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"What Should I Do?" - The Ethics of Marketing, Money, and Managed Care
by Gerald P. Koocher, Ph.D., ABPP and Patricia Keith‑Spiegel, Ph.D.

4 CE Hours - $99

Last revised: 02/01/2016

Course content © copyright 2009-2016 by Gerald P. Koocher, Ph.D. and Patricia Keith-Spiegel, Ph.D. All rights reserved.

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Learning Objectives

This is a beginning to intermediate course. Upon completion of this course, mental health professionals will be able to:

Authors’ Note: Almost all of our case scenarios presented in this course are adapted from actual incidents. We use improbable names throughout to enhance interest and ensure that identities of all parties are not discernible. It is not our intention to trivialize the seriousness of the issues. As part of our disguising process, we also randomly assign various professional designations and earned degrees or licensure status.

The materials in this course are based on current published ethical standards and the most accurate information available to the authors at the time of writing. Many ethical challenges arise on the basis of highly variable and unpredictable contextual factors. This course material will equip clinicians to have a basic understanding of core ethical principles and standards related to the topics discussed and to ethical decision making generally, but cannot cover every possible circumstance. When in doubt, we advise consultation with knowledgeable colleagues and/or professional association ethics committees.

Course Outline


Mostly gone are the days when mental health professionals sat in their private offices waiting for clients to show up, in person, for their weekly appointments.  To comply with the ethical standards of mental health professions, only a tasteful set of bare facts appeared in the yellow pages of the local phone directory.  The client and the therapist agreed on fees and treatment duration. 

Today modern technology has essentially unregulated how mental health services can be advertised and marketed. Enforceable ethical standards can hardly keep up with the scores of available avenues to connect with potential clients.  Insurance and managed care companies largely dictate service reimbursements and limit the number of sessions based on decisions made by other than the treating therapists.  Psychiatrists Michael Robertson and Garry Walter (2007) paint a solemn picture of the impact managed care has on ethical and compassionate treatment by declaring that psychiatry “has been transformed from a healing craft in the Hippocratic tradition to a process of trading technical services on behalf of third party intermediaries” (p. 777), a situation that can be applied to all mental health and counseling professionals.

This course seeks to grapple with the many issues that have complicated the business of mental health services in recent years.


How do these statements, adapted from actual advertisements by mental health professionals, strike you?

The manner in which we offer mental health services to the public has important ethical implications on a variety of fronts. Each example used above has a less-than-desirable element, yet no bright line separates the sketchy from the clearly unethical.  The first ad seems to promise something only this psychotherapist can deliver. The second one uses social media in a tacky manner. The third describes an allegedly unique technique in a dubious fashion; we can’t tell anything about it from the ad itself. The fourth plays with the therapist’s name and comes off as a bit juvenile. The fifth feels crass and commercial. The sixth suggests a suspect activity that could prove embarrassing for the volunteer. The seventh suggests possible client exploitation, and the last one is just plain silly.

Succeeding in private practice requires attracting clients, and it’s not that difficult to find marketing and financial advice (e.g., American Psychological Association Practice Directorate, 1996; Hemmings & Field, 2007; Mikalac, 2005). Certainly, some forms of marketing or calling attention to one's services or products constitute appropriate ways to educate and inform potential consumers. However, some psychotherapists have occasionally used confusing, anxiety-provoking, or frankly deceptive practices in presenting themselves to the public. In addition, mental health services, by their very nature, do not easily lend themselves to comparisons across vendors as with dishwashing soap, life insurance, or used cars. Almost by definition, some of our potential clients suffer from cognitive or emotional impairments and possibly financial disadvantages that may put them in more vulnerable positions than the average member of the consuming public.

Despite the self-serving feature of advertising one’s services, it is still possible to do so with integrity and truthfulness (Barnett & Klimik, 2012; Knapp & Vandercreek, 2008). Inappropriate commercial public statements by mental health professionals range from actual facts taken out of context to the bizarre, and one cannot easily identify specific clients as “victims” of such infractions. It often becomes evident, however, that certain material made public reflects unfavorably on mental health professions as a whole. Because our profession has commercial and business aspects, and because professional regulatory bodies are arms of government or professional organizations (e.g., the American Counseling Association, American Psychological Association, American Psychiatric Association, or National Association of Social Workers), a tension between maintaining appropriate conduct and avoiding restraint of trade may also exist. In addition, as Internet searches and social networking have essentially replaced print directories, how can practitioners best use these tools in a consumer-friendly and still ethical manner?  

Historically, the mental health professions considered the advertising of services or direct solicitation of clients as declasse at the very least. They have traditionally liked to think of themselves as self-regulating and rejected the notion that advertising constituted a meaningful distinction of value to their clients. The first American Medical Association (AMA) Code of Ethics in 1847 unambiguously forbade advertising (Tomycz, 2006). The point cited as justification for this view holds that an advertisement cannot reflect true skill or competence, and one should instead rely on the referral of a presumably informed and knowing colleague.

Federal Trade Commission Actions against Professional Associations

The Federal Trade Commission (FTC), an independent agency within the federal government founded in 1914, consists of two main branches – the Bureau of Competition focuses on antitrust issues, while the Bureau of Consumer Protection investigates charges of false or deceptive advertising. Stimulated by the work of grassroots advocates, a wave of consumer activism became prominent in America during the 1960s and 1970s. This climate became an important factor in the decision of the FTC and the U.S. Department of Justice to alter the ways professional associations attempted to regulate their members (Koocher, 1994a, 1994b).

By the early 1970s, the Bureau of Competition began approaching professional organizations with concerns about their practices barring the presentation of useful consumer information through advertising. From the perspective of the FTC’s Bureau of Competition, three prime directives seemed to apply:

In 1972, the FTC and the Antitrust Division of the Justice Department initiated complaints against a variety of professional associations alleging that some of their rules directly reduced or eliminated competition that might constitute unlawful behavior. The FTC’s actions focused on professional ethical codes prohibiting soliciting business by advertising, engaging in price competition, and otherwise using competitive practices. In the case of medical societies, enforcing the then existing medical ethics code was deemed to create de facto price interference and frustrate the consumer's right to choose services in an unrestrained fashion.

Clinicians who use devices (e.g., biofeedback monitors or devices purportedly used to enhance some cognitive functioning) do need to make certain that any mention of such devices in professional advertising complies with FTC and Food and Drug Administration (FDA) policies.  In particular, regulators have enforcement concerns about product claims and promotional reminder ads (FDA, 2008). "Product-claim" ads typically include both the name of a product and potential therapeutic uses, or assert a claim of success for a medical device. "Promotional reminder" ads typically cite the name of the medical device and other descriptive or price information, without giving the device's supposed benefits or uses.

The increasing availability of so-called “smart phone apps” aimed at medical and mental health conditions known as mobile health or mhealth apps has attracted the FDA’s attention (see: Some smart phones equipped with mobile medical apps will qualify as “medical devices” under FDA regulations. Many of these products are aimed at chiefly at the practitioner market or to enable better communication between patient and practitioner. However, many apps are aimed at consumers, including apps focused on mental health conditions and treatments. Advertising for such products will most likely fall under the same regulatory scrutiny as more traditional modes, except for the special issues associated with internet “cookies” and search engines. For example, those using such apps may find themselves targeted for pop-up advertising touting certain drugs. Aided by geolocation features of the smart phone, advertising by nearby psychotherapists may also soon pop up on computer and phone screens as users shop on the web or make use of search engines.

In the face of the FTC’s focus on making useful information available to the public, one can understand how clinging to vestiges of sameness in public statements solely to maintain a sense of professionalism would not survive. However, some limits on advertising do serve legitimate public interests. This is especially true in professions such as mental health service providers that may unduly influence potential clients because of the consumers' compromised cognitive or emotional status.

States’ Interest Doctrine

It appears likely that state professional licensing boards, which originate from statutory actions of a legislature, would have authority to implement more restrictive limitations on advertising than specified in the associations’ professional codes. For example, a statutory licensing authority might specifically define a state's interest in proscribing “appeals to fear,” testimonial advertising, or false claims of unique or one-of-a-kind services by mental health professionals. In such cases the FTC would probably not object, and might lack authority to take action since intrastate regulation lies outside the FTC’s interstate commerce mandate. National professional associations, however, would be specifically prevented from cooperating with state agencies in developing such regulations as potentially anti-competitive. The states’ interest doctrine will likely face increasing challenges as a result of web-based advertising under rules governing inter-state commerce.

“In Your Face” Solicitation

In general, direct solicitation of individual clients by mental health professionals is not advisable. The central issue involves the potential vulnerability of the client relative to the psychotherapist. Vulnerability may include client insecurities, emotional problems, naivete, lack of information, or simply awe of the professional. The therapist’s special expertise and knowledge are generally accorded a degree of respect or deference that may predispose clients to follow her advice and recommendations, even if this means changing long-standing patterns of behavior. Therapists must recognize this social influence, and consider its use carefully. Advice must be presented with respect to the client's freedom to choose a lifestyle or course of action. Recommendations must always be tailored to an understanding of the client and his unique life situation.

A personal solicitation of the “in your face” variety may pit the expert's advantage directly against the potential client’s insecurities and fears. While there is nothing wrong with a therapist’s announcement of general availability to the community through advertising, the direct solicitation of individual clients has considerable potential for abuse and distress to the object of the pitch.

Case 1:

Max Pusher, M.D., a psychiatrist well known for his syndicated newspaper column, was invited to teach an extension course at Thunder State University dealing with anxiety, tension, and depression. A huge audience was attracted by his name and reputation. Dr. Pusher was accompanied by several assistants wearing colored armbands, who passed out brochures about Dr. Pusher's private clinic and other private workshops he offered. In addition, some of the assistants approached selected students, saying, “You look troubled. Perhaps you could use an appointment or two.”

Case 2:

Drambuie Stalker, Ph.D., bragged to a colleague that she attracted many of her clients by frequenting upscale bars late at night looking for patrons who seemed to be depressed or distraught.  She would strike up a casual conversation to discern their situation and share her card with those she thought needed psychotherapy.

The method used by Dr. Pusher clearly upset many of the students that were approached and certainly would play on the insecurities of others. This seems little more than an appeal to fear as a means to recruit clients in the guise of a public lecture. Dr. Stalker’s stealth approach may not be as easy to classify, although trolling for clients seems crass, sleazy, and possibly dangerous to her own well-being should a bar patron feel “led on” once the purpose of her pecuniary approach is revealed.   

As in the case of testimonials, which will be discussed next, some tolerable exceptions apply to the general prohibition on solicitation of individual clients. These generally occur when the client is not an individual, but an agency, business firm, or other organizational entity. Consider the following examples:

Case 3:

Effie Casey, Ph.D., an industrial and organizational psychologist, has developed a well-validated practice assessment program to evaluate pharmacists’ competence at filling prescriptions and catching drug interactions. He prepares a factually accurate descriptive brochure and mails it to potential employers of pharmacists and colleges of pharmacy, offering his consultative and evaluative services.

Case 4:

Karen Kinder, M. Ed., is trained as an early childhood educator and school psychologist. She has developed a kindergarten screening instrument with good reliability and predictive validity. She has appropriate information printed in pamphlet form and mails these with cover letters offering to conduct training workshops to superintendents of schools and directors of special education in school systems throughout her locale.

While the clients approached by Dr. Casey and Ms. Kinder are indeed contacted as individuals, they are not in the same relative position of vulnerability as an “unaffiliated” individual in emotional distress. Employers, schools, or other entities will generally stand in a better position to objectively assess their needs for such services. Moreover, the nature of the services offered is quite different from individual offers of psychotherapy, although in some circumstances, therapeutic services might also be offered in this manner.

Case 5:

Ethyl Fluid, L.M.H.C., plans to approach a variety of large corporations to encourage their purchase of alcoholism counseling services for their employees using an EAP (Employee Assistance Program) model. She will offer to provide a team of properly trained clinicians to staff an in-house clinic at each company's plant. Employees would be seen for counseling on a self-referral basis, with appropriate confidentiality safeguards in place, for counseling. Dr. Fluid cites that the advantages of the program include convenience for employees and improved conditions of employment, with a possible reduction in alcohol-related work problems and absenteeism. She presents this plan in letters to company presidents and personnel directors.

Assuming that Dr. Fluid observes other ethical obligations related to providing the treatment she proposes, this type of solicitation also presents no problems. No outrageous claims are made, and each company is clearly free to evaluate its own need for the program as well as other alternatives. Client freedom is ensured, and no one is pressured individually.


The use of testimonials by “satisfied users” has a kind of inherent face validity that appealed to the FTC. Unfortunately, the true predictive potential of a testimonial endorsement becomes far more complex with regard to mental health services. Psychotherapy research has taught us that any given psychotherapist will not have equal success in treating all potential clients. Psychotherapists also know very well that their influence in the life of their clients does not end at the close of the last treatment session. Apparently the FTC does not regard the lingering influence of the transference relationship and its potential consequences as an automatic barrier to testimonial advertising (e.g., potentially unfair and deceptive endorsements provided in the afterglow of a positive transference).

Case 6.

Barney Catchum, MSW, asks clients who appear to be satisfied with his services during the termination session to either write out or make an audio or video tape expressing their views of his skills as a therapist. He does not interfere with how clients express themselves, although he only uses the most favorable ones to post on his blog and Website.  He figures that because he no longer sees these clients and their names are not disclosed, he is simply engaging in a creative marketing practice.

We wonder how many clients would feel free to express reservations or refuse Dr. Catchum’s request. Fears about their privacy may be overpowered by a need to help the person who helped them.  That type of guilt leverage is ethically inappropriate that Dr. Catchum has either rationalized away or ignored. And, although most psychotherapists know that satisfied clients and the people who referred those clients do become their best sources of future referrals, there is no proof that the public will rely on commercially advertised testimonials in selecting medical or psychological care providers.

We certainly feel gratified when clients value our services or professional efforts, but there are many reasons not to cite such laudatory comments in advertisements for professional services. Such statements may be taken out of context or reflect value judgments from which the public cannot reasonably draw valid generalizations. In addition, testimonials or public endorsements may compromise clients' confidentially or later prove embarrassing in ways that may not be anticipated when they initially agreed to the quote. Although most professional ethics codes – revised under pressure from the FTC as described earlier in this course – permit the use of testimonials from former clients, we strongly advise our colleagues not to use them in advertising services.

One type of advertising testimonial that has traditionally proved acceptable involves promotions of books or other products aimed at other professionals. Another example might include corporate endorsements of industrial psychologists or organizational consultants. The rationale for permitting specific use of testimonials in these exceptional circumstances links to the consumer and the presumption that the mental health practitioner who permits the use of a quotable endorsement will do so fairly. Unlike the potential client who seeks the help of a therapist during a period of emotional distress, we assume that the scholarly review of a book or assessment tool occurs in a relatively thoughtful and dispassionate manner. Similarly, a corporate endorsement of a consultant who has performed well may translate across industry clients more favorably than recommendations of individual psychotherapists.

Case 7:

Cherry Picker, Psy.D., created an advertisement for her book, "Master of My Mind," citing words from a review that appeared in a professional journal. She claimed that the reviewer described her work as “unique” and “fascinating.” In fact, the reviewer had written, “Dr. Picker has shown a unique ability to take a fascinating topic – the human mind – and make it mundane and superficial.”

Such ill-used quotes will likely be discovered, because their citation will eventually come to the attention of the originator. In fact, permission should be sought prior to the use of such quotes in promoting one’s authored works.

Appeals to Fear

Many psychotherapists might wonder why the FTC objects to a professional association’s ban on advertising that appeals to potential clients' fears of what could happen if services are not obtained. From the FTC's perspective, global bans on advertising that appeals to fear seemed simply unacceptable on general principles. A lot of effective advertising appeals to emotions and fears at some level (e.g., fear of tooth decay if you do not brush, fear of accidental injury or death if you ride in a car without seat belts and air bags, or are driving and texting, or fear of AIDS as a result of not practicing “safe sex”). In fact, social psychology has taught us that an “appeal to fear” coupled with a designated course of action can prove highly effective in evoking attitude change.

How might an ethics committee have become involved in complaints about appeals to fear? In one instance, complaints were filed when consumers objected to advertising by psychologists who ran programs to help people quit smoking. The advertisements, however, merely articulated the potentially fatal consequences of smoking-induced lung cancer and other pulmonary diseases.

Concern is warranted, though, when an ad reads like this:

Did you know that stress can kill you? People drop like flies every day from everyday stress. If you feel tense more often than once a week, you cannot wait. Call me at 555-5555 today.

Unrelenting stress is, of course, likely to lead to physical consequences. However, this ad appears to be incorporating the human condition and using it to frighten people.

Another troubling example is the coupling of an appeal to fear with an “in your face” solicitation. Imagine the following scenario:

Case 8:

Dinah Saur, L.M.F.C., arrives unsolicited at the home of a child who witnessed a playground shooting, urging the parents to subscribe to a course of therapy to prevent “inevitable post-traumatic stress syndrome” in their as-yet asymptomatic child.

Advertising that offers encouragement to seek help for emotional problems in a non-sensational manner can, however, provide ethically appropriate guidance. For example, consider the advertising campaign that cautions, “Friends don’t let friends drive drunk,” or the suicide hotline ad that says, “You’re not alone, we’re here to listen.” Other appropriate advertising might note that, “Depression and anxiety are among the most treatable emotional problems,” or “You can’t always stop life from making you feel down, but there are things you can do to feel better.” The key involves avoiding melodramatic, shocking, or fear-inducing messages.

Current Practices

The FTC did not intend that mental health practitioners or other professions should necessarily adopt the market tactics of miraculous weight loss pills and carnival barkers, but rather focused on universal advertising prohibitions. Potential harm that could result from hucksterism and advertising abuses remains a valid focus of specific, tailored restrictions by professional associations. However, under the FTC guidelines, claims to “professional dignity” and the imagined need for “uniformity” would no longer constitute a legitimate basis for limiting advertising by professionals.

As an example, the relevant sections of the current version of the ethics code of the American Psychological Association (2010) that were most directly covered by the FTC mandated changes includes the following:

Nothing in this section of the APA code should preclude meeting with collateral contacts of current clients. For example, ethics codes do not consider a child therapist’s request for parents to attend a family session a prohibited solicitation. Similarly, an adult therapist’s invitation for a client's spouse or significant other to a session with the client’s permission would also be appropriate in many circumstances. It is also acceptable to offer to provide disaster relief and community outreach services.

Interestingly, while all of the mental health professions have taken steps to address remote delivery of services, none have directly addressed Internet based advertising. We expect the general standards that apply to the ethical content of advertising will not change, but at some point the professions may need to consider potential targeting or intrusiveness of personalized advertising. For example, a clinical practice adept at offering cognitive behavioral therapy (CBT) for depression could target geo-located pop-up ads and even targeted e-mail to people near their offices who use a search engine to look up information on Prozac or Zoloft. Whether such subtle but personalized approach to marketing mental health services will qualify as “in your face” solicitation remains to be seen.

Acceptable and Unacceptable Elements in Advertising

Citing One's Degrees

The most correct way to indicate an earned degree from an accredited educational institution would be to use initials following the holder's name (e.g., John Jones, Ph.D., or Mary Smith, M.D.) Simply using the title “Doctor” invites confusion since the doctorate may be in psychology, divinity, social work, law, nursing, or even medicine. In fact, many mental health professionals do hold graduate degrees in fields unrelated to their clinical or research work. In some professions, a licensing designation such as L.I.C.S.W. (Licensed Independent Clinical Social Worker), L.M.H.C. (Licensed Mental Health Counselor), or L.M.F.T. (Licensed Marital and Family Therapist) may be the preferred mode of listing, since the alphabetical designation of the master’s degree tells the consumer little. In any case, one should list only the designations one has earned as completed academic degrees or professional licenses that have relevance for the services being advertised.

Case 9:

Ann Ticipatory has an M.A. in psychology and has begun work on a doctoral dissertation as the last requirement for a Ph.D. in that field. While working at a practicum site, she signs her case notes and reports as “Ann Ticipatory, Ph.D. (c)” or “Ann Ticipatory, Ph.D. (cand).”

Ms. Ticipatory takes pride in her academic accomplishments, and can see the light at the end of the long academic tunnel leading to her doctorate. Her university may even have formally declared her a Ph.D. candidate, thus authorizing her to begin dissertation research. Still, she has not yet earned the Ph.D. and the use of “Ph.D. (c),” “Ph.D. Cand.,” or “A.B.D.” (as in, “all but dissertation”) may well imply to the average consumer an earned credential that she does not hold. This type of listing is deceptive and is considered ethically inappropriate. Only earned degrees may be listed. Neither “admission to candidacy” nor “all but . . .” references relate to an earned degree. One certainly should explain the precise nature of professional training and credentials directly to clients, but abbreviations that could falsely imply actual degrees should never be used. Hopefully, her supervisor will notice her listing and request a correction.

Similarly, one must strive for factual accuracy in mentioning any professional licenses. Most states have so-called generic licensing laws, but a few states have different levels of licensure. In a state with generic laws, psychological practitioners are licensed as psychologists. It is therefore inappropriate to list oneself as a licensed clinical psychologist in such states. Some states license social workers at three or more levels (e.g., Licensed Social Worker, Licensed Clinical Social Worker, or Licensed Independent Clinical Social Worker). No state licenses anyone as a psychiatrist; rather, psychiatrists are licensed physicians who go on to specialize in psychiatry. Thus, one might qualify as a “board certified psychiatrist,” but not as a “licensed psychiatrist.” The best guide in determining how to advertise one’s services involves looking carefully at the certificate or license itself and using only the specific title authorized. Other accurate elaborations are possible. Someone may handle such a situation by a listing of “Mary Roe, Psy.D., Licensed Psychologist, practice limited to clinical psychology.” This would be both factually accurate (official state-granted title) and ethically appropriate (accurately descriptive of specialty functioning).

Listing Affiliations

Many mental health professionals work in more than one agency or practice relationship. For example, it is not uncommon for a therapist to hold full-time employment at a clinic or hospital, while also conducting a part-time practice or consultation business. Many mental health practitioners also serve on boards and committees of corporations, professional organizations, and private agencies. When presenting this information to others, however, it is important that such affiliations do not wrongly suggest sponsorship by, or approval of, that organization or agency. Clients must also clearly understand whether the organization mentioned has any role in their relationship with the practitioner. Consider the case of the “all-purpose” psychologist:

Case 10:

Robert Hartley received a letter from a psychology ethics committee after a neighbor complained of a six-foot high sign he had erected on the lawn of his private residence that announced his practice of psychology in four-inch tall letters. He replied to the committee on stationery even more interesting than the sign. The stationery was headed: “Dr. Robert Hartley, Ph.D., Consulting Clinical Psychologist and Sexologist.” Three-color printing and assorted institutional logos ran down the side of the page that listed the services Hartley offered. These included:

Across the bottom of the page, the following institutions were listed – Mid-America Hypnosis Clinic, XYZ Learning Disabilities Center, Sex Counseling Institute, Affective Education Foundation, and Plainville Marriage Enrichment Center.

To begin with, for Hartley to list himself with the prefix “Dr.” and the suffix “Ph.D.” is redundant and simply in poor taste. The six-foot high sign and the three-color stationery were equally inappropriate. The double doctorate, sign, and stationery design – while tacky – are not unethical, per se. On investigation, however, the ethics panel learned that Hartley's Ph.D. was earned in sociology, from a university not regionally accredited. He did hold a valid master's degree in psychology, but the context in which he listed his doctorate was inappropriate. The organizations listed across the stationery turned out to have two things in common: they were all headquartered in his home office, and he was the sole employee of each. When asked about his training relative to the services listed, Hartley proudly cited a long chain of briefly held jobs and weekend workshops he had attended, which covered virtually all of the services mentioned. This created a substantial question about his competence. Although Hartley's presentation of self seemed rather cloddish and he appeared truly ignorant of his infractions, the potential for public deception in his self-portrayal is obvious.

Case 11:

Roger Snob, M.D., was in full-time private practice, but volunteered a few hours a week to supervise a resident at the university hospital. In exchange for his time, Dr. Snob was given a largely symbolic appointment as an adjunct professor at the university. He promptly had new stationery printed that included his new title with the university seal, and used it for all his professional correspondence.

Case 12:

C. U. Infer, M.S.W., worked at the Northeast Mental Health Institute, a prestigious nationally-known facility, on a research project that was to last for 2 years. He was a licensed social worker and was permitted to see private clients in his office at the Institute during hours when he was technically off duty from the project. Many clients assumed that they were being treated by a clinical staff member of the Institute under its auspices. When Infer moved away at the end of the project, several of his former clients were surprised to find that the Institute had no records of their treatment and could not easily provide continuity of care for them.

Dr. Snob's misrepresentation is one of pride and possibly ignorance. While he has not demonstrably harmed any individual, he is clearly attempting to trade on the reputation of the university to enhance his own status. In reality, his relationship to the university is limited, remote, and does not have actual relevance to much of his professional work. Mr. Infer, on the other hand, may have misled clients, to their ultimate detriment. He, too, is trading on the reputation of an agency to which his actual affiliation is quite different from what his clients may be led to believe. Some clients may have chosen to use his services in part because of the presumed coverage, backup, or expertise represented by the Institute. It is inappropriate for Mr. Infer simply to remain silent. Rather, he has an obligation to disabuse others of incorrect impressions or conclusions they may draw.

Contents of Acceptable Advertisements

In general, it is acceptable to advertise in the print and other media so long as the tone and content of the advertisement are appropriate. Specific examples of unethical and inappropriate public statements and advertisements will also be discussed in this course, but here are some samples of the acceptable statements

Case 13:

The following notice appeared weekly in a metropolitan newspaper:
Harry Childs, L.M.F.T.
Licensed Marriage and Family Therapist
MA, granted by Western State University, 2003
Specializing in the treatment of parent-child problems
Convenient office hours
Sliding fee scale
Hablo espanol
Health insurance accepted
Family therapy available
24-hour answering service
Call 555-0066

Case 14:

The following is the text of a radio announcement aired in a major metropolitan area:

“Mary Okay, Ph.D., is a clinical psychologist specializing in marital therapy. She is opening her practice in Centerville at the Glenwood Mall, with ample free parking and convenient evening office hours. If you are having marital problems, she may be able to help. Call 555-0211 for an appointment.

Assuming that the facts are accurate and truthful, and that Mr. Childs and Dr. Okay are indeed qualified to perform the services they list, there is nothing wrong with these notices. Any information that might be of interest to a consumer, including facility in speaking a foreign language, application of special techniques (e.g., behavioral treatment of obesity, relaxation training, parent consultation, or hypnosis for habit control), convenience of office location, availability of evening or weekend hours, or other helpful facts would be permissible. One must be careful not to mix facts that may be misleading, however. Some psychological services (e.g., child custody evaluations or other forensic services) may not be covered by health insurance. Therefore, if Mr. Childs were to note that his practice involves only child custody work, he should not simultaneously mention that he accepts health insurance without caveats about coverage. To do so might mislead readers into thinking that his services will be covered by insurance. Likewise, if Mr. Childs has no more room for low-fee clients in his practice, then he should drop the reference to a sliding fee scale. It is true that such matters can be dealt with in a first session or telephone consultation, but to leave a false impression in the advertisement is inappropriate, even if the situation is later remedied with no harm to the client.

If a psychotherapist does intend to advertise in any way, we recommend several precautionary steps:

We know of instances in which clinicians, anxious to take advantage of liberalized advertising policies, hired public relations firms. All were unhappy with the flashy packages created for them, but had to pay the high fees anyway.

From Yellow Pages to the Web

A decade or more ago, listing oneself in the classified (yellow) pages of the telephone directory seemed an essential way to attract clients. Some problems emanated from the fact that the directory publishers have an interest in selling space and remain relatively unconcerned about the ethics of professions. Little is known by way of scientific data about whether telephone directory advertising generates client referrals. After all, if one were searching for a skilled surgeon or trial lawyer, and relied solely on a colorful, cutely illustrated box ad in the telephone directory, the consequences could be unfortunate. Still, telephone directories were highly visible and attracted the attention--and occasionally the ire--of colleagues, if not clients. In one case a hapless psychologist was horrified to see the “typo” (an extra space in the first word) in the final printing.  Part of the ad read:  “The rapist accepts children under the age of 12.”  Already printed and distributed, the book stayed active for a year.

With the era of the Internet and the ubiquity of the web-enabled cell phones, paper directories have become less valuable resources. Businesses focus more attention on Internet-based marketing and finding ways to bring consumers to web sites. In October, 2012, searching Google under the term “find a therapist” yielded 53 million hits! Web sites of well-trained mental health professionals, con artists, and everything in between exist on the Internet, and consumers must beware.

Individual Web Pages

Although the number of paid media therapists has dwindled, the irony is that anyone can be an advice-giver to whomever on the planet can find them. Domain names and hosting services are inexpensive, and web pages are easy to create. As a result, hundreds of sites at any point in time are put up by people who claim mental health expertise. These sites often dispense advice, usually associated with advertising fee-based services, although perhaps as many as a third do not appear to have any professional training or credentials (Heinlen, Welfel, Richmond, & Rak, 2003). Troubling ethical questions exist regarding the services offered (Heinlen, Welfel, Richmond, & O’Donnell, 2003).

At one site, a counselor (no credentials offered, although she refers to herself as “doctor”) offers some general advice for those suffering loss, and promises all of the answers if you sign up for her workshops. An elaborate marriage counselor’s site features a dozen video clips on such topics as stress, overeating, and depression, along with how to contact him for his various fee-based services. Another asks the reader a series of questions, and promises to help if any of the answers are “yes,” through for-fee counseling by webcam, email, or telephone. A radio therapist operating a small geographical niche market uses her web page to attract face-to-face paying clients. A dating service founder (listing himself as a certified psychoanalyst) claims to use an extensive researched-based system to match people. Some sites publish considerable information about psychodiagnostics and other assessment techniques that pose threats to test security.

When ethical psychotherapists plan to advertise their availability – whether in paper directories, online directories, or their own web sites – some common elements apply:

Use of Social Media as Advertising

We live in an age of rapidly evolving social media in which many people choose to communicate and form virtual relationships with people in their personal, social, and professional networks on-line. Many people follow friends and public figures via blogs, “tweets,” or similar means of communication. However, those who fail to responsibly use new technologies and blur professional and social boundaries can face embarrassment and other unwanted consequences (Devi, 2011; Gabbard, Roberts, Crisp-Han, et al., 2011).

Mental health practitioners can certainly use these media to their advantage, but should follow the same general guides that apply to advertising in general, with attention to the added issue of avoiding confidentiality problems.  For example, some social networking sites (e.g., LinkedIn) focus on professional contacts, while others (e.g., Facebook) have a much broader range of content and usage.  If one chooses to participate in such sites, maintaining professional decorum, an awareness of who has access to what information, and avoiding the challenges of “friending” patients pose special challenges, 

Blogging and tweeting may offer useful marketing tools, but do pose other problems, such as the inability to offer truly substantive responses in some formats and the confidentiality risks attendant to Internet communications and potential that a client who “follows,” “friends,” or otherwise links to a treating clinician may inadvertently become “visible” to others breaching their own confidentiality.

Case 15:

 Bernard Public, Ph.D., accepts any friendship invitations on Facebook.  His family members from all over the world as well as his clients have been befriended and can view his entire wall.  He posted photos of his children, wife, home, office, and stories about his travels and hobbies.  When a client entered an irrelevant comment complaining about something Dr. Public said during a therapy session, everyone else chimed in, mostly to defend Dr. Public and accuse the poster of being mean and “a loser.”  The client felt humiliated and pressed ethics charges.  Dr. Public maintained that he never discussed psychotherapy or his clients and only wanted his clients to see him as a normal human being not unlike themselves.  Furthermore, he didn’t want to have his clients think he was rejecting them by turning down their friending request.  He had not anticipated this kind of problem.

Although an ethics committee did not find him guilty of an ethics violation, they strongly suggested that he rethink his Facebook privacy settings and the wisdom of giving clients so much access to his personal life.

The American Insurance Trust (Trust Insurance) has offered a continuing education workshop on risk management and the electronic age since 2011.  The workshop leaders offer advice on how to respond tactfully to clients who wish to connect to their psychotherapists via social media.  Here are examples:

Another way mental health professionals advertise, whether they want to or not, is on sites that allow consumers to post comments about businesses and professional service providers. Psychotherapists can be blindsided by negative reviews anyone can see, and such reviews could result in the loss of potential business.

Case 16:

A client wrote a scathing comment about the “poor-quality” therapy he received from Upsetta Peeved, Ph.D., and posted it on YELP.  Dr. Peeved added a scathing response about her ex-client’s anger issues, suggesting that the client was also possibly dangerous. The client wrote to an ethics committee claiming that Ms. Peeved violated his rights to confidentiality and made defamatory statements about his character.

Whereas electronic media has left everyone vulnerable to unfortunate and possibly biased or untrue public criticism, Dr. Peeved does not have the same luxury with regards to her client, or even an ex-client. What was shared during therapy does not become irrelevant after the relationship has terminated.  

Did Dr. Peeved have other recourses, such as getting the critical comment removed?  This is not likely.  Yelp does not take responsibility for what gets posted, and the site apparently has statutory immunity because there is no way to assess the validity of anyone’s reviews. Only if ordered by a judge will Yelp remove a comment.

It appears that bad reviews for the world to see are a new risk to mental health professionals.  One client created a website devoted entirely to trashing his psychologist! There are other steps clinicians can take. These include taking “ownership” of one’s review pages, such as Yelp page, by creating a professional profile and offering other information including an explanation that you cannot ethically respond to any comments because of confidentiality owed to clients, ask colleagues and other professionals with whom you have no confidential relationship to post positive comments, and “bury” bad reviews by attempting to make your positive presence known though articles you have written or blog comments to push the negative comment down in the search results.

Contents of Unacceptable Advertising

We provide the following illustrations of what many state licensing boards might consider unacceptable, including misrepresentation, guarantee or promise of favorable outcome, appeals to client fears or vulnerability, claims of unique or one-of-a-kind services, statements critical of competitive providers, and direct solicitation of vulnerable individual clients. The next three cases have one common element, which appears as a lack of a professional perspective, poor taste, or simply gross insensitivity. Each also has some rather distinctive and difficult aspects.

Case 17:

Martha Newby, Psy.D., a recently licensed psychologist, in an attempt to get her private practice off to a brisk start, took out a full-page ad in the local newspaper. She announced an office open house, complete with a visit from “Psycho the Crazy Clown,” free balloons imprinted with her address and phone number, a “first session free” certificate, and a door prize of “20 free sessions for you or the significant other of your choice.”

Dr. Newby is a relatively inexperienced psychologist in a big hurry, making ethical blunders out of an impulsive effort to get her practice off and running. Fortunately, such colleagues are generally amenable to constructive, educative approaches to their ethical misconduct. Psycho, the Crazy Clown, certainly does little to enhance the image of the profession, while tending to make a mockery of people with emotional problems. In addition, the offer of free treatment sessions via a door prize tends to belie the careful assessment and planning that should accompany any course of competently delivered psychotherapeutic services. Finally, the free first session coupons create a problem akin to the bait-and-switch routines used by unscrupulous salespeople. The potential client is drawn to the store or potential sale by an attractive offer, but upon showing interest is encouraged to switch to an item or service more profitable to the seller. In psychotherapeutic service delivery, a first interview is often critical to the formation of a working rapport between therapist and client. Often, the client will share emotion-laden material and form an attachment to the therapist, which may predispose the client to continue the relationship. In this sense, the offer of a free first session represents a type of bait, with implications the client will seldom recognize. There is nothing wrong with offering to waive the fee during the first session. Many therapists will do this if they find it unlikely that they will be able to work with a client after the first session; however, this is quite different from advertising no fee for the first session to lure new clients.

Case 18:

The New Wave Underground Militia kidnapped a bus full of schoolchildren and held them at gunpoint for several hours before the police were able to negotiate the children's release. Tyme Lee Buck, M.D., drove to a shopping center parking lot where the children were to be reunited with their parents. He passed out handbills describing himself as an expert on trauma therapy. The material included, “It is a well known fact that hostages can suffer serious emotional delayed reactions. Preventive psychotherapy for your child is a must.” His address and phone number were also listed.

Dr. Buck’s behavior is much more obnoxious than is Dr. Newby’s because he is trading on people's fears and vulnerabilities. He may be correct in anticipating psychological problems among the hostage children, but his presumption that virtually all will need so-called preventive psychotherapy is out of line, and his style is offensive. He is also soliciting individual clients directly and personally, which is unethical even when appeals to emotionalism are not used. His behavior and the circumstances under which he approached the families actually seem to create a potential for increasing the emotional stress on the already-strained families.

Case 19:

The advertisement read:
“You'll just have to live with it!”
Is that what you've been told? It's not true!
New evidence based techniques available at the
Southside Psychological Development Center
ill help you master your chronic problems,
whatever they may be: bad habits,
chronic pain, or relationship problems.
Don't delay, call today! 666- 555-9999.

The advertisement from the Southside Psychological Development Center seems folksy and well meaning, but it also appears to promise or ensure the likelihood of a favorable outcome. Aside from the inherent misleading quality of its tone, the ad implies success with recalcitrant problems, and further suggests the application of some novel or unique technique not available elsewhere. In fact, the Center turned out to be a group practice of well intentioned, but overzealous, psychologists trained in behavioral techniques. The comparative desirability of their services and the new techniques were more representative of their hopes than of documented scientific claims. They do use the popular buzz words “evidence based,” but it’s not clear what they mean or why they consider their use of such approaches “new” or different from the approaches used by other competent practitioners. The ad has an additional flaw in that it does not name the individuals responsible for the operation. It is desirable that qualified mental health professionals not hide behind a corporate or group practice title, and it would be preferable (and, in some states, it is legally required) to have their names listed along with the name of the Center. The final problem with this ad is the implication that effective treatment will be available at the Southside Center for virtually any condition. This is the same sort of problem evident in Dr. Hartley's situation (Case 10). It is likely that the range of effective services to be offered at the Center is actually narrower than the public would be inclined to believe.

Growth Groups and Educational Programs

One type of counseling service that has often skirted the border between ethical and clearly unethical behavior in terms of marketing issues is the so-called growth or enrichment seminars and workshops. When does a course or workshop become psychotherapy? Is there a difference between a seminar that has a psychotherapeutic impact on an individual and psychotherapy conducted in the form of a seminar? May one then solicit clients for a psychotherapeutic course? Consider these examples of more than semantic interest:

Case 20:

The Happy Karma Wellness Institute, under the direction of Harry Creeshna, M. Div., frequently advertises seminars in “personal power and creative change” and “relaxation systems.” Clients are solicited by direct mail advertising and told that the seminars teach “increasing harmony in interpersonal relationships, self-analysis, Sullivanian analysis, biofeedback, autogenics, deep muscle relaxation, Hatha yoga, and guided fantasy.” Mr. Creeshna is described in the mailings as having been trained in psychological techniques and esoteric disciplines.

Case 21:

Communication Associates, LLP advertises a seminar entitled, “Introduction to Personal Growth.” The format is described as lecture and experiential group participation, including “training techniques in psychodrama, confrontation, gestalt, assertive, and encounter transactional analysis therapies”. The ad appears weekly in a metropolitan newspaper.

Case 22:

Psycho-Tronic Laboratory Learning Systems, Incorporated, directed by Lester Clone, Ph.D., uses a business card with an optical illusion imprinted on it. Instructions on the card explain that viewing the illusion in a certain way is a sign of an inflexible problem-solving style in need of “cogno-effective reprogramming,” which can be obtained through an individualized course at Psycho-Tronic.

While it is one thing to give didactic or explanatory lectures about therapeutic techniques, it is another thing entirely to apply techniques intended to have some psychotherapeutic outcome in the context of a course or seminar. First, certain therapeutic techniques, such as group confrontation, can have a harmful impact on some individuals. In other cases, individuals with serious somatic problems might seek out psychologically based treatments such as relaxation training instead of first obtaining proper medical care. Without appropriate screening and follow-up, the sampling of seminar topics seems more like random indiscriminate episodes of play with therapy techniques. They may be educational, but are also potentially harmful if targeted at the lay public in a commercial venture. In addition, the promises or claims alluded to, especially in the ads from the Karma Institute and Psycho-Tronic Laboratory, are at best inane and at worst blatant misrepresentations. One can hardly be taught the work of Harry Stack Sullivan in a few hours during a group seminar, and cogno-effective reprogramming seems a term conjured up by an Orwellian psychotherapist. Communication Associates mentions training in their ad, but they target it to the lay public. Whom do they intend to “train to train” and for what?

Those psychotherapists oriented toward group enhancement of the human potential must fully explore their goals. If these are therapeutic in nature, they should use appropriate professional cautions. If their goals are educative, then the didactic nature of the course or seminar must be stressed, and it must be clear to all concerned that the program is not intended as psychotherapy or therapeutic training. Even advertisements for psychotherapy workshops designed for other professionals can have shortcomings.  In a content analysis of over 260 ads in psychotherapy publications, Cook, Weingardt, Jaszka and Wiesner (2008) purport that few cited evidence of treatment effectiveness beyond testimonials.


To make an independent or institutional practice fiscally successful, one must pay careful attention to a variety of ethical details. .  Mental health practitioners who are anxious about managing their own finances may also fail to implement a clear plan for setting fees and billing with their clients (Zur, 2014).  If the commerce details of a practice are ambiguous and confusing to clients, ethical as well as financial problems may ensue.

Because we think of ourselves as members of the helping professions, discussing money may seem crass or pecuniary or some sort of “dirty business” (Gabbard, 2005), or heavily laden with unconscious issues (Lanza, 2001). Some may even have an aversion to discussing money issues with their clients (Knapp & Vandercreek, 2008).  During our current economic downturns, therapists will likely have to deal with clients who were able to pay previously, but have since fallen on hard times (Treloar, 2010). However, we cannot overlook the fact that helpers have bills to pay, too.

When finances are discussed in the course of mental health professionals' formal training, specific discussions of actual practices involving billing, collection, and third party reimbursement are rarely mentioned. (Barnett, & Walfish, 2012). Perhaps this is one reason why client complaints and ethical difficulties frequently arise in connection with charges for psychotherapy services. (Knapp, Younggren, VandeCreek, Harris, & Martin, 2013; Koocher & Keith-Spiegel, 2016). Often the problems arise from miscommunication, procedural ignorance, or naivete, rather than greed or malice.

Factors that influence fee-setting can differ as a function of the psychotherapist’s gender. Men have generally reported higher median full-time salaries than women report (Stetell, Pingitore, Scheffler, Schwalm, & Haley, 2001), and charge self-pay clients more than women charge (Psychotherapy Finances, 2000). In addition, another study reported that developmental and sociocultural expectations may keep female patients and female therapists from addressing financial issues openly in group psychotherapy (Motherwell, 2002).

The Ethics of What to Charge

Determining the customary charges for one's services is a complicated task that mixes issues of economics, business, self-esteem, and a variety of cultural and professional taboos. When it comes to mental health services, the process is complicated by a host of both subtle and obvious psychological and ethical values (Auld, Hyman, & Rudzinski, 2005; Gabbard, 2005; Lanza, 2001; Motherwell, 2002; West, Wilk, Rae, Narrow, & Regier, 2003). The comparison of fees is further complicated by differences in procedures, length of sessions, and other variables. For example, rates can differ depending on whether the service provided involves psychotherapy, psychopharmacology, forensic services, neuropsychological assessment, or group therapy. Psychotherapy Finances had produced useful fee surveys but has not published one since 2006 (“Survey,” 2006a, 2006b, 2006c). Their surveys found that the fee for a single therapy session might vary by more than 100% over the range of clinicians in a given region. Variations occur by region, practice site, professional degree, experience, and specialty, among other factors (Norcross, 2005).

Time spent with a client has relevance (Zur, 2014). When considering fees, matters are further complicated by the issue of what constitutes a “therapy hour.” A session could range from an 8-10 minute medication check by a psychiatrist or psychiatric nurse to 120 minutes or longer for a family or marathon group session. Some practitioners offer their clients 60-minute hours, whereas for most others a treatment session will more often occupy 50, 45, or even fewer minutes. Likewise, group or family therapy sessions might extend 90 minutes or more, making clear direct fee comparisons across modalities and practitioners difficult.

Shortening the session may have once seemed a way to increase cash flow by degrees; however, this practice more often results from an effort to catch up on the hidden demands on the therapist’s time. Paperwork requirements for filing health insurance reimbursement claims, detailing treatment plans, and making telephone contacts related to cases have increased significantly over the past few years. In many circumstances, therapists may spend 50 minutes meeting with the client, only to spend another 50 minutes completing therapy notes or other documentation necessary to seek third party approval for addition sessions. In addition, new Current Procedural Terminology (CPT) codes (see: require therapists to more precisely specify the time spent with the patient.

Some practitioners may offer a sliding fee scale for clients who cannot afford to pay a customary charge, while others maintain a high “usual and customary rate” and provide an assortment of discounts. For example, a client who has remained in treatment for an extended period of time may pay a lower rate than would a new client. On the other hand, an individual whose treatment program necessitates three hours per week of professional time may have a lower hourly rate than would a person seen once per week. From an ethical standpoint, the actual fee charged for services rendered is not as important as the manner in which it is set, communicated, managed, and collected. By definition, however, many of a therapist’s clients may be regarded as somewhat vulnerable to potential abuse because of emotional dependency, social naivete, psychosis, or other psychopathological conditions.

Case 23:

Arnold Avarice, Ph.D., was contacted by Sally Sibyl for treatment of her emotional problems. He diagnosed her as having a multiple personality disorder. During the first 2 months of treatment, Dr. Avarice claimed to have treated Ms. Sibyl an average of 3 hours per day (some days as many as 5-6 hours) at a rate of $175 per hour. Ms. Sibyl's wealthy family was billed more than $30,000 for services during this time. When Ms. Sibyl's family questioned the bill, Dr. Avarice justified the frequency of his work with the client by noting, “I often had sessions with two or three different personalities the same day. She is a very disturbed woman requiring intensive work.”

Most psychotherapists, including those expert in treating people with a multiple personality disorder (AKA dissociative identity disorder), would question the necessity and appropriateness of Dr. Avarice's intervention. When called before an ethics committee, Dr. Avarice could not provide a treatment plan or detailed case notes for the many hours of treatment he claimed to have provided. Ms. Sibyl showed little improvement and could not remember when or how often she had seen Dr. Avarice.

From the outset of a relationship with a new client, the therapist should take care to explain the nature of services offered, the fees charged, the mode of payment used, and other financial arrangements that might reasonably be expected to influence the potential client's decision. If the therapist has reason to question the ability of the client to make a responsible decision, this too must be considered in deciding to accept the client or make some specialized referral elsewhere. Of course, parents or legal guardians may grant permission for treatment of minors or adults over whom they have guardianship. Providing informed consent should be regarded as a process rather than a single event. The flow of information and mutual discussion of the treatment process – including costs – should be ongoing, as needed, throughout the professional relationship. If therapists provide an estimate of charges, they must honor such estimates, unless unforeseen circumstances arise. In the latter situation, any changes should be discussed with and agreed to by the client. If it seems that financial difficulties may become an issue, they should be dealt with openly at the very outset of the relationship.

Occasionally, clients complain to ethics committees about pressure to enter treatment at a higher fee than they can afford. Such practices include both “soft sell” and “hard sell” pitches by therapists. An example of the low-pressure pitch might involve explaining, “If you really want to get better, you will find a way to finance good therapy. It's an investment in yourself.” A more pressured or aggressive pitch might sound like, “You can't afford not to see me. I have been very successful in solving your sort of problem. Things will only get worse if you don't take care of it now.” Aside from the implication of special skill explicit in both these pitches, they subject clients to unethical pressure by playing on their insecurities.

There are appropriate ways to address the issue of the client who cannot afford the usual charges for services. Many mental health professionals offer a flexible fee schedule that varies as a function of client income. Most professional associations also encourage their members to offer at least some pro bono services (i.e., professional activity undertaken at no charge in the public interest).

Many psychotherapists will offer a financially troubled client the opportunity to extend payment over a long period, but this practice will not prove helpful if the charges incurred remain beyond the reasonable means of the client. Some therapists tack on interest or “billing charges” to unpaid bills. This practice may also involve substantial administrative difficulties because state and federal laws generally require a special disclosure statement informing clients about such fees and obtaining their agreement in advance.

It is critical that the therapist consider these issues very early in the professional relationship and raise them openly with the client in a realistic, yet supportive, fashion. If a prospective client seems unable to reasonably afford the services of the practitioner in question, the therapist should be prepared to make a sensitive and appropriate referral. In this vein, it is important for all mental health practitioners to keep abreast of hospitals, clinics, community mental health centers, training programs, and other resources that might offer more affordable services for those with financial difficulties.

Along these lines, therapists must consider their obligations to the client and local agencies in terms of treatment continuity and limited financial resources in the community. A practice known as “creaming and dumping” illustrates this point:

Case 24:

Roberta Poore consulted Phil T. Lucre, M.S.W., for treatment of long-standing difficulties with her parents and coworkers. After only one session, it was clear to Mr. Lucre that Poore would, at minimum, require several months of weekly psychotherapy to begin addressing her relationship problems effectively. Mr. Lucre's usual hourly rate was $100, and he did not have a policy of reducing his fee for clients who could not afford it. Poore had health insurance coverage that provided limited annual outpatient mental health benefits. Her salary was low, and she could not afford more than $50 per week to pay out of pocket for psychotherapy. Mr. Lucre saw her for 6 sessions. As soon as her insurance coverage was exhausted, he referred her to the local community health center, where she could receive treatment at a reduced fee.

In this case, the Mr. Lucre has skimmed the “cream” (insurance benefits due to the client) and then “dumped” her in the lap of a community agency. This constitutes a disservice to the client, who faces a disruption in her therapeutic care, as well as a disservice to the community agency that would have benefited from the insurance payments while also providing continuity of care after the coverage was exhausted. When the possibility of service needs in excess of coverage becomes evident, the therapist should not take on the case but, rather, make an appropriate referral immediately.

The case of Mr. Lucre and Ms. Poore represents one type of abandonment of a client by the therapist, but what of the more general situation when a client cannot pay for services rendered or for continuing services? Should the therapist terminate services in the midcourse of treatment, or does that represent abandonment of the client as well? The ethical therapist will attempt to avoid abandoning clients for financial reasons with two specific strategies. The first is never to contract for services without first clarifying the costs to the client and reaching an agreement on affordability. The second is not to mislead the client into thinking that insurance or other such coverage will bear the full cost of services when it seems reasonably clear that benefits may become exhausted before the client’s need for service is over. When a client becomes unemployed or otherwise can no longer pay for continued services during the course of therapy, the therapist should remain especially sensitive to the client's needs. If a client cannot realistically be helped under existing reimbursement restrictions and the resulting process might be too disruptive, it is best simply to explain the problem and not take on the prospective client. While it may be necessary to terminate care or transfer the client's care elsewhere over the long term, this should never occur abruptly or in the midst of a crisis period in the client's life.

Increasing fees in the course of service delivery can also pose ethical dilemmas. Commitments made to provide consultation or to conduct an assessment for a given fee should be honored. Likewise, a client who enters psychotherapy at an agreed-upon fee has a reasonable expectation that the fee will not increase excessively. Once service has begun, the provider must consider the obligations for continuity of care due to the client. Aside from financial hardship issues, therapists must not abuse the special influence they have with their clients.

Case 25:

Chuck Gelt began psychotherapy with Helen Takem, MD, expecting to pay $85 per session. After several weeks of treatment, Mr. Gelt shared some intense and painful concerns with Dr. Takem. These emotional issues included mixed feelings over his relationship with his deceased parents, from whom he had just inherited substantial wealth. Dr. Takem pressed Gelt to contract with her for a minimum of 100 sessions at a cost of $190 per session. She argued that, for this particular affluent client, the fee needed to be high or else he would not perceive the therapy as valuable. The minimum contract for 100 sessions was needed, Takem reasoned, because Gelt was “ambivalent and tended to lack commitment.”

Dr. Takem's proposed contract is clearly unethical, as it requires new terms independent of demonstrated client need and without meaningful client participation in the decision-making process. In addition, the client's mixed feelings may inhibit his ability to see or raise a complaint about the inappropriateness of the dramatic boost in fees. At the same time, the client may feel reluctant to go through the emotional pain of sharing his concerns all over again with a new therapist. The emotional investment made by the client during the first few sessions may contribute to making him less able to act as an informed, reasoning consumer.

When a client has participated in psychotherapy for an extended period of time (i.e., six months to a year or more) and inflation has occurred or other costs of conducting a professional practice have risen, it is not unreasonable to adjust fees upward accordingly. This should, however, be done thoughtfully, reasonably, and with due consideration for each client's economic status and treatment needs. Some practitioners, for example, will raise fees for new clients while maintaining ongoing clients at their preexisting rate. The ethical point to consider is that mental health professionals incur added responsibility because of the influential roles they occupy relative to clients. Raising the fee exponentially or without a meaningful economic rationale is seldom, if ever, therapeutically defensible.

Some practitioners require clients to pay certain fees in advance of rendering services as a kind of retainer. This constitutes unusual practice in psychotherapy, but is not unethical as long as the contingencies are mutually agreed on. The most common uses of such advance payments or retainers involve relationships in which the practitioner is asked to hold time available on short notice for some reason (as in certain types of corporate consulting) or when certain types of time-consuming assessments or litigation are involved. A specific example occurs when a therapist agrees to undertake a child custody evaluation and the two hostile contesting parties (such as the Bicker family in Case 35) each agree to pay half of the fee in advance. In such cases, at least one of the parties will very likely become unhappy with the outcome, and in such circumstances the unhappy party may refuse to pay for the services rendered because of displeasure with the findings. Another example might involve a family requesting a private neuropsychological assessment of their child in the hope of securing changes in the child’s special education IEP (Individualized Educational Plan). Such an evaluation may well require the neuropsychologist to invest five to ten hours of data collection, plus similar amounts of time in preparing a report. In such situations, it is not unusual for the practitioner to request a retainer or escrow payment prior to commencing work.

Payment for missed appointments is another source of inquiries to ethics committees. It is not unethical to charge a client for an appointment that is not kept or that is canceled on short notice (Auld et al., 2005; Ritt, 2000). Again, the key issue involves giving proper advance information about this practice to the client. No one wants to have their schedule disrupted or lose time that they might have reallocated for other useful purposes. In addition, if a practitioner has a waiting list and could well use the vacant appointment time, it is frustrating and costly to have a client cancel on short notice or simply fail to show up for the appointment. If the practitioner intends to charge the client in such instances, however, it is necessary to advise the client of this at the start of the relationship and to make the conditions explicit, preferably in written form initialed by the client. When informing clients about such charges, it is important to advise them that insurance companies generally will not pay for missed appointments. In actual practice, it appears that few therapists charge clients for a missed appointment unless the behavior becomes a recurrent pattern.

Case 26:

Skippy Session saw Harry Biller, L.M.H.C., for psychotherapy on a weekly basis for 6 weeks. During the first session, Mr. Biller explained his policy of charging clients for appointments canceled less than 24 hours in advance, and Mr. Session accepted those terms. A few hours before the scheduled seventh appointment, Session's father was killed in an automobile accident. Session telephoned Mr. Biller that he would be unable to keep the appointment and would call to reschedule. Mr. Biller did not charge Mr. Session for the canceled appointment out of deference to the unusual circumstances. Several months later, Mr. Session neglected to keep a scheduled appointment with Mr. Biller. When the therapist charged him for that missed appointment, Mr. Session complained, “That's unethical! After all, you never charged me the last time I missed one.”

There may be many different reasons that Mr. Session missed his most recent appointment, ranging from “unconscious acting out” to simple forgetting. He was informed about, and did agree to, Mr. Biller's terms at the start of therapy. Mr. Biller's compassionate waiving of his fee the day Mr. Session's father died may have been misinterpreted by Session. Mr. Biller is ethically entitled to charge for the second missed session; however, in the interest of maintaining the therapeutic alliance and for risk management purposes it probably would prove wiser to discuss both the misunderstanding and the meaning of “forgetting” the appointment, postponing the implementation of the missed session fee until the next occurrence.

Fees certainly do have substantial psychological impact on a number of levels and may often become a therapeutic issue (Newlin, Adolph, & Kreber, 2004; Newman, 2005). Lovinger (1978) noted that the fee is all that the client has to give, aside from coming to the therapist's office. The client does not owe the therapist gratitude, respect, consensus, or anything other than a fee for services rendered. The fee may, in that sense, develop some special meaning via transference. This means that the client may react to a fee change in the same manner as some duty owed in relationship with another significant person in his life. It may become a means of addressing the anger held in relation to a demanding parent or represent a penance to atone for some imagined wrong to a spouse. Lovinger, like Freud (who, he reports, viewed fees as a frank matter of the therapist's livelihood) suggests that a direct and candid approach is the best means to begin a client-psychotherapist relationship.

Bill Collecting

Fee disputes frequently lead to legal complaints against mental health professionals (Knapp, Younggren, VandeCreek, Harris, & Martin, 2013; Woody, 2000) The creditor-debtor relationship is just as much a part of the therapist-client relationship as in most other purchases of service. Inevitably, some clients will fall behind in paying for services or fail to pay for them at all. Because of the nature of clients’ reasons for consulting mental health professionals and the nature of the relationships we establish, however, we have some special obligations to consider in formulating debt collection strategies.

When a client remains in active treatment while incurring a debt, the matter should be dealt with frankly, including a discussion of the impact of the debt on treatment. In most cases, however, the problems that arise occur after formal service delivery has terminated.

Case 27:

Cindy Late complained to an ethics committee that her former therapist, Lucy Tort, Ed.D., had taken her to small claims court over $400 in unpaid bills. Ms. Late reported that she had been emotionally stressed and publicly embarrassed by having to appear in court to acknowledge that she had been treated by a psychologist. Dr. Tort advised the committee that Ms. Late had not responded to her bills or offers to work out an extended payment plan, noting that no confidential information was released; the court was only informed that Ms. Late had been a client and owed the money for services rendered.

Some psychotherapists have argued that disclosure of client status to the court violates a client's right to confidentiality unless specific informed consent is first obtained. While that is an ethically considerate and conservative view, it is probably not unethical to initiate small claims actions in instances such as Dr. Tort's situation. An unpaid bill constitutes a broken contract between the client and therapist. The American Psychological Association (APA 10: 1.25) does advise psychologists to first inform the client, who may then pay up, before engaging the service of a collection agency.  

Collection agencies represent quite a different matter from the small claims court because the collection agent acts as a representative of the psychotherapist. This mechanism of resolving a debt is more private than using small claims court, but has its own intrinsic hazards. In such instances, the therapist would retain responsibility for the behavior of the collector and would need to execute a HIPAA business associate confidentiality agreement with the collector. While most states regulate the nature and frequency of contacts by collection agencies, the mental health professional retains a degree of responsibility for any improper, abusive, invasive, or otherwise noxious collection activities initiated in their name. Debt collection practices may also trigger client complaints.

Case 28:

Marvin Blindside, M.A., felt that he had no other recourse but to hire the Gotcha Collection Agency to extract funds owed for three sessions by ex-client Terry Fied.  The employees at Gotcha called the Fied home at all hours using threatening language.  Mr. Fied feared that Blindside had taken out a contract on his life and called the police to ask for protection.  Mr. Blindside was picked up for questioning. 

Mental health professionals stand in a unique position to cause clients emotional pain and should never take advantage of their professional status or power relationship to collect a debt. While “ethics” does not constitute an excuse to deprive therapists of their legal rights, we should use caution in exercising those rights vis-a-vis clients.

Case 29:

Sara Caustic, L.M.F.C., was annoyed with Nellie Angst, who had terminated treatment and left a bill unpaid for several months. Dr. Caustic continued to bill Ms. Angst monthly and began adding handwritten notes to the statements, such as, “Don't hold me responsible for the resentment you have toward your mother.''

In this instance, Ms. Caustic inappropriately expresses her anger through the pointed use of sensitive material gained in her professional capacity. While it would not necessarily be inappropriate to give a client factual warning that collection or court action might follow if a bill remains unpaid, threats of this sort are unprofessional and not often effective. If emotional damage results from collection practices, a malpractice suit may follow. In this sense, a psychotherapist may have an obligation to assess the clinical risks associated with different debt collection strategies. As in any situation for which therapists employ other people to work in their practices, a degree of vicarious liability exists with bill collection activities. Debt collection should be businesslike and totally void of any psychological or clinical content.

Another way in which a psychotherapist may occasionally attempt to abuse a professional relationship to collect a debt involves the withholding of information:

Case 30:

Nellie Angst was so distraught by the notes from Ms. Caustic (Case 29) that she sought treatment again, but from a new therapist. She signed a release of information, and the new therapist contacted Ms. Caustic to obtain data on the prior treatment. Caustic told the new therapist that she would not discuss the case or provide copies of any reports she had prepared until Angst paid her bill.

In this situation, Ms. Caustic continues to exercise her professional leverage irresponsibly. If she were asked to undertake new work on behalf of Ms. Angst, she certainly would have the right to decline. On the other hand, she may not ethically withhold materials already prepared, or refuse to communicate with a colleague about a vulnerable client solely because of her own financial dispute with the client. In this instance, she is actually potentiating the harm to the client, compounding her own unethical behavior and may have violated state and Federal law (i.e., HIPAA). Therapists seeking to avoid such problems should routinely discuss any payment issues with clients as they arise. In addition, we should take care that legitimate efforts to collect fees never compromise our professional obligations to clients.

Fee Splitting

Fee splitting, often called a “kickback,” refers to a general practice under which part of a sum received for a product or service is returned or paid out because of some prearranged agreement (or coercion).  Considerable caution is advised when contemplating even seemingly defensible fee-splitting practices as state laws can vary widely on definitions (Woody, 2011).

As sometimes practiced in medicine and the mental health professions, clients have usually remained unaware of such arrangements. Traditionally, nearly universal agreement existed among medical and mental health professionals that such practices are unethical, chiefly because they may preclude a truly appropriate referral in the client's best interests, result in delivery of unneeded services, lead to increased costs of services, and generally exploit the relative ignorance of the client. Unfortunately, fee splitting may still exist in rather complex and subtle forms that tend to mask the fact that it is occurring.

There is a continuum of types of fee splitting or sharing agreements that range from reasonable and ethical to clearly inappropriate. At one end of the continuum, we find employer-employee relationships in which one party hires another to perform services and, at the other, we find arrangements in which the person making the referral gets money solely for sending business to another. The employer-employee relationship provides an ethically clear context (i.e., I pay you a salary, and I collect fees for the work you do as an employee). Unethical fee splitting occurs in the case of making a payment or kickback simply for referring a new client. In between these two extremes, one can find a range of business practices with varying incentives that raise ethical questions. In addition, actions by the Federal Trade Commission (FTC) have legitimized some practices previously prohibited by professional associations' ethics codes.

Case 31:

Irving Slynapse, MD, a prominent neurologist, agrees to refer substantial numbers of his patients to Ester Choline, Psy.D., for neuropsychological assessment. Dr. Choline bills the client or insurance company and pays Slynapse 10% of all the money collected on clients he refers to her. Slynapse characterizes that 10% as a continuing charge for medical coverage and consultation; however, there are no regular appointments scheduled for consultation, and Choline never avails herself of Dr. Slynapse’s services.

Case 32:

Nick Proffit, MD, P.C., has a large professional practice in which he supervises several master's-level psychotherapists and rents office space to other doctoral-level mental health practitioners. His secretary bills all of the clients at a rate of $100 per session. The supervisees are paid 25% of the fees collected, and the renters are paid 40% of the fees collected. The clients remain unaware of this distribution plan.

Case 33:

G. Ima Helper, M.S.W., is well known for her many self-help books and media appearances. Her public visibility results in many self-referrals by clients in the community. Ms. Helper refers such clients to Helper's Haven, her private clinic, where they are seen for $90 per session by master's-level therapists who are paid $35 per session. The clients are led to believe that their therapists are supervised or receive consultation from Dr. Helper. Actually, they are not even employees (i.e., salaried) but simply earn a fee for each session held and have no contact with Dr. Helper, who has little direct involvement with the clinic.

The three cases cited above have a number of unethical features in common. To begin with, the clients are generally unaware of the proprietary relationship between the service provider and the person making the referral. It is therefore unlikely that the clients would realize that the referrals originated because of motives other than their own best interests. In each of the cases, one party is also being paid for services not rendered. That is, Dr. Slynapse, Dr. Proffit, and Ms. Helper receive a commission in a manner concealed from, and to the detriment of, the clients. Clients may assume that referrals to therapists were based on the therapists' special abilities or competence rather than chiefly for profit. The more responsibility and liability the referrer has for the case, the more reasonable it is to pay that person a fee. None of these therapists has objectively weighed the needs of the individual client and considered these in making the referral. A key point is the matter of professional responsibility. Some clients may actually end up referred to therapists without the competencies to treat their specific issues or charged for services that they do not even need.

Dr. Proffit’s situation is potentially more appropriate than those of Dr. Slynapse and Ms. Helper. If Proffit has a long-term contract with the therapists who rent space from him and provides supervision, consultation, or case oversight, he may be legitimately entitled to a percentage of fees collected. On the other hand, if he has no professional relationship with the therapists and no clear responsibility for their clients' welfare, he is not entitled to a fee. The key issue in determining appropriateness of such fees is the rendering of legitimate, reasonably priced services.

The case of Ms. Helper also raises the basic question of what one must disclose to a client about arrangements among practitioners. Helper may also be exploiting the other therapists in her clinic. The issue in the current context is that clients should be told any aspects of the arrangement that might reasonably be expected to influence their decision about whether or not to use the services. They have a right to know that Ms. Helper will not participate in their treatment in any way. In all of the cases in which a commission is paid to someone not rendering services, the client should be advised. By “commission” we mean any payment made simply for a referral, as opposed to a payment made for some services rendered in a joint practice or professional collaboration.

Special Business Agreements

Although technically not fee splitting, a variety of special business agreements common in the commercial world would be considered potentially unethical in mental health or medical practice for reasons similar to the issues raised thus far in this course. These agreements would include so-called covenants not to compete or contracts with liquidated damages clauses.

Case 34:

Lester Workman, MD, spent 10 years building a favorable professional reputation and busy private practice in a suburban community. He began to attract more referrals than he could handle, but he was not sure if the volume would be sufficient to warrant the addition of a colleague as a full-time employee in the practice. Instead, he hired Peter Partner, L.M.F.T., as a half-time employee at a salary agreeable to both for a one-year contract. By the end of the year Mr. Partner, who was young and energetic, began to build his own strong reputation in the community and wondered if he ought to consider going into practice independently.

In an ideal world, Workman and Partner will sit down and attempt to sort matters out in their clients' best interests. If they are to have totally separate practices in the same community, the choice of whom to consult should be up to each client. Clients in mid-treatment with Mr. Partner, for example, should reasonably expect to continue their relationship with him. Unfortunately, however, such split-ups often result in considerable acrimony among practitioners, with clients caught in between. It would have been preferable for Workman to consider this potential outcome as a possibility from the outset should they terminate working together and include some reasonable professional plan in the agreement with Partner to meet clients' needs. This agreement could include some fair allowance for the effort Workman put into building the practice.

Two types of advance agreement for the termination of such relationships can cause serious ethical problems. In the first type, Dr. Workman might have attempted to sign Mr. Partner to a contract that included a “covenant not to compete.” Under such a clause, Partner would agree, for example, not to set up an independent practice or work for any other practitioner within a 50-mile radius of Workman's office for a specific period of time after leaving the practice. Whereas this might meet Workman's needs, it would deny clients their freedom to choose and is, therefore, clearly unethical. In some jurisdictions, state laws make such agreements among health care professionals illegal. The usual legal standard is “reasonableness.” Although there are obviously many different perspectives on what is reasonable, the paramount ethical perspective would focus on the well-being of the clients. Clear differences exist between the obligations to a client who is psychologically vulnerable and the more usual circumstances in business and industry, in which such covenants are more appropriately used to protect trade secrets.

The second type of problematic contractual element Workman might have considered would be a liquidated damages clause. Such a clause might have asked that Mr. Partner pay Workman financial “damages” for each client he takes with him, either at a flat fee-per-client rate or as a percentage of future revenues. Paying a flat fee for each client who leaves with Dr. Partner might prove ethically acceptable, so long as the cost of this fee is not passed to the client. Paying a percentage of future earnings, or a royalty, from the fees of the transferred clients is more clearly a fee splitting situation and could be legally unenforceable in some states, even if Mr. Partner had agreed to it initially.

The message inherent in this discussion has three aspects. First, such issues require discussion and clarification prior to beginning the professional association. Second, the choice of a psychotherapist should ultimately rest with the client. Finally, professional colleagues must exercise great care, and at times suffer potential economic disadvantage, so as not to abuse the relative position of power and influence they have over the clients they serve. Psychotherapists should not profit unfairly at the expense of either clients or colleagues.

Selling a professional practice is another kind of special business agreement that raises ethical questions. Suppose Dr. Workman wanted to retire after 30 years in solo private practice. Can he sell his practice? What does the practice include? Furniture, an office, some aging psychological test equipment, the name of the practice or clinic, and a group of clients make up a practice. One can indeed sell the furniture, real estate, and equipment. However, selling the clients, their files, and access to this information raises many significant ethical issues (Koocher, 2003). Practitioners cannot ethically transfer clinical responsibility for clients or confidential client records in a private practice without the clients' consent. Clients have the right to choose practitioners. In addition to freedom of choice issues, the seller's clients may feel heavily influenced by the seller's recommendation that they continue to obtain services from the buyer. The seller is in a complex role with respect to these clients. That is, the clients are in some respects a commodity when they are referred en masse to the buyer. They have the right to expect that the referral to a new practitioner is based on careful professional judgment of their individual needs (Pope & Keith-Spiegel, 1986). Principles for valuing a practice, including ethical issues related to client lists and records, are described by Woody (1997).

If Dr. Workman wanted to maximize his ability to transfer a thriving practice to another professional, the most ethical and effective way to accomplish this feat would be to spread the transition out over a period of years. Ideally, Dr. Workman could attract a potential partner and forge an agreement (e.g., a legal entity, partnership, or professional corporation) that included a buyout of the practice over time. As Workman's retirement drew near, he could offer clients the opportunity to transfer to his partner or elsewhere in the community. The agreement could call for the partner to maintain and administer the practice's records for the legally mandated interval, and might even include a continuing consulting role for Workman on an as-needed basis should special issues with former clients arise. In this way, the selling of the practice actually becomes an evolutionary transfer that allows time, choice, and continuity options for the clients.


Ways Clients Pay

Clients typically pay for mental health services in one of three ways: (1) directly out of pocket with no reimbursement; (2) in whole or in part by a health insurance plan, health maintenance organization (HMO), preferred provider organization (PPO) plan, or some other employee assistance benefit plan; or (3) public funds (e.g., through a school system, Medicare, or Medicaid).

Whenever some company, agency, or organization other than the mental health professional and client becomes involved in payment, a fiscal third-party relationship exists. There is no doubt that these third parties, their reimbursement policies, and the regulations that govern these policies have historically had a direct and powerful influence on practice and client care (Bachman, Pincus, Houtsinger, & Unutzer, 2006; Gittelman, 1998; Harrison, Moran, Albrecht, Fitzpatrick, & Scrimshaw, 2000; Sperling, Sack, & Field, 2000; Sturm, 2004; Weisgerber, 1999). Although some well-established practitioners refuse to accept third party payments (Bennett & Lazarus, 2005), it is unrealistic for most mental health practitioners to expect that they will be able to earn a living without substantial interactions with third party payment entities. Although many therapists will have no difficulties in their relationships with these entities, very few will consider them an unmitigated blessing.

In historical context, insurance coverage for mental health services has attracted a range of interesting critiques. Some asserted that including psychotherapy benefits in health insurance coverage represented inequitable service to different income groups (Albee, 1977a, 1977b). Others raised threats to clients’ confidentiality (Alleman, 2001; Austad, Hunter, & Morgan, 1998), concern about accountability and review criteria grew (Acuff, Bennett, Bricklin, et al., 1999; Alleman, 2001; Austad et al., 1998), and some even cited expensive litigation as a disincentive to coverage (Kiesler & Pallak, 1980). Access to such coverage has also led to many intra- and interprofessional squabbles about who ought to qualify to bill third parties for what services.

Looking Toward Accountable Care Organizations

Beginning in the 1960s, federal health care policy in the United States focused on engaging medical care providers with a fee-for-service system. This has often incentivized the delivery of volume-focused services by independent clinicians who do not necessarily communicate well with each other. Providers are generally paid to deliver services with no particular assessment of outcome or quality. Thus, a depressed patient with obesity, heart disease, and type 2 diabetes may have a psychotherapist, a cardiologist, an endocrinologist, and a primary care physician who seldom (if ever) interact. The consequences can often yield suboptimal outcomes when the patient’s depression treatment is impeded following advice on treatment of their other chronic conditions. Efforts are increasingly under way to realign reimbursement policy and financial incentives to increase patient-centered out-of-hospital care focused on quality outcomes through so-called ACOs (Franx, Dixon, Wensing, & Pincus, 2013; Maust, Oslin, & Marcus, 2013; Munjal & Carr, 2013).

Health insurers, led by the federal Medicare program, have begun to move toward increased integration, and health care systems have bought many medical practices. Mental health clinicians will increasingly have roles to play in this rapidly evolving system, but doing so will require sophistication and nimbleness with attention to primary care (Rozensky, 2014). This will include not only developing new competencies, but also keeping an ethical eye on emerging reimbursement schemes that may tend to limit patients’ options with respect to choosing their providers and preferred modes of service. In the name of quality, we will likely see some types of modified rationing or limitations placed on access to types of services and providers. Americans have access to insurance in many new ways, but the manner in which this access to coverage links to mental health service in the context of large ACOs will remain to be seen.

Billing for Services Not Covered

A common third-party problem with major ethical and legal implications relates to billing for services not covered under the third party's contractual obligations. Most third-party payers limit their health coverage to treatments for illness or health-related problems, usually defined in terms of medical necessity. One must invariably assign a diagnosis to the client in order to secure payment. Many services provided by mental health professionals are not, strictly speaking, health or mental health services. For example, relationship counseling, educational testing, school consultation, vocational guidance, child custody evaluations, executive coaching, and a whole variety of forensic functions may not be considered health services. As such, these would not normally be covered by health insurance.

Some insurance carriers also specify certain types of diagnostic or therapeutic procedures as uncovered services. Such treatments or services might be considered ancillary, experimental, unproven, or simply health promoting (e.g., weight control and smoking cessation in the absence of a medical diagnosis), but not treatment for a specific illness. Attempts to conceal the actual nature of the service rendered, or otherwise attempt to obtain compensation in the face of such restrictions, may constitute fraud. (Earlier, we discussed the practice of billing clients for missed appointments. Because such billing results from services that have not been rendered, virtually no third-party payer will cover such charges.)

Exactly what services are covered under any given insurance policy is a matter of the specific contract language. Some therapists have found themselves in the position of negotiating one fee if the client receives reimbursement by their insurer and a different fee if the service is not covered. This practice can lead to client resentment, and put the therapist in clear violation of certain contracts between providers and insurance companies. One strategy offered by some therapists involves offering a reduced rate that represents a cash discount for clients who no longer use third-party coverage. A legally acceptable rationale would be passing on savings realized when the therapist no longer has to submit claims forms and case reports to the third party.

Case 35:

Becky and Barney Bicker have been separated for 3 months and have filed for divorce. They are contesting for the custody of their two children. Their respective attorneys suggest a psychological consultation to prepare a forensic report for the courts on the best interests of the children. They are referred to Bill Lesser, Ph.D. Dr. Lesser assures the Bickers that their health insurance policy will cover his fee and proceeds with the evaluation. He subsequently files an insurance claim for his services without noting that they conducted primarily for resolution of a custody dispute. He assigns the diagnosis “childhood adjustment reaction” to the Bicker children for billing purposes.

Case 36:

Sven Gully, L.M.H.C., is trained in the use of hypnosis and relaxation techniques. He offers a smoking cessation program that regularly attracts clients. Potential clients often ask about costs and whether Gully will accept health insurance coverage for payment of his services. Gully knows that many companies will not cover hypnosis or will not pay for health-promoting programs in the absence of actual illness. He completes billing forms and lists his services simply as “psychotherapy” and assigns “adjustment reaction” diagnoses to his clients.

Both of the therapists described above may be competent and caring professionals, but both have engaged in unethical conduct and flirted with fraud charges. Perhaps neither has carefully inquired of the third parties in question as to whether the services are indeed covered and are simply trying to expedite claim processing. On the other hand, each should recognize that the specific services rendered in both cases may not be considered mental health related or treatment of an illness. What appears expedient and helpful to the client (i.e., making services less expensive to the client in question) may constitute illegal practices and tend to increase insurance costs for other policyholders. The more appropriate behavior would be, when in doubt, to check with the third party for explicit advice and to inform clients accurately early in the relationship about whether their coverage applies. Dr. Lesser and Mr. Gully may believe that they have helped their clients, but they technically engaged in a “white-collar” ethical violation that costs all consumers money. If Dr. Lesser has concerns that health insurance will not cover his services, and worries that the Bickers might squabble over paying for his time, he may reasonably consider requesting a retainer before initiating services.


Managed care Organizations (MCOs) take many forms. Some may be actual health care delivery organizations, such as a free-standing Health Maintenance Organization (HMO) with its own physical facilities and employees serving as health care providers. Others may be networks of independent providers. Still others may be HMOs that act as insurance companies and contract with a group of professionals organized as PPOs (preferred provider organizations) that agree to certain rules and reduced rates of reimbursement in exchange for patient referrals. Some large businesses and municipalities are self-insured. That means they act as their own insurance company with the help of a claims and risk management program, often run by an insurance company or MCO in exchange for a management fee.

In most models, the MCO manages a full spectrum of health care benefits. In other models, a state Medicaid agency or insurance company may “carve out” mental health benefits from overall health insurance packages and assign management of these particular benefits to an MCO organized chiefly as a benefits manager. A brief lesson on the microeconomics of health insurance can be useful in understanding the forces at work here.

The goal of the various MCOs is essentially the same – to control the increasing costs of health care. When health insurance is provided on an indemnity basis (i.e., costs of covered services are paid for or reimbursed up to policy limits regardless of the provider), few controls or incentives exist to limit spending. In such circumstances, economists would say that the moral hazards of insurance are not well controlled.

Under provisions of the Patient Protection and Affordable Care Act of 2010 (Public Law 111-152) we have seen limited development of health care cooperatives or other payment systems aimed at new integrated care models for better coordination of all health services and cost improvements for consumers.  How this will unfold in the coming years depends on pending court decisions and state actions.  Wise mental health professionals will scan the evolving landscape of payments carefully.

The Moral Hazards of Insurance

Suppose we were to offer you “individual pregnancy insurance” at a very low price – complete coverage from prenatal care through delivery at a cost of $1 per month or $9 total per covered individual. Would you buy it? If your answer is, “Yes, where do I sign?” you are most likely a female who is considering becoming pregnant at some point within the span of coverage. If we decided that the policy would be available only to men, prepubertal girls, and postmenopausal women, do you think we would have many buyers? Likewise, would you buy automobile insurance if you did not own a car or hold a driver's license? These brief examples illustrate a basic moral hazard of insurance – rational people are unlikely to buy it unless they think there is a chance they will need to use it (Hemenway, 1993). If your chance of becoming pregnant is near zero, you are unlikely to buy the insurance regardless of how low the cost. Similarly, a rational person with no access to a motor vehicle is unlikely to purchase automobile insurance regardless of cost. Pregnancy insurance is indeed available, but it is bundled together in family-rate health insurance policies that take into account the fact that some members of some families will need the benefit, whereas others will not.

People who have insurance behave differently from people without it. This is another moral hazard that can be considered on an ex ante and ex post basis. The ex ante model refers to behavior prior to making an insurance claim. Simply stated, it means that people will be less careful in avoiding insured perils than they would without insurance coverage. Using the pregnancy model, a rational person who is capable of becoming pregnant will generally be less careful about contraception than she would be without any access to health insurance to cover pregnancy. In addition, an automobile owner whose insurance has expired might keep the car in the garage to avoid risk of damage until a new policy is in force.

The ex post model refers to behavior following the insured event. People with insurance will demand (i.e., consume) more and higher quality services than would an uninsured person. If your automobile's fender is dented, but the car is drivable and you are uninsured, you might choose to drive the damaged car rather than pay for the repair out of pocket. If fully insured, on the other hand, the rational person would most likely seek complete repair from the best body shop in town. If your health insurance provides full pregnancy coverage, you will be more likely to use all of the prenatal care available to you rather than skipping some services to save money.

Insurance companies traditionally attempt to reduce the adverse effects of such moral hazards by devising ways to have policyholders share in the risk. Required deductibles, co-payments, and variable coverage limits are examples of these strategies. Although the use of such techniques appears to be effective in the case of automobile and homeowner’s insurance, health insurance costs have not historically been well controlled in this manner. One reason is that health needs often must be dealt with as survival issues. One may choose not to rush to repair a dented fender or leaky roof or even to live with the damage rather than bear the expense of repair. Cost sharing reduces inappropriate utilization, but appropriate use is also reduced. However, it is not wise to postpone surgery for an inflamed appendix, ignore treatment for diabetes, or prematurely suspend cancer chemotherapy for economic reasons, as the resulting harm may be irreparable later. In addition, our relationships with health care providers must be based on trust, confidence, and professionalism at a level of intimacy that is not usually expected from those we hire to patch a leak in our roof or fix a dented automobile fender.

It is in this context and amid demands from large group insurance purchasers (i.e., employers) that MCOs have evolved. In addition to policy limits, deductibles, and co-payments, MCOs introduced case reviews, requirements for prior approval, and other steps intended to reduce unnecessary, redundant, or ineffective (but costly) medical care. By doing so, insurance plans can theoretically reduce the cost of coverage and thereby offer less expensive benefit packages. In reality, the individual consumer has little impact on the system, and the large employers (the major purchasers of coverage) often make decisions with bottom-line cost as the prime directive.

Paramount Ethical Dilemmas

The central ethical threat in managed care involves conflicting loyalties. Mental health professionals working under managed care must balance the needs and best interests of their clients with an array of rewards, sanctions, and other inducements issued by the company. In its most common form, this conflict results in providing practitioners with financial incentives to alter or limit care. The limits on care proposed may prove efficient, appropriate, and promote reasonable economies. On the other hand, limits curtail the freedom of both clients and service providers. In the worst circumstances, decisions that are adverse from a client's perspective may be orchestrated without the client's knowledge, input, or consent.

Sicker and Quicker

Many health and mental health practitioners have railed against MCOs, claiming that patients are turned out of hospitals “sicker and quicker” than in the past. Shore and Beigel (1996a,b,c) note that infringements on professional autonomy also have been a key point of antagonism between MCOs and service providers. The issue is an emotional one that often is not well understood by mental health practitioners. Karon (1995) observed that, although managed care programs are essentially vehicles intended to save money by eliminating unnecessary services, it is easier to save by simply cutting services. He worries that these are short-term approaches, with little interest in preventive mental health services. It is true that case review can potentially eliminate unnecessary psychiatric hospital admissions or psychotherapy in the same way second opinions can reduce unnecessary surgeries. However, review and decision-making in the arena of mental health care are not often as clear-cut as problems in physical medicine. Regulation of MCOs has become a significant public policy issue.

In this context, it is worthwhile to consider the now classic case of Wickline v. State of California (1987):

Case 37:

Ms. Wickline was a California Medicaid recipient who needed surgery for arteriosclerosis. When post-surgical complications arose, her physician requested an eight-day extension to the ten-day admission originally preauthorized. The reviewer authorized only a four-day extension, and, because the physician did not object and request additional time again, Ms. Wickline was discharged after a total hospitalization of only 14 days. She subsequently developed a blood clot that ultimately required amputation of her right leg. She sued, alleging that failure to grant the extra 4 days of hospital care requested caused her injuries. The trial court found the reviewer negligent and awarded $500,000 in damages. On appeal, however, the decision was reversed on two bases. First, Ms. Wickline's physician had not protested the lack of a full eight-day extension. Second, the court concluded that the blood clot and resulting amputation would have occurred even if she had remained in the hospital.

This case is worth reviewing carefully because the court also went on to state that third-party payers could be held legally accountable if appeals made on behalf of the patient by the care provider were “arbitrarily ignored or unreasonably disregarded or overridden” (“Wickline v. State of California,” 1987, p. 1645). The message in this case is that third-party payers can be held liable for negligently designed or implemented cost containment strategies. Mental health professionals should actively call that point to the attention of case managers when they believe an inappropriate and potentially harmful denial of service decision has been made.

A unanimous U.S. Supreme Court decision blocked lawsuits in state courts for wrongful denial of coverage against employer-sponsored health plans (“Aetna Health Inc. v. Davila,” 2004). In that case, two beneficiaries of health care plans covered by the Employee Retirement Income Security Act of 1974 (ERISA, 29 USCS § 1001 et seq.) brought separate Texas state-court suits, claiming that HMOs administering their employer’s plans had wrongly refused to cover certain medical services in violation of a Texas health care statute, and that those refusals had caused damages. Two justices noted that Congress and the Supreme Court ought to revisit what they regarded as an unjust and increasingly tangled set of ERISA rulings. However, the decision voided statutes in 10 states that expressly allowed such suits in state courts. For practitioners and hospitals, the main result of managed care's renewed immunity may translate to higher liability risk. Caregivers who prescribe treatment but do not provide it because health plans deny coverage may be forced to bear the full cost of liability if something goes wrong (Bloche, 2004). Although the Aetna case did not involve mental health issues, it may well apply to such cases.

Becoming a Provider and Staying on the Panel: Between a Rock and a Hard Place

The MCOs have many bases for failing to admit applicant providers to their service pools. They may already have enough practitioners in a limited area, or the applicant may have an ethics complaint, licensing board action, or major malpractice claim on his record. In most cases, practitioners not admitted to, or dropped from, MCO provider panels have no clear grounds to appeal. As a result, many providers fear that if they “rock the boat” by raising active objections to decisions they believe are adverse to their clients or by speaking out against MCO policies, they may be terminated from the provider panel. Some MCO contracting strategies do little to reassure providers.

Case 38:

On June 1, Psyche Mental Services (PMS) mailed renewal contracts to 2,000 practitioners in three states; this ended up causing major professional distress. Most recipients received the mailing on June 7 and were told that renewal contracts must be returned no later than June 15. The lengthy contracts included a “hold harmless” clause and a “gag rule.” Some providers, fearing economic losses, rushed to sign and return the contracts without seeking legal advice or raising objections.

So-called hold harmless clauses specify that the practitioner will not hold the MCO responsible for actions it may take that may result in harm to the practitioner as a result of decisions they make regarding services to a client. For example, if the MCO denies services and the therapist continues treating the client without coverage in order to avoid abandonment, that therapist would not be able to attempt to recover damages from the MCO. As another example, the MCO denies services, and, as a result, the client commits suicide and the client's family files a wrongful death suit against the psychotherapist; the MCO would not be liable.

Such clauses may be legally invalid as being against public policy. Therapists should refuse to sign such contractual conditions from the outset.

The no disparagement or “gag rule” prohibits the provider from making “critical, adverse, or negative” statements about the MCO to clients or in any public forum. Such policies make sense in traditional business practices, but they are out of place when applied to health care. Aside from the blatant abrogation of practitioners' rights to free speech, such a rule might be deemed a limit on client advocacy and an attempt at intimidation. Such restrictions can interfere with the therapist’s ethical obligation to provide patients with information about benefits, risks, and costs of various interventions. Nonetheless, in the above example, many providers felt they had little choice but to sign, especially in the face of the time deadline. Fortunately, many states have now banned such contract provisions outright.

Some MCOs have been highly aggressive and heavy-handed in contract offers. Among the problems reported in contracts offered to providers by MCOs are clauses stating that the provider will be solely responsible in any legal actions undertaken by any party; take no legal action against the MCO under any circumstances; deal exclusively with the MCO; agree to abide by all of the MCO's utilization review processes and decisions; agree not to bill clients for non-covered services without advance written consent; agree not to bill clients for covered services except for co-payment and deductibles; agree to provide services when benefits are exhausted; and even agree to abide by future contract provisions that the therapist has not yet seen. Although many such provisions are unenforceable, no prudent practitioner wants to be the “test case.''

Signing a contract with provisions of this sort does a disservice to clients and service providers alike. In particular, agreeing to such clauses may void coverage in related cases by the therapist’s professional liability insurance and may compromise her ability to defend herself in the case of a suit. It also represents an effort to shift unreasonable responsibility for MCO actions to the shoulders of unwitting or coerced providers. When you receive such a contract, have it reviewed by an attorney familiar with mental health practice. Often, state professional associations will be able to suggest such lawyers or refer you to clinicians in your locale familiar with that MCO's contracts. If you are pressed to sign a contract in haste, be wary!

Practical Considerations

Some illustrative examples may help to understand the nature of the struggles health and mental health practitioners must increasingly address on a daily basis.

Case 39:

Ralph Downer is significantly depressed. His child died of leukemia a few months ago, he is experiencing tension in his marriage, and he has just learned that the company he works for is headed for a major downsizing. Based on a careful intake evaluation, Opti Mum, Psy.D., has formulated a plan for individual and couples therapy over the next few weeks. Dr. Mum knows that antidepressant medication may also be useful, but he first wants to gauge the client's response to treatment without seeking a medication consult. When Mum contacts the case manager overseeing Mr. Downer's benefits, Mum is thanked for his assessment and is told to refer the client to a specific psychiatrist for a medication consultation. The manager explains that it is company policy to try treatment with generic antidepressant medication before authorizing any verbal psychotherapy because, “a lot of patients get better with just a little medicine.''

Case 40:

Polly Substance, age 13, was brought to the office of Toomuch Thinkin, M.S.W. Her mother was concerned that Polly had been caught smoking pot at school. Her father has a history of problems with alcohol and has allegedly been physically threatening towards his wife. Polly also has a history of learning disabilities and depression. Ms. Thinkin recommended family therapy at least once per week to begin addressing the multiple problems in the family. Comprehensive Regional Associated Programs (CRAP, corporate motto: “You're not sick until we say you're sick''), the managed care entity overseeing the family's benefits, will allow only four visits each for the mother and child during a 3-month period and insists on putting both on antidepressant drugs.

In both of these cases, the therapist’s best clinical planning has been brushed aside by case managers with another agenda, presumably formulated by management with the intent of reducing costs. In addition, the limitations the MCOs may attempt to enforce will occasionally violate or seek to side-step mental health parity or other regulations. The preference of some managed care companies to prescribe medication instead of therapy is well known (Burns, Walker, & Rey, 2012; McGrath & Rom-Rymer, 2010). In both cases, the ideal ethical conduct of the therapist would be similar. First, firmly but respectfully explain the reasons for the recommended treatment plan. Cite supportive research and other factual data whenever possible. If the case manager does not agree, respectfully ask about the appeals process or request to speak with a supervisor. Again, make the case in a thoughtful, rational manner, stressing the potential adverse consequences of not following it (e.g., failure to address the significant family relationship problems will undermine the chances for permanent change and may result in need for hospitalization or more extensive and costly interventions later). If there is still no favorable resolution, therapists should meet with their clients and present both their recommendations and the response of the benefits management company. Clients should also be told of their own recourse (e.g., complaints directly to the management company, complaints to their employer, or contacts with regulatory agencies) if they wish to pursue such options. The three principles involved are holding the best interests of the client paramount, advocating for the client in a professional manner, and involving the client in the decision-making process.

Having stated the above ideal, it is important to recognize the realistic constraints many psychotherapists feel. It is not unreasonable to fear that getting a reputation as a therapist who persistently appeals decisions or encourages clients to do so may result in a “no cause termination.” That is, the MCO may exercise a standard contract option to drop a provider without giving a specific reason. In addition, when a company is self-insured, employees may be reluctant to pursue legitimate benefits assertively out of fear of retaliation, even when this fear is unjustified. As noted above, some MCOs occasionally attempt to secure contractual provisions intended to prevent practitioners from speaking critically of company practices or advocating too vigorously for clients. There are also significant financial pressures:

Case 41:

Tom Swift, Psy.D., was very successful in doing focal short-term therapy. Pleased with his work, Giant Health Organization (GHO) sent him many referrals. A few months later, in a letter to all of its providers, GHO informed Dr. Swift that it planned to narrow its provider pool to those who could provide up to 30 hours of service per week. Soon, GHO subscribers became the major portion of Dr. Swift's practice. GHO then began to offer special incentives, including cash bonuses at the end of each calendar quarter, for meeting a certain quota of cases “successfully terminated in fewer than eight sessions.''

In this example, Dr. Swift has become the victim of an insidious seduction. He is increasingly dependent on GHO as a source of income, and is then propositioned with a bonus plan that places corporate profit goals ahead of client welfare. Even if Dr. Swift is a therapist of the highest ethical integrity, he will be sorely tempted by the new plan. One must also wonder how vigorous an advocate he might be for a client who needed more services or wishes to appeal a GHO decision. After all, Dr. Swift could be obliquely threatened with a no cause termination. We do not wish to imply that all, or even the majority, of MCOs would engage in such conduct; however, we do advise our colleagues to be prepared and forewarned of such strategies and the resulting risks.

Two of the most common worrisome ethical questions raised by therapists who practice in MCOs are: (1) “If I go along with a managed care philosophy that emphasizes short-term therapy, can my client charge me with incorrect or inappropriate treatment?” and (2) “If the company decides that the treatment I am providing is not medically necessary, it can stop providing payment with little notice. If my client is unwilling to pay out of pocket, am I at risk for abandonment charges?”

The answer to each question has a similar focus – professional responsibility, competence, and planning. Under no circumstances should a therapist allow his care of a client to be dictated by a third-party payer. If an MCO insists on a “one size fits all” (or even “one size fits most'”) formula for psychotherapy, a therapist who agrees to that policy is headed for trouble. The policy implies that treatment is framed independent of a careful diagnostic assessment or plan matched to the client's needs. The nature of the treatment contract highlights the importance of helping the client to understand and agree to the treatment plan and costs from the outset of the professional relationship. This includes helping clients to find out what mental health coverage their insurance provides; this may include recognition that out-of-pocket costs are likely at some point.

One can certainly advocate for a client whose need for services is questioned, and it is easiest to do this when clear, competent treatment plans and records are produced. If a third party refuses payment and a client cannot or does not wish to pay out of pocket, the therapist should attempt a resolution consistent with the client's needs (e.g., offering a reduced fee or making a referral to an agency offering more affordable fees). There is no obligation to continue treating such clients indefinitely, although some reasonable interim coverage should be provided. Again, no client should ever be abandoned in the middle of a crisis situation.

Who actually saves money under managed care? Both non-profit and for-profit MCOs exist. An unpublished survey commissioned by the Blue Cross Blue Shield Association (BCBSA) in 2001, cited an average, 85.7 percent of commercial premiums for all health plans as going to pay medical claims, while 11.6 percent went to administrative costs and 2.7 percent went to profits (Gale Group, 2003). Some mental health professionals believe that the for-profit MCO data are quite different. For example, a former president of the American Psychiatric Association has asserted that some MCOs take 40%-70% of the health care dollar for overhead, profit, and huge CEO and other executive salaries, leaving the actual amounts spent on direct care for the mentally ill in the range of 2%-4% of the health care dollar (Eist, 1998).

More recently health maintenance organizations (HMOs), have faced quality and coverage mandates that restrict previously popular aggressive strategies for managing costs, such as denial of coverage for pre-existing conditions or placing excessive limits on mental health services (Dugan, 2015). An Obama administration regulation reignited the debate over profits by requiring insurance companies that manage Medicaid plans to spend at least 85 percent of their revenues on medical care, rather than profit or administrative expenses. Similar limits, referred to as medical loss ratios, were imposed on commercial insurance plans during the implementation of the Accountable Care Act (Sullivan, 2015). Still, some companies continue to show profits of 7% or more (Conover, 2014).

Some disputes against for-profit MCOs have led the American Psychological Association and its state affiliates to seek remedies in the courts. Litigation against Humana in Florida, alleging conspiracy to reduce, delay, and deny provider payments led to a $3.5 million settlement (Monitor on Psychology, 2006). In a settlement with CIGNA, more than 4,000 psychologists received nearly $2.2 million (Monitor on Psychology, 2005). As a result of such litigation and other changes related to mental health parity and accountable care legislation, the strategies used by MCOs to control costs will likely shift.  The most obvious pattern to date involves the use of lower cost providers and slowed or reduced reimbursement rates for mental health services.

Key Ethical Problems in Dealing with Managed Care Organizations

Managed care evolved as a function of changes in the economic realities of the health care marketplace. At the same time, managed care raises a number of stressful concerns for mental health professionals and consumers (Kremer & Gesten, 2003); these concerns range from “A”utonomy (i.e., infringements on the tradition of a professional's independent judgment) to “Z”eal (i.e., the energy with which some care managers have attempted to cut costs). Managed care came about in response to dramatically escalating costs of health care services, lack of meaningful economic controls on prices (particularly prescription drug prices), demand by employers who contract for employee health insurance, and legislators who oversee payment under state and federal insurance plans. Not all of the concerns about managed care are ethical issues in the sense that they directly compromise one's ability to conform to professional ethics codes. Similarly, not all MCOs are sinister or malevolent. Many do a good job of controlling costs with reasonable peer review. When buying health care services, employers and subscribers must recognize that you get what you pay for. A low-cost plan will have more limited coverage and possibly less professional management when it comes to case review decision-making. In the end, the quality of services provided is dependent on the competence and integrity of the service providers.

Ethical Challenges to Monitor When Dealing with Managed Care Entities

1. With a primary emphasis on cost containment, the needs of specific clients may be compromised. Providers may find themselves placed in conflicting roles when they try to offer what the client needs versus what is covered.

2. Increasingly, providers (as individuals or groups) may feel pressure by third-party payers to agree to capitation schemes. Under such plans, clear financial incentives exist to reduce the amount of care provided, somewhat akin to the agricultural practice of paying some farmers to let land lie fallow. Such schemes will ultimately erode the patient’s trust, even when practitioners are justified in saying “no” to requests for incremental services.

3. The reduction in clients’ free choice under managed care is significant. Clients may be forced to accept a provider from a particular pool, requiring them to work with someone who has a previously negotiated arrangement with the MCO to which the patient was not a party.

4. The same closed provider pools may lead to the creation of panels that are short on diversity (e.g., ones that do not adequately include mental health professionals skilled in working with ethnic minorities, people with sensory impairments, etc.).

5. Confidentiality concerns are potentiated because of demands for detailed case data by MCO reviewers.

6. Restrictive covenants, such as gag rules and hold harmless clauses, can have far-reaching liability consequences for practitioners.

There are indeed some benefits to society in managed care. These include reductions in the cost of services and insurance, lessening the so-called moral hazards of insurance (from the insurance company perspective), and putting new pressures on practitioners to think carefully regarding all aspects of their treatment planning. None of these potential benefits is hidden. At the same time, there are great risks inherent in a system of health care delivery that potentially provides systematic incentives to withhold care (as in the case of capitation models, in which a set fee is paid to cover all the mental health needs of a set number of insured people regardless of how much service is provided) or raises unreasonable barriers to reasonable care. Ironically, managed care and capitation models introduce a new kind of moral hazard by creating an incentive to provide less service.


As a legal concept, fraud refers to an act of intentional deception resulting in harm or injury to another. Abuse is defined as billing insurance companies or government programs for delivered but unnecessary services or furnishing incorrect information, and may be due to a mistake or misunderstanding of proper procedures (Barnett & Walfish, 2012).  It has been estimated that fraud and abuse account for at least 60 billion dollars each year across all health care service providers (Iglehart, 2004, 2010).  Gross (2004) asserts that abuse of insurance is one of the most common violations among mental health professionals.

There are four basic elements to a fraudulent act:

  1. One party makes representations to another, while either knowing the claims are false or being ignorant of their truth. This may be done by misrepresentation, deception, concealment, or simply nondisclosure of some key fact.
  2. The misrepresenter’s intent is that another will rely on the false representation.
  3. The recipient of the information is unaware of the intended deception.
  4. The recipient of the information is justified in relying on, or expecting the truth from, the communicator. The resulting injury may include financial, physical, or emotional harm.

A variety of unethical acts might be considered fraudulent, including deception in some research paradigms or educational settings, lies about one's training or qualifications, or some types of promotional advertising. In this section, however, we focus on fraud as a financial matter.

The next three cases highlight one aspect of the problem in the sense that the “victim” is a third-party corporate payer, not a person as more often occurs in scam situations. Because the fraud frequently takes place in paper transactions, some offenders tend to regard themselves as less than serious violators.

Case 42:

Rhett E, McCarty, PhD, pled guilty in a federal court to scheming to defraud Medicare and Medicaid.  Over a period of several years, Dr. McCarty received over a million dollars for sessions that never took place.  He claimed he saw 19 clients every day except for Christmas, although the clients later claimed they consulted him once a week. In one case, McCarty received $101,712 in payments for a client with whom he had only a single session.

Whereas one may wonder why it took Medicare and Medicaid almost four years to question a provider who claimed to see clients many hours a day for 364 days a year, this higher profile fraud case not only steals taxpayer dollars but sullies the image of the mental health profession. (See one media story at

Dr. McCarty represents an extreme case taken from the public domain. However, sloppiness or rationalizing that one is actually doing a good deed can land therapists in the same hot water.

Case 43:

Carla Dingle, MD, was indicted for fraud by a grand jury and asked to answer for her conduct to an ethics panel. She explained that she consulted at a private proprietary hospital on a fee-for-service basis in which part of each charge went to her and part to the hospital for administrative costs. To “simplify” the billing process, Dr. Dingle signed several dozen blank claim forms and left them for the billing office secretary to complete. She simply had not noticed that insurance companies were paying her for services not rendered. She claimed that hospital administrators must have improperly added extra appointments to the billing sheets to inflate their income.

Case 44:

Ernest Churchman, Ph.D., worked as a consulting psychologist for a nursing home run by a religious group. He offered his services free to the facility as an act of religious devotion and submitted bills for his services to a government agency, turning over all monies collected to the home. He was indicted for fraud when an audit disclosed that he had been paid for several thousand dollars worth of services not rendered. Churchman had simply added two to five extra visits to the billing for each of the clients he was asked to evaluate. He was apologetic when confronted, but noted that the home was in need of funds and the money did not come out of the pocket of any patients, all of whom had government-sponsored insurance plans.

Neither Dr. Dingle's poor judgment nor Dr. Churchman's well-intentioned diversion of federal funds is ethically defensible. Dingle should not have provided signed blank forms and remains fully responsible for any acts she delegated to others. Her carelessness and failure to monitor her accounts accurately raises serious questions about her competence and awareness of professional practices. Dr. Churchman was clearly guilty of defrauding the government, despite his perceived harmless intentions and rationalized sense of economic necessity.

It is wise to retain duplicate copies or electronic records of all insurance claims completed. Such a practice will go far to prevent problems that result from alterations made on the forms after they leave the therapists’ hands. In some cases, clients have been known to inflate listed charges, especially when insurance company procedures require the client (rather than the practitioner) to turn in claim forms, and the insurer reimburses the client directly.

Most third parties insist on signing a contract with providers before agreeing to pay for their services. Blue Shield is an example of such a provider in many states. In the typical contract, a provider agrees to accept the company's usual and customary payment as specified in the contract in full satisfaction for the service rendered to the subscriber or client. The provider also promises not to charge a policyholder more for any given service than would be charged to another client. In other words, the provider agrees to accept, from time to time, certain set fees determined by the company and agrees not to treat policyholders differently from non-policyholders. In this way, the company attempts to provide good, inexpensive coverage, while endeavoring to prevent its policyholders from being overcharged or treated in a discriminatory manner. Ideally, the therapist gains access to a client population, timely payment for services, and the ability to treat covered clients at less expense to them.

Despite prior agreements between practitioners and MCOs, contractual violations occasionally form the basis of complaints. Intentionally violating contractual obligations generally constitutes illegal and unethical conduct. Three typical types of such contractual violations include the practices of ignoring the co-payment, balance billing, and attempting to “boost your profile,” as illustrated in the following cases.

Case 45:

Some insurance coverage provides that the client must pay a small set portion of the mental health professional’s fee, known as a co-payment. Nell Sweetheart, M.S.W., often does not bother to collect $10 co-payments from her clients. She believes she is doing them a favor and that “no one will mind.” She does not realize that she may be accused of fraud.

Ms. Sweetheart's failure to make a reasonable effort to collect the co-payments has the net effect of misrepresenting her fee to the insurer. Assume, for example, that she bills the third party $90 for a session and is paid $80 on the assumption that she will collect $10 from the client as a co-payment. If she does not make a good faith effort to collect the $10, she has effectively lowered her fee to $80 while continuing to tell the insurer that it is $90. This practice might be interpreted as fraudulent misrepresentation. Sweetheart may choose not to press collection of the fee against indigent patients for whom this is a hardship, but she must be prepared to demonstrate that she made good faith efforts to collect it.

Case 46:

Sam More, Ph.D., is treating a client whose Blue Mace/Blue Helmet health insurance policy requires policy holders to pay up to $1500 per year as a deductible for outpatient psychotherapy. His usual charge is $150 per hour. Once the client pays out the $1500 deductible, the company will pay up to 80% of Dr. More’s fee. The client asks Dr. More to accept payment of $150 per session, but to issue invoices for a higher amount in order to make the insurer believe that the $1,500 deductible is reached more quickly.

If Dr. More goes along with this request he will have conspired with the client to defraud the insurance company and in so doing commit a criminal act of fraud.

Case 47:

I. B. Hire, L.M.H.C., knows that he will only be paid $75 per session by Blue Mace/Blue Helmet, and he abides by his obligation not to balance bill or otherwise subvert the client's coverage. He also knows that no matter what fee he lists on the insurance claim form, $75, $90, or $150, he will still be paid only $75, rather than the $90 per hour he usually charges clients who pay out of pocket. Hire also knows that, according to his contract, future increases in reimbursement by the company are based on his “billing profile,” his usual charges filled in on claim forms for similar services. He knows that his future rates will be linked to this profile. As a result, he reports his usual hourly rate as $150 per hour on all the claim forms, reasoning that he will eventually get a fairer rate than if he lets the company know his usual fee is actually only $90.

Hire's behavior presents a more subtle form of contract violation. In some ways, it is actually fraud because he deliberately lies to the company in hopes of some future gain. Mr. Hire would probably rationalize that he is hurting no one because he will never bill the client more than his usual $90 when coverage is exhausted. He is, however, lying to the company and violating his agreement to provide them with honest data.

If Mr. Hire does not like the insurance contract offered by the company, he has the option not to sign it. He might lose out on some income and/or clients because they do not belong to the company’s network, but professional disagreements over fee contracts do not lend themselves to individualized attempts at remedies like those described above. The acts of Moore and Hire are both illegal and unethical, given the contracts they agreed to sign.

In conclusion, a psychotherapy practice must navigate between what Carnochan (1997) labeled “commerce and care.”  Paying careful attention to the business aspects of one’s practice while keeping in mind how they intersect with every client will ultimately save time, money, and perhaps a most unwelcome ethics complaint.


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