Physician Patient

Starting a Cash Practice

Why Independent Psychiatrists Are Switching to Direct Pay Practices
Despite long-standing advocacy efforts, mental health/substance abuse insurance coverage “parity” is interpreted and administrated by managed care systems which carve out psychiatric services from general medical care. In practice this means low pay for our time and work, challenges to our recommended plans of care, and interposition of special rules and procedures for patients to get psychotropic medications. Regrettably, psychiatrists are commonly viewed by managed care workers as “providers” interchangeable with primary care physicians and nurse practitioners.

As we look to the future, the ACA law will increase the number of patients who are eligible for federal government subsidized health care coverage through Medicaid expansions in 25 states, and allow the provision of federally subsidized private market insurance through the Obamacare insurance exchanges — based on enrollee’s incomes. To achieve this expanded access to coverage for patients, the American Psychiatric Association (APA) supported passing the ACA, as did the American Medical Association (AMA), the American Academy of Family Physicians (AAFP), American Academy of Pediatrics (AAP), and American College of Physicians (internists — ACP). The APA hoped that the ACA would enhance the value of psychiatrists and boost our pay by including mental health and substance abuse coverage as a basic health care insurance benefit and has consistently supported US teaching and safety-net hospitals who treat poor and uninsured patients, many of whom have severe mental and substance-related disorders.
How the ACA affects psychiatric practices and psychiatrists of APA members depends on our venues of practice. The good news: Psychiatrists are in great demand across the country! And we can be savvy about how, how much, for what, and by whom we are paid to do our work.
But the ACA poses an inconvenient truth to us psychiatrists in independent, office-based medical practice. We suffer financially when we take on ACA Medicaid enrollees! In 2013 government Medicaid and Medicare pay less than our costs to practice. Moreover, it is unlikely that Medicaid, Medicare or Obamacare exchange insurance payments for psychiatric services will increase, and much more likely that Medicaid, Medicare, and private insurance payments for office-based clinical psychiatric services will decrease in the future due to mounting pressures to cut health care costs.
For psychiatrists like me who do independent private practice and love the challenges of patient-centered bio-psycho-social work with patients in psychotherapy, as Yogi Berra said, “When You come to a fork in the road, take it.” So, to taking Yogi’s advice, we in independent psychiatric practices have two alternatives:
  • Give up our private practices. Join a (preferably large) group or health care system. And lots of psychiatrists are doing this. Get salary and benefits rather than relying on fee-for-service patient encounters. Work for a big hospital or hospital-clinic system. Then let the administrators worry about contracting for “provider” payments from government programs and insurance companies, maybe through signing up with an Accountable Care Organization (ACO) in Obamacare. Or, join the VA system, work for the state (there is a great need here), or provide psychiatric services through a philanthropic organization.
  • Change one’s practice model to a Direct Pay (cash-based) practice. Get rid of all health care insurance “provider agreements” and opt out of the Medicare program. Doing Direct Pay practice does not mean that patients are unable to use their insurance benefits (many have choices to make about what insurance products they buy), unless they are on Medicaid or Medicare. Medicare, of course, prohibits any payment to physicians who are not Medicare providers. Depending on his or her insurance contract, patients may be able to arrange for insurance company reimbursement to go directly to them. And we can help facilitate this.
The move to Direct Pay psychiatric practices has happened in large part because of patient demand for access to psychiatric services which are not available or attainable in insurance provider networks. See to view an August 10, 2013 AAPS-MPPA Conference on Direct Pay Practices held in Minneapolis.
Do we know how many APA members are in Direct Pay (DP)practices now? It would be nice to know and track this trend as numbers increase. I hope the APA will actively support Direct Pay practice as an appropriate and ethical alternative to managed care behavioral health and restrictive provider networks. 
Lee H. Beecher, MD, DLFAPA, FASAM
Adjunct Professor of Psychiatry, University of Minnesota
President, Minnesota Physician-Patient Alliance (MPPA)

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