Value-Based Contracting For Psychotherapy: The New Normal?

  • Previous attempts to reduce costs have failed and Healthplan profits have increased.

  • Part of the reason for the failure of attempts to reduce cost has been the lack of appropriate and accountable incentives for care providers.

  • Cost control efforts such as utilization review offer little or no focus on quality of care.

By the end of 2020, federal debt held by the public was projected to equal 98 percent of GDP. The projected budget deficits would boost federal debt to 104 percent of GDP in 2021, to 107 percent of GDP (the highest amount in the nation’s history) in 2023, and to 195 percent of GDP by 2050. If current laws generally remain in place, net outlays for those programs would increase to 9.2 percent in 2050.

Finding ways to make significant changes to the way in which the government and employers finance health care has proven difficult. Healthcare policy makers’ efforts to slow this rapid growth are proving to be difficult using traditional Healthcare contracting strategies. Previous attempts to reduce costs have failed while Healthplans’ profits have generally increased. Reasons for failure to reduce costs include lack of appropriate and accountable incentives for care providers. Cost control efforts such as utilization review have little or no focus on quality of care. These efforts fail because the policies create incentives to limit care (sometimes advisable or necessary care). Or, Healthplans simply reduce the price they are willing to pay for services, again without regard to quality.

Perverse attempts by Healthplans to reduce costs have included lowering compensation for psychotherapy services. (These are short-sighted, neglecting the medical cost-offset research of decades.) In communities where the dominant Healthplans’ therapy compensation is lower, psychotherapists focus their marketing on out-of-pocket services to maintain revenue.

A return to exclusively out-of-pocket services is not viable for an entire profession. Only a small number of practitioners will attract a sufficient number of patients to make a living. Calls to boycott Healthplans that pursue value-based contracts are illegal.

Strategies that limit care lead to greater health problems or patients seeking medical care for psychological distress. Healthplans with higher than average reimbursements know that their patients are being seen longer than those plans that pay providers lower rates. Yet many Healthplans that pay lower rates see no point in auditing psychotherapists and allow providers to see their patients longer before questioning medical necessity of care.

Health insurance in Oregon is currently provide health care services at higher levels in terms of quantity. As a consequence of Oregon House Bill 3046, Healthplans will be subject to normalized comparisons of psychotherapists and Healthplans. This law will likely have an equalizing effect on the cost of mental health services. By requiring normalized psychotherapy reimbursements, Healthplans can more easily, and with greater certainty (lower risk), develop and offer value-based psychotherapy services. As a result of the pandemic, and of HB 3046, value-based contracts are more important and also more feasible.

Even after effects of the 2020 coronavirus pandemic fade, economic deficits are projected to be huge in coming decades. The Congressional Budget Office (CBO) projects deficits will increase from 5 percent of gross domestic product (GDP) in 2030 to 13 percent by 2050—larger in each year than the average deficit increase of 3 percent of GDP over the past 50 years.

Congressional Budget Office report presenting its projections of what federal deficits, debt, spending, and revenues would be for the next 30 years.

Congressional Budget Office report presenting its projections of what federal deficits, debt, spending, and revenues would be for the next 30 years.

The Oregon Healthplan and commercial Healthplans seek models for high-value health care services that will contribute in a meaningful way to manage costs. Healthplans want to reduce costs, increase the quality of care, and to maintain an acceptable level of profit. The values they wish to contract for are measurable outcomes using processes that reduce cost, increase their profits and offer their customers a competitive value proposition (i.e. quality of care). Since they have failed to accomplish this by restricting care, they are now forced consider incentives and rewards for providers who will accept lower, the same or greater reimbursements.

Value-Based Contracting is already in use in the medical care economy, primarily Medicaid and Medicare. Commercial versions are being developed in Oregon. Several Federal and Oregon State versions have been in operation for nearly 10 years. If we assume utilization review and cutting fees-for-service will not contain costs for psychotherapy services, then the only avenue that remains is for Healthplans to offer or require value-based contracts.

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