Consultation Services Help Psychiatrists Survive

Psychiatric TimesPsychiatric Times Vol 14 No 5
Volume 14
Issue 5

After a decade of diminishing control and exclusion from provider panels, psychiatrists are developing strategies to regain some control of health care. With the help of consultation services like those provided by the American Psychiatric Association, they are learning to survive and prosper in this era of managed care.

After a decade of diminishing control and exclusion from provider panels, psychiatrists are developing strategies to regain some control of health care. With the help of consultation services like those provided by the American Psychiatric Association, they are learning to survive and prosper in this era of managed care.

Psych Care of Connecticut is an example of one strategy-the formation of clinician-owned-and-operated delivery systems capable of assuming responsibility for large numbers of patients and the financial risk for their care. Payers, government and industry, favor these arrangements because they offer one-stop shopping and the opportunity to negotiate for the cost of care through a variety of capitation arrangements.

Under the leadership of a visionary psychiatrist and the assistance of the APA consulting service, 30 local psychiatrists organized into 14 group practices formed a statewide not-for-profit independent practice association (IPA), Psych Care, and a for-profit management services organization (MSO), Psych Management. The IPA provides a vehicle for clinicians, practicing in their own offices, to take on responsibility for 140,000 covered lives on a contractual basis. Although IPA ownership is presently limited to psychiatrists, participating providers include the entire range of mental health professionals. This arrangement offers the continuum of services and fee schedules that payers demand. Providers participate in Psych Care as independent clinicians, behavioral group practices, and hospital-based department chiefs of inpatient and lower levels of care services.

Paralleling a management services organization with a provider network solved a number of the problems that confront many provider networks. The Psych Care provider network is large and growing larger. This makes it cumbersome and indecisive in contrast to the leaner management services organization governing structure. The IPA cannot accept investment from outside of the participant's owners, limiting ability to raise cash for start-up and growth as well as its potential value as an equity holding. The MSO faces none of these restrictions. In its bylaws, Psych Management has placed restrictions on the sale of its stock to ensure that control of the organization remains in the hands of physicians.

Consulting services can be an invaluable aid in the formation of groups like Psych Care of Connecticut in areas such as start-up, legal formation, network development, capitation and preparing the bid for its groundbreaking contract.

Services may include educational offerings, advice on organizing group practices and provider networks, and assistance to hospital and academic medical centers on restructuring for the future. Consulting formats may include telephone consultation with an expert, one- or two-day educational seminars and on-site visits.

To aid in the development of new systems and the reengineering of existing organizations, the APA consultation service has created an organizational checklist that can serve as a blueprint for designing practices and systems capable of succeeding in the new health care marketplace. Readers can use the list below to assess their own progress and identify where they need additional information or help.


As a first step, colleagues must arrive at a shared vision of what they hope to accomplish, and create a vehicle capable of achieving this goal. Clinicians can chose from among behavioral group practices with or without walls, IPAs, preferred provider organizations (PPOs), MSOs and physician hospital organizations (PHOs).

Hospitals hoping to maintain market share can purchase practices, develop hospital physician organizations (HPOs), enter into a joint venture with another entity, join the merger and acquisition frenzy, or develop their own managed care organization.

Legal Entity

The goal is the creation a legal entity capable of signing a contract with payers and providers. Institutions can utilize existing structures or create freestanding organizations capable of doing wholesale business. Groups and networks must often develop their organizations from scratch with the help of an attorney who will draw up the corporate bylaws and operating agreements that define ownership, the decision-making process and the relationship of various participants. Compliance with state and federal regulations is crucial.

Clinical Services

In modern psychiatry, clinical care now means providing a vast array of interventions over an ever-expanding continuum of care. Clinical delivery systems must have access to short-term inpatient units, 23-hour beds, partial-day and evening programs, hospital diversion programs, home treatment teams and intensive outpatient programs. Care must be available for all age groups and diagnoses, both for mental health and substance abuse. Everyone involved in the treatment process must share a commitment to short-term treatment at every level of care.Clinical care has now been expanded to include clinical management. This is particularly important for organizations intending to operate within global budgets. Treatment guidelines, case management and triage systems are necessary to ensure that the patients are treated with the least intensive, least expensive treatment at the lowest level of care that will return them to health and function. Data on outcomes, quality of care and provider performance must be readily available and integrated into clinical decision-making.


Provider groups and institutions must be able to run the business of these large systems with attention to the bottom line and in compliance with accrediting organization requirements. Traditional "back office" functions include practice management, billing and collections, human resources, cost accounting and budgeting. Additionally, these new systems must have centralized scheduling and record-keeping to support case management, triage and treatment planning. Quality assurance and provider credentialing programs must be in place. Marketing and sales, contract negotiations and recruiting are necessary for organizational growth.

Management Information Systems

When clinicians and systems take on responsibility for large numbers of patients, they must be able to process vast amount of information.

Data that must be routinely monitored include information on client demographics, client insurance, client treatment such as short-term and long-term goals, utilization of services, provider performance and cost and outcome.

Financial Issues

Three of the most important financial issues organizations must confront are capitalization, capitation and cost accounting.

Capitalization. Organizations must select the source of their funds for start-up, ongoing operations and growth. Possible sources include the providers' own pockets, banks, hospital and health systems, physician management corporations and venture capital.

Capitation. In order to bid for contracts to provide care to populations, organizations must have adequate information about the past medical experience of their "covered lives" and be able to evaluate this data.

Cost accounting and budgeting. Provider organizations and institutions must be able to operate like any success business with costs (clinical salaries, corporate expenses and office expenses) kept within the limits of revenues.

Insurance Coverage

Clinicians participating in the newer delivery systems incur legal liability far beyond the real practice risks of traditional mental health care. In fact, utilization review, case management, responsibility for other providers and corporate business decision-making are specifically excluded from malpractice coverage. Clinicians must understand the place for vicarious liability protection, errors and omissions coverage, and directors and officers policies.

Marketing and Sales

Clinicians no longer receive patients from traditional referral sources. Instead, patients are now channeled through distribution arrangements that result from managed care contracting. This change forces clinicians, networks and delivery systems to rethink how they can maintain adequate patient volume.

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