The leading practice resource for behavioral health providers — since 1974

Volume 32, No. 10, Issue 390October, 2006

PRACTICE BASICS: Should you encourage clients to bypass managed care benefits?

For therapists, the advantages of minimizing managed care work are obvious: less paperwork, fewer headaches, and more money. But there are advantages for the patient as well—and pointing them out is a strategy some clinicians use to wean clients off managed care.

Several clinicians we know make a conversation about the problems inherent in managed care a standard part of their intake procedures. (See the box on page 2 for details on that.)

This is a simple matter if you’re not a participating provider with a client’s health plan—the client can work with you or not, as they choose. But recently, a reader posed a question that complicates the issue. What about MCOs that you are active with? Can you, in effect, play it both ways—accepting the managed care fee from clients who choose to use their benefits, while taking cash from others who choose to bypass those benefits?

Discussing the question with a variety of experts—managed care execs, lawyers, professional billers, and ethics experts—we heard opinions on all sides of the issue. But overall, the answer is a qualified yes: Many therapists do it, and while there are legal and ethical caveats, with some careful consideration, it is doable.

“Magellan’s policy is, it’s about whatever is in the best interest of the member,” says Tina Carroll, spokesperson for the country’s number-one behavioral health MCO. She adds, however, that documentation showing that this is what the patient wanted will be important if the company ever audits your records— something they do at random, and in response to complaints.

The fact is, when a client bypasses benefits, the managed care company saves money. Officials from other companies have reacted with bemusement when we asked if they minded this kind of activity. “Why would we mind?” has been the general reaction.

“The reality is that it’s the patient’s choice—period”, says Susan Frager, who runs a billing service, Psych Administrative Partners, in Lacey, WA. “I don’t want to be told that I have to use my insurance if I’m concerned about confidentiality and want to pay out of pocket.”

Frager, a licensed clinician herself—as well as a former MCO case manager—says the practice is “very common” and adds, “I think a majority of therapists do it. And my sense is that they’re coming from an ethical position. I’ve been told we have to sternly warn our patients about the limits of confidentiality that insurance imposes.”

Another professional biller we contacted, Jean Thoensen, agrees: “There are a lot of reasons why people might not want to use their benefits these days. Especially people in the military.”

Not so fast, says Hillel Bodek, longtime ethics chair at the New York State Society for Clinical Social Work, and current president of that organization. He recalls a case in which the patient complained about such an arrangement midway through treatment.

“The managed care company wrote a letter to the therapist saying, ‘You’re on our panel— what are you doing?’” The therapist was forced to pay the money back to the patient, and the managed care company paid only what was billable under the contract. Then the therapist was tossed off the panel.

It’s a violation of your contractual obligation,” Bodek continues. “In effect, you’re lying to the company you signed an agreement with.”

For this reason, it’s a good idea to go on a company-by-company basis. Check your contracts to see if the practice is specifically prohibited, recommends Bryant Welch, an attorney and former head of the American Psychological Assocation’s Practice Directorate. “It’s entirely a function of the contract,” Welch says.

If you do see room in your contract for treating clients on a cash basis, have them sign a waiver stating that they’ve chosen to bypass their benefits. And Susan Frager thinks that to be safe, you should stick to the contracted rate rather than your full fee—even though the client is paying out-of-pocket. For some clinicians, that defeats a primary purpose of the enterprise—being able to charge your full fee. Frager responds that eliminating paperwork and MCO interference in therapy is justification enough.

Contacts: 1) Hillel Bodek, Brooklyn, NY, email:; 2) Tina Carroll, Magellan, Bridgeton, MO, (314) 387-5345; 3) Susan Frager, Psych Administrative Partners, Lacey, WA, (360) 628-8612; 4) Jean Thoensen, PsychBiller, Centreville, VA (703) 266-8612; 5) Bryant Welch, Hilton Head, SC, email:

     You get what you pay for. That’s what some clinicians are telling new patients in an effort to move away from managed care. The bottom line, they say, is that cash buys confidentiality, while managed care compromises it.
     That message, presented at intake along with the standard information about your fees and office policies, seems to work well. A Connecticut clinician we know includes the following language in her standard intake form:
     “If your mental health insurance benefit is managed by a managed care company, we will discuss payment procedures as they are determined by your plan. Please be aware that all managed care plans involve direct clinical management by the company. This makes it necessary for us to work together with your company to determine the nature of your treatment, and therefore, does have some impact on confidentiality.”
     A California therapist we spoke to recently puts it even more bluntly: “I tell them straight out, ‘If you pay me
directly, everything’s between us. If you use managed care, there’s just no confidentiality. Anyone might have access to what goes on during our therapy.’ I feel like I have a responsibility to tell them that.”
     Ginger Blume, another Connecticut therapist, is even more aggressive. She’s trained her office assistant to brief potential patients about managed care pitfalls at first contact. If the prospective client still wants to use the MCO benefit, Blume calls back to speak to them personally.
     By then, 60% of them decide they’d rather pay out-of-pocket. The rest are referred out—period.
     “Therapists don’t believe it when I say that,” Blume says. “They don’t have confidence. I point out that people are paying $50 or $60 out of pocket for a massage. They should be willing to pay that much or more for therapy.”
     And because Blume doesn’t work at all with most managed care companies, the contractual issues discussed in the article below aren’t relevant.