Managed Care Changing Practice of Psychotherapy” was an attention-grabbing 1994 headline in The New York Times. The article claimed that managed care companies intended to wipe out what they called the “New Yorker Syndrome” or the “Woody Allen Syndrome.” Spending years in psychoanalysis was about to be a thing of the past.

Fast forward to 2008: Is the “New Yorker Syndrome” a distant memory or has it prevailed? Has managed care indeed changed the practice of psychotherapy? Only 20 sessions are typically funded by managed care, but, then what?

Years in psychoanalysis may have been over the top, but are 20 sessions the answer? What do private practitioners do about clients who have exhausted their funding but still need more therapy?  Do their choices compromise the ethical demands of their profession?

Realities of Practice

A survey of mental health counselors[1] conducted in 2001 found that managed care had in fact had a major impact on practice.  A majority (60%) of mental health counselors said that they would change treatment plans based on managed care limitations.  Almost half (46%) said that they had terminated with clients before they were ready because of these limits.  Almost as many (44%) admitted diagnosing for dollars: either “upcoding” to give an acute problem, or “downcoding” to an acute problem to avoid an unreimbursable Axis II diagnosis.

If a managed care company denies reimbursement for care judged to be necessary, the same survey found that most (55.65) mental health counselors would reduce their fees to continue treatment. Others would opt to see the client on a pro bono basis (27.8%), Approximately one-quarter (27.8%) would refer the client to another provider. And 11% would terminate treatment without offering the client another option–even if they judged further treatment necessary.

Ethical No-No: Abandonment

“It’s a question that we have grappled with for a while” says Nancy M. Levine, LICSW, about what to do when managed care sessions run out and treatment is still needed.  Levine has chaired the Massachusetts NASW Chapter Ethics Hotline for about 13 years and is also a member of the ethics committee for the national office of NASW.  Levine feels that there is an “easy out” in the Social Work Code of Ethics: the code says that you never have to abandon a client because you can make referrals and give the client options.   But she challenges: The places to refer people to when they have no means are few and far between. Referring out also ignores the base of social work practice–the relationship.  “I think that managed care flies in the face of the Social Work Code of Ethics because it really doesn’t acknowledge what is at the heart of social work: the importance of relationship.”

Stephen Behnke, J.D, Ph.D. is the director of the ethics office of the American Psychological Association and also an attorney and a clinical psychologist, says that there is nothing in the APA ethics code that requires the psychologist to continue to treat the client who is not able to pay for it.  What the psychologist is ethically obligated to do is: have a discussion at the outset of treatment about what will be paid for; and have a discussion at the conclusion of treatment about possible referrals if the client will benefit from further treatment.

Does that mean that the APA ethics code allows you to abandon your client when funding runs out? “No! No! No! I want to be very clear about this. You cannot abandon a client, but you are also not ethically required to see them forever if they cannot pay,” says Behnke.  Abandonment is an inappropriate termination of services.  “So you cannot just abruptly terminate a client.  One would need to ensure that the client received services that would be necessary in an emergency situation and that they had sources of referrals. The APA ethics code is very much focused on the process by which therapy begins and ends—none of this should be a surprise to the client or the psychologist.”

“Abandonment Prohibited” is the title of section A.11.a of The American Counseling Association Code of Ethics, echoing the codes of NASW and APA.  The ACA code suggests that, “counselors assist in making appropriate arrangements for the continuation of treatment, when necessary, during interruptions such as vacations, illness, and following termination.”

Choosing Not to Play

“I know what I have done in my own private practice: I decided that I just wasn’t going to play, which is why I have a small private practice,” says Levine. Lynne Spevack, LCSW is the chair of the private practitioners committee of the NASW New York City chapter and says that she also is a proponent of working outside of managed care.  “I have a fulltime private practice (in New York City) with no managed care clients.  That is my bias.”

Choosing not to play in Woody Allen country where lots of people are used to paying privately for psychotherapy is an option that may not be available in other areas, however.  Norman C. Dasenbrook, MS, LCPC has extensive experience working with managed care companies in his private practice in Illinois. “I’m in the blue collar community of Rockford, Illinois, and I find that 95% of our clients want to use their insurance.  If you are in a more affluent community and the client wants to pay out-of-pocket or they don’t want it on their record that they used their insurance for mental health, that could be another set of circumstances.”

Astute Diagnosis: Is That the Answer?

There is some consensus in the field that an astute diagnosis is the answer.  Levine suggests:  “I think that if a social worker in private practice does a really good diagnostic assessment and determines that a person is going to need more treatment than what their managed care provider will cover, then they have an ethical obligation to make a good referral at the outset.  In other words, they should not take someone on if they are going to wind up at the ‘what do we do now?’ point.”

“I don’t think you can treat the insurance policy, you have to treat the condition,” says Dasenbrook.  He explains, “If at the 15th session, you’re advising your client, ‘we have five more sessions that are going to be reimbursed by your insurance company and it is my clinical judgement that you are going to need more,’ then you should be able to contract with your client about the options that are available.”  Having a diagnosis at the outset and tracking the client’s progress through the allowable treatment period is key to effectively managing a client’s reimbursement in Dasenbrook’s view.

Paul Alie, LICSW, who has a private practice that is 90% managed care in Massachusetts, is in full agreement. “A therapist needs to think about planning the treatment so that the client gets what they need out of treatment in the time that is covered.  In my opinion, it is unethical if a therapist doesn’t pay attention to that and just flies through twice weekly treatment and then at the end of benefits says, ‘Where do we go from here?’ It needs to be part of the planning from the beginning.”

The Time Is Up

“What do you do when the approved managed care benefit runs out for a client?”  is a question that Spevack posed to her committee of 400 NASW members in private practice in New York City. The response was surprising: Nobody said, make a referral!

So what do they do? According to Spevack, some clinicians tolerate clients who drop out of treatment and then resume later. “Let’s say they run through their 20 sessions and they drop out in September and then they resume in January when they have another 20 sessions approved.” A lot of clinicians negotiate a rate, which might be the full fee, the managed care fee or sometimes it is a reduced fee.  “So, if a client has 20 sessions, they might see them every other week and then maybe there is a gap in treatment and they will negotiate a rate for that period of time.” Other clinicians may stretch out the allotted number of sessions over a longer period of time.

Dasenbrook feels that it is important for clinicians to get back to the insurance company and advocate for them to extend their coverage when it is needed. He claims that managed care companies are much more flexible today than in the past.  “They are a lot more user-friendly. Its cheaper in cold hard dollars and cents to extend someone’s treatment than having them end up in the hospital or having something tragic happen to them.” Alie agrees, “Insurance companies are generally more than willing to provide more outpatient treatment in order to avoid higher levels of intensive care.”

Another option, suggests Dasenbrook, is to have clients talk to their employers, if they are comfortable doing that.  “A lot of times they have an Employee Assistance Program that will give 3-5 sessions at no cost to the employee, which can be added on top of whatever their managed care benefit is.  Sometimes EAP programs have a single case agreement, so that even if I am not one of their providers, I can see someone that I have been seeing through a managed care plan.”

Alie says that sometimes insurance companies will fund “maintenance care” once someone is stabilized and the benefit has run out, which is cheaper and less disruptive than risking another severe episode.  “You can make a case to an insurance company that ongoing treatment every month or perhaps two times a month is necessary to prevent decompensation.”

Both Dasenbrook and Alie agree that having a client advocate for more treatment with the managed care company can be effective.  And if everything fails, Alie says that the therapist can file an appeal to the managed care company, which often is successful in attaining more treatment for the client.  “If it is denied, then they need to help the client find the services that he or she needs the best way  they can.  Having done all that, I think  they have fulfilled their responsibility to the client.”

The secret of working with managed care companies, according to Dasenbrook, is not to get adversarial.  “We find that a nice, polite approach is the way to do it.  You just go in and advocate for your client.  The managed care companies tend to respond (to this approach) by asking us what we think the client needs and more than likely they approve it.”

Final Analysis

In the final analysis, managed care has changed the practice of psychotherapy in fundamental ways.  But, in the years since managed care companies vowed that they were going to eradicate the “Woody Allen Syndrome,” they have learned a few things too.  They have come to realize that long term psychotherapy is a must for some people to be healthy and is not just palliative for the neurotic.  The gulf between therapists and managed care companies, which at first seemed impossible to bridge, may finally be closing to some middle ground.

Author:   Dr. Lynn K. Jones

Certified Personal and Executive Coach



Psychotherapy Finances Newsletter

Psychotherapy Finances is a newsletter written expressly for behavioral health practitioners and provides its subscribed readers with the latest news and ideas for building strong private practices, including practices in managed care.

The Complete Guide to Private Practice for Licensed Mental Health Professionals by Robert J. Walsh, MA, NCC, LCPC, and Norman C. Dasenbrook, MS, LCPC

This guide includes many aspects of setting up a private practice, including: dealing with managed health care, how to handle claim denials and how to get on closed panels.


S 558—The Mental Health Parity Act of 2007

After a years-long battle, the Senate passed legislation in September, 2007, that would require equal health insurance coverage for mental and physical illnesses when policies include both.  The bill, known as the “Paul Wellstone Mental Health and Addiction Equity Act,” if passed by the House, would dramatically change how mental health is funded by managed care insurance companies.

“Parity” is the bill’s basic principle: that mental illness is a disease like any other.  The objective of the bill is to require insurance coverage that is equal to, but not superior to, other medical conditions such as cancer, diabetes or heart disease.  Parity is not a benefit or treatment mandate, but rather a coverage condition.  Therefore, if you cover mental illness, you cannot impose limits or conditions that do not apply to everything else.

With the addition of New York and Ohio in 2007, there are now 41 states with parity laws covering 26 million Americans.  These laws vary substantially in their scope and requirements.  The federal parity law will only preempt standards in state laws that establish parity for day/visit limits and financial limitations.

Paul Alie, LICSW explains how the mental health parity law works in Massachusetts:

Medical necessity determines the number of sessions for which a person is eligible and the sessions are unlimited as long as treatment is medically necessary. “So, for a biologically-based diagnosis, such as bi-polar disorder, schizophrenia, or major depression, there is no cap on the number of sessions as long as the therapist can demonstrate that there is medical necessity. And even if it is a non-parity diagnosis, such as an adjustment disorder or an anxiety disorder, subscribers are usually going to get up to 24 sessions, since most people come in with some level of distress or impairment that is going to meet the criteria for medically necessary care.”

[1] Welfel, Elizabeth Reynolds. (2001, April 1). The Impact of Managed Care on Mental Health Counselors: A Survey of Perceptions, Practices, and Compliance with Ethical Standards The Free Library. (2001). Retrieved November 18, 2007 from Impact of Managed Care on Mental Health Counselors: A Survey of…-a075246278

Dr. Lynn K. Jones is a Certified Personal and Executive Coach based in Santa Barbara, California and a sought after coach and consultant for organizations and individuals across the US.   Her doctoral work completed at the Wurzweiler School of Social Work, Yeshiva University concerned organizational culture; she coaches, consults and trains organizations on what they need to do to create organizational cultures that are aligned with their vision and values using a process of Appreciative Inquiry.  She coaches individuals on achieving their reflected best selves.  An MSW@USC faculty member, Dr. Lynn K. Jones, MSW, DSW, CSWM, teaches Human Behavior and Social Environment.