The National Coalition of Mental Health Professionals and Consumers, Inc.

DOWNSTREAM RISK MANAGEMENT: IMPLICATIONS

By James T. Wrich, Director, J. Wrich and Associates, a health performance company in Chicago.

To: Our Colleagues

Subject: Managed Care Further Erodes Mental Health Care to Keep Corporate Profits Untouched

From: Drs. Patricia Dowds & David Byrom/NCMHPC

Reported from the conference to form a behavioral managed care coalition by professional organizations in the Greater Washington, DC, region to draft and get legislation enacted to protect consumers and professionals from MC corporations. (Thanks to the Greater Washington Coalition of Mental Health Professionals & Consumers, Inc.)

Managed behavioral health care (MBHC) firms have significantly reduced mental health and substance abuse treatment expenditures in recent years. Most of this reduction has come as a result of denial of care. But with the near elimination of service at the inpatient, primary residential, intensive outpatient and partial hospitalization levels, MBHCs have nowhere else to reduce fees except at the individual and group therapy levels.

Mental health carveouts will be paying outpatient professionals less in 1998 and 1999 – to pay for increased profits – e.g., the recent acquisition of much of the industry by Magellan has cost Magellan ONE BILLION DOLLARS and the mental health professionals will pay for this! Arriving today were certified letters reducing fees by further unconscionable amounts.

For psychologists:

90801 (Initial diagnostic interview, from $82 to $65) - 21%;

90806 (Individual psychotherapy, from $72 to $50) - 31%;

90847 (Family/couples psychotherapy, from $77 to $50) - 35.1%;

90853 (Group psychotherapy, up from $43 to $45) + 4%.

These were the only fee comparisons available to the writers of this article, both psychologists, at this time.

The only "profitable" part of total health care insurance/managed care is ‘behavioral health care’ and we alone have accepted an actual reduction of our service by more than 50%, while overall health care has increased by 49% under managed care. The increasing need for mental health services is still present and being ignored to everyone’s peril - by too many of us professionals and the general public, not just by MBHCs/HMOs.

The only place Magellan can get the money for its 1) Debt; 2) Debt Service; 3) Profit & Administration, which in ‘behavioral’ health care carveouts runs from 40% to 68%; and 4) actual ‘direct service’ by its ‘down stream providers,’ which is what us professionals in outpatient public and private practices are called by the industrializers. Magellan will not raise premiums - Jim Wrich pointed out that psychotherapists and substance abuse counselors have overall been most willing to accept infringements on their service and on their fee. The corporation will retain its 40-68% level of profit while we cut back our standard of living, or are driven out of independent practice. Wrich further said, while he was sure all of us can find employment elsewhere, he is not sure we can be replaced with our combination of knowledge, expertise and caring. At the end of his presentation at this 11/20/98 conference in DC, Mr. Wrich added that he knows this personally because he is the parent of a schizophrenic child.

The following is an analysis of the impact on private practice psychotherapists when managed behavioral health care companies reduce their fees. Also an estimate of the impact such fee reductions can have on MBHC's profit margins has been calculated. (Note: Wrich had detailed calculations of fees/ client hours/weeks per year --i.e. vacation, sick leave, and conference time-- minus office expenses - to arrive at gross and taxable income. Only a brief summary follows here:

$80/25client hours= $94,800 Gross and $54,300 taxable for a 40 hr a week

$70/28 client hours=$94,080 Gross and $53,580 taxable for a 45 hr week

Note: He doesn't even go to $40 a client hour and thought $50 was too low to include, but he did:

$50/32 client hours w/3 additional work weeks=$78,400 gross and $37,700 taxable for a 53 hour work week.

UPSTREAM BENEFITS OF DOWN STREAM RISK TRANSFER

The following calculates the potential increase in profits when a managed behavioral health care company reduces its fees to private psychotherapists from $70 per hour to $55. (Note: You can calculate for $50)

W/$55 per hour fee

W/$70 per hour fee

Total revenue

$200,000,000

Direct Care*

$94,300,000

$120,000,000

Gen & Admin

$50,000,000

Pre-Tax Profit

$55,700,000

$30,000,000

Taxes (35%)

$19,500,000

$10,500,000

NET PROFIT

$36,200,000

$19,500,000

*Direct Care = payments to professionals or providers

Monopsony is what this business activity is – a monopoly of the DISTRIBUTION of a service or a product that is manufactured by many providers. We professionals are not in charge of the distribution of our service, our product - psychotherapy and/or counseling. The distributor will not negotiate with us much less talk to us about our fee. The reality (thanks to Kate Berman) is that we are day laborers/piece workers - with no benefits or compensation for overhead costs. An independent contractor can say more than ‘yes’ or ‘no’-An independent contractor can be a party to the contract.

Clinical social workers can join the CSW Guild in order to regain the right to negotiate the terms, if not the economics, of the financial arrangements with the corporations controlling the financing and the delivery/providing of health care services. Psychologists do not have similar viable alternatives yet. All of us must become activists. Join the National Coalition for Mental Health Professionals and Consumers (1-866-8-COALITION) and work for and demand that our respective local and national professional associations unequivocally fight the destruction of health care in America, with mental health care as the most vulnerable and as the most under siege now.

For submissions, for volunteering to report and work with the newsletter editors, and for letters to the editor, please contact:

Editor, The Coalition Report
William A. MacGillivray, Ph.D.
newsletter@TheNationalCoalition.org

Note: When you become a member of the National Coalition, you will receive the Mental Health Consumer Protection Manual and the monthly newsletter, the Coalition Report.

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