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Eleven Unethical Managed Care Practices Every Patient Should Know About - (with Emphasis on Mental Health Care)

By Ivan Miller, Ph.D.
August 1998

Please photocopy and distribute this document widely.

Disregarding personal and medical privacy.
Using false advertising.
Using deceptive language.
Violating traditional scientific ethics.
Practicing outside of a professional's area of competence.
Creating and intensifying conflicts of interest.
Keeping secrets about financial conflicts of interest.
Violating informed consent procedures.
Using "kickbacks" to keep patients away from specialists.
Squandering money entrusted to their care.
Disregarding information about harm to patients.

Americans want more than affordable health care--they also want ethical health care. Ethical standards are needed to protect patients, to assure honesty, to maintain minimum standards of quality, and to prevent the wasteful and fraudulent use of health care funds. Without the safeguards of ethics, the health care system will be a financial jungle where the quick and the powerful will have great economic advantage over the sick and the vulnerable. Such a jungle is not a place where anyone would go or send family and friends when frightened, weak, sick or vulnerable.

As Americans are discovering, the managed care system often does not give consumers what they want or need. Managed care's primary focus is on cutting costs and raising profits; its concerns about ethics and quality of care are only secondary. Although health care professionals and the media report widespread unethical managed care practices, the managed care industry is not correcting its ethical problems.

Consumers who learn about the unethical managed care practices will be better equipped to navigate today's managed health care system. In addition, something must be done to stop the moral decline in health care. As Americans become more aware of the ethical problems in managed care, consumers and professionals can join together and call for an end to these unethical practices.

Eleven Unethical Managed Care Practices

1. Disregarding personal and medical privacy.

Health care ethics call for the greatest respect for patient privacy and confidentiality. Privacy is especially important in mental health because patients talk about sensitive and personal topics like being a victim of physical or sexual abuse, drug and alcohol use, personal sexual behavior, and family problems. Managed care, on the other hand, disrespects privacy:

True privacy and confidentiality means sharing sensitive, personal information with a single, trusted professional chosen by the patient. Managed care, on the other hand, usually requires sharing private information with several people who are not chosen by the patient, such as gatekeepers and utilization reviewers, and storing it in files accessible to hundreds or thousands of employees.
True privacy and confidentiality means protecting records so that they cannot be seen by anyone who is not involved in treatment. Managed care, on the other hand, usually protects records only to the extent of federal and state law which, in the case of insurance records, is poor protection. In fact, insurance records, under current laws, are at times even available to employers.
True privacy and confidentiality means patients have freedom to control, without coercion, who can see their personal and confidential information. In managed care, on the other hand, patients are often forced to give up all privacy as a condition of using their insurance benefits.

2. Using false advertising.

Professional health care ethics set a high standard for truth in advertising. Managed care, on the other hand, often engages in advertising that deceives many consumers.

Managed care, particularly in states that have so-called parity laws, often claims that mental health benefits are unlimited, when in reality, hidden policies and rules make even ordinary treatment unavailable.
Managed care often claims to provide all mental health services at times when it offers only ultrabrief therapy -- a short-term and frequently ineffective treatment.

3. Using deceptive language.

Professional ethics emphasize giving patients accurate and straightforward information. Managed care, on the other hand, uses misleading language.at every level Companies which intentionally restrict choice call themselves names like "Choice Health" or "Options Health." Companies who are hired to restrict access to treatment call themselves a name like "Access Health." Cost cutting programs are called "quality improvement programs." Gatekeepers, hired to divert patients from treatment, are called "patient advocates." Such misleading language does not belong in health care.

4. Violating traditional scientific ethics.

According to scientific ethics, the research support for new treatments must be reported in peer-reviewed journals so that the community of science can debate the new treatments' potential benefits, possible risks, and effectiveness. Even when the research is conducted in secret, such as during the development of new medication, before the new medication is given to patients, the scientific evidence, research support, and description of the medication must be publicly disclosed. In this way, patients are protected from hoaxes, unscientific manipulation, and harmful treatments.

In managed care, on the other hand, new methods of delivering treatment are decided according to secret and proprietary guidelines. Managed care claims that these are scientific guidelines, but does not reveal the guidelines or the supporting evidence. As a result, health care scientists and professionals cannot independently evaluate if science really supports the new managed care methods of treatment. Using secret treatment guidelines is just as unethical as giving a patient a secret medication.

5. Practicing outside of a professional's area of competence.

All ethical codes forbid professionals from practicing outside of their area of competence. In managed care, on the other hand, professionals are encouraged and, at times, even required to practice outside of their competence.

Because managed care limits referrals to specialists, it forces many professionals to treat special problems for which they do not have the training or experience.
Utilization reviewers commonly do not have the credentials or training necessary to confirm that they are competent to overrule and change the decisions of the treating professional. For example, in managed mental health, utilization reviewers often have merely a bachelor's degree or a master's degree with limited experience. These reviewers routinely overrule and change the treatment decisions of greatly experienced specialists with a master's or doctorate degree.
A utilization reviewer's decisions may overrule the decision of the professional who is conducting the treatment. However, the reviewer's decision often is based upon the limited information contained in a two page form and discussing a case for a few minutes with the treating therapist. When evaluating the treatment of a patient with a condition as complex as a mental health problem, it is outside of all professionals' areas of competence to overrule the treating professional based on such meager information. Unless a professional conducts an in depth evaluation, the most appropriate action is to defer judgment to the person who is treating the patient.

6. Creating and intensifying conflicts of interest.

Medical ethical codes require that health professionals avoid and minimize conflicts of interest regarding their primary obligation to the patient's welfare. Managed care, on the other hand, does just the opposite. It seeks out and develops conflicts of interest in which professionals profit the most when the patient receives the least treatment.

The conflict is most serious with case rates and capitation in which the professional is paid a set fee regardless of how much treatment the patient is given. Competitive mental health case rates may be as low as $200 per patient, regardless of whether the patient is seen once or fifty times. If patients are seen for as few as an average of eight one-hour sessions, simple arithmetic shows that a $200 case rate yields $25 per session. After subtracting a modest overhead cost estimate of $20 per session1, only $5 is left. That is too little to pay the therapist for each session and paperwork. When case rates are this low, professionals have a terrible conflict of interest because they cannot stay in business unless the patient is given much less treatment than is really needed. It is no wonder that the vast majority of professionals refuse such contracts even when it may mean leaving the profession or the financially risky option of working outside of managed care.

While sometimes the conflict of interest is obvious as it is with case rates, other times it is more subtle but just as harmful to the patient. For example, professionals may avoid dealing with important long-term issues or cut therapy short because managed care prefers to refer new patients to therapists with a record of short-term treatment. The therapist has a conflict here between treating current patients for the necessary length of time, or cutting treatment short to assure future referrals.

7. Keeping secrets about financial conflicts of interest.

Whenever the involvement of a third party creates a potential conflict of interest, according to professional ethics, the professional must fully disclose both the arrangement with the third party, and how it may influence a patient's treatment. Managed care, on the other hand, usually hides these arrangements.

Managed care companies often pay a "case rate" or "capitated payment" for each patient regardless of how much treatment the patient receives. However, the company rarely reveals this important payment arrangement to the patient.
Many managed mental health care companies will stop referrals to therapists who provide more than ultrabrief therapy, but patients usually are not told their treatment is restricted by this hidden managed care policy.
Some companies have contractual "gag clauses" which forbid professionals from giving patients any information that would make the patient unhappy with their managed care company. Due to intense public pressure, most companies have dropped these gag clauses, but many still use what they call "managed care unfriendly" behavior ratings which perform the same function as gag clauses. These ratings are used to control therapists in the following way. If a therapist commits an "unfriendly behavior," it shows up as a low rating. Professionals are regularly notified of the ratings, and low ratings serve as a warning that unfriendly behavior may result in terminating the contract. The forbidden "unfriendly behavior" includes even telling patients when they may benefit from a treatment not paid by the managed care company. Patients are not told that their therapist's professional freedom is constrained by these rating systems.

8. Violating informed consent procedures.

The rights patients have to control the treatment of their own minds and bodies are protected through a procedure called informed consent. In this procedure, patients are given the important information about treatment and the major treatment options, and after being informed, they can decide if they will consent to treatment and choose which treatment.

Managed care, on the other hand, often fails to inform patients of any treatment alternatives outside of the plan. This failure to inform serves the purposes of the managed care company because patients who do not know other treatment is possible are more likely to report satisfaction with the managed care treatment. Unfortunately, this failure to inform also undermines the patients' control, because the patient looses the choice to self-pay for the preferred treatment.

Medication is frequently presented as if it is complete treatment. In truth, psychotherapy for many problems, either in place of medication or along with medication, is better treatment than medications alone, and psychotherapy is a treatment that many patients will pay for out-of-pocket if they believe it will help.
Patients who are sent to psychotherapy are usually told that ultrabrief therapy is the treatment of choice, and if they don't improve, they are told that there are no realistic alternatives. The reality is that longer-term psychotherapy is a more effective treatment, and many patients find it so helpful that they will self-pay for longer psychotherapy.
Patients, particularly children, are rushed through treatment, either therapy or medication, without being informed of the benefits of psychological and educational testing to evaluate and diagnose problems. Again, some patients or parents choose to self-pay for this testing when they know it is available.

9. Using "kickbacks" to keep patients away from specialists.

Most states have laws against medical specialists making hidden referral payments called "fee splitting" or "kickbacks." An example of such a payment occurs if a family doctor refers a patient to a cardiologist for a cardiac evaluation and the family doctor receives a hundred dollars "kickback" for the referral. This is illegal because patients believe that referrals are based on their best interest, when, in fact, the referrals are strongly influenced by the hidden kickback.

In managed care, on the other hand, the family doctor is often the gatekeeper and may be paid a financial bonus for avoiding referrals to specialists. These bonuses violate the same ethical principle involved in the laws against kickback and fee splitting. The non-referral may appear to be based on the patient's needs when, in fact, the non-referrals are strongly influenced by hidden kickback. Although unethical, these bonuses avoid the laws that were specifically designed to protect patients against kickback or fee splitting.

10. Squandering money entrusted to their care.

When insurance is sold, the company promises that it can be trusted to handle the funds prudently in order to pay for health care. Managed care, on the other hand, commonly spends over 30% of health care money on administration and profit and pays its executives more than any comparable sized industry. In mental health, managed care creates administration and profit expenses that consume over 50% of the money that was previously available for treatment. When money is entrusted to a managed care company's control, it is not ethical to divert large portions of the funds on the company's own administration and profit. It is even worse that this financial irresponsibility leads to some patients being prematurely discharged from hospitals and other patients having their treatment ended before they have healed.

11. Disregarding information about harm to patients.

Health care ethics require that professionals publicly report potential harm from a treatment, attempt to evaluate possible harm, and consider possible risks along with potential benefits when making treatment decisions. Managed care, on the other hand, usually reports only those statistics that show the benefits of managed care and does not adequately examine of the potential harm to patients.

Managed care has many policies that can have a negative impact on patients but does not report evaluations of this negative impact. For example, managed care executives have reported that the hassle of going through gatekeepers will stop 10-20% of the patients from seeking treatment. It is well known also that depressed and shame-ridden patients are easily discouraged from treatment and often need outreach rather than another barrier like a gatekeeper. However, in spite of numerous reports that gatekeeper systems keep patients from needed treatment, managed care reports do not estimate the harm resulting from such barriers to treatment.
When managed care considers cost effectiveness, it often does so only on the basis of cost to insurance, not the costs to the patients or their families. For example, when ultrabrief therapy is used for the treatment of depression, fewer patients will recover. The many patients who don't recover will suffer damages through missing work, losing a job, a divorce, inadequate parenting of their children, or suicide. Their families also may need to take time from work and be less productive. Both the patient and their family will suffer emotionally. However, when reports about managed care cost-effectiveness decisions are revealed, these reports do not consider these important costs to the patients and their families.
Managed care does not adequately assess its potential to increase death rate. Human life and quality of life are simply not entered into the managed care formulas for measuring the treatment cost-effectiveness. The cost-effectiveness calculations show only insurance expenses. As a result, these formulas actually indicate that cutting expenses as a result of a speedy death is a cost-effective disposition for any patient whose treatment will cost more than their monthly premiums.