Does managed mental health care have a future? – Special Report

Does managed mental health care have a future? – Special Report – The 1990s: What’s Ahead for Health Benefits

Nancy Coe Bailey

Does managed mental health care have a future?

A major shakedown looms ahead for this burgeoning new industry that’s changing how mental health care is delivered.

Pop quiz: Is managed mental health care (a) American business’s only hope of salvation from out-of-control psychiatric and substance abuse treatment costs, or, (b) a disastrously false economy that will strew the landscape with wounded psyches?

Passions about managed psych care, as the cognoscenti call it, run high. But then again, the stakes are high. A survey by A. Foster Higgins & Co., Inc., reveals that in 1988, coverage for mental health and substance abuse care represented nearly 10 percent of the average American company’s health care costs, or about $207 per worker–a 27 percent jump over the average bill for 1987.

A growing problem

Why the jump? The U.S. Public Health Service reports that mental illness, including milder forms of emotional distress and behavior disorders, is estimated to affect 15 to 20 percent of the nation’s population. Treatment of these disorders now accounts for nearly 11 percent of the nation’s health care expenditures.

Charter Managed Mental Health, based in Atlanta, reports that in recent in-depth interviews with the corporate benefits managers of 90 large employers, more than 95 percent reported extensive increases in utilization and costs associated with mental, nervous, and chemical-dependency problems.

Honeywell Inc. reported in 1988 that mental disorders were number two on its list of the top five conditions leading to total, annual individual claims of more than $10,000.

Obviously, something has to be done. But what? Some companies are going for the quick fix by simply cutting back on mental health benefits.

But others are exploring the possibilities offered by a steadily proliferating variety of managed mental health plans on the market. How will things shake down for the 1990s? Read on.

Cutting back

Northwestern National Life Insurance Co., Minneapolis, surveyed 400 corporate executives from companies representing a total of 3.9 million workers. More than half the respondents foresaw restricting or excluding coverage for dependent mental health or chemical-dependency illnesses. A third of them predicted a time when employers would prescreen family members prior to coverage, and possibly impose-waiting periods on those in high-risk groups, like teenagers who already had been treated for chemical dependency.

This “instant gratification” approach to reducing mental health care expenses is tempting, but mental health experts warn that cutting back is counterproductive in the long run.

For example, a major finding of the RAND Corp.’s Medical Outcomes Study, released in August 1989, was that depression is equal to, or greater than, many major chronic medical diseases as far as absenteeism and loss of productivity. In addition, the study found that the effects of depression worsen in combination with other chronic, medical illnesses the employee may have.


Managed mental health care appears to be the compromise for the ’90s. As John Ludden, M.D., medical director of the Harvard Community Health Plan, says, “The need for management is striking to practically everybody.”

More than 70 percent of companies surveyed in 1988 by American PsychManagement, a managed care firm headquartered in Arlington, Va., said that they were either considering installing a mental health managed care program or actually had one in place–a dramatic increase over results from other surveys just three or four years ago, when this figure was closer to 10 percent.

A variety of options are available. Some of the major insurance companies have responded to the growing market for case management by developing new, often custom-tailored plans. These plans often incorporate such alternatives to the traditional 28-day hospital treatment schedule as day hospitals, halfway houses, intensive outpatient treatment, and residential treatment centers.

For example, Aetna Life & Casualty purchased Human Affairs International, Inc., to administer its managed care program. The result is a pick-and-choose package that includes an employee assistance program, precertification, a preferred provider network, hands-on case management, and claims coordination.

MCC Co., Inc., a subsidiary of CIGNA Corp., offers a managed mental health and substance abuse program designed to work with existing indemnity programs.

The new kids on the block

More controversial has been the emergence of independent managed mental health companies. These firms contract with employers, insurers, and HMOs, and promise to lower costs by monitoring patients and their claims. They approve all hospital admissions, and review the course of inpatient care.

Their origins are varied and include EAP companies that have branched out, utilization review and cost containment companies that have developed specialized mental health programs, companies sponsored by providers seeking to maintain their share of the market, and specialized proprietary companies formed specifically to manage behavioral health services.

These new firms are the target of much criticism from private psychiatric providers. Lee Grindheim, director of the office of economic affairs of the American Psychiatric Association, Washington, comments, “To my mind, there is an amazing persistence of managed fee-for-service. I would have expected it to disappear quicker.”

As a matter of fact, employers thinking of using one of these new firms should at least be aware that some of them can be expected, as HCHP’s Ludden puts it, “to blossom and fold” as the decade rolls on.

However, Ludden credits the aggressive new companies with pioneering some of the most promising treatment schedules for the next decade, and forcing the entrenched, traditional providers into paying attention to these innovations.

Says Ludden: “There’s pretty good evidence that case management of major mental illnesses will assure compliance [with treatment directives] and follow-up, and therefore be able to reduce ultimate utilization and costs” by making sure a patient gets well and stays well.

On the other hand, Ludden admits, there is some truth to the charges that, because much of what the new companies are doing is essentially experimental, the results may not “always be positive in terms of quality.”

What about quality?

Because the managed mental health concept is so new, there are no accepted standards and no accrediting body. The field is still largely unregulated, although Robert Thomas, executive director of the National Association of Private Psychiatric Hospitals, says, “I foresee a lot of movement on the state level to regulate these firms.”

Thomas also predicts an increase in court cases as providers are increasingly willing to “take on the reviewers,” whom private psychiatric hospital staffs feel belong to the Procrustean bed school of health management.

“You can’t force patients to get better just by cutting off days of care,” Thomas says. He predicts outcomes studies will eventually vindicate the psychiatric hospitals when it is shown that patients treated under case management have higher relapse rates and ultimately cost more.

In fact, the one thing that everyone seems to agree on is the urgent need for outcomes studies in managed mental health. Ludden says, “We need practical, down-to-earth research to find out what keeps people out of the hospital and prevents relapse.”

The future

Despite the reservations of traditional psychiatric providers, case management seems destined to be a permanent factor in mental health treatment. The only question is: Who will do it?

Thomas claims that the private hospitals already are doing utilization management on their own. For example, he says, “The typical 28-day stay is disappearing. Our lengths of stay are determined more by age brackets now. In 1986, the average stay for an adult was 25 days. Today, it’s 23. For adolescents, it was 48 days. Now it’s 42.”

But Ludden counters, “With all due respect, the psychiatric hospital industry is probably 15 or 20 years behind the rest of the hospital industry.”

“Managed mental health is going forward,” he says. “In the 1990s, there will be no substitute for actually managing the care of the patient.” Standards and protocols must be developed, and they “will not come from the traditional psychiatric-psychological-social worker establishment, but rather from some of these new psych utilization management companies, and from other managed care plans actually going through the process.”

COPYRIGHT 1989 A Thomson Healthcare Company

COPYRIGHT 2004 Gale Group