts with healthcare practitioners to provide services to the patients to whom they sell coverage. The insurance company is an intermediary between patient and professional. The intermediary “services” are where the insurance company stands to profit, provided it can keep the costs of the professionals’ services below amounts paid in by the patient/purchaser.
Those intermediary functions are where the crux of the tensions lie: decisions by you, the mental health professional, in relation to the extent you participate in such systems; decisions by patients related to the costs of purchasing the coverage in this manner (and whether there are any other options, such as patients purchasing services directly from professionals); and the restrictiveness versus flexibility of the plan in paying for the care patients desire. The insurer, of course, needs to maintain low enough costs to be profitable, while keeping the contracted professionals and purchasing patients happy. It is strongly in the interests of the insurance company to closely manage costs—to “manage care.” The inherent conflicts of interest may be self-evident. Note the difference between this model and the first group care purchasing “Shadid” model, which was a more direct patient–professional dyad.
Pros and Cons for the Practitioner to Consider in Decisions About Participating
A managed care company may seek to contract with you as a provider, or you may seek to contract with a company to provide services. Advantages to the MCO or MBHO of seeking providers may include being able to expand the number of policy purchasers (“lives covered”) to whom coverage can be sold, being able to better serve their current and expanding number of members, and being able to hold themselves out as engaging many well-qualified, vetted professionals. Advantages to the professional to contracting with an MCO could include expanding the number of patients who might be referred, seeking contract conditions that are favorable in terms of MCO expectations and reimbursement, and being able to hold oneself out to the public as having been vetted and qualified by companies that manage care for many people in one’s community. Potential disadvantages for MCOs to increasing the number of providers include the costs of vetting and maintaining contracts with providers and accepting providers who may not follow contract requirements such as ongoing education, timeliness of access by referred patients, or recordkeeping, or who end up (p. 268) providing services “excessively” (e.g., more than typical as determined by the MCO for patient conditions or according to professional standards, thereby increasing costs to the company).
The Credentialing Process
Once a decision has been made to offer or seek a contract (become “empaneled”) with the company, the professional will need to complete a credentialing process. Applications may be extensive, and the length of time needed to complete the process will vary from 30 to 45 days up to six months or longer. Fundamentally, professionals need to establish that they have appropriate education and training (degree), that they are licensed in their jurisdiction (typically at an independent level or with the level of supervision required by the license and professional services), that they have malpractice coverage at levels that are often specified by the MCO, and that they have had no prior “adverse events” (not meaning untoward patient outcomes but more typically defined as findings by an adjudicating body of improper practice) in terms of providing services. Advanced credentials such as board certification, or specialty services perhaps particularly desired by an MCO in a locale, may be to the applicant’s advantage when seeking credentialing on an MCO’s panel of approved providers.
Clinicians should be aware that not every MCO will be seeking, or accept, everyone who applies. Not infrequently panels will be “closed” to new applicants—potentially signaling that the MCO is attempting to minimize the disadvantages noted above or has sufficient numbers of providers to serve their subscribers. Many states now have “any willing provider” laws that require companies to accept every qualified applicant (National Conference of State Legislatures, 2014). These laws will interact with the requirements of ACA, which includes provision for “nondiscrimination in healthcare” (Section 2706), meaning that groups of licensed or certified providers (such as a particular profession) may not be discriminated against by insurance companies, although it does not mandate contracting with every willing provider. Meeting credentialing requirements does not guarantee that an applicant will be accepted, even if participation on a particular panel would be desired by the professional.
Similarly, by no means does an offer to apply mean that the professional has to accept or pursue this. Contracts “offered” tend to favor the MCO, which will say it is doing this for the advantage of its subscribers, and contract terms tend to be relatively fixed. But the professional has the choice to accept or reject contract “offers” and indeed should review the terms carefully and thoroughly. Some providers (e.g., Holstein, 2007) have been successful in negotiating modified terms, including reimbursement amounts.
Issues Related to Contract Review and Negotiation
Unless this is an area in which you have legal expertise—and even then the maxim about a person acting as his or her own attorney should be kept in mind—it is strongly recommended that mental (p. 269) health professionals have all contracts reviewed by an attorney specializing in this area of healthcare law. The investment in this consultation will be well worth the possibility of preventing future problems. At the very least, a knowledgeable attorney will be able to advise the clinician whether the contract is relatively standard or has unusual requirements. Contracts will specify many expectations and aspects of the relationship between clinician and MCO, such as the length of time the professional will have obligations to the company and to their covered/referred patients (even, for example, after the contract ends, a “wind-down period”), how to ensure renewal of a contract, how to end the contact if it is no longer desired, how soon covered patients must be seen after referral (perhaps even the number of openings that should be made available for covered patients), recordkeeping and documentation requirements, collection and reporting of “quality” and outcomes measures, and allowed access for review of documentation by the company (perhaps even the potential for company representatives to visit the office/clinic setting). The clinician will certainly want to know all of these details before entering into a contract to ensure that the contract is acceptable and is not violated, intentionally or inadvertently.
On a contractual basis, MCOs likely will establish requirements for clinicians to submit treatment plans to be approved prior to initiating services that would be reimbursed (prior authorization). There likely will also be requirements to produce written progress updates—or participate in telephone reviews by case managers—during the course of treatment (concurrent reviews). Case reviewers/managers will have different levels and quality of mental health expertise, and this can at times be a frustrating process for the licensed professional who is fully focused on ethical and competent practice.
Typically the treatment record can be reviewed by the MCO during treatment as well as after treatment has ended, again for the company to determine whether services were “medically necessary” and documented according to agreed-on requirements. In the worst-case scenario for a clinician, services could retroactively be deemed to have not been “necessary” or correctly documented, and amounts reimbursed could be recouped (known as a “clawback”). Companies are now required to have processes in place for both internal and external reviews of “medical necessity” decisions, but recoupment (or withholding and application of payment to what would be approved reimbursement on new or other cases) could occur while such reviews are in progress and prior to a determination in response to an appeal. The contract will specify review and appeal procedures.
“Medical necessity” is a term that has had a quite fluid definition over the years and has been used at times by MCOs to deny coverage for treatment that professionals believe to be fully warranted based on case needs and professional standards, including egregious examples in mental health (e.g., NY Attorney General, 2014). A useful, consumer-oriented definition of medical necessity is,
…standards used by health plans to decide whether treatments or health care supplies recommended by your mental health provider are reasonable, necessary and appropriate. If the health plan decides the treatment meets these standards then the requested care is considered medically necessary. (National Alliance on Mental Illness [NAMI], 2016, para. 4)
Widely agreed-on standards of what is “necessary” tend to be less well established in mental/behavioral health services than in other areas of healthcare. This allows for “judgment calls” by (p. 270) both MCOs—which by definition emphasize minimizing their costs—and clinicians, who, even in the context of maintaining professional and fiduciary responsibilities to patients, may at times err in the direction of increased frequency or intensity of services (longer sessions, individual plus group sessions, testing when not indicated). It is strongly recommended that when becoming credentialed and before entering a contract, clinicians should ensure that “medical necessity” policies and procedures are in writing, transparent, and plain for the MCO, patient, and clinician to see. If these are not documented, circumstances may well be interpreted after the fact (e.g., after treatment has begun, is in progress, or has ended), and probably not to the advantage of the patient and clinician. For example, insurance companies may not consider marital or couples therapy to be “medically necessary,” rather requiring a diagnosis of an individual. Similarly, “uncomplicated grief,” premarital counseling, or client concerns about work-related issues may not meet medical necessity criteria. Health insurers typically do not consider assessment for academic needs such in learning disability to be sufficient for coverage, with the rationale that these are for academic and not health purposes. Unless specifically disallowed by the contract, such evaluations could be provided and directly billed to the client. Similar circumstances occur when assessments are for court and medicolegal purposes. Forensic assessments are almost never covered under a health insurance policy, as these are not deemed to be health-related activities, and services and costs may be arranged directly with clients. At a bare minimum, written medical necessity policies should specify which diagnoses are covered (or excluded); any limits on treatment frequency or levels of care (such as office, hospitalization, or specialty facility coverage); any special requirements for pre- or reauthorization of treatment for particular conditions or treatment types; and any limitations on treatment approaches allowed or disallowed. In the current context of the ACA (Healthcare.gov, 2016) and mental health parity, limitations and exclusions that are substantially different from those applied to medical care may be increasingly difficult to justify by MCOs, though clinician and patient appeals and enforcement will remain challenging.
One of the potential advantages of contracting with an MCO is the possibility of estimating numbers of referrals. One way to understand this is to ask the MCO how many policyholders (“covered lives”) they have in the ZIP code or region where the clinician practices. Unless the clinician has particular expertise for which people will travel, one of the top considerations for those seeking care is convenience of location. Beware of MCOs that respond they “do not know” or are unwilling to provide the information. While watching their own corporate health, any sound MCO most definitely will know how many subscribers it has, and where they live. Most online searches for “find a therapist who specializes in X” will also include a component of the search “within Y miles of” an address or ZIP code. Indeed, the clinician will want to reasonably understand in advance the company’s expectations for the numbers of subscribers the company will want to be seen, to ensure the clinician can meet those expectations.
Another advantage of contracting with an MCO is the ability to know in advance the reimbursement amount for specific services. Clinicians should not accept a contract without reviewing (p. 271) the current, to-be-agreed-on fee schedule. Avoid companies that will not provide this early during the process of deciding whether to apply to become empaneled. The clinician should determine whether the reimbursement offered meets the clinician’s needs by performing all appropriate calculations. Practice cost factors could include major overhead expenses such as rent, employee salaries, purchased services such as billing and bookkeeping, and other costs, including projected likely future cost increases. MCO reimbursement is likely to show no or at best very minimal increases over time, probably not keeping pace with inflation. In terms of potential income implied by a contract, variables to consider could include such factors as the number of clients likely to be referred who are covered by the particular MCO and the number of appointments expected by contract to be made available for that population in relation to other referral source expectations, relationships, and reimbursement. Clinicians may have experiences at both extremes: too many clients referred for the clinician to reasonably provide care or that reduce access by other referral sources, to no clients referred at all covered by a particular payer. Remember, the MCO is in the position of keeping its enrollees satisfied by being able to readily receive services, and keeping the clinician panel happy with a predictable referral flow, while at the same time limiting its costs. Do not sign a contract without ensuring the attached fee schedule is the same as the one reviewed during the credentialing process, including all the same potential covered services.
As has been mentioned, some clinicians have successfully negotiated higher reimbursement rates for some services than the contract fee schedule in particular circumstances (Holstein, 2007). Such possibilities exist, for example, when a clinician has particular expertise sought by an MCO in a local area; when the company has insufficient numbers of clinicians in an region to serve its subscribers; when the clinician has an extended, favorable working relationship with an MCO (consider such at contract renewal); or when the clinician can demonstrate a particularly strong record of success with the MCO’s referrals. Known local reimbursement rates, particularly those provided by other similar MCOs, are potentially very useful information for the clinician to have in such negotiations, to the extent these are known. Such numbers may be difficult to obtain, particularly as clinicians must be careful about openly sharing rates (remember the earlier mention of “anticompetitive” activity). Additionally, MCOs typically require clinicians to keep fee schedules confidential. Thus, even if a clinician holds contracts with several companies, it may not be possible to directly use such fee schedules in negotiations. Thankfully, data about national and regional charges and reimbursement are becoming more transparent and available in this era of big data, from public sources such as http://fairhealthconsumer.org/, or for purchase, such as http://pmiconline.stores.yahoo.net/mefe201.html.
Anticipating and Preventing Common Challenges
Assuming a successful credentialing and contracting process, ideally the clinician would begin to see clients covered by the MCO, provide and document services, successfully respond to prior and concurrent reviews, submit charges, and receive reimbursement in a timely manner. Yet, in each of these areas a number of common challenges may occur.
(p. 272) Suppose the clinician has a limited number of openings in the schedule in the near future. More new referrals are received than can reasonably be served. The clinician is well aware of the reimbursement amounts for clients referred, either covered by third-party payers or MCOs with which the clinician may hold contracts, or the full fee. Would it be proper to limit scheduling newly referred clients whose coverage is known to be less than others, or compared to those who might pay the full rate out of pocket?
First, recall that an MCO contract may well specify requirements for the timeliness with which covered individuals must be scheduled once a referral is received. This must be taken into account in accommodating new appointments, or there is the risk of violating a contract provision. All it would take would be for one or a few prospective patients calling a number of clinicians only to find they cannot actually make an appointment to complain to the MCO or possibly to the human resources department of the employer through whom their coverage was purchased, to raise awareness of specific clinician scheduling responses and availability. Worse, though the practice is rarer these days, MBHOs have in the past employed a “secret shopper” approach precisely to determine clinician/practice scheduling responses, with representatives posing as potential clients seeking services (http://www.socialworkers.org/pubs/news/2001/06/shopper.htm). From a business perspective, it may be a “good problem” to have an overflow number of referrals. But the clinician must know and honor the contractual timeliness and other availability requirements for scheduling, regardless of anticipated relative reimbursement.
A proactive solution would be to have a policy written in advance that specifies timeliness of scheduling, perhaps even the number or percentage of openings available to those with different resources, for example, including being seen on a pro bono basis, those with public insurance such as Medicaid, other third-party insurance, or out-of-pocket purchasers of service. This “payer mix” may reasonably be determined in advance, based entirely or in part on business factors, as long as this takes into account the requirements of existing contracts and is applied objectively to all new referrals.
What if a client is covered by one of the MCOs to which the clinician is contracted but says he or she cannot afford the required co-payment or co-insurance? (“Co-payment” is a set amount to be paid, such as $10 per visit. “Co-insurance” is a percentage of the amount the insurance company would reimburse, such as 20%.) May the clinician forego, or “write off,” the co-payment/co-insurance amount?
Check the contract. In most cases, MCOs will not want clinicians to routinely waive co-payments or co-insurance. Insurance companies, and in some cases laws and regulations, might consider routine waivers to be “unfair” or even illegal “inducements.” For example, if potential patients hear that you usually do not require co-payments, they might be more likely to seek you out rather than other clinicians. This potentially is an unfair practice that, from the MCO’s perspective, could lead to patients using your services more than they might others, or more than necessary. Routine waivers of co-payments are flatly prohibited under Medicare (though “hardship” exceptions are possible periodically, based on objective criteria determined in advance and applied to all payers).
If allowed by the contract, then the clinician has the option to waive amounts for which patients are responsible. This still leaves the potential for intentional or unintentional bias about when and to whom to offer this “discount.” In either event, a proactive approach again would be advisable. (p. 273) For example, clinicians would do well to establish a policy, in advance and in writing, that could be part of a more complete informed consent and/or treatment agreement process. A policy that establishes how decisions are made about when patient amounts might be waived—with objective criteria such as defining financial need—would fully inform clients and allow the policy to be applied fairly and consistently.
What about “balance billing”? This would occur when the clinician’s charge for a service is more than the amount reimbursed by the insurance company. May the clinician bill that difference directly to the patient? Again, this likely is specified in the contract. Some payers allow this, but many will not. This is another good example of the importance of understanding a contract in detail. A similar situation may occur if a clinician provides a service that is not covered under the policy, or for “no show” appointments. Is it possible for the clinician to directly bill the patient for these? In many cases, if a service is not covered under the insurance policy, clinicians may be allowed based on contract terms to make arrangements for service provision and billing directly with the patient. The potential to charge for missed appointments likely also will be specified in a contract.
Ethical Issues and Dilemmas in Managed Care
Potential conflicts of interest and other dilemmas are inherent in the three-party arrangement between patient, insurance company (MCO, MBHO), and clinician. By contract, clinicians will be required to perform certain activities on behalf of the insurer. Patients, as purchasers of insurance policies, will be required to adhere to the terms of their policy. Clinicians will have responsibilities for clients based on licensure and other legal requirements as well as ethical standards. As businesspersons, professionals will certainly be mindful of the financial health of their practices, even extending to the implications of reimbursement in a particular case. These multiple roles and responsibilities are likely to conflict in a number of ways in this context.
For example, a clinician may diagnose a particular problem that, it turns out, is not reimbursable under a client’s policy. There may be a temptation to “find” other diagnoses that are covered, though these otherwise would not be the focus of recommended assessment or treatment. It would be frankly improper to provide an unsupportable diagnosis, even though this might seem to be in the best interest of the client, who would have the cost of care covered, and also potentially to the benefit of the clinician, who might otherwise not be able to provide reimbursed services. (Recall, however, the prior discussion of the potential for direct-to-patient billing, if allowed by contract, for noncovered services or identified problems.) As language on the standard HCFA 1500 insurance form indicates, “Any person who knowingly files a statement of claim containing misrepresentation or any false, incomplete or misleading information may be guilty of a criminal act punishable under the law and may be subject to civil penalties.” Federal laws would apply for insurance claims to federal programs, such as Medicare and its “managed care” version (Part C). All insurance companies would consider it potentially fraudulent to submit a claim with a diagnosis that did not exist. Most if not all health professional ethical standards would likely prohibit such a (p. 274) “false or deceptive statement” (e.g., section 5.01(a), American Psychological Association Ethical Principles and Code of Conduct, 2010).
Privacy and confidentiality are well-established foundations to successful mental health treatment, but in the managed care context, clinicians are required by contract to provide information, often in considerable detail, about clients’ conditions, functioning, and progress in treatment. There is an inherent conflict in duties to clients, effective treatment, and contractual obligations to a third-party payer. In this instance, clinicians are reminded that clients, by virtue of their having purchased a health insurance policy, have already provided consent to the insurance company to obtain information from treating professionals in order to ensure the validity of claims. Of course, it may be argued that many consumers purchasing policies have not really provided fully informed consent about this possibility. The Health Insurance Portability and Accountability Act (HIPAA) also allows release of information for “treatment, payment and healthcare operations,” which broadly would include claims submission and case reviews.
The proactive clinician will explain limits to confidentiality thoroughly to clients at the beginning of treatment, especially if claims will be submitted to an insurance company. Clinicians also would ideally review requests for release of records or clinical information when these occur, so that clients are involved in an ongoing way in the informed consent process. Client responses to release of information and the associated intrusion into the patient–clinician relationship may well become a focus of treatment at times. Other strategies in a managed care context have included having clients participate in live telephone case reviews, or reviewing and consenting to documentation provided. Additionally, using professionally driven documentation standards, for example by including only required elements in the formal record, reserving other information to “psychotherapy notes,” as defined under HIPAA, has been recommended to minimize the extent of disclosures when these must occur (Herz, 2007).
One of the most vexing issues in working with managed care is when there is a difference of opinion between a case reviewer and the treating clinician about what is indicated—for example, the number or frequency of visits, continuing or ending treatment, whether or not testing might be necessary, or even the types of treatment approaches. Several considerations are worth bearing in mind. First, if clinicians are aware that such reviews and efforts to limit care seem to be occurring more intensively for mental health treatment than for reviews of medical care, there may be a pattern that violates federal requirements for equal treatment of medical and mental health benefits. In such cases, providing information to professional and other advocacy organizations—of course, with due consideration for patient confidentiality—may prove helpful to identify and intervene in potentially biased administration of benefits. For example, the American Psychiatric Association (2016) identifies how to report potential parity violations, and the American Psychological Association Practice Organization actively seeks reports of potential violations of the federal mental health parity law (http://www.apapracticecentral.org/update/2014/04-10/parity.aspx).
Second, clinicians will need to use their complete set of social skills, persuasive abilities, and knowledge base when interacting with reviewers. It may be natural to assume a defensive, adversarial approach when one’s professional judgment and integrity seem to be questioned. Such a response is likely to work to the clinician’s detriment, however, and potentially to the detriment of the client for whom the clinician is advocating services. Objective behavioral terms that will describe expected outcomes and potential improvements in a client’s functioning—or prevention (p. 275) of a worsening condition potentially requiring more intensive (expensive) levels of service such as hospitalization—and reasonable timeframes are also advised in such interactions. Being able to refer to “evidence-based” reasons for recommended treatment may also be helpful.
Third, clinicians and patients certainly could pursue both internal and external review processes, to have other reviewers make a determination based on the facts. Finally, if reimbursement for care is denied either at the outset or during the course of treatment, this potentially places the clinician in the position of forgoing payment for services deemed by the clinician to be necessary, or having clients pay for services they thought would be covered. Clinicians should remember that initiating or continuing treatment certainly remains an option to be decided between clinician and patient. If an insurance company determines services not to be necessary, fundamentally this is a coverage and payment determination, not a decision about whether treatment is actually indicated, based on the clinician judgment in collaboration with the patient. A decision to move ahead with services, though not paid for by the insurer, is still available for the clinician and client. A payer’s determination not to cover services may actually empower the clinician–client dyad to pursue their decisions. Ultimately, clinicians should not let insurance coverage and reimbursement decisions supersede their clinical judgment about clients’ treatment needs. We should never abandon clients in need of treatment and can consider other payment alternatives, referrals to less costly treatment options, or continuing to provide needed treatment while adverse utilization review decisions are being appealed (see Wickline v. State, 1986).
The Future of Managed Care
Micromanaging patient–clinician interactions adds costs for MCOs. Prior authorization, concurrent and post-treatment reviews, and similar activities are time consuming, labor intensive, and expensive. These may not save costs for the MCO by detecting or inhibiting “unnecessary” services. Up to now, common MCO strategies to maximize their own cost–benefit equation in such activities have included focusing greater attention on higher-cost services (such as hospitalization over outpatient visits), reducing or even eliminating the need for prior authorization, or allowing up to an established number of treatment visits before requiring review and reauthorization (Papatola & Lustig, 2015).
But healthcare delivery and payment systems are undergoing tremendous changes at this time, in the wake of the ACA, mental health parity, and other influences. Mental health and substance use disorder services are one of 10 categories of essential health benefits that health plans must now cover under the ACA (Healthcare.gov, 2016), including psychotherapy and inpatient treatment. Policies must cover preexisting conditions, and yearly or lifetime dollar limits are not allowed for mental health coverage. Coverage must also provide parity between mental health and medical/surgical benefit limits, including financial limits such as deductibles, co-payments, co-insurance, and out-of-pocket costs, treatment limits such as number of days or visits covered, or “care management” such as prior authorization. The potential for MCOs to save costs by micromanaging these factors would appear to have become more limited, at least in relation to the management of other health conditions. On a broader level, the ACA requires (individual and small-group) (p. 276) insurance plans to spend to spend at least 80% of the premiums received for medical benefits (85% for large-group plans) or reimburse policy purchasers their share of premiums overpaid. In terminology that reflects the insurance industry’s views of these amounts to be paid in healthcare benefits, this is called the “medical loss ratio” (MLR) (Congressional Research Service, 2014). Thus, there are a number of recent changes that would seem to limit costs savings by micromanagement of benefits.
How will companies limit expenses (maximize profits), and what are the implications for private practice? First, healthcare payment models are undergoing dramatic restructuring. Payers are identifying ways to shift “risk” (i.e., benefit payouts) to professionals. For example, groups of professionals might be paid an overall amount to provide services to an agreed-on number of patients over the course of a year. This may sound familiar to some as a previously much-reviled system known as “capitation,” “based on a payment per person, rather than a payment per service provided” (see Capitation, American Medical Association), although attempts to build in important differences are now occurring. Should the clinicians sustain more costs when providing care than the total paid, clinicians would incur the losses.
Why would clinicians agree to this? Because the “carrots” on the other end of this arrangement could include bonus payments if costs of services are less than the total amount allocated. Insurance companies could provide incentive payments to clinician groups for cost containment, or for meeting other benchmarks such as collecting and reporting “quality” and outcomes data, and meeting health outcomes. Perhaps a group of clinicians might be expert and efficient at treating particular populations or conditions and able to closely estimate and contain its own costs. Such a clinician group might be able to estimate a total payment for the costs of care to which it could agree and work toward additional quality or other incentive payments for the total population. Such pay-for-performance or value-based care models are in full swing in accountable care organizations (ACOs) within Medicare as well as in the commercial insurance industry. At the end of January 2016, 838 ACOs were in operation, approximately 57% in Medicare and 43% in private insurance, in all states, an increase of about 13% from 2015, with about 28 million lives covered (Health Affairs, 2016). In March 2016, the U.S. Health and Human Services Department announced that fully 30% of $380 billion in projected Medicare payments were tied to “alternative payment models that reward the quality of care over quantity of services provided to beneficiaries” (HHS.gov, 2016, para. 1). Another estimate found that “90% of payers and 81% of providers are already using some mix of value-based reimbursement (VBR) combined with fee-for-service (FFS)… . Providers using mixed models expect FFS to decrease from about 56% today to 34% five years from now” (McKesson Corporation, 2014, p. 5).
The implication for those in private practice is that mental health professionals should certainly take such systems into account for possible participation, referral, clinical activity, and payment resources. Given the recent and likely future growth, it may become nearly impossible to ignore such systems, particularly since 90% of U.S. citizens are now covered by insurance. Mental health professionals—even on an independent practice basis—certainly could join such organizations to provide clinical services, to serve in management, and to participate in other activities such as outcomes measurement and research. Such systems are actively collecting and reporting health outcomes data as well as fiscal outcomes, costs, and cost savings. Early results are mixed (p. 277) about which models might prove to fail or be most effective in improving patient experiences, population health, and reduced costs—the “triple aim” now being pursued amidst healthcare reforms (Institute for Healthcare Improvement, 2014). Note the key difference between the “triple aim”—with concurrent emphasis on quality for patients and improved health outcomes—and the prior single-minded focus on cost savings by managed care. It remains to be seen whether such systems will actually improve healthcare and maintain a focus on quality, without reverting to fixation on cost savings. But managed care likely will evolve away from the traditional methods of direct oversight of fee-for-service payment and activities to managing alternative payment models and measures of effectiveness and of value. Private practitioners likely will have to evolve in their understanding and work with such systems.
A further important change occurring in the context of healthcare system reform is the renewed interest in, and opportunities for, varieties of clinical/business entities owned and operated by health professionals, or other forms of integration among healthcare practitioners. These include “independent practice associations” and “member services organizations,” or other arrangements such as co-location. Entities and arrangements such as these must certainly take into account state laws related to the corporate practice of medicine as well as federal requirements, including antitrust considerations, when independent practitioners coordinate services. Again, this is an area in which it would be essential to purchase expert legal consultation. But in the context of ACA and the increased emphasis on integrated and coordinated care, independent practitioners may have greater latitude than allowed by prior interpretations and enforcement of antitrust limitations. With proper clinical and financial integration, independently practicing mental health professionals may find much greater opportunities in the future to work together and with others toward common goals of improving care, saving costs, and increasing reimbursement than previously available. A number of such organizations are in operation around the country (e.g., Northwest Behavioral Health IPA, http://www.nwbhipa.org/; Rhode Island Primary Care Behavioral Health Network, http://www.ripcpc.com/about/behavioral-health-network). Indeed, mental health professionals could create, own, and operate systems of service delivery and reimbursement, for example by managing a local network of clinicians. Professionals could also create organizations that provide specialty care such as assessment, emergency care, and aftercare, or provide care more broadly, including efforts to contain costs and measure quality of services and outcomes.
Given that insurance companies will of course continue to manage costs, it is likely there will be increasing efforts for them to pursue contracts with larger groups of mental health professionals, rather than with many individuals. Independent practitioners will not be immune to contracting and service delivery issues, reimbursement negotiation challenges, and increasing practice costs that have contributed to the decrease from 57% of physicians in independent practice in 2000 to an estimated 33% by the end of 2016 (Accenture Consulting, 2015). There are likely to be ongoing clinical delivery, care integration, and cost-savings pressures for private practitioners. Solo and small-group independent practitioners may well find it necessary to form larger groups in the future. But such changes also potentially provide great opportunities to improve the care provided, to demonstrate one is doing so, and to increase leverage when negotiating reimbursement for one’s value to systems of care. How to implement these changes in the context of independent practice will be the challenge of the future.
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