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The APA Assembly grappled with two key areas affecting managed care during the Assembly's meeting in Toronto, in late May before referring them to two different APA committees for further development. The proposed items would direct APA to explore whether the Association should devise a definition of medical necessity and whether APA should endorse a model outpatient form to be used by managed care companies.
After wrestling with the question of whether to define medical necessity, the Assembly referred the item to the Council on Economic Affairs with a directive that it be brought back to the Assembly by March 1, 1999. A draft of a model outpatient form submitted by Houshang Hamadani, M.D., was revised and then referred to the Joint Reference Committee for further development.
Both issues touched a raw nerve by interjecting APA into the unpleasant realities of the rapidly changing managed care marketplace. The term "medical necessity" has become synonymous with third-party review. As practicing psychiatrists know, the denial of the existence of a medical necessity by third-party payers is invoked to refuse reimbursement to patients and physicians for medical procedures. Psychotherapeutic procedures, in particular, have suffered under the definition of medical necessity employed by third-party payers.
Those who favor APA developing its own definition of medical necessity argued that however distasteful members may find the idea, it is a harsh reality of contemporary medical economics, and, given that, it would be better for APA to have some voice in shaping the term's meaning.
The action paper, which was submitted by Lawrence Kline, M.D., deputy representative for Area 3, and Lawrence Sack, M.D., and Roger Peele, M.D., representing the Washington Psychiatric Society, asked that there be an exploration of "whether APA should develop and support a definition of medical necessity that is appropriate to the treatment of mental illness, including substance abuse."
"There is a problem crying out for help," said Sack. "That is that medical necessity is being defined in an entirely inappropriate and unethical manner." Under the guidelines of the National Academy of Sciences' Institute of Medicine, such criteria are ethical only if shared in a collaborative fashion with physicians, according to Sack. But at present they are shared only with the managed care executives of the companies rendering the decisions, he observed. Medical necessity guidelines are determined "by for-profit managed care companies with one thing in mind-to reduce payment for psychiatric services in order to fatten" the companies' profit margins, Sack said.
The referral to the Council on Economic Affairs "is a necessary step in the ultimate implementation of this idea as policy," he noted.
Although "medical necessity" has become a term of opprobrium, that was not always so, according to Kline. The term "has been used in third-party insurance since the inception of third-party insurance," Kline observed. "It used to be everything but custodial or cosmetic care, that is, any treatment legitimately needed to treat a disease or defect. It was basically defined as the standard of care in the community," he observed. Physicians have become "cynical and mistrustful because of the way [terms like this] have been twisted. So a term that was once respectable has become a term of opprobrium, which is why we have to take the term back. We either do it ourselves or we leave it to someone else to do it. We must bite the bullet."
One need not look far for a reasonable definition of medical necessity, said Kline. For example, a pending piece of federal legislation designed to protect patients' rights defines "medical necessity or appropriateness" as "a service or benefit which is consistent with generally accepted principles of professional medical practice." That definition is one possible model for APA in that it "puts the ball back in the doctor's court," said Kline.
"Right now we have a standard of medical necessity set by insurers that says a patient can't be hospitalized unless they are suicidal, and as soon as they are not suicidal they must be discharged. That's crazy."
Prior professional standards required retaining the patient until he or she was clearly ready to cope with his or her situation, said Kline. "Now we have the notion that medical necessity stops after 10 visits. It's a purely economic standard, and it's clearly unacceptable. That's why we have to make the standard of medical necessity medical."
Peele echoed this view. "I think we need to take it away from the managed care companies and create a definition with boundaries acceptable to psychiatry."
Just as a once-benign term has been turned against psychiatry, so, too, have the cumbersome forms required by third-party payers, said Peele. Getting them to use a form developed by APA will probably require an aggressive marketing strategy to convince managed care companies to make the change, he added.
APA's two-page model form is designed to "reduce the hassle factor," said Kline. The clinician has the option of filling out only the first page, which "really establishes medical necessity," he noted. Based on the five-axes diagnostic approach used in DSM-IV, it is "sufficient documentation to establish medical necessity in most cases," he added. "If the treatment goes beyond a certain number of visits, it may be necessary from the payer's standpoint to provide the additional information [on the second page]."
The reasoning is that by allowing the clinician to establish medical necessity without revealing sensitive information, breaches of confidentiality will be minimized. The form also establishes a high standard of informed consent, Kline said.
The form's brevity and confidentiality protections are augmented by the elimination of a need for extended narrative documentation, Kline continued, making it easy to fill out. Further, it tracks to the contemporary state of knowledge in psychiatric diagnosis and treatment and is compatible with clinical guidelines. He credited Deborah Zarin, M.D., deputy medical director in the APA Office of Research, for seeing that the latest version of the form was diagnostically sound.
Joanne Ritvo, M.D., chair of the APA Committee on Managed Care, has been involved with development of the treatment form for the last three years. She and her colleagues reviewed more than a dozen examples of forms to get an idea of what could be distilled into a simple, two-page form.
Optimistic about APA approval, Ritvo pointed out that "the main problem will be getting managed care companies to use it." But several small managed care companies have already committed to using the form if it is approved by APA, she noted.
The form project was in part a response to the complaints of members about excessive paperwork. Many members complained that there was "great redundancy but no uniformity," she noted. The need to protect the patient's confidentiality was the other key issue, she said.
Outgoing Speaker of the Assembly Jeremy Lazarus, M.D., was another individual who helped initiate the push for an APA-designed form several years ago. "Once we get it approved and accepted by APA, the challenge will be to see if managed care organizations will either accept this form or adapt their own forms" in ways similar to the APA form, he told Psychiatric News.