‘You Get the Outcome That You Pay For’: Pediatric Behavioral Health Demands Payment Innovation

This is an exclusive BHB+ story

The mental health of American youth is moving in the wrong direction by several measures.

Recent data from the federal government show mental health indicators such as feelings of hopelessness and suicidal thoughts are much worse now than they were 10 years ago and are largely unchanged in the years following the onset of the COVID-19 pandemic.

However, the present fee-for-service paradigm across payers of many types does not account for the unique challenges that pediatric behavioral health providers face. This leads providers to operate at a financial deficit, prioritize serving only financially secure patients, or not provide care to patients due to resource constraints, e.g., economic or time constraints.

“Does fee-for-service billing truly compensate multi-specialist, multi-disciplinary care? And the short answer is no,” Dr. Mona Potter, the chief medical officer and co-founder of InStride Health, said during a panel at the Behavioral Health Business VALUE 2025 conference. “In a traditional fee-for-service model, you are billing for the face-to-face time you spend with a patient. … But there is a whole system around this child that needs to be part of the treatment.”

Engaging in that system — which includes some combination of clinicians, guardians, schools, government agencies and others — is largely uncompensated. This pushes psychiatrists and their practices into one of two undesirable directions, Potter said. Either they become a “pill mill” and grind through medication management or take the extra time to ensure excellent care for patients and take a financial hit doing so.

“This is where [we’re] trying to think about a way to change incentive — rather than incentivize for the time spent, incentivize for the quality of the time, the quality of what we’re delivering,” Potter said. “It feels like a no-brainer.”

InStride Health is a virtual behavioral health provider that specializes in children and teens with anxiety and obsessive-compulsive disorder (OCD). Its care model includes psychiatrists, therapists and exposure coaches. Services include tailoring care plans, including symptom severity scores, one-on-one therapy, group therapy, coaching and medication management.

It raised $30 million in funding in March 2024.

Much of what providers like InStride Health have had to do to work with payers to make innovative care models viable is push for unique arrangements with payers. In the case of InStride, it has arrangements with health plans to bill for services but also collect payment from patients and their families.

At the core of many issues in paying for pediatric behavioral health care is a lack of acknowledgement by fee-for-service arrangements that children need and receive fundamentally different care than adults.

“It’s absolutely a different service,” Alex Mercier, vice president of strategy and operations for Transformations Care Network, said during the panel. “In addition to the modalities for child care being different, the whole circumstance is different.”

He also noted that therapists — the bulk of Transformations Care Network’s work is in therapy — get pulled in many different directions that don’t directly relate to providing care. This can even include entanglements with the courts over dysfunctional families present in divorce or protective hearings.

“This results in this clinician getting a really great education in delivering care, being uncompensated for all of the care management work that they’re doing, and learning [they] have a great skill set and can go out of network and command 200% of Medicare and do pretty well,” Mercier said.

Mercier said the most innovative solutions with partnering payers have come from working with the Medicaid programs and the health plans that contract with them. For example, Maryland’s Medicaid program provides reimbursement codes that address specific care and case management functions. These include different rates for pediatric patients that are noted with a modifier to an outpatient code and additional codes for 15-minute increments of care collaboration with outside organizations, as well as simply paying for the care provided by therapists still under supervision.

“Interestingly, all of those approaches are coming from the Medicaid space; Medicaid is the payer that’s forced to acknowledge this a bit more so than the commercial plans,” Mercier said. “I’ve been screaming from the hilltops for the commercial payers to recognize this and adopt some of it.”

However, health plans are skeptical of simply paying more for care, even specialized services such as pediatric behavioral health.

Dr. Amy Milewski, vice president of clinical partnerships and associate chief medical officer for Blue Cross Blue Shield of Michigan, said during the panel that physical health care stopped simply paying more for care over time about 20 years ago and focused much more on value-based care and similar models that focus on care outcomes.

Similar work is happening in the behavioral health space. But the COVID-19 pandemic laid bare and worsened the access challenges that impede people from getting care or the right kind of care. This led to wide acknowledgment by payers about the importance and connection between behavioral health and overall health.

The industry still largely struggles to find clear and actionable ways for behavioral health providers and health plans to agree on the value of behavioral health, its quality, and its connection to improvements in care outcomes or spending.

“Just paying more does not give you the outcome,” Milewski said. “You get the outcome that you pay for.”

Milewski said that health plans and health plan customers, especially employers, know that behavioral health delivers value, but aligning that to the right outcome measures is still a challenge.

Across the board, payers are paying more for behavioral health services. A study by PwC found that, since the pandemic, overall spending on behavioral health is up more than 50%, in-person utilization is up about 40% and behavioral health claims as a share of all health care claims are up over 70%.

This leads many payers and their employer customers to question the value of the care they are paying for, Milewski said.

“Seventy percent of our commercial business … is self-funded, which means it’s the big clients — like Ford, Chrysler, GM — that are actually paying the bills and looking at what they’re getting, and they’re saying, ‘We’re just seeing this continue to grow, and we can’t even tell what value we’re getting,'” Milewski said.

However, those are the exact questions that have and will push value-based care and other reimbursement innovations forward. That has led Blue Cross Blue Shield of Michigan to support the certified community behavioral health center (CCBHC) model for pediatric patients with severe needs and the collaborative care model for less acute needs.

Both models integrate behavioral health and physical health care, a major demand for employers. Milewski.

Transformations Care Network embraces care integration as well: Mercier said the company has hired pediatricians to see patients once a week to provide primary care services in collaboration with its behavioral health service providers. Mercier coined the approach reverse integration.

“Right now, I’m hearing loud and clear and what we’re seeing in regard to how payers are behaving — the days of paying for access are over,” Mercier said. “Clearly, we are now in a phase where outcomes matter, value matters.”

The company was founded in 2021 and has become one of the fastest-growing behavioral health companies in the U.S.

Looking forward, the panelist zeroed in on the need for providers to seek to prove their services reduce overall health care spending. Mercier called it “the Holy Grail” of value-based care. They also noted a need for more encompassing assessments of the value of care at the individual patient level. Each called for a greater focus on quality-of-life measures.

“These are children. They should not be patients forever,” Potter said. “They should be students and athletes and musicians and friends and whatever else. Their identity should not be around being a patient.”