Managed Care: The New Colonialism

Psychiatric TimesPsychiatric Times Vol 15 No 12
Volume 15
Issue 12

The term managed care has become the new blasphemy in the health care industry. Symposia, lectures and other presentations on this topic at the 1997 American Psychiatric Association convention all seemed to conclude that managed care in any form is evil and unethical and that by maintaining the moral high ground, physicians holding out against managed care would ultimately win because the cause is just.

The term managed care has become the new blasphemy in the health care industry. Symposia, lectures and other presentations on this topic at the 1997 American Psychiatric Association convention all seemed to conclude:

  • Managed care in any form is evil and unethical. One presentation in a symposium on the ethics of managed care made an analogy between doctors who resisted the Nazi implementation of the Holocaust and those who resist managed care. (This was not the only presentation comparing managed care with Nazi Germany in what seems to be a popular analogy.)
  • Psychiatrists who refuse to participate in managed care programs are freedom fighters, even those who have not suffered economic martyrdom and whose livelihoods do not depend, for the moment, on any type of managed care affiliation.
  • By maintaining the moral high ground, physicians holding out against managed care would ultimately win because the cause is just. According to the APA president then holding office, there are signs that we are already winning the war, so we should stay the course in uncompromising opposition to any and all forms of managed care. We may lose some battles, but we shall surely win the war.

There were disquieting signals, however, that all may not be so well. Many APA members claim that their incomes are plummeting and they can no longer afford to pay dues, so dues-paying membership is declining. Graduates of American medical schools are avoiding going into psychiatry. There are various reasons for this, but many students carrying a large debt feel that they have to be practical, and cannot afford to spend many years in training, unable to make a reasonable living. (Dermatology, on the other hand, has become popular with medical students!)

In contrast to the APA president's declaration that we were winning the war with managed care, Alan Stone, M.D., insisted that we are losing. He perceptively pointed out that the deregulation of health care has caused the current laissez-faire free-market attitude. This attitude has put Wall Street firmly in the center of the health care professions and, for Wall Street, return on investment is more important than providing care to the sick.

In this climate, there is more money to be had by preventing care than by providing it. Stone refers to this as the "competitive race to the bottom." He calls parity for psychiatric patients an illusion, since managed care companies must first approve benefits in order for patients to gain access to them. Stone pointed out that Wall Street-controlled managed care organizations (MCOs) regard medical opinions as irrelevant. The doctor-patient relationship is fast becoming a thing of the past.

Another speaker pointed out that ethical dilemmas exist for physicians who participate in capitation arrangements. Whatever control over care physicians gain by capitation becomes dwarfed by the problems that arise when risk is passed down to physicians. He cited the following two real-life examples.

A psychiatrist sees a young girl recently discharged from an out-of-state hospital. After this consultation, he recommends what-in his opinion-is the "best" course of treatment: a return to the hospital, although the patient seemed to have received little or no benefit after several months of treatment there. The person in charge of the capitation program then calls the psychiatrist, informing him that the department is paying for this patient's care. The psychiatrist then was asked to consider a less expensive course of treatment closer to home, preferably outpatient-based, given that the patient failed to respond to inpatient care in the first go-around.

This precipitated a change of recommendation on the part of the psychiatrist, who had already told the patient and her family that the best course of action was a return to the long-term inpatient program. An ethical crisis within the department ensues. This type of no-win ethical dilemma is presented as caused solely by capitation.

The second example concerns a depressed woman diagnosed with serious postpartum depression. The examiner suspected this condition was related to her relationship with her husband. The psychiatrist felt that a combination of antidepressant medication and short-term therapy would probably be effective in symptom control, although the core problem (the pathological relationship with her husband) would not be addressed.

This course ultimately is recommended because the patient cannot continue treatment without insurance reimbursement. Her health plan does not cover the long-term, in-depth psychotherapy she requires; hence the ethical dilemma. Apparently, in this case, the psychiatrist felt ethically compromised by having to recommend only what the patient could afford, not what he believes is the best treatment.

The session concluded with a discussion of how psychiatrists can ethically live with the fact that a patient needs long-term intensive therapy, but the managed care program will only pay for short-term, symptom-removing therapy. Not discussed is why this ethical dilemma is different from that posed by patients who have no health insurance coverage at all, or those patients who have arbitrary $1,000 maximum outpatient mental health care benefits (or $5,000 maximum inpatient benefits). These patients may, too, need in-depth, long-term psychotherapy or hospitalization, and not be able to afford it. However, these concerns are presented as exclusive to the managed care environment, as a problem somehow unknown before.

So, what do we do? Perhaps a government-run single-payer system would be everyone's salvation. But would such a program resolve the ethical dilemmas posed in these real-life examples?

A single-payer system would certainly relieve the doctors from having to base their clinical choices on costs. If the resources under a government program were unlimited, only the doctors' problems-but not necessarily the patients'-would be solved.

Would a government program be unregulated? Is a single-payer system a real possibility in the near future? Aren't Medicaid and Medicare already single-payer systems? What do we tell residents and medical students-wait for the climate to change, or take political action? Should we recommend 40 days and 40 nights of fasting and prayer in the desert hoping a savior, or the cavalry, will come to deliver us?

Hospitals and, much later, physicians set up the original health insurance plans. However, as Robert Kuttner pointed out in his book Everything for Sale(1997), physicians no longer have anything to do with the financing aspects of health care. Indeed, those physicians who take an interest in this now-vital aspect of health care are inevitably branded as unethical. Simply to talk about cost control has become another form of blasphemy. As a consequence, MCOs and venture capital companies can simply buy control over psychiatric practices, and the psychiatrists have little involvement in the financial transaction. In fact, the relationship is a cavalier one: colonial subject (psychiatrist) to colonial overlord (MCO). What's more, blame for this intolerable situation rests almost entirely with us and not with them.

MCOs have now taken possession of the "natural resources" of our profession. These include the expertise gleaned after years of study, training, clinical experience, research, the open sharing of knowledge, journals, seminars, and the exchanges of ideas and information in biology, genetics and psychology. The imperial powers of Europe dominated the rest of the world for 400 years by virtue of superior military and industrial technologies. However, MCOs have taken over the domains and natural resources of medicine and psychiatry by default.

Obviously, this is not a question of repeating rifles and cannon versus spears and arrows. The "indigenous people" of these new colonial empires are well-educated and have earned tolerably good incomes for years. Somehow, unfortunately, they came to the peculiar belief that participation in economic matters was ignoble and unprofessional. Venture capitalists and accountants, not having heard the call to the noble service of humankind, waded ashore in the health care industry during the 1990s. They declared themselves kings and filled their galleons with gold, while physicians toiled on plantations. We did not share in the profit, but were confident we were doing God's will.

Parallels can be drawn between physicians and MCOs and the responses of both Japan and China to the incursions of barbarian Europeans-from the 17th century right through to the 20th century. The ruling classes of both Japan and China were unwilling to accept or adjust to the changes that technological developments in the West foisted on them. However, when Commodore Perry sailed into Tokyo Bay in February 1854, brandishing modern weaponry and a powerful fleet, he convinced the well-educated Japanese that they were at a serious disadvantage. They saw they had two choices: modernize their society and give up feudalism, or become a vassal state to Western powers. Japan chose the former.

The Chinese, however, felt that their superior civilization should not adopt the ways and technologies of barbarian cultures. The end result was that China, the Celestial Empire, became-in effect-ruled by Europeans whose main interest was not land, but trade, on European terms only. Moreover, China-not an island nation like Japan-was not nearly as homogeneous. The Chinese rulers did not take into account possible competing interests among their different subjects. They thought laws and regulations would allow them to prevail in their dealings with the Europeans.

The Chinese were wrong. The economic forces were too powerful. By the time the Chinese learned the facts of modern economic life, they had lost substantial control over their own country.

Based on this analogy, psychiatry and medicine have three choices.

  • Choice No. 1-Do Nothing

Over the last 15 years, this has been the most popular choice. Doing nothing is not the same as nothing in terms of energy expenditure. Nothing here simply means nothing useful, proactive or competitive. It may, however, involve much complaining, legal maneuvering, making loud sanctimonious speeches on the evil of the profit motive in MCOs and lob-bying for laws that would control the evildoers who separate us from our noble mission.

We expend energy talking about how we are winning because our cause is just, or how we are winning because our patients will demand that we return to the status quo, circa 1974. Yes, there is lots to do under "do nothing," but ultimately we march off to the plantation because we all still need to eat.

The Chinese made this choice. And, like their choice to do nothing, our choice to do nothing could forever change the health care professions, particularly psychiatry and psychology. Under this option, psychiatrists will see patients only when told to by others, and will have only a minimal influence in treatment planning. This will result in a loss of talented students willing to enter this field. It will certainly not foster the development of the professional identity required for long-term survival, and it will marginalize even those who prefer strictly biological psychiatry.

  • Choice No. 2-Await the Cavalry

A second possibility is to circle the wagons and wait for the cavalry. This requires believing that the government will step in and remove all free-market pressures from the practice of medicine by establishing a single-payer system that will be virtually unregulated, provide universal coverage and terminate the health insurance industry. This presupposes a number of things, not the least of which is that the insurance industry will allow this to happen. And this choice ignores the fact that Medicare and Medicaid are already existing single-payer systems that the government seems all too anxious to terminate in favor of the highly regulated managed care model. Therefore, expecting to be rescued by the cavalry is not the best way to plan for the future.

  • Choice No. 3-Adapt to Change

To do something effective, then, we have to think of ourselves like the Japanese. After years of stonewalling change, they peered down the barrels of Perry's cannon and got the message. Real change is required in psychiatry's philosophy and outlook. This means being realistic and ridding ourselves of unproductive fantasizing. It means taking health care economics seriously and viewing the competition realistically. Demonizing the executives of MCOs does not represent a realistic strategy. Displays of sanctimonious outrage have only short-term benefits-especially if an economic recession appears.

As practicing psychiatrists, we must realize that we have all the responsibility and hold all the risks in patient care. We have ethical obligations to those who come to us, no matter what their health plan. However, we have not emphasized the ethical obligation to manage money. So we find ourselves pleading to be paid for work already done or to be allowed to do what we think needs to be done. Like the Chinese who believed that the Celestial Empire was unassailable, physicians havebelieved that the practice of medicine is exempt from the laws of nature and of the marketplace.

Leaders in psychiatry who argue against physician involvement in health care financing ignore at their peril what I immodestly call "D'Agostino's First Law of Managed Care Economics": They who get the money first make the rules. In the current free-market climate, there are no exceptions to this law.

The practical application of this law in daily life means that psychiatrists need to be much higher up on the money chain in order to rid ourselves of managed care as currently practiced. But to see physician control as a return to the good old days-whenever they were-is as foolish and as impossible as the Japanese believing that they could maintain a feudal society in Japan by ignoring the outside world. It didn't work then, and it's not going to work now.

MCOs exist because they serve a purpose. Physicians previously ignored issues of cost, creating a vacuum, which nature always abhors. This, in fact, facilitated the development of the modern managed care company. We cannot demonize others for perceiving a reality we refused to acknowledge.

The simple act of organizing our profes-sion's collective knowledge into an agreed-upon rationale with reasonable protocols is what the industry calls a product. That product becomes marketable, if the price is right. A manageable information system capable of generating the information needed to operate such a product is the only hard capital requirement for creating an organization fit to get money first. Since rational and humane management of mental health care costs is our product, it is the noncapital items that are most critical. Adapting to change could mean eliminating the need for MCOs.

  • A Proposal, In Two Parts

Part One: Recommended here is a proactive strategy of locally owned and organizedprovider-sponsored networks (PSNs). Psychiatrists need not own 100% of the stock in such organizations, but should own at least 60% and no less. Each psychiatrist should own shares in equal proportion, with no one practitioner owning more than any other. Long-term survival in this undertaking will depend more on cooperation and less on the individual accumulation of wealth.

Each PSN needs to agree on a coherent op-erating philosophy and be willing to contribute capital, both financial and intellectual. Hospitals should be natural allies in this struggle as they have a great deal to gain. First, however, they need to change the way they view physician-owned networks. Hospital systems can contribute both capital and business expertise, but they sometimes see physicians as risky business partners lacking common sense in business matters. Psychiatrists are often seen as more interested in analyzing the competition's psyche than their business strategy.

The members' collaborative attempts to define and influence quality will turn out to be an important learning experience for those who participate in the process. If local, the PSNs will always be superior to whatever the large national MCOs can bring to bear. Participating psychiatrists will have to live with the concepts of budgets and reasonable protocols, and will have to become sophisticated in the strategies of continuous quality improvement. Start-up costs for these local organizations have been vastly overestimated, although contributions of time will have to be assigned a monetary value for those who would lead these new organizations.

Part Two: These PSNs-whether in St. Louis, San Diego or Dallas-by themselves will present no serious threat to major MCOs. These various new organizations need to somehow coordinate their activities with one another. With similar policies and procedures, philosophies and protocols in Houston and Chicago and New York City, and quality management techniques and marketing efforts on a local level coordinated on a national level as well, these organizations may collectively become a major force on a national level.

The call right now is for practical people who can make things happen, not more discussion about how helpless or vicitmized we are.

These are interesting times.


  • References 1.Forum 8, Town Hall Meeting on Reasserting Psychiatry's Control of Its Future: The Containment of Managed Care (1997), American Psychiatric Association Annual Meeting, May 17-22; San Diego.
    2.Keegan J (1993), A History of Warfare. New York: Alfred A. Knopf Inc.
    3.Kuttner R (1997), Everything for Sale: The Virtues and Limits of Markets. New York: Alfred A. Knopf Inc.
    4. Symposium 16, Ethical Conflicts in Managed Care (1997), American Psychiatric Association Annual Meeting, May 17-22; San Diego.
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