By Stephen Schultz
(Editor’s Note: This article was inspired by a conversation I had with a mother whose son was in crisis.)
The concept of Medical Necessity sits at the center of modern behavioral health insurance coverage. At its core, it is a reasonable and well-intended standard: to ensure that individuals receive the right level of care at the right time, while avoiding unnecessary or overly intensive services. When applied thoughtfully, Medical Necessity protects both patients and systems.
In practice, however—particularly when authorizing residential or inpatient care for adolescents—the application of Medical Necessity can produce outcomes that run counter to its original purpose.
When Cost Containment Becomes Care Shaping
Medical Necessity standards were developed, in part, to reduce excessive utilization and control escalating costs. The underlying assumption is that less restrictive, lower-cost services should be attempted first, with higher levels of care approved only when clearly required.
What is often overlooked is how coverage decisions shape behavior over time—not only for providers, but for families and adolescents as well.
When residential treatment centers (RTCs) are denied despite clear indicators of need, teens are frequently left in outpatient care that may consist of two to four appointments per month. For some adolescents—particularly those with complex behavioral, developmental, or safety-related concerns—this level of care is simply insufficient.
The Gap Between “Approved” Care and Effective Care
When outpatient care does not meet a teen’s needs, several predictable outcomes tend to follow:
Appointments feel ineffective or irrelevant
Engagement decreases
Sessions are skipped or canceled
Treatment becomes inconsistent or stops altogether
Importantly, this disengagement is not always a conscious choice. Adolescents often lack the internal structure, insight, or external support needed to sustain engagement in care that does not adequately address their challenges.
Over time, treatment resumes only when a crisis emerges.
Crisis as the Gateway Back Into the System
As symptoms escalate—whether through emotional dysregulation, aggression, suicidality, or other unsafe behaviors—families are left with few immediate options. The emergency department becomes the default entry point back into care.
From a behavioral perspective, this pattern matters.
Conditioning and the Reinforcement of Emergency Care
Basic principles of learning and conditioning tell us that behaviors followed by a response are more likely to recur. In this context:
Outpatient disengagement leads to no immediate system response
Crisis leads to rapid access, attention, assessment, and services
Emergency departments become the most reliable way to re-enter care
Over time, both families and teens learn—often implicitly—that crisis is the most effective pathway to services.
This is not because families prefer emergency care. It is because the system has inadvertently reinforced it.
The result is a cycle in which higher-acuity, higher-cost services are used repeatedly—not because they are clinically ideal, but because they are the only reliably accessible option.
The Cost Paradox
Ironically, this pattern often increases overall costs:
Repeated emergency department visits
Short inpatient hospitalizations without continuity
Disruptions to school and family systems
Escalation of behaviors that become harder to treat over time
What began as a mechanism to limit utilization can unintentionally drive more frequent use of the most expensive services.
The Role of Appropriate Evaluation
One way to interrupt this cycle is through timely, thorough, and behaviorally informed evaluation.
Appropriate evaluations do more than confirm diagnoses. They help determine:
The functional drivers of behavior
The adequacy of current supports
The level of structure and supervision required
Whether safety and skill deficits can realistically be addressed in outpatient care
When evaluations are used proactively—rather than reactively after a crisis—they allow systems to match adolescents to the level of care most likely to be effective, before emergency services are needed.
Residential Care as a Preventive, Not Reactive, Intervention
Residential treatment is not appropriate for every adolescent. For some, however, it represents a preventive level of care rather than an excessive one.
When authorized based on comprehensive evaluation, RTCs can:
Provide consistent structure and supervision
Address behavioral patterns directly and systematically
Reduce reliance on crisis-driven interventions
Create measurable change that outpatient care alone cannot sustain
In these cases, residential care may reduce—not increase—long-term utilization and cost.
Reframing Medical Necessity
Medical Necessity works best when understood not merely as a cost-containment tool, but as a clinical matching process—one that accounts for developmental needs, behavioral patterns, and the consequences of under-treating complexity.
When systems rely solely on crisis markers to justify higher levels of care, they risk reinforcing the very utilization patterns they are trying to prevent.
Moving Forward
A more effective approach recognizes that:
Not all risk announces itself through immediate crisis
Under-resourced care can condition reliance on emergency services
Early, appropriate evaluation supports better outcomes and better stewardship of resources
Aligning Medical Necessity with evaluation-driven decision-making allows adolescents to receive the care they need before crisis becomes the entry point—and helps systems avoid reinforcing patterns no one intends to create.
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