Breaking with tradition: by covering non-traditional treatments and naming an advisory board to monitor quality, IBM cuts its mental health costs substantially

Breaking with tradition: by covering non-traditional treatments and naming an advisory board to monitor quality, IBM cuts its mental health costs substantially

Monica Battagliola

By covering non-traditional treatments and naming an advisory board to monitor quality, IBM cut its mental health costs substantially.

The impetus for change at IBM began in 1988 when its benefits staff and consultants sought ways to bring the increase in mental health care costs under control without taking benefits away. Mental health costs rose from $80.8 million in 1987 to $93.3 million in 1988. By the end of 1989, IBM’s mental health care costs had jumped to $105.7 million. Based in Armonk, N.Y., IBM employs more than 160,000 people in the United States and is responsible for approximately 600,000 covered lives.

Compounding the problem was the fact that the company was making a tremendous financial outlay for its mental health benefits and employees indicated in surveys that they didn’t understand how to use the employee assistance program.

“We found that a lot of people were not inclined to use the EAP and were not sure where to go for help. They felt they were on their own to find a provider,” says Richard Kahn, a project leader within of IBM’s WFS Workforce Solutions division. WFS Workforce Solutions, in Mount Pleasant, N.Y., is IBM’s U.S. human resources division that designs and administers benefits and human resources programs for IBM and other companies.

“We were left with questions about access and quality of care,” Kahn added. “We wanted to do something to help our employees and save money.” Moreover, the WFS benefits staff lacked the expertise to meet those challenges on its own, he said.

After a year of considering alternatives, IBM decided to keep its EAP in place, hire Value Behavioral Health Inc., recruit a mental health advisory board to monitor VBH’s performance, and increase the flexibility of its benefits design by including coverage for non-traditional methods of treatment. As a result, IBM reduced its mental health care costs to $97.9 million in 1992 and to $59.2 million in 1993.

Under a widely reported restructuring plan, IBM has been cutting its workforce. The number of employees dropped by 3% in 1992 and by just over 4% in 1993. But many of those employees have continued to take benefits under COBRA, so the covered population has not dropped substantially, even though mental health costs have been reduced significantly. At the same time, the effect of downsizing typically has a negative effect on a workforce, and can result in increased usage of mental health benefits.

Key to the success of the program is the system of checks and balances built into the relationship between VBH and the mental health advisory board.

Based in Falls Church, Va., VBH manages behavioral health care benefits. For IBM beneficiaries, VBH manages a 20,000-plus provider network, a resource and referral telephone service, and a utilization review for inpatient and outpatient services. VBH also oversees a case management staff that can recommend treatments–provided they are cost effective and appropriate–that are not otherwise specified by IBM’s benefit plan.


Realizing that it didn’t have the internal resources to measure and monitor VBH’s performance, IBM also recruited an independent, five-member mental health advisory board to provide clinical quality oversight: three psychiatrists, a psychologist, and a social worker are paid by IBM as consultants. The board is chaired by Alan McLean, M.D., who has worked for IBM since 1957 as a psychiatric consultant, manager of the company’s medical programs, and head of IBM’s medical departments on the East Coast.

The advisory board meets regularly to review case Files and VBH’s specific services, with an emphasis on the quality of VBH’s overall customer service. VBH, in ram, is responsible for monitoring and assuring the quality of services provided by the practitioners and facilities in its network. In frequent meetings with the advisory board, VBH must show that it is providing continuity of care, identifying and reviewing sources of unusually high recidivism, and identifying and reviewing practitioners with unusual practice patterns.

A computer-generated quality assurance report was designed for IBM and VBH by the vendor’s parent company, Value Health Sciences, in Avon, Conn. The advisory board uses these reports to monitor the clinical referral line, network operations, and case management services.

Aside from reviewing statistical data, the board receives anecdotal reports from Value Health Sciences on all emergency cases. These reports include a description of the case and how practitioners are treating patients. The advisory board also reviews individual cases by examining case records. For example, if an employee has a long history of care with a particular practitioner and no progress is being made, the advisory board may ask if the physician has considered other treatments or has consulted with other practitioners, says Kahn. “We can zero in on unusual practice patterns or raise questions on the adequacy of the network,” McLean says.

The advisory board also can check to see that inpatient care is not excessive. “Long-term therapy doesn’t necessarily move the patient in the direction of improvement very much or very fast,” says McLean. “It’s a waste of health services manpower. Inpatient facilities need to arrive at a fairly good diagnostic formulation early on and start discharge planning within the first few days of admission. These issues will be an increasingly significant part of managed care.”


Flexibility in treating mental health problems is another crucial part of IBM’s program. In its amended form, IBM pays for 100% of inpatient mental health costs and 80% of outpatient costs when beneficiaries use in-network providers. However, the company now covers the costs of non-traditional methods of treatment, such as in-network psychiatric nurses, social workers, or by using outpatient substance abuse programs, residential treatment centers, halfway houses, and group homes.

“Using treatment methods beyond what IBM offered in the past is an important way to control costs and curb abuses,” says McLean. “One of the things we noticed was that there had been a tremendous emphasis on inpatient and acute care,” Kahn said. “In our previous coverage, we really didn’t offer alternatives that provided quality cost-effective care.”

To date, the plan is working. Despite an increase in the company’s outlay for non-traditional care, IBM has seen its mental health utilization costs for inpatient and outpatient care dwindle.

VBH case managers can authorize care not otherwise covered by IBM’s plan and may extend outpatient benefits for patients with a continuing need for ambulatory services if doing so can avoid hospitalization or worsening serious illness. Case managers also will work with providers to place patients in alternative care settings, such as residential treatment centers or group homes, when continued inpatient care is required but at less-than-acute levels.

VBH clinicians offer EAP services to all referral line callers. IBM’s EAP–serviced by Human Affairs International for its workers in the West and South, and by Personal Performance Consultants, for beneficiaries in the Northeast and Midwest–provides as many as eight free visits with a professional counselor. It is staffed by psychologists and clinical social workers hired by the two vendors.

More than 19,000 beneficiaries had used the resource and referral line by the end of 1992, says Kahn. More than 2,000 people have been referred to case management and, of them, more than 1,000 have been placed in alternative treatment settings. Inpatient costs per day have dropped from $531 in 1990 to $326 in 1993 largely because of increased use of non-traditional treatment. Mental health utilization costs as a percentage of IBM’s total medical costs have dropped about 1% a year, from 14.8% in 1989 to 10.5% in 1992, the latest number available.

IBM’s Mental Health Care Coverage


Inpatient: 365 days every three years at 100% reimbursement

Outpatient: 80% up to $15,000; 50% from $15,000 to $25,000 per individual


Outpatient and inpatient: 50% of the usual and prevailing rate up to $25,000.


Headquarters: Armonk, N.Y.

Covered lives: 600,000 (165,000 are employees)

Health plans: Indemnity; managed mental health care.

Health care costs 1993: $1 billion

COPYRIGHT 1994 A Thomson Healthcare Company

COPYRIGHT 2004 Gale Group