How to Charge?

All the recent talk about CPT coding changes in psychiatry has resurrected discussion of how to charge for services, especially whether to charge by unit of time or per procedure. In the case of psychotherapy historically we talked about "hourly rates" even though the standard session usually lasted 45 or 50 minutes. Even so, it might make sense to charge say five dollars per minute, so a 15 minute session might cost $75 or a session that lasted an hour and a half might cost $450.

With so many psychiatrists no longer providing psychotherapy, however, and with much shorter visits, fixed costs become important. These include expenses like malpractice insurance. Liability connected with a case remains more or less the same regardless of the frequency or length of service. If I were to only "see" the patient once a year for five minutes, using the fee above, I would only make $25. Another patient might come in weekly for an hour, totaling thousands of dollars in the same year. And in fact more frequent monitoring reduces rather than increases liability. If something were to go wrong with that once a year case a plaintiff's expert would likely argue that I was negligent in not evaluating the patient frequently enough, and yet I would make very little money.

The seemingly higher relative cost of shorter visits then makes up for reduced frequency to cover those fixed costs which might also include ordering prescription refills, documenting visits, and preparing insurance claims.

A more novel approach that some boutique practices have actually implemented involves payment of a subscription fee in addition to or instead of fees for actual encounters with the patient. The psychiatrist might charge a nominal fee of say $100 per quarter regardless of how many visits took place. This might more accurately reflect the actual cost, including liability, during that time, aside from services rendered during actual encounters.

Incentives play a role here as well. If the patient pays per unit time, and the patient is paying out of pocket, the patient may neglect to bring up important information in the hope of saving money. The incentive for the physician, however, might tend toward inefficient use of time, especially if the patient is not paying out of pocket: the longer the visit, the more I get paid.

Finally, we have to consider scheduling. In the old days when every session lasted 50 minutes it was easy to schedule each patient on the hour with a few minutes to spare after the patient left to return phone calls, use the bathroom, or write progress note. But when we cannot predict duration of encounter scheduling can rapidly deteriorate, either leading to long waits in the waiting room or reduced revenue from empty timeslots.

The new coding paradigm strikes a balance between time-based and fixed payment, but increases the complexity of claims for reimbursement and leaves the patient unable to predict what each visit will cost them.

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