Chapter Eleven: Managed Care and Third-Party Reimbursement
Chapter Overview
Chapter eleven explores the issue of managed care and its effects upon mental health
professionals. Managed care has altered the field of counseling, forcing many professional
counselors to change how they conduct and manage sessions. Additionally, many counselors in
private practice have been forced out of the business. The chapter addresses a number of issues
concerning managed care and its influence on the practice of mental health counseling.
In order to understand the impact managed care has had on mental health counseling, it is
important to explore the historical context for its development. Society shifted from being rural
and communal to one that is more industrialized and individualistic in nature. In the mid-1800s,
insurance companies were created to help cover costs of injuries sustained at work. From there,
an increase in the number of insurance companies occurred across the country. The Great
Depression spurred on the development of health care, and from World War II on, insurance
became more popular in society. The Community Mental Health Centers Act of 1963 helped
increase the acceptance of counseling for individuals, which led to insurance coverage. Moving
into the second half of the 20th century, costs continued to rise for insurance companies, and they
started to become more involved in preventing unnecessary services from occurring in
counseling.
As one enters into the professional world of mental health counseling, the term “managed
care” is often used, but many people do not fully comprehend what it entails. Managed care
managed care. These include moving toward, moving away, or moving against the system. The
chapter concludes by discussing ways to survive in this era of counseling. The author suggests
important self-care ideas to prevent burnout. Besides self-care, it is critical for counselors to
possess the skills and knowledge of doing business in the managed care world. Additionally,
counselors need the skill and knowledge to successfully conduct negotiations with the managed
Key Words/Terms
• Updiagnosing-occurs when the mental health practitioner gives a reimbursable diagnosis
to a client who does not fully meet DSM criteria as a “favor” so that the 3rd-party
reimbursement will pay instead of the client
• Managed care-a range of programs and policies that control access to care, the types of
“out-of-network” providers are still an option.
• Patient care medical homes (PCMH)-a model of service delivery and reimbursement that
utilizes a team-based approach to health care delivery that facilitates the comprehensive,
coordinated, and integrated approach to manage all aspects of patient’s health care.
• Accountable care organizations (ACO)-a model of service delivery and reimbursement
that builds in integrated behavioral health
Lecture Outline for Chapter Eleven
Managed Care and Third-Party Reimbursement
I. Managed Care in Context
A. Financial Risk and the Rise of Insurance Companies
2. Needs arose and community looked to “take care of their own”
3. Mid to late 1800s, society became more industrialized
a. Loosened community and familial ties
4. Early 20th Century
a. Renewed call for health care
b. Forerunner to Blue Cross/Blue Shield created in 1929
c. In 1937, Health Service Plan Commission developed to oversee the
Blue Cross plans
d. Blue Shield developed in 1939
e. After WWII, numerous insurance companies created
f. After WWII, federal government supported health industry by
B. The Push Towards Managed Care
1. Until late 1970s, there were two underlying assumptions
2. By the 1980s, change in perspective that things were excessive
3. Cost
a. 1965=$42 billion
4. Unnecessary Services
a. Vessy and Howard’s Study
i. 50% of people in psychotherapy overdiagnosed
ii. Updiagnosing-occurs when the mental health practitioner
gives a reimbursable diagnosis to a client who does not
fully meet DSM criteria as a “favor” so that the 3rd-party
reimbursement will pay instead of the client
b. Managed care controlling by placing limits on the amount and
types of services rendered by providers
II. What is Managed Care?
A. Cost containment
2. Attempts to control costs by managing the frequency and fees of services
B. Focus on accountability to ensure efficiency and value
2. Value =(desired outcome-adverse outcomes)/cost
C. Primary function of managed care is to get a better deal from the mental health
professionals
D. Managed care-a range of programs and policies that control access to care, the
types of care delivered, and the cost of care
E. Health maintenance organizations (HMOs)-the most common form of managed
care systems. They provide direct services to consumers and typically have lower
premiums and out-of-pocket expenses, no deductibles, and are less
comprehensive than other types of managed care systems
F. Preferred provider organizations (PPOs)-networks of providers that collectively
provide comprehensive health care coverage or an array of specialty care, such as
mental health or substance abuse
G. Service plans (POS)-allows for consumers to choose provider while a professional
controls utilization of services. It promotes the use of providers within the
network, but “out-of-network” providers are still an option.
H. Procedures for Reducing Utilization
1. Pretreatment Authorization of Treatment
a. Ensures that any treatment initiated has been determined to be
2. Concurrent Utilization Reviews
a. Counselor must meet with a reviewer to justify continuation of
3. Incentives for Efficient Providers
a. Gaining a position on a provider’s list
4. Increased Employee and User/Client Cost Sharing
I. Procedures for Controlling Price Per Unit
1. Capitation
a. Counselors contract with the MCO
2. Less Expensive But Equally Effective Treatment Approaches
3. Retrospective Claims Reviews
4. Process
a. Client meets with social worker to determine eligibility
b. Passed to mental health counselor or MSW who conducts
biopsychosocial assessment
c. Level of medical necessity established
III. Impact on the Practice of Mental Health Counseling
A. Managed care has caused “an upheaval in the practice community.”
B. Managed care world under stress and always changing
C. Coping
2. Counselors doing what they need to do in order to survive
3.Patient Protection and Affordable Care Act (PPACA)
a. Mandates of coverage
4. Alternative reimbursement models are being proposed (e.g. bundled
payment model)
5.Some counselors by-passing third-party reimbursement
6.Counselors going against managed care
IV. Conclusion: Surviving in the Era of Managed Health Counseling
A. Impact of the economic context depends on setting in which the mental health
practitioner practices
1.Private practices relying on 3rd-party reimbursement
3.Health-related service provider organizations
B. Impact of ACOs and cost-sharing of health care costs
2.Move toward pay-for-performance contracting
3.Cash-paid market for services increasing
C. Counselor self-care skills are critical
1.Implement and maintain a balanced lifestyle
3. Stress management techniques
D. Must possess a working knowledge of the “ins and outs” of doing business in the
managed care environment
E. Have appropriate knowledge and skills to conduct direct negotiations successfully
with MCOs
1. Establishing a positive and collaborative relationship ensures that the
welfare of the client is primary
3. Using correct procedural codes in completing paperwork and
communicating to the case manager
F. Must possess a thorough knowledge and understanding of their code of ethics
G. Must make a paradigm shift from older, traditional models of service delivery
1. Catalyst model
a. Clients seen for brief episodes of treatment, frequently in
nontraditional modes
2. Also guided by ecological theory, which supports the counselor’s
approach to assessment, treatment, and utilization of client support
systems
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