Shrink to Fit

The Lakewood office where Dr. Mary Hansen practices psychology has just two rooms. The tiny, mauve-toned waiting room holds four plain chairs and a table covered with issues of Reader's Digest, Woman's Day and a recent Esquire, with Mr. Rogers on the cover. There's no receptionist asking clients to fill out forms, just a door to the next room, where a Fisher-Price table and chairs await Hansen's smallest clients and whatever therapeutic insights their play might reveal.

Beside a cushy couch, Hansen sits in the therapist's chair, which is positioned for careful listening. But this time she's the one talking.

"Well, I guess I've been really angry," Hansen says matter-of-factly in her soft-spoken voice. "I'm getting past most of it. It's been a while, and it's not something I'm going to devote any more energy to."

Thousands of people who have followed their insurance provider's instructions in seeking counseling over the past few years for relationship problems, addictions, depression, eating disorders, sexual abuse, stress or anger control never realized their therapists might have their own anger issues. For a few hundred psychologists and psychiatrists who saw clients insured by the Mutual of Omaha of Colorado company doing business as Antero Health Plans, though, anger control has been a challenge.

Up until early this year, those therapists were part of a network of mental-health providers managed by a for-profit corporation called, both appropriately and vaguely, Mental Health Services Inc. Owned by three nonprofit community mental-health centers, MHS had contracted with Antero to manage the care of the insurance company's clients who needed mental-health services.

When MHS shut down on February 11, the company still owed $528,467.52 in unpaid claims to 498 therapists and health facilities. The debts ranged from 26 cents owed a therapist in Aurora to a bill of $126,058.87 at University Hospital. MHS stiffed institutions such as Boulder Community Hospital, the Children's Hospital, the Cleo Wallace Center, Parkview Hospital and West Pines for thousands of dollars; even a couple of ambulance companies never collected their fares.

But the majority of those financially traumatized by MHS were individual therapists or therapists who worked in small group practices, trying to run their offices on tight budgets with just a couple of employees. They had contracted with MHS to be on the company's list of mental-health providers in a managed-care environment that often requires therapists to settle for less than the market rate.

"A therapist might usually bill seventy or eighty dollars an hour," says one, "but MHS contracted with us for fifty. We accepted less money, but we would get more referrals." For these providers, a few hundred dollars can mean a lot. Some of them are owed thousands.

"There's no way to know how much I'm owed," says Hansen. "I added up $2,000 worth. They paid $35 [for a client's session], so that $2,000 represents a lot of hours." When she joined the MHS network in January 1996, there were so many problems at first that Hansen thought it was a new business--although by then it had been operating in Colorado for eight years. "There were always questions," Hansen says, "inconsistencies in what they were requesting, so it was hard to bill it, code it." And even after those rough spots were smoothed out, one crucial problem area remained.

"They would take sometimes six to eight months to pay," Hansen says. She looks through the file folders on her lap. "They never paid on that one, so that doesn't count," she says, then says the same thing after looking at the next file. In the remaining files, she finds a claim she submitted in August that was paid in February, a claim from April that was paid in December and one from March that was paid in October.

While the company eventually paid on some claims, MHS was also "finding every excuse in the world" not to pay her at all, Hansen says. "I was to bill them within sixty days of the appointment, and if I was one day late, they wouldn't pay. That didn't have to happen very long before I started billing after every single appointment. I faxed it right on over. Then it would take six or eight months, sometimes calling and calling and calling."

"MHS had always been the worst managed-care provider as far as their rate of reimbursement," says Steve Westra, a psychotherapist who has been in private practice in the area for eighteen years and who contracted with MHS since 1988. "We had a contract with them that said they would reimburse us within sixty days of receiving the claim form, but there are claims they still owe me that are over a year old. Everybody who worked with MHS complained of them being so slow to pay."

Many of the therapists who spoke with Westword about MHS asked that their names not appear because they feared being blackballed from other managed-care companies' provider lists. "Most of those lists are closed. It's very hard to get on the list," says one of these therapists. "When you're on these lists, you can't alienate the people who are going to refer to you. You don't want to be known as a troublemaker."

"I've had the experience of having conflicts with [managed-care companies] and then going through periods of time when I don't get referrals," says another therapist. "I can't say it's been a total blackball, but I get the feeling that they're saying, 'We're going to punish this guy for a couple months, not send him any clients.'"

Adds Westra: "The managed-health-care industry--if you say anything to them that they could construe as 'not managed-health-care friendly,' they're going to take huge offense at that. From my own perspective, I'm not taking offense at them from a clinical perspective on this, I'm taking offense from an administrative and financial perspective--but I know they're not going to see it that way. Anytime anyone tries to present an administrative, financial or ethical operation issue, you're running into a great probability of being considered managed-care-unfriendly. They're like the Nixon administration when I was growing up: This is America--love it or leave it. You can't criticize it, which is so much B.S."

In the case of MHS, however, Westra felt that "the need to expose improprieties outweighed those concerns."

And the improprieties go beyond MHS.
In February, therapists in the MHS network who had been seeing Antero's clients received letters informing them that Antero was switching to a new network of providers managed by PRO Behavioral Health.

"It's my understanding that Antero had known for years that MHS was mismanaged, that fiscally they weren't handling their fiduciary responsibilities very well," Westra says.

Antero had performed an audit of MHS, says Michael Rembold, Antero's vice president of legal and underwriting services. "At the point that we discovered problems, we suggested actions that MHS could take to remedy that." At the same time, though, Antero began searching for a "possible replacement provider organization." That new provider was PRO.

"That was the irony to me," says a psychiatrist on the MHS list who moved to Colorado two years ago. "In my experience with managed-care companies, MHS was one of the few that didn't have as many problems of abuses of under-treatment. Whereas twenty years ago doctors and hospitals over-treated, managed-care companies push for under-treatment, and MHS seemed to be one of the more sane ones. They didn't question fairly obvious things, where I have companies now who basically allow three days for something that, in my training, easily justified a month. When I heard the name PRO as a replacement, I found out from my billing secretary, who's been doing this for years, that they're notorious. They're the worst."

This year the Colorado Division of Insurance denied PRO's application for a Limited Service Licensed Provider Network. With that license, a network can provide services in a specific limited area such as mental health; without it, it must work under another licensed organization, such as Antero. PRO's application was denied "due to their financial condition at the time," says Nancy Ryan, public affairs director at the Division of Insurance. "We've also inquired of the HMOs that have contractual relationships with PRO Behavioral. We want to make sure their due diligence is thoroughly done so any HMO that's contracting with them won't be put in a precarious situation."

Despite PRO's precarious situation at the Division of Insurance, Antero decided to pull its contract from MHS and give it to PRO. After Antero did so, MHS closed its doors--but said nothing to its contractors. "In fact," Westra says, "they were referring people to providers such as myself even in the last week of February, full well knowing they were never going to pay for the services that would be rendered by us providers. They just went ahead pretending as though everything was okay."

Hansen's first indication that something was wrong came when she tried to fax her claims to MHS and the fax machine wouldn't work. "Then I started calling and no one answered the phone," she says.

Toward the end of April, therapists who had contracted with MHS received letters notifying them of the "dissolution of Mental Health Services." They were instructed to submit "any outstanding claims for services rendered" to the claims department at Antero.

But a new law making insurers responsible for paying providers managed through middlemen such as MHS had only gone into effect on January 1, 1998. That meant therapists who had worked for MHS for years but whose contracts had not been renewed after January 1 had no way to recover their money from Antero.

MHS had evaporated, and Antero wasn't responsible.
In many ways, it seems as if no one was responsible.

Mental Health Services Inc. was incorporated in Colorado on November 7, 1988. The for-profit corporation was owned by three nonprofit mental-health centers: the Jefferson Center for Mental Health, the Aurora Community Mental Health Center and the Arapahoe Mental Health Center, all community centers that received their funding from a variety of sources including county, state and federal governments.

"In the mid-'80s, it was clear to a lot of people that big changes were coming in health care," says Dr. Harriet Hall, president and CEO of the Jefferson Center for Mental Health. Across the state, Hall says, directors of mental-health centers were beginning to talk about "how to participate" in the coming days of managed care. While centers like hers already saw many clients on Medicaid and Medicare, they knew it would become increasingly difficult to hold on to "third-party revenue"--the money that comes from insurance companies when a party other than the client is paying for the client's care.

Centers like hers "wanted to learn managed care," Hall says, "and use [its concepts] internally in running our own business, and we wanted to maintain the third-party revenue." After they were contacted by an Arizona-based, for-profit mental-health center asking if they wanted the Colorado share of a Met Life contract, Hall says, the three community mental-health centers got together and formed MHS to handle the business. The for-profit picked up the Antero contract soon after.

"These three organizations had been providing mental-health services for many, many, many years," says Steve Williams, an accountant who served as treasurer of the MHS board of directors. "They found that there were certain activities out there in providing mental-health services which technically were not best suited under their nonprofit umbrella."

Those "activities," Williams adds, included "capitation contracts with health-insurance companies who were required to provide mental-health services under their health-insurance policies."

Barbara Crawford, an attorney serving as the agent for the dissolved corporation that was MHS, explains "capitation" this way: "A lot of insurance companies have come to mental-health networks and said--and this is just an example--'We're going to pay you three dollars per head for all of our members, whether they come to you or not. You're going to manage their care, make sure they get their appropriate care.' But you pay sixty dollars for a licensed clinical social worker to provide a weekly therapy session. If you've been getting three dollars for that person for a year, by the first visit to a therapist, you're not exactly coming out okay. The reason you come out okay is that the other thousand people in the group aren't going to therapy that week."

But MHS didn't come out okay, and its fate reflects what's happening in the health-care industry nationwide, Williams says. "A lot of the key players are really struggling--they all struggle. And to make a long story short, over the course of ten years, the three nonprofit organizations that owned MHS came to the realization that they were not very good at running a for-profit corporation. You combine that with the difficulties in the industry and the financial losses, and [the fact that] nonprofits shouldn't be subsidizing for-profit corporations, and it made the decision fairly easy to liquidate MHS."

MHS had tried to negotiate with Antero for an increase in the amount paid per client, Crawford says, "but Antero did not give in. MHS didn't seem to have any more opportunities for adding to its client base and realized that the process would get worse over time. They decided to simply close the doors."

Although several MHS contractors speculate that the company underbid its initial contract with Antero, Williams disputes that. "Frankly, MHS got what the marketplace would provide it, and that's no different than any other competitor of MHS," he says. "That's why companies like MHS have struggled. Denver and this region is a highly competitive market. The capitation rates are very competitive--I would say almost cut-rate--so I wouldn't place any value judgment on whether Antero was paying their fair share. They paid what the market would bear."

If the decision to close its doors was easy for MHS, it also turned out to be easy on Antero, since the therapists who'd contracted with MHS had all signed "hold harmless" clauses stipulating that they could not seek payment from Antero if MHS went out of business.

"I signed it," says one therapist, "but I thought it applied to individual circumstances, when one client wasn't paying. I didn't think it meant if MHS went out of business. I never even thought of that." The therapist admits to being naive but adds, "Most people are desperate to get on these lists, and if you don't sign the hold-harmless clause, they'll keep you off."

Over the past several months, that hold-harmless clause has created a small flurry of legal activity. One doctor took Antero to small-claims court and won. "It just seemed so obvious that Antero was to blame," this doctor says. In small-claims court, "Antero's argument was 'Hey, it's in the contract; there's a hold-harmless clause here.' They had no disagreement that I saw the patients I purported to have seen, no contention as to the amount of money that would have been owed me, no contention about anything except that they weren't liable based on that one contractual clause."

On August 25, a small-claims judge "basically found that this hold-harmless clause was, in his opinion, null and void because it contradicted a tenet that had a 'higher value' than the contract itself," the doctor says, "and that tenet was a public-policy concept that an insurance company has to do what's in the best interest of their insured. He agreed that the clause was contradictory in that it indirectly would hurt their insured. Of course Antero appealed it, so it's going to district court and it gets reviewed by another judge.

"What helped quite a bit was having a letter stating in more legalistic terms the opinion of the Colorado Division of Insurance. They said when a company like Antero chooses an entity like MHS, a company that is going to dissolve midstream, ultimately the clients get hurt--the clients being the patients. When Antero chose to say, 'Hey, MHS, you're out and PRO is in,' guess who could not see their MHS doctors or therapists anymore. I had one patient who was nice enough to write a letter detailing how upsetting that was to her treatment, that she had to find a new doctor and therapist because of some whimsical bold penstroke on the part of some CEO in Antero's office."

But in future court proceedings, the Division of Insurance is likely to be much less helpful.

Last May, the attorney general's office wrote a letter to Antero president Charles R. Stark outlining the division's opinion that "Antero is liable to pay MHS's subcontractors, notwithstanding any contractual provisions to the contrary...It is Antero's duty to exercise due diligence in the selection of contractors. Antero is ultimately responsible to ensure that health-care services are continuously available and accessible to its members. It cannot avoid this responsibility by insulating itself from the insolvency of one of its contractors...The Division therefore expects Antero to promptly pay all valid unpaid claims of MHS' subcontracted providers."

By this fall, though, the attorney general's office had backed away from that opinion. Today it says that Antero is not responsible for MHS's contractors after all.

The letter last May had been intended only to "start a discussion" with Antero, sources in the AG's office say, and when attorneys there looked more closely at the MHS contract providers had signed, they determined that the hold-harmless clauses really did absolve Antero from responsibility.

While they bemoan what happened with MHS as "unfortunate, very unfortunate," employees at the Division of Insurance trumpet the law that went into effect on January 1 of this year, making insurance carriers such as Antero responsible for "payment of all participating providers" in the event that any entity with which the company contracts or subcontracts goes out of business.

"Now, effective for contracts after January 1, 1998, we are holding the HMO to a higher standard of due diligence," says Nancy Litwinski, the division's assistant commissioner of financial regulation.

But that's no comfort to providers who were having trouble with MHS long before January 1, 1998. Neither are other Division of Insurance policies that have let unpaid therapists fall through a wide hole in the insurance-industry safety net.

For example, before MHS went out of business, the Division of Insurance wasn't monitoring the company, because it wasn't required to have a license. MHS was a Limited Service Licensed Provider Network; as of November 1, 1996, insurance regulations required that such entities be licensed. But there are variations in the rules.

"There is a regulation at the Division of Insurance that requires that any company that is directly contracting with a consumer must have a license if they're getting paid on a capitated basis," Crawford says. But while MHS was created specifically to enter into capitation contracts, "if their only contracts are through licensed carriers, then they do not have to have a license," she explains. "In Antero's case, where it was Antero's insured lives for which MHS was providing mental-health services, there was no need for a license, because there was a licensed carrier taking the risk in that picture."

This same loophole allowed PRO to contract with Antero in February.
Explains Litwinski: "If MHS contracted with a licensed entity--which is Antero--that has an HMO license, then our regulatory role is that we hold the HMO responsible to monitor the financial condition of the providers that they contract with."

But even if Antero monitored the financial condition of MHS, the hold-harmless clause in its contracts meant that Antero would not be responsible for MHS's bills.

To those who will never collect, it seems as if MHS operated in a completely unregulated environment.

"This was an entity functioning without any guards in place," says one therapist. "No one's watching them."

If MHS had been licensed, the Division of Insurance could have prevented the company from stiffing its contractors. LSLPNs are required to have "statutory deposits of money, and they have a minimum amount of assets and capitalization requirements they have to meet," says division spokeswoman Ryan. "If they drop below that level, they come under company watch, and we would go in and review their costs or administration and other areas just to see what was happening. That way we can put in all kinds of stop-gap measures to make sure the consumers don't get harmed--the consumers being their regular consumers as well as whoever they've contracted with. Hopefully, no one would have been harmed."

But hundreds were harmed. "I think, probably, it certainly isn't going to make them feel good," says the Jefferson Center's Hall, "but when it closed, MHS used all the money it had, sold all of its assets and paid every single claim it could pay. The board was very involved in making sure that happened, that the money didn't go someplace else, that what was owed to the providers went to the providers. That was all we could do."

Adds Williams: "It's a very unfortunate situation, and I know that the nonprofits feel badly about that, but whenever a corporation goes out of business, it's obviously not uncommon for debt to be outstanding, so it's nothing personal. I'm sure there was no conscious decision to stiff any particular therapist. It was purely a matter of MHS's extreme financial difficulty."

In September Dr. Mary Hansen received a postcard. The return address was a P.O. box. The message was terse: "Dear Claimant: MHS has liquidated all assets and applied all proceeds to outstanding debts. No funds remain to pay your claim."

Many claimants have considered taking Antero to small-claims court or filing some kind of class-action lawsuit--even though they're not sure who they can sue. But for the most part, they've decided that they can't afford to put the effort into recovering money that doesn't exist.

"I was what they would call a high-volume provider, meaning that I saw a lot of their people," says Dr. David Kieffer, who has a marriage- and family-therapy practice in Lakewood. "My experience with MHS was that they slowly went out of business. So they're gone. They just disappeared. There's no remedy for that. I've put little to no action into this, because I don't think that there's any remedy. I have a busy practice, and I don't have the time to go after something that may never materialize. I think that's one of the ways insurance companies take advantage of doctors--we're so busy right now trying to keep up with the demands of managed care in general and trying to increase our volume, when we're not dealt an even hand by an insurance provider, I hardly have the energy to pursue the problem, because I have obligations to my patients and other managed-care people. It takes a lot of the fun out of practicing as a health-care provider."

When MHS went out of business, it owed not only therapists, but also its own parent corporations, facilities partially funded through tax dollars. The Jefferson Center for Mental Health had an outstanding claim of $1,544, and the Aurora Community Mental Health Center was still owed $4,467.65.

Hall winces on hearing the amount but then shrugs it off. "I knew we were owed money, but I didn't know how much," she says. "There's all kinds of bills that get paid and don't get paid. That's small compared to the amount that was lost by the shareholders."

Shareholders knew they were taking a risk, however, while therapists thought there were regulations that would protect them. But the concept of managed care seemed to extend only to managing the range of services provided patients--not managing the companies that provide them.

"It's not fair," Kieffer says. "I'm just another angry doctor. It's tough being a doctor. It used to be fun. I've been practicing for over twenty years. There was a real sense of community support and respect that we once received. There was actually a sense of privilege with being a doctoral-level health-care provider, and now there's not."

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