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Fraud, Waste and Abuse Are a Dishonorable Trinity for Behavioral Healthcare

April 11, 2019

When I first heard someone refer to “the trinity of fraud, waste and abuse” years ago during my time as a practicing psychologist, I imagined that this referred to some distant and boring administrative aspects of healthcare. I could not really distinguish one concept from the other, and I had no idea how these ideas related to the activities of clinical professionals.

As my career progressed, I became more aware of how professional behavior could fit into these awful categories. I worked with both adult and adolescent inpatients in the 1980s since my training prepared me for working with severely disturbed patients, and I witnessed an appalling level of deception by clinicians in those hospital settings.

Clinicians are enraged today at reports of abuses by managed care organizations in denying medically necessary care due to purely financial motivations. This is unacceptable, and we must find the means to prevent this under any circumstances. However, I witnessed the venality of fraud during my early years of clinical practice, and I don’t see a meaningful distinction between the fraud of clinical professionals and that of managed care bean counters.


During the 1980s, before the advent of managed behavioral healthcare organizations (MBHOs), insurance for inpatient treatment was often very generous and coverage for outpatient treatment quite limited. Based on the insurance coverage and the lack of oversight, professionals in inpatient settings often pushed for treatment until the benefit was exhausted.

In particular, many adolescents spent months, even years, in inpatient treatment because: a) the benefit was available; b) oversight did not exist; and c) many parents welcomed a guilt-free break from their highly disturbed children. The treating professionals convinced parents of the need for ongoing confinement, in what can only be described as fraudulent deception motivated by greed.

I became involved in hospital oversight committees that constrained this behavior and terminated treatment privileges for egregious offenders, but the behavior was widespread and impossible to monitor on an internal basis. The managed care industry was needed to provide oversight and financial limits.

Waste and abuse

Waste in the healthcare system may be less outrageous, but still involves seeking payment for services that are not medically necessary. I have had conversations with directors of facility-based care who believe everyone admitted to their facility should be funded for a minimum amount of care, regardless of their clinical status. I know many clinicians who believe insurance should cover outpatient mental health treatment for as long as the patient (or clinician) wants it.

Abuse involves intentionally misrepresenting facts in order to secure payment. If you have participated in utilization review discussions – that is, an interaction between a treating professional and a managed care reviewer – you are probably aware of many salient examples of this. I should say that these discussions can be disgraceful from both directions. The clinician determined to misrepresent a case in any way necessary to get authorization and payment is no better or worse than the utilization reviewer determined to deny services regardless of the clinical facts. Abuse is dishonesty, not just a well-intentioned debate about the need for services.

I am offering these comments in part to illuminate the history of the behavioral healthcare industry, and more specifically, the creation of external managed care organizations to monitor treatment offered by facilities and clinicians. However, the core issue I want to highlight is not this history of organizational change and conflict, but rather the reality that the assumption of financial risk for clinical services by any entity sets up a foundation for this dishonorable trinity.

Some of the most tightly managed clinical services in the U.S. are those offered by healthcare systems bearing financial risk. Large medical groups receiving capitated payments from health plans are well-known to manage behavioral healthcare services in highly limited ways. They often start on this path by having very few providers of behavioral healthcare. Healthcare systems can then proceed to limit necessary behavioral healthcare by emulating the worst of the MBHOs.

The antithesis of fraud, waste and abuse is honest discussion. This applies to healthcare executives as much as to clinicians and reviewers on the front lines. Anyone who has negotiated a healthcare contract knows that it is difficult to arrive at a price where all necessary and appropriate care is funded and both sides to the agreement make a reasonable profit. Needless to say, people may disagree about what is reasonable.

Wasted resources; unavailable resources

During the past decade there have been several studies reformulating waste as unnecessary care for whatever reason, and estimates have been made of the amount of waste in the overall healthcare system. In 2012 Berwick and Hackbarth1 estimated that somewhere between 18% and 37% of total health spending in 2011 constituted waste. There are several categories of waste that have been identified through the years, including failures of care delivery, failures of care coordination, overtreatment, administrative complexity, pricing failures, fraud and abuse.

We can easily find many examples of each category of waste within behavioral healthcare. Yet at the same time, millions of people with behavioral health conditions receive none of the treatment they need. This is the unique puzzle of behavioral healthcare. We still have fraud, waste and abuse siphoning off precious resources, and yet at the same time, we have no licensed behavioral health professionals in half the counties in the U.S. Another fact: fewer than 15% of people with chemical dependency problems in the U.S. get treatment.2

While there are many reasons for a lack of addiction treatment – including people refusing to access needed treatment – the point is that we have a complex set of circumstances that we should keep in perspective. We can get emotional about each issue, from deception to the under-funding of needed services, but we will best serve our field by having a broad and balanced perspective.

We are living in a time when an opioid epidemic is resulting in dozens of deaths daily for people who receive no treatment whatsoever. At the same time, we have wasteful spending based on everything from poorly designed systems of care to dishonesty and greed. The system is broken and there is plenty of blame to go around. We don’t need scapegoats. Instead, we need behavioral healthcare executives with a passion for our collective mission and a broad view of our current failures. The best solutions can only arise from a clear understanding of the depth and breadth of our problems.

Ed Jones


Ed Jones, PhD, is senior vice president of the Institute for Health and Productivity Management.


1Berwick, Donald M., and Andrew D. Hackbarth, “Eliminating Waste in US Health Care,” JAMA 307, no. 14 (April 11, 2012): 1513–6.

2National Institute on Drug Abuse,

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