Managed Care: How Are Psychiatrists Surviving?

Psychiatric Times
by Michael G. Wise, M.D
April 1996

The spread and growth of managed care has had a profound impact on psychiatric practice, especially in large metropolitan areas. In regions of the United States where penetration rates of HMOs are high and the competition fierce, premiums are being cut and services reduced. In psychiatric practice, this has meant reduction, if not abandonment, of coverage for many inpatient psychiatric services and all long-term psychotherapy. It has also brought about such rapidly growing trends as mental health carve-outs, development of clinical protocols and capitation of providers.

Psychiatrists buffeted by these forces fight for survival and reasonable psychiatric services for their patients. This article will provide the psychiatrist with practical tips for survival in this managed care environment.

Managed care has transformed our ability to treat patients as well as the way we view the future. According to Psychiatric News (Jan. 5, 1996), managed care has also decreased psychiatrists' median income. In 1991, the number of HMO enrollees in the United States was 38.6 million. Enrollment was projected to top 56 million in 1995.

Rising membership and declining premiums indicate that the managed care market is expanding and becoming more competitive. A Group Health Association of America survey projected a 1.2 percent decline in premiums for 1995 compared with 1994. While membership was growing, HMO premiums declined during the last four years.

Given these rapid changes, what are psychiatrists doing to survive managed care?

To answer that question, I conducted a quasi-scientific survey. I interviewed by telephone or in person 50 psychiatrists who practice in different settings including academic, private, public and military practice in different regions of the United States. Questions asked included: "What percentage of your patients are 'managed care' patients?"; "What impact has managed care had on your practice?"; and "What changes are you planning or have you already made to help survive managed care?" Additional information was also requested, such as number of years in practice. The following are my impressions from this survey.

Important Variables

Several variables seemed to influence the impact of managed care on psychiatrists. These variables included location, competition, years in practice as a psychiatrist and type of practice. The penetration of managed care varied from state to state, as well as within most states. In some states, including Massachusetts, Minnesota, California, Maryland and Oregon, the percentage of residents who belong to HMOs is greater than 30 percent. In other states, such as Mississippi, North Dakota, Idaho, Montana and Arkansas, the percentage of residents who belong to HMOs is much lower (e.g., less than 5 percent). In addition, locations with fewer mental health providers and fewer competitive health care systems had less managed care. For example, a psychiatrist in private practice in Monroe, La., reported that managed care has had a small impact on practice patterns in his area. In contrast, a psychiatrist practicing in an academic setting in Boston reported major upheaval and changes in practice patterns.

During interviews, psychiatrists expressed particular angst with utilization review, the loss of reimbursement for inpatient services and long-term psychotherapy, and the infringement of many people upon the patient-physician relationship. One psychiatrist stated, "All managed care wants us to do is manage medications."

Number of years in practice seemed to strongly influence the psychiatrists' reactions to managed care. Older and more clinically experienced psychiatrists were, in general, more angry and disillusioned by the changes that have occurred. These psychiatrists described the changes with terms such as "mangled care," or statements like "Managed care is a misnomer; it's all about money, not care. It's managed money."

Many younger, recently trained psychiatrists were less bothered by the language and philosophy of managed care. Some, especially residents, were perplexed and somewhat put off by the strong negative reactions of their teachers or senior colleagues. Younger psychiatrists were more comfortable than older psychiatrists with terms like "short-term treatment strategies" and "alternatives to inpatient hospitalization."

Why is there such a difference? It seems likely that experience creates resistance to change, especially if changes are perceived as negative. Clinically experienced psychiatrists "know" that some patients benefit from longer hospital stays and long-term psychotherapy. To deny patients effective treatments and psychiatrists the ability to use hard-earned skills is frustrating, demoralizing and, in some cases, unethical. On the other hand, many younger psychiatrists who have trained using short lengths of hospital stay and short-term psychotherapy "know" these approaches are also effective.

Psychiatrists also reacted to managed care based upon their location on the managed care "food chain." Psychiatrists who are consultants to employers are employees of managed care companies, are capitated or at financial risk for overutilization, and more likely to support managed care. Unfortunately, the psychiatrist in private practice in a community where most residents belong to HMOs becomes the "plankton" in this food chain and suffers most from these changes.

Survival Strategies

In spite of the adversities previously described, psychiatrists are attempting to adjust and adapt to changes that have occurred.

Many psychiatrists in solo private practice have joined a group or merged practices. A group offers a defense against the powerlessness felt by many psychiatrists, as well as more bargaining power when dealing with managed care organizations. A psychiatrist in solo practice in Texas joined a large group of physicians who had formed a group without walls (GWW). Because this particular GWW included most of the physicians in the community, the managed care companies couldn't dictate unreasonable benefits for patients or reimbursement rates for physicians.

Greg Zinzer of Vista Foundation, a nonprofit organization for the advancement of managed care, made the following suggestions for psychiatrists who affiliate with a managed care organization (MCO): 1) Form or affiliate with a multidisciplinary group (i.e., a group that includes psychologists, social workers, nurses, etc.) in order to offer a full range of mental health services; 2) Join an MCO that has good administration and leadership; 3) Join the highest-quality MCO in the area ("If you wait [to join], it may be too late"); 4) Get to know the MCO's top administrators so that you can have input into decisions that affect patients who have psychiatric disorders.

Diversify your practice. The old adage, "Don't put all your eggs into one basket" seems to apply. If most of your patients are long-term psychotherapy cases, this is unlikely to continue. You might learn or develop additional clinical skills. For example, learn brief, focused therapies or specialized treatments, such as electroconvulsive therapy (ECT). One psychiatrist whose practice was self-described as "strictly inpatient" took a week-long practicum in ECT and has since developed an inpatient and outpatient ECT service. Several psychiatrists who previously had not done much forensic work now accept legal cases. The legal cases were typically interesting and fees were not discounted. One psychiatrist commented, "Managed law is probably not around the corner."

A frequently mentioned practice strategy was capitation and other types of financial risk arrangements. In a capitation arrangement, the psychiatrist or a psychiatric group would, for example, provide psychiatric services for an agreed amount per month per managed care member. One psychiatrist with less than two years' postresidency experience works in a small group practice, and was offered a capitation contract to provide several thousand people with psychiatric services at 17 cents per member per month. The psychiatrist was quite naive about capitation and wondered aloud if this was a reasonable offer. This contract, if accepted, would have led to a financial disaster for the group.

Capitation and other types of financial risk arrangements traditionally have not been taught in psychiatry residency training programs. Capitation is complicated business and is not for those who lack business sense. In areas of the country where MCOs control access to health care for most patients, survival for the psychiatrist will likely require in-depth knowledge about business arrangements that place the physician at financial risk. Financial arrangements such as these are problematic for other reasons. The potential for conflict of interest exists whenever the delivery of less treatment means more money for the physician. This bottom-line business approach to patient care is a source of angst for many psychiatrists.

One area within psychiatry, consultation-liaison, could potentially benefit from a managed care organization's cost-consciousness. Medical services research has shown that psychiatric disorders are frequently unrecognized by primary care physicians and, if recognized, are often not appropriately treated. In addition, individuals who are medically ill and also have untreated or inadequately treated psychiatric disorders stay in the hospital longer, use health care services at markedly increased rates, and have increased rates of morbidity and morality. These data are especially important for consultation-liaison psychiatrists, because they contain cost-offset information necessary to justify improved psychiatric treatment. In order to improve patient care and decrease overall cost, managed care organizations need psychiatrists to work closely with "gatekeepers" to ensure that psychiatric disorders are identified and appropriately treated. This can occur through rapid consultation and collaboration with psychiatrists or liaison between psychiatrists and primary care physicians to improve the latter's diagnostic and treatment skills.

With some exceptions, such as military and public practice, psychiatrists reported that utilization review and utilization reviewers were the bane of their existence. The anger and frustration created by utilization review was considerable. One psychiatrist described it as an obstacle course supervised by untrained people that is placed between the patient and the needed treatment. Another psychiatrist had to hire a full-time individual to manage utilization reviewers because the time required of the psychiatrist had become a financial drain. Although the utilization review process allegedly determines whether recommended treatment is medically necessary, psychiatrists described it as adversarial and very unpleasant. Capitation eliminates this type of utilization review, because the treating physician, who is also at financial risk, must decide if treatment is medically necessary.

Two psychiatrists from different states had left group practice for solo private practice. This seemed incongruous given the widely held belief that solo private practitioners are destined to become an extinct species. Their stories were similar.

These psychiatrists disliked the changes brought by managed care, especially limitations on treatment options and direct intrusion of managed care organizations into the psychiatrist-patient relationship. In their private practices they avoided, as much as possible, any contact or contracts with MCOs. They said they now enjoy their practices more and remain busy.

Several psychiatrists interviewed talked about retirement. Two mentioned the possibility of going into another medical specialty, primary care. Although psychiatrists had heard of colleagues retiring or leaving the specialty because of managed care, no one interviewed could name a specific psychiatrist who had done so. One psychiatrist who was a member of a busy psychiatric group practice reported the group had sold 50 percent of the practice to a health care company. This may be an isolated event for psychiatrists, although it is not uncommon for health care or managed care companies to purchase primary care practices as a way to gain patients ("market share").

In summary, this survey indicates that the impact of managed care on psychiatrists varies greatly. Important factors that influence the size of this impact include geographic location, number of years in practice, type of practice and position on the managed care "food chain." Despite the pessimism, anger and frustration frequently expressed during these interviews, psychiatrists are using creative and adaptive strategies to survive in a managed care environment.

Michael G. Wise, M.D., is clinical professor of psychiatry at Louisiana State University School of Medicine, Tulane School of Medicine and Uniformed Services University of the Health Sciences, F. Edward Hebert School of Medicine.