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Jan/Feb 2008

When Managed Care Coverage Runs Out — Effective, Ethical Solutions
By Lynn K. Jones, DSW
Social Work Today
Vol. 8 No. 1 P. 22

Therapists who work with managed care companies can face challenges when allotted sessions expire. Seasoned clinicians share professional advice.

“Managed Care Changing Practice of Psychotherapy” was an attention-grabbing headline in a 1994 issue of The New York Times. The article claimed that managed care companies intended to wipe out what they called the New Yorker Syndrome—spending years in psychoanalysis was about to be a thing of the past.

Fast forward to 2008: Is the New Yorker Syndrome a distant memory or has it prevailed? Has managed care indeed changed the practice of psychotherapy? Only 20 sessions are typically funded by managed care, but then what?

Spending years in psychoanalysis may have been over the top, but is a 20-session limit the answer? What do private practitioners do about clients who have exhausted their funding but still need more therapy? Do their choices compromise the ethical demands of their profession?

Realities of Practice
A 2001 survey of mental health counselors confirmed that managed care has had a major impact on their practice (Danzinger & Welfel, 2001). A majority (60%) of mental health counselors said they would change treatment plans based on managed care limitations. Nearly one half (46%) said they had terminated care with clients before they were ready because of these limits. Nearly as many (44%) admitted diagnosing for dollars by “upcoding” to give an acute problem a more severe diagnosis or “downcoding” to an acute problem to avoid an unreimbursable Axis II diagnosis.

The same survey found that if a managed care company denies reimbursement for care judged to be necessary, most mental health counselors (55.6%) would reduce their fees to continue treatment. Others would opt to see the client on a pro bono basis (27.8%). Approximately one quarter (27.8%) would refer the client to another provider, and 11% would terminate treatment without offering the client another option, even if they judged further treatment necessary.

Ethical No-No: Abandonment
“It’s a question that we have grappled with for a while” says Nancy Levine, LICSW, about what to do when managed care sessions run out and treatment is still needed. Levine has chaired the National Association of Social Workers’ (NASW) Massachusetts chapter ethics hotline for roughly 13 years and is a member of the ethics committee for the NASW national office. Levine believes that there is an “easy out” in the NASW Code of Ethics: The code says that you never have to abandon a client because you can make referrals and give the client options. But she explains that the referral options for clients who have no means are few and far between. Referring out also ignores the basis of social work practice—the relationship. “I think that managed care flies in the face of the social work Code of Ethics because it really doesn’t acknowledge what is at the heart of social work: the importance of relationship.”

Stephen Behnke, JD, PhD, director of the ethics office of the American Psychological Association (APA), an attorney, and a clinical psychologist, says there is nothing in the APA ethics code that requires the psychologist to continue treating the client who is unable to pay. What the psychologist is ethically obligated to do is discuss at the outset of treatment what will be paid for and discuss at the conclusion of treatment possible referrals if the client will benefit from further treatment.

Does that mean the APA ethics code allows a counselor to abandon a client when funding runs out? “No! No! No! I want to be very clear about this. You cannot abandon a client, but you are also not ethically required to see them forever if they cannot pay,” says Behnke. Noting that abandonment is an inappropriate termination of services, Behnke adds, “so you cannot just abruptly terminate a client. One would need to ensure that clients receive services that would be necessary in an emergency situation and that they had sources of referrals. The APA ethics code is very much focused on the process by which therapy begins and ends; none of this should be a surprise to the client or the psychologist.”

“Abandonment Prohibited” is the title of section A.11.a of the American Counseling Association (ACA) Code of Ethics, echoing the NASW and APA codes. The ACA code suggests that “counselors assist in making appropriate arrangements for the continuation of treatment, when necessary, during interruptions such as vacations, illness, and following termination.”

Choosing Not to Play
“I decided that I just wasn’t going to play, which is why I have a small private practice,” says Levine. Similarly, Lynne Spevack, LCSW, chair of the private practitioners committee of the NASW New York City chapter, is a proponent of working outside managed care. “I have a full-time private practice [in New York City] with no managed care clients. That is my bias,” she says.

Choosing not to play in New York City, where lots of people are used to paying privately for psychotherapy, is an option that may not be available in other locales.

Norman C. Dasenbrook, MS, LCPC, has extensive experience working with managed care companies in his private practice in Illinois. “I’m in the blue collar community of Rockford, IL, and I find that 95% of our clients want to use their insurance. If you are in a more affluent community and the client wants to pay out of pocket or they don’t want it on their record that they used their insurance for mental health, that could be another set of circumstances.”

Is Astute Diagnosis the Answer?
There is some consensus in the field that an astute diagnosis is the answer. “I think that if a social worker in private practice does a really good diagnostic assessment and determines that a person is going to need more treatment than what their managed care provider will cover, then they have an ethical obligation to make a good referral at the outset. In other words, they should not take someone on if they are going to wind up at the ‘What do we do now?’ point,” says Levine.

“I don’t think you can treat the insurance policy; you have to treat the condition,” says Dasenbrook. “If at the 15th session, you’re advising your client, ‘We have five more sessions that are going to be reimbursed by your insurance company, and it is my clinical judgment that you are going to need more,’ then you should be able to contract with your client about the options that are available.” Having a diagnosis at the outset and tracking the client’s progress through the allowable treatment period is key to effectively managing a client’s reimbursement, according to Dasenbrook.

Paul Alie, LICSW, who has a private practice in Massachusetts that is 90% managed care, agrees: “A therapist needs to think about planning the treatment so that the clients get what they need … in the time that is covered. In my opinion, it is unethical if a therapist doesn’t pay attention to that and just flies through twice-weekly treatment and then at the end of benefits says, ‘Where do we go from here?’ It needs to be part of the planning from the beginning.”

Our Time Is Up
“What do you do when the approved managed care benefit runs out for a client?” asked Spevack of her committee of 400 NASW members in private practice in New York City. The response was surprising: No one suggested making a referral.

So what do counselors do? Some clinicians tolerate clients who drop out of treatment and then resume later, according to Spevack. “Let’s say they run through their 20 sessions, and they drop out in September and then they resume in January when they have another 20 sessions approved.” A lot of clinicians negotiate a rate, which may be the full fee, the managed care fee, or sometimes a reduced fee. “So if a client has 20 sessions, they might see them every other week and then maybe there is a gap in treatment and they will negotiate a rate for that period of time,” explains Spevack. Other clinicians may stretch out the allotted number of sessions over a longer period of time.

Dasenbrook believes it is important for clinicians to get back to the insurance company and advocate to extend coverage when it is needed. He claims that managed care companies are more flexible today than in the past. “They are a lot more user-friendly. It’s cheaper in cold hard dollars and cents to extend someone’s treatment than having them end up in the hospital or having something tragic happen to them,” he says. Alie agrees: “Insurance companies are generally more than willing to provide more outpatient treatment in order to avoid higher levels of intensive care.”

Dasenbrook suggests that another option is having clients talk to their employers if they are comfortable doing so. “A lot of times an employee assistance program [EAP] will give three to five sessions at no cost to the employee, which can be added on top of whatever their managed care benefit is. Sometimes EAPs have a single case agreement so that even if I am not one of their providers, I can see someone that I have been seeing through a managed care plan.”

Alie says that some insurance companies will fund maintenance care once a patient is stabilized and the benefit has run out, which is cheaper and less disruptive than risking another severe episode. “You can make a case to an insurance company that ongoing treatment every month or perhaps two times a month is necessary to prevent decompensation,” he explains.

Dasenbrook and Alie agree that having the client advocate with their managed care company for more treatment can be effective. And if all else fails, Alie says the therapist can file an appeal to the managed care company, which is often successful in obtaining approval for more treatment. “If it is denied, then they need to help the client find the services that he or she needs the best way they can. Having done all that, I think they have fulfilled their responsibility to the client,” he adds.

The secret of working with managed care companies is not to get adversarial, according to Dasenbrook. “We find that a nice, polite approach is the way to do it. You just go in and advocate for your client. The managed care companies tend to respond to this approach by asking us what we think the client needs and more than likely they approve it,” he explains.

Final Analysis
Managed care has changed the practice of psychotherapy in fundamental ways. But in the years since managed care companies vowed that they were going to eradicate New Yorker Syndrome, they have changed too. They have come to realize that long-term psychotherapy is a must for some people to be healthy and is not just palliative care for the neurotic. The gulf between therapists and managed care companies, which at first seemed impossible to bridge, may finally be closing on some middle ground.

— Lynn K. Jones, DSW, is a freelance writer and an executive coach and organizational consultant in Santa Barbara, CA. As a specialist in organizational culture, she supports leaders and organizations in developing mission-driven cultures.

The Complete Guide to Private Practice for Licensed Mental Health Professionals by Robert J. Walsh, MA, NCC, LCPC, and Norman C. Dasenbrook, MS, LCPC, is a guide that includes many aspects of setting up a private practice, such as dealing with managed healthcare, how to handle claim denials, and how to get on closed panels.

Psychotherapy Finances is a newsletter written expressly for behavioral health practitioners and provides its subscribers with the latest news and ideas for building strong private practices, including practices in managed care. The newsletter is available at www.psyfin.com.

S 558 — The Mental Health Parity Act of 2007
After a long battle, the Senate passed legislation in September 2007 requiring equal health insurance coverage for mental and physical illnesses when policies include both. The bill, known as the Paul Wellstone Mental Health and Addiction Equity Act would dramatically change how managed care insurance companies fund mental health treatment if passed by the House.

The bill recognizes that mental illness is a disease like any other. Its objective is to require insurance coverage that is equal to, but not superior to, other medical conditions such as cancer, diabetes, or heart disease.

With the addition of New York and Ohio in 2007, there are now 41 states with parity laws covering 26 million Americans. These laws vary substantially in their scope and requirements. The federal parity law will only preempt standards in state laws that establish parity for day or visit limits and financial limitations.

The mental health parity law in Massachusetts stipulates that medical necessity determines the number of sessions for which a person is eligible, and the sessions are unlimited as long as treatment is medically necessary. Paul Alie, LICSW, explains: “For a biologically based diagnosis, such as bipolar disorder, schizophrenia, or major depression, there is no cap on the number of sessions as long as the therapist can demonstrate that there is medical necessity. And even if it is a nonparity diagnosis, such as an adjustment disorder or an anxiety disorder, subscribers are usually going to get up to 24 sessions since most people come in with some level of distress or impairment that is going to meet the criteria for medically necessary care.”


Danzinger, P. R. & Welfel, E. R. (2001) The impact of managed care on mental health counselors: A survey of perceptions, practices, and compliance with ethical standards. Journal of Mental Health Counseling, 23(2), 137-150.