Psychological testing: old specialty, new markets

By Jonathan Rich, Ph.D.
July 1, 2007



Psychological testing is an important part of psychology’s history. Opinions about its future are wide ranging. Some psychologists believe it’s a nearly obsolete tool while others see it as a specialty area with tremendous growth potential.

Payment trends
Psychological testing has followed a reimbursement course similar to that of psychotherapy. With the incursion of managed care in the 1980s and 1990s, payment amounts were reduced and the kind and quantity of services were limited by “medical necessity” criteria. Third-party payers vigorously followed these criteria and that dramatically slashed reimbursement for testing. Typically, psychological testing is considered medically necessary if the diagnosis is still unclear after thorough diagnostic interviewing.

However, psychologists have had some good news with regard to insurance reimbursement for testing. Although some Master’s level mental health practitioners have expanded their practices to include psychological testing, insurance typically only pays when a psychologist performs the test. Despite overall declines in Medicare payments, the rate for psychological testing has actually increased recently.

In January 2006, Medicare introduced new billing codes that distinguish tests administered by psychologists from those administered by a technician or assistant. This resulted in a 26 percent to 69 percent increase in payment for outpatient testing by psychologists.

Aurelio Prifitera, Ph.D., psychologist and president of Harcourt Assessment International, sees mental health parity laws as another factor which will reverse the trend toward declining payment for psychological testing. Parity laws require that mental health insurance reimbursement be on equal footing as physical health payments.

Survey of testing psychologists /
In a 2007 survey in 18 states, I asked 32 psychologists that use testing in their practice if they saw psychological opportunities becoming more of less plentiful, their opinions about the future of testing and the psychological testing niches.

What was most remarkable about these results was the diversity of opinions. Forty-seven percent of respondents believed that, for psychologists in general, the market for psychological testing was shrinking, while 22 percent saw the market growing. The remainder had not seen a change. But when these psychologists were asked whether they had experienced a growth in testing opportunities in their own practice, 42 percent answered affirmatively.

One recurring theme among the most pessimistic psychologists was that insurance and managed care had drastically reduced payments. A North Carolina psychologist stated, “Managed care and insurance reimbursement have been drastically cut. Testing such as the MMPI, which used to be a regular part of the intake, is not done at all.” Others lamented that testing is being less emphasized in graduate training. John L. Reeves II, Ph.D., ABPP, professor and director of behavioral medicine services at UCLA’s Orofacial Pain Clinic said, “Sadly, the majority of psychology graduate schools are doing a very poor job of teaching psychometric testing and psychodiagnostics. Few graduate departments even require a competency evaluation on such gold standard tests as the MMPI.”

Psychologists with specialized training such as neuropsychology had the most positive attitudes or had found niches outside traditional medical insurance arena. Frank Cushing, Ph.D., practicing in Rockford, Ill., was among the most optimistic respondents. He sees some societal trends opening new markets, including schools asking for violence risk assessments and courts asking for sex offender evaluations. He noted requests for “ADHD evaluations have increased with more data about children being overmedicated.”

Surveyed psychologists who perform testing reported an average minimum $850 charge for a test battery and an average maximum of $2,550. Those with a subspecialty in neuropsychology reported an average range of $1,000 to $3,260.

There appears to be no shortage of opportunities for creative and entrepreneurial psychologists. Professional school admission tests, such as the LSAT (Law School Admission Test), require specific documentation in order to accommodate learning disabilities (see lsat.org).

Other new niches include testing for citizenship waivers, pre-surgical evaluations and assessments to screen candidates for the ministry or police work. Matchmaking services such as eHarmony use psychologist expertise to design and validate tests that pair kindred spirits with each other.

Prifitera commented that testing is expanding into business settings to assess talent and into primary care medical settings to screen for mental health needs. In these contexts, psychologists may have a less direct role but are still needed to manage the assessment process.

Traditionally, testing has been done to guide mental health treatment planning. While economic pressures have decreased the demand for this application, new markets continue to make testing a viable, exciting and expanding area of practice.

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Jonathan Rich, Ph.D., is a psychologist in private practice in Irvine, Calif., specializing in psychological testing. His website is PsychologicalTesting.com. He is the author of The Couple’s Guide to Love and Money. His e-mail address is: jrich@psychologicaltesting.com.

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