Physician Patient

Archive for June, 2014

The Direct Pay (DP) Psychiatric Practice Model

Wednesday, June 25th, 2014

A key question for psychiatrists (and other physicians): How will we and can we select a model of payment for our services to enhance quality psychiatry (medical practice) as defined by our profession and our patients?
In 2014, the prevalence of psychiatrists doing Direct Pay or cash practices is the highest among US all physicians. A recent survey by Tara Bishop et al reports as many as 45% of solo and small group psychiatric practices nationwide are now Direct Pay (Ref .1). This is in response to growing patient and family demand for quality psychiatric services. Clearly, psychiatrists who want to do clinical practice have many options for arranging their venues of practice, including Direct Pay independent office practice.
Doing outpatient office-based psychiatry is a time-dependent, bio-psycho-social medical practice model well suited to direct pay from patients. Given increasing deductibles for health care insurance, patients and families engaged in the health care value conversation are asking pertinent questions: how much will their care cost and how much and for what are their doctors paid? Patients like the idea of directing pay to their doctors.
There are four reasons why independent psychiatrists are going to Direct Pay and are increasingly declining contracts with insurance companies, Medicare, and Medicaid. These are:
1. Low pay. Medicare, Medicaid, and private health care insurance payments are insufficient to provide both a decent living for the doctor and needed staff and appropriate practice venues to do quality patient care.
2. Restrictive scope of psychiatric practice. In most managed care settings in Minnesota, scant time is allowed for patient and family encounters with psychiatrists. Clinics frequently assign psychiatrists to doing brief, infrequent patient visits involving predominantly medication evaluations and prescriptions. Often the psychiatrist’s boss or administrative authority does not view a doctor-patient relationship as the organization’s priority to do quality patient care, and burdens of electronic medical record (EMR) documentation override contact and interaction with patients. Today, the clinic, insurance company or government, rather than the physician and medical profession, define the psychiatrist’s scope of medical practice with patients.
3. Data privacy and confidentiality. This is a big concern for psychiatrists and their patients. What information goes on the clinic’s electronic medical record (EMR), who has access to it, for what purposes, and for how long? Moreover, from the psychiatrist’s standpoint, how does posting a patient’s sensitive clinical data on an EMR affect the doctor’s stance towards the patient? And, DSM 5 psychiatric diagnoses are frequently stigmatizing to patients. So, a good share of our clinical data needs to remain personal if psychiatric treatment is to be respectful, patient-centered and effective. Most practicing psychiatrists believe that doctors and patients should be in charge of when and how this information is used or conveyed to others, and patients (and families) want to and need to trust their psychiatrist and other mental health professionals involved in their care — as do those referring patients to psychiatric consultation or care. Yet, many patients do not know if or who the psychiatrist is on their case, and despite HIPAA privacy rules, patients and families don’t trust the “System” — be this a large clinic, insurance company, or government program — to safeguard their privacy and confidentiality when seeking or obtaining psychiatric care (Ref. 2)
4. Access to psychiatrists. Patients and families are often told by the insurance plan or Medicaid that there are no psychiatrists available to see them in their HMO, VA clinic, or insurance network, or that they must wait weeks or months for an appointment to see a psychiatrist. DP psychiatrists are frequently contacted by dissatisfied patients and families looking for a timely psychiatric consultation and/or ongoing care by a psychiatrist. Also physicians and mental health professionals in the community are very frustrated when looking for psychiatric consultation and referrals.
Outpatient psychiatry is a time-dependent, bio-psycho-social medical practice which is well suited to a Direct Pay payment model. A cardinal principle of doing quality psychiatry is the expectation that both patient and physician are accountable to each other within a professional, doctor-patient relationship framed and guided by Hippocratic ethics.
Due to high insurance deductibles and co-payments, patients want and need to know how much their care will cost them in insurance premiums and out-of-pocket, and they are increasingly interested in how, for what, and how much their doctor is paid.
Switching to a cash-based outpatient psychiatry practice can be done in doable steps (Ref. 3 Beecher, 4 Parnell). The Association of American Physicians and Surgeons (AAPS) provides useful information on how to establish a Direct Pay medical practice and opt out of Medicare and insurance contracts. (Ref. 5).
Lee H. Beecher, MD
References (internet links):
Lee H. Beecher, MD is president of the Minnesota Physician-Patient Alliance (MPPA), a health care think tank founded in 1997 as a 501 (c) 3 charitable non-profit organization in Minnesota (, an adjunct professor of psychiatry at the University of Minnesota, past-president of the Minnesota Psychiatric Society, distinguished life fellow of the American Psychiatric Association, fellow of the American Society of Addiction Medicine, ABPN certified in psychiatry and addiction psychiatry, and a member of the editorial advisory board of Clinical Psychiatry News.
Teaching Objectives: Participants will:
  • Realize that the prevalence of outpatient solo and small group Direct Pay (cash) psychiatric practices nationwide is now very high and growing, 45% in a 2012 survey by Tara Bishop et al (
  • Understand from the perspectives of patients, families, and doctors why outpatient psychiatry has the highest percentage of cash practices among all medical specialties.
  • See how Direct Pay outpatient psychiatry and addiction medicine services are well suited to Direct Pay — in terms of patient motivation, satisfaction, physician flexibility, and patient-centeredness.
  • Inform policymakers that health care savings accounts (HSAs) and health care cash accounts for both for private and public insurance enrollees coupled with high deductible health care coverage will improve access to psychiatrists.
  • In the Medicare and Medicaid programs, permit defined $ contribution directed by patients to physicians of their choice.


What is a “Cash Medical Practice”?

Wednesday, June 25th, 2014


The article below, written by Lee H. Beecher, M.D., a psychiatrist in private practice in St. Louis Park, Distinguished Life Fellow of the American Psychiatric Association, adjunct professor of psychiatry at the Universityof Minnesota, and immediate past president of the Minnesota Physician-Patient Alliance (MPPA), explains his medical practice business model.

* Disclaimer: Lee Beecher is no longer in office practice



Article Published in November, 2007 Issue of MINNESOTA PHYSICIAN also Reprinted within “Adviser’s Viewpoint” (Opinion) Section of the February, 2007 Issue (Volume 35, Issue 2, Page 9) of CLINICAL PSYCHIATRY NEWS

I have been in solo psychiatric private practice for 33 years and continue to truly enjoy my work.  But the stress level was building because of reimbursement realities and administrative hassles, so in the fall of 2005, after a lot of thought, I opted out of all health plan and insurance provider agreements.  I now ask my patients, including those on Medicare, to pay at the time of service in my office.  My administrative assistant then promptly sends insurance forms to the patient’s health plan(s) so that enrollees are directly reimbursed.

Making the decision to change to a cash practice was not easy.  I was afraid to lose access to patients and disrupt the care of my established patients, since most parties rely on employer-based or government health care coverage.  Nonetheless, in 2005 the future looked grim for my private medical practice, given the mounting administrative costs of chasing insurance payments coupled with diminishing payment for psychiatric services.

A year later, the good news is that the switch to a cash medical practice has worked.  I now have no accounts receivable for patient care rendered.  And, patients have been surprisingly receptive to a cash medical practice model as well.  They tell me that they are now actually getting better customer service and prompt payments from their insurance companies, even better than before the switch, because they know when and how much the insurance company pays.

As before, patients get timely administrative and clerical support from my office to provide insurance company documentation and challenge benefits denials.  Some patients, armed with their health insurance contracts, enlist support from their employer’s HR departments to clarify and receive their contracted mental health coverage.

Patients also like the privacy and confidentiality safeguards of a cash practice because I don’t share details of their psychiatric care sessions with their insurance companies.  I consult patients before disclosing any information about their care to all outside parties, and the patient or his legal representative and I discuss the details of any proposed information disclosures in advance of release.

By moving the insurance company out of the consulting room, I am now accountable to my patients, rather than the insurance company, and am an effective advocate in helping my patients obtain payments for their covered psychiatric services.

Reimbursement realities

One of the main reasons behind my decision to switch to a cash-only practice was the continuing decline in reimbursement for my professional services.  Mental health coverage has lost ground relative to coverage for medical-surgical care over the past decade.  Health care premium costs to employers (which are passed on to patients) have increased an average of 10 percent a year for the past decade, while mental health benefits have slipped from 7.5 percent of annual health care spending in 1975 to less than 3 percent in 2004, according to the Hay Group and American Psychiatric Association.

How have the cuts been implemented?  The instruments of cutting mental health payments in Minnesota, for both private insurance enrollees and Medicaid patients, are behavioral health ‘carve-outs,’ i.e., mental health services that are administered and funded separately from general medical services and restrict and manage mental health provider networks to cut costs.  Behavioral carve-outs have also served intra-professional communications and care continuity among a patient’s health care professionals, and between hospital and outpatient mental health clinicians.  In addition to disrupting care continuity, behavioral carve-outs and their parent insurance company organizations define the reimbursable scope of practice for psychiatrists, psychologists, social workers, alcohol-drug counselors, and mental health nurses by judging “medical necessity” for mental health services.

Moreover, psychiatric “talk” in a doctor-patient relationship is cheaply reimbursed in Medicare as well; Medicare sets a maximum allowable fee of $113 an hour for time with a psychiatrist to do psychotherapy and evaluate medications.  The Medicare Program (CMS) pays for only 50 percent of allowable charges for all psychotherapy srvices in fee-for-service Medicare, whereas brief-time psychiatric medication checks are paid at an 80-20 ratio, the same as general Medicare physician outpatient services.

Another reality of reimbursement–cutbacks in private sector insurance mental health benefits–supports a cash-practice model for outpatient psychiatric care from the patient’s perspective.  Over half of Minnesota’s privately insured patients are enrolled in plans exempted from state mental-health parity provisions that mandate mental health coverage (ERISA exemption).  Employers are shifting health coverage costs to their workers, and few self-insurance plans on the market provide any mental health benefits at all.  This means that many patients, insured or not, must fund outpatient psychiatric care from their own pockets.  Despite reduced insurance benefits for mental health services, patients continue to demand quality psychiatric care, and the demand for outpatient psychiatric services is currently outstripping the supply of available psychiatrists in Minnesota. 

Reducing the practice “hassle factor

Minnesota’s four major nonprofit health plans specify nonpayment for those services deemed not “medically necessary” and prohibit balance billing and fee variation by contracted physicians.  No health plan provider agreement allows variation in professional fees based on service value as determined by patients themselves.  Nor do provider agreements pay clinics for the high costs of preparing and revising insurance payment forms, waiting “on hold,” contesting arbitrary post-service payment reductions and delays, calling insurance company case managers, again waiting on hold, etc.  The “hassle factor’ expenses accounted for about 20 percent of the patient’s fee before I switched to the cash model.  Now, administrative time and hassles are budgeted into my fee, about 20 percent of which goes to paying for an administrative assistant to help patients get the insurance benefits that they paid for in their insurance contracts.

Advising potential patients

When potential patients call our office, we advise them to know their mental health coverage insurance details.  Few do.  We also advise patients to get a hard copy of their mental health benefits and managed care medical necessity rules from their insurance company if possible, and to personally call or have a family member call their insurance company for verification of coverage specifically to see me before scheduling an appointment.  See sidebar.

Pros and cons

A year after opting out of health insurance provider agreements, I’ve found that the advantages of operating a cash practice far outweigh the disadvantages.

The pros:

* A business model where revenues and costs are known and can be intelligently managed.  No accounts receivable.

* Fee transparency for potential patients and payers:  fees are posted on the practice web site with the ability to raise or adjust fees.

* Improved patient adherence to treatment goals, methods, and strategies.  Ongoing communication and negotiations between doctor and patient is the best indicator of quality psychiatric care.  What is working and what isn’t for this patient?  What is the current plan of care?

* Documentation of process.  Patients receive copies of my clinical notes after each session, including medications taken by the patient from all prescribing sources, communications with doctors or others, plan for return visits, and dsceduled or needed contacts with the patient’s primary care medical home, other specialty physicians, and counselors and health care professionals.

* Insurance coverage and payment advocacy for patients by hiring an administrative assistant to serve as an internal practice advocate.

* Nixing the dysfunctional triangle of the doctor contracting with an insurance company.  I am now paid by the accountable to the patient for the medical care provided.

* Preserving and protecting the privacy and confidentiality of psychiatric treatment.

* Access to patients regardless of their insurance coverage.  Many patients lose their doctor or care team when their insurance changes.

* Care continuity.

The cons:

* Pushback from insurance companies seeking to manage provider panels, define the scope of professional activities and “best practices”, and fix professional fees.  Patients may believe that they need to trust the insurance company rather than the physician.

* The economic hardship to patients who seek psychiatric services and cannot afford them.

* Not taking new public sector patients. Ii currently treat all Medicare patients in the practice, but I am not taking new Medicare or Minnesota Medical Assistance patients due to very low government payment rates, and medicare is projected to cut physician payments 5.1 percent for outpatient psychiatric services in 2007.  Current state government MA fee-for-service payments patients are lower than Medicare, and Medicaid HMOs pay very little for medical psychotherapy services by a psychiatrist.

A bellwether for other practices?

Ongoing cognitive work by physicians and mental health professionals who spend time with patients and communicate with care teams and families is currently undervalued by health care insurance companies and Medicare–but not by patients themselves.  Going to an emergency room or being admitted to a mental health or chemical dependency unit is very stressful for patients and their families.  Moreover, averting psychiatric hospitalizations, emergency room visits, and/or expensive lab or imaging experience saves the system money and helps patients achieve better care outcomes.  When a patient does need inpatient care for safety or clinical management, the inpatient team benefits greatly from an accurate treatment history from the outpatient psychiatrist or care team, and appreciates having an available outpatient disposition in these days of short psychiatric inpatient stays.

I am aware that some psychiatric colleagues now have switched to cash practices and others are also considering doing this.  “Best practices” for me and my patients meant opting out of insurance provider agreements.  Perhaps cash practice for outpatient psychiatry will be a bellwether for physicians and clinics in primary care and specialty care.