Over the last few months, we’ve watched Optum pull back on behavioral health funding on multiple fronts.
While substantive to the specific sectors impacted, it signals that previous worries about payers cutting back on behavioral health reimbursements are warranted. In short, that’s bad news. But it’s not unexpected. Why is that? Because payers are largely unable to do much else when it comes to limiting costs — costs that are ostensibly ballooning as Americans en masse seek to use their behavioral health benefits.
Naturally, many BHB+ Update readers will think, “Wait, isn’t this a good thing? Haven’t Americans ignored mental health issues for generations? Isn’t there a strong connection between quality behavioral health services and reductions in overall spending?” And those readers would be right on all the facts. But they would be thinking about this from the perspective of patient impact, the correct perspective for professionals who take on the “do no harm” ethos of health care.
Health insurance companies are fundamentally different, complete with different pressures, constituencies and objectives. Their primary concern is having more money coming onto its books than it does going out. In support of that, they have to make medical decisions based on what they perceive as health care providers’ clinical and financial value. On top of that, these health insurance companies’ financial performance is under the public microscope every three months or so and the judgement of the titans of the finance and investment industry. For example, UnitedHealth Group’s (NYSE: UNH) largest shareholders are Vanguard Group, Blackrock, State Street Corp., FMR (parent of Fidelity Investments) and JP Morgan Chase & Co.
It’s unfortunate, at odds with the behavioral health industry’s objectives, but inevitable. It’s just the insurance industry doing what it does.
I’ve heard people share various versions of this quote from the psychologist Abraham Maslow to describe what I mean when describing health plans doing the only thing they can do: “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.”
In this week’s BHB+ Update, I will get into the following:
— A minor revelation from the Optum autism network news
— Putting Optum’s mental health platform funding cuts in perspective
— Where things go from here
Unexpected clarity from Optum cutting autism therapy in Medicaid networks
First, I’ll repeat something I’ve said before in these updates: The current health plan-provider dynamic in behavioral health is fundamentally based on fear. Providers are so twisted up in agreements to not talk about rates that even passing mentions of payer dynamics in casual conversations makes the people I talk to clench up like they got zapped with a taser.
Plus, the highly consolidated payer environment makes the negotiating power between any one provider and payer similar to a mouse negotiating with a lion. The lion does what it will, and the mouse can only decide to take or leave what the lion offers.
All of this makes getting an idea of the state of play at the intersection of health plans and behavioral health organizations incredibly difficult. Through bits and pieces of conversations that I’ve had over the last few years, I’ve heard from behavioral health executives who hear it from their contacts at health plans that behavioral health, while a relatively tiny slice of spending, is the fastest ballooning expense in health plan budgets. But getting anything specific has been tough to track down.
That’s one reason the ProPublica exposé was insightful for me — apart from the whole thrust of the article, which details Optum’s plans to whittle back autism therapy spending in Medicaid networks. Overall, the number of people seeking autism therapy services increased 20% over the past year, while spending is expected to increase by $75 million. This validates other tidbits that I’ve heard that autism therapy spending is way up for payers.
“The ProPublica article grossly misrepresents our efforts to ensure the people we serve are getting the most effective, evidenced-based care for their needs,” a representative from Optum told me.
The wider discourse about the ProPublica kicked up a discussion that reminded me of something that happened earlier in the year but is newly relevant — LifeStance Health Group (Nasdaq: LFST) veiled disclosure about a major rate cut.
During the company’s first-quarter call, LifeStance Health executives disclosed that one payer reduced an above-average rate to a more market rate. On its face, it’s not a big deal. But dwell on this: the revenue reduction created by this one rate renegotiation was material enough for the company to 1) disclose it on the call with investors and analysts and 2) project that the impact of the rate cut would be felt through 2025.
While the company didn’t at that time name the payer — and more recently, a representative of LifeStance declined to comment on the matter — its public documents give two potential possibilities of which payers would be meaningful enough to LifeStance’s business to warrant such disclosure.
“Two payors individually exceeded 10% of our total revenue for the year ended December 31, 2023: UnitedHealthcare and Elevance Health, Inc., comprising 19% and 13%, respectively. Our contracts with payors are generally fee-for-services arrangements,” states the company’s most recent annual financial filing with the U.S. Securities and Exchange Commission.
Even if neither payer above was the specific payer who cut their rate with LifeStance Health, it demonstrates that even the largest behavioral health players aren’t immune to steep rate cuts. For reference, LifeStance Health said in its third-quarter earnings announcement that it operates more than 550 centers spread across 33 states.
Level-setting rate cuts for mental health practice platforms
In November, Clear Health Costs reported that Optum would cut its rate for therapists practicing with the digital practice enablement platforms Headway and Alma. I’ve verified from multiple sources that Optum indeed cut these rates. Based on many conversations with knowledgeable sources — who all sought anonymity for fear of reprisals — the rate cuts by Optum are so far limited to Headway and Alma.
The platforms attracted respectable rates from payers because they simplified the process of getting mental health clinicians in networks, a major historical problem that was worsened by the pandemic.
Many incorrectly speculated that these cuts had or would sweep through the expanding galaxy of similar providers that establish contracts with payers and plug in a cohort of independent therapists. Further, this shows that Optum’s rate cut did not imply a sweeping judgment of these types of ventures. While it has an arm’s length association with its namesake company, Optum Ventures is an investor in Alma.
However, the outcry online over the development was loud. All of a sudden, potentially hundreds of independent therapists seeking to merge their clinical expertise with a bit of entrepreneurial spirit were looking at making less money for the same level of work with no real recourse.
To me, the outrage was out of proportion to this development. As discussed above, rate cuts are what payers do. It’s a likely and acceptable move in the proverbial game played by payers and providers. But that’s a take that is coolly and distantly separated from what happened. I am 100% certain I would be singing a different tune if this happened to me.
So now what?
Optum and its fellow entities within the UnitedHealth Group conglomerate collectively are the undisputed alphas of the payer landscape. It’s not unreasonable to suppose that other payers are experiencing similar pressures to the UnitedHealth Group family and will act in a similar manner. But it’s impossible to know if that will happen or what that will look like. Will cuts be swift and all-at-once? Will payers hold rates flat or make steeper-than-normal rates over the next few years?
Such speculation might seem alarmist and pessimistic. But people a lot smarter than me have thought something along these lines in the not-so-distant past. The RAND Corporation released a study last year that found that mental health spending for members of employer-backed insurance plans increased by 53% while use increased by 39% between March 2020 and August 2022. The study noted the explosion of the use of telehealth to access mental health services, highlighting it as a driver of utilization.
The study’s authors posited that payers would rein in that spending.
“If greater utilization of health services drives higher health care spending, insurers may begin pushing back on the new status quo,” Jonathan Cantor, lead author of the study and a policy researcher at the RAND Corporation, said in a news release. “Insurers may look for ways to curb costs and that could mean less flexibility about using telehealth for mental health services.”
While the ultimate fate of telehealth policy remains up in the air, payers doing what payers do when costs balloon has happened, is happening, and is likely to happen in the future. The obvious question going forward is, “Now what?”
In brief, it’s not inconceivable that therapists will try to step out of the insurance game altogether at a greater clip than previously seen. So much of that industry’s history has existed outside of the payer-provider complex. A mass exodus would be something of a return to that industry’s roots — a migration that would clearly be to the financial benefit of practitioners and a mixed benefit/harm to patients. Already roughly a third of psychologists are not in-network with any health plans, according to a recent poll by the American Psychological Association.
But for the rest of the behavioral health industry, such a dramatic action is simply not feasible. Taking it or leaving it is just not on the table.
Companies featured in this article:
Alma, Headway, Lifestance, LifeStance Health, Optum, RAND Corporation
