January 15, 1999

Many of New York's 7,000 or so psychiatrists are up in arms over the latest insult from the managed care industry: three of the largest mental health carveout companies have implemented significant reimbursement reductions for some types of psychiatric care.

Value Options Behavioral Health, United Behavioral Health, and Magellan Behavioral Care (which is the successor to Merit Behavioral Health) decreased reimbursement rates by anywhere from 10 percent to 40 percent for several of the most frequently used psychiatric CPT codes. For example, Magellan reduced fees for all psychotherapy codes, while United decreased them for outpatient psychotherapy without medication management. The changes took effect January 1.

Members of the New York State Psychiatric Association (NYSPA), the organization that encompasses the state's 13 district branches, are reacting to the news with "outrage and resignation at the same time," commented NYSPA President James Nininger, M.D. "They feel beaten down by these managed care companies, but are not sad about the fact that the companies' financial reverses may point to light at the end of the tunnel."

On learning of the cuts, Seth Stein, executive director and general counsel of the New York State Psychiatric Association (NYSPA), wrote letters to each of the managed care carveout companies expressing NYSPA members' extreme dismay about the reductions and their potential consequences for individuals who seek treatment for mental disorders. The letters recommended that the companies cancel the fee reductions and restore "integrated treatment" to a system that often limits psychiatrists to medication management while psychologists and social workers are given the responsibility for conducting psychotherapy.

He pointed out that mental health carveout and other managed care companies "are well aware that outpatient care provided by psychiatrists is more cost-effective and shorter in duration than psychotherapy provided by nonpsychiatrists."

Nininger stated that while he and other New York psychiatrists are aware that managed care companies are under increasing economic pressure, they were "greatly surprised by the degree of the cuts and the fact that they came all at once."

Stein, suspicious about the timing of the announced reductions, also sent letters to government agencies to alert them to the NYSPA's concerns about the coincidence of several large mental health care carveout companies all deciding to reduce psychiatrist reimbursements at the same time.

Stein told Psychiatric News that he is looking into whether the companies might have violated federal antitrust laws by deciding to act in unison to cut fees to psychiatrists with whom they have contracts.

"We are making sure that these companies are living up to all the requirements of their contracts and whatever laws may apply," Stein said. "We are also making sure they are aware of the clinical implications of the bifurcated treatment issue."

The NYSPA has taken steps to inform its members of their options for responding to this managed care payment reduction, Nininger pointed out.

In a December letter to all NYSPA members, Stein noted that psychiatrists "need to make immediate decisions regarding their response to the fee reductions." Psychiatrists, he indicated, can reject the fee reductions if they inform the insurers within 30 days of receiving notice of the cuts. Doing so, however, does subject them to having their contracts cancelled.

Also, psychiatrists have the option to "preemptively cancel their contracts," which will leave current fees unchanged until the termination date, though their contract's terms may require them to treat current patients at the existing fee schedule until treatment is completed or the patient transfers to another therapist.

Stein suggested as well that all New York psychiatrists, regardless of whether they plan to resign or lodge a protest with the managed care companies, should consider writing to the companies "to express their views regarding the fee reductions."

The number of people affected by the reimbursement reduction is significant. The three carveout companies involved in the fee rollback control the psychiatric care of millions of people in New York State. ValueOptions Behavioral Health alone has more than 800,000 New Yorkers in the plans it manages, Stein pointed out.

"Unfortunately," Stein said, "with customers wanting cheaper premiums and managed care firms needing to maintain profitability, we don't expect this round of fee reductions to be the last. I think future actions by the managed care companies will depend on how this recent move is received."