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Where have all the cherries gone? Cherry picking in behavioral healthcare in 2010

August 12, 2010
by Terry L. Stawar, Ed.D.
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The practice of siphoning off the most profitable aspects of a business and leaving someone else holding the bag for the rest (Cherry Picking) is a time honored tradition in the more competitive venues of behavioral healthcare. At one point many CMHCs saw their core mission as providing services to people who were indigent and didn’t have the resources to access the for-profit psychiatric system.

Of course many centers started to compete for private insurance patients with their own “Sherwood Subsidiaries,” private practice clones, purportedly designed to “rob from the rich to give to the poor.” Then a strange thing happened. Managed care started to strangle the private insurance profits and suddenly there was actual competition for the previous persona non grata Medicaid patients. Medicaid and Medicare did have its financial superstars, especially partial hospitalization. But now they have been audited, managed, and transformed to the extent that they have become little more than break-even propositions.

The cherries that people try to pick today just aren’t as sweet as in the past. But only recently a competitor counseling group in my area complained to state officials that our CMHC doesn’t provide enough low-cost/no cost psychiatric services. They would like for our physicians to see their patients who may require medication, while they would continue to provide the profitable parts of treatment. Even a rival CMHC has tried to send their patients to us for medication evaluations, rather than hiring their own psychiatrist.

With high numbers of no shows, sliding fee scale discounts, laughably low Medicaid rates, and the enormous collection allowances for first party payers, psychiatric services (our core services in many respects) are a loss leader. I have heard two different CMHC administrators in my state say that they lost $50,000 a year for each psychiatrist they employ.

Maybe we're doing it all wrong and some of you can set us straight. For years we have made it work by shifting profits from other services, but as those cherries are eliminated, where do we go from here? Somehow I don’t think competition among providers has made for better services for our clients. We spend way too much time, resources, and creativity to compete instead of improving quality or excelling in our mission.

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Great blog, Terry. As I learned in my very first class in Strategic Nonprofit Management last night, nonprofits should support and collaborate with other community resources, not compete.

Terry Stawar

President/CEO (LifeSpring, Inc.)

Terry Stawar

@tstawar

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Terry L. Stawar, EdD, is President and CEO of LifeSpring Health Systems, a community behavioral...