Seeking to gain a competitive edge in today's health-care market, Alan Graham, PhD, has devised three diverse ways to deliver his services.

He's developed a training program for parents of children and adolescents with Attention-Deficit Hyperactivity Disorder (ADHD) that he delivers through weekly teleconference calls and markets on his own web site, www.ADDvisor.com. He partners with pharmaceutical companies to train pediatricians and family physicians on how psychotherapy and parent training can complement medication in the treatment of ADHD. And his practice, ACP Consultants, receives referrals from physicians at Lutheran General Hospital in Park Ridge, Ill., where he has staff privileges.

Russ Newman, PhD, JD, APA's executive director for practice, says Graham is doing the types of things necessary to compete in today's aggressive health-care market.

"It's a whole new ballgame," says Newman. "Practitioners need to find new ways to deliver their services and collaborate with as many primary-care physicians, psychologists and hospitals as possible. It's become increasingly difficult for an individual provider who's entirely outside the third-party reimbursement system to be competitive."

Indeed, the traditional psychology practice of yesterday has largely given way to an increasingly complicated marketplace. Much of that change has been driven by the integration of the health-care system. Hospitals and health-care professionals are joining under one administrative umbrella. Consumers and employers are looking for group practices where they can do "one-stop shopping"---receiving primary health-care and psychological services all under one roof.

Meanwhile, technological advances are feeding this integration by allowing providers to share data and work in connection with others despite boundaries and differences.

What's this all mean for psychologists? Increasingly, they need to examine how these forces are influencing their practices and look for new ways to position themselves.

"There are hooks practitioners can grab onto in this complex health-care system," says C. Henry Engleka, APA's assistant executive director for marketing in the Practice Directorate. "Psychologists need to look for handles where they have expertise and contributions to make."

During the year, the Monitor will look at the ways the integrated health-care system is changing psychology practice--and what psychologists can do to succeed in this market.

No longer a fragmented system

Health-care integration is, of course, nothing new. It started in the 1960s when large hospitals began swallowing up others, creating hospital chains. Soon afterwards, managed-care companies were born, creating networks of providers.

Meanwhile, health-care purchasers--primarily employers and the government--were no longer satisfied with having contracts with many different health-care practitioners: They sought to contract with one entity that offered all services.

Although some of the fallout of this integration has been challenging for psychology--primarily the advent of managed care--other trends have sprung up that are benefiting the profession.

For example, integration has allowed hospitals to see that psychological interventions can reduce treatment costs by preventing future hospitalizations and emergency room visits.

"If you integrate psychological services into the treatment of breast cancer or cardiovascular disease, for example, you get better health-care outcomes and you get lower health-care costs overall," says Newman.

This may ultimately benefit psychology by increasing the financial resources available to pay for behavioral health care, says Engleka. Money that has traditionally been spent on medical or surgical treatments to alleviate acute illness may become available for behavioral interventions, he says. This may allow psychologists to work in settings in which they traditionally haven't worked and demonstrate their value to a wider range of health-care providers.

Another benefit of integration has been the growth of disease-management models. Through disease management, health-care providers recognize that maladies often have developmental lives and that different interventions--including behavioral interventions to prevent disease--are appropriate at each stage of the illness. For instance, in managing heart disease among smokers, the health-care provider would suggest a smoking-cessation program before an illness develops.

Insurers are now willing to pay for these behavioral interventions because they recognize that spending money to prevent a chronic illness will save money later on costly hospital visits and operations.

Initial outcome studies show that disease management can reduce hospital and emergency room visits and provide a 5 to 10 percent cost savings, says Joel Ray, a health-care analyst for First Union Capital Markets. Some studies have even shown 50 percent cost savings, he says.

Psychologists are well-positioned to capitalize on the disease management trend, says Ray.

For instance, he says, in addition to providing behavioral interventions such as smoking cessation, psychologists treat depression--a side effect of a chronic illness that's often inadequately addressed by physicians.

Disability management is another area where psychologists' interventions can provide immediate cost savings by helping employees return to work and preventing employers from having to pay costly disability claims. Employers are willing to pay for these psychological services because such interventions save money down the road on disability claims, says Newman.

Although employers are spending less money on health care, their disability and workers' compensation payments are increasing, says Newman. One theory, he says, is that medical costs are being shifted to disability insurance as managed-care companies deny payments for medical treatment.

"Employers are saving money on health care through managed care's cost-containment mechanisms, but they are spending more on disability insurance because more people are ending up on disability," says Newman.

Data from UNUM Life Insurance Company of America supports this theory. UNUM reports that disability claims due to psychiatric conditions, severe back pain, AIDS, carpal tunnel syndrome, muscle/tissue disorders and chronic fatigue syndrome are increasing dramatically.

Psychologists are also paying close attention to other trends that are spurring further integration in the health-care system. Among the most significant is a social phenomenon: Consumers are increasingly recognizing the mind-body connection, perhaps even more so than many health-care providers.

In fact, Newman says he was surprised by results of the APA Practice Directorate's 1996 public opinion survey, which asked about people's understandings of the mind-body connection.

"We thought we would have to teach them about the link between psychological and physical health but in fact the public already appreciates the link," he says. "We had almost 80 percent of the people saying they would prefer to see a primary-care physician who worked collaboratively with a psychologist."

Now that consumers understand this connection, psychologists need to take it a step further by making sure primary-care physicians know how to make the best use of psychologists and psychological services.

Physicians are more willing to refer patients to psychologists when they see that including a behavioral intervention to treat a physical ailment leads to better patient outcomes, says Graham of Illinois.

Tapping into the system

Although not all of them like it, many practitioners have recognized the trends in today's health-care marketplace and are finding new ways to deliver services in this competitive market.

Yet psychologists may be hesitant to partner with other psychologists or form their own provider networks because they feel they can't compete with large managed-care organizations in a market that values pricing over quality of care, says Newman.

But the Practice Directorate is pursuing an agenda that is aimed at changing that market (see sidebar, page 59).

"If the marketplace would compete on quality as well as cost," says Newman, "then psychologists would have a chance to provide better health outcomes at lower costs, particularly when they collaborate with primary-care physicians."

Psychologist Alan Graham (right) has positioned himself to succeed in the new marketplace by collaborating with physicians and pharmaceutical companies. He often helps Kenneth Miller (left), a pediatric nephrologist, to address behavioral issues with his patients and their families.

APA's Practice Directorate pushes agenda to help psychologists succeed

The Practice Directorate recognizes that even the most business savvy group of psychologists will find it difficult to compete in today's integrated health-care system, which often values pricing over service. The directorate has been pursuing its own agenda to help smooth the bumps psychologists are facing in an increasingly complicated health-care system.

For one, the directorate has been pushing for a managed-care reform bill that amends the 1974 Employee Retirement Income Security Act to allow patients to sue managed-care companies for inappropriate denial of treatment or inadequate care. This bill would allow patients to sue their managed-care companies when, for instance, mental health services are arbitrarily limited to the patient's detriment.

The directorate has also been fighting to set court precedents by legally challenging managed-care companies that are, they charge, interfering with and even inhibiting patient care by placing too much emphasis on cost-cutting measures. Lawsuits have been filed in New Jersey, California and Virginia. The goal is to illustrate that managed-care companies are, in effect, delivering health care and persuade the courts to hold them accountable.

And, to illustrate the value of psychological services, the Practice Directorate is conducting a demonstration project to show that patient outcomes are better, and overall health-care costs are lower, when psychological services are integrated with physical health care, says APA Executive Director for Practice Russ Newman, PhD, JD.

The directorate has partnered with Blue Cross/Blue Shield of Massachusetts, Inc., on a breast cancer demonstration project to compare the psychological, behavioral, and health outcomes of women participating in a 16-week group therapy program with the outcomes of women receiving standard care.

The directorate has hired PricewaterhouseCoopers to build an actuarial model that projects the financial impact and return on investment resulting from integrating psychotherapy services into cardiac patient care. The actuarial model is based on a Duke University study of cardiac patients assigned either a 16-week cognitive-behavioral therapy program for stress management, a 16-week exercise program or standard medical care without psychotherapy or exercise. The model will predict the treatment costs and savings realized from each intervention.

The goal, says Newman, is to demonstrate that when psychologists see cardiac or breast-cancer patients, they're treating a physical ailment, not a mental health problem.

"Even in an integrated market," says Newman, "we have a long way to go before we have total integration between physical and psychological services."