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By Bill Brubaker
Washington Post Staff Writer
Tuesday, October 29, 2002; Page E01
These should be boom times for the companies that manage mental health
benefits for insurers and large employers.
The number of Americans with mental health benefits has more than
doubled in the last decade, and more people are seeking therapy as the
stigma that once accompanied such care disappears. And of course there's
stress galore. From 9/11 and anthrax to sniper attacks and an unsettled
economy.
Yet, far from being flush with profits and promise, the $4.5 billion
managed
behavioral health care industry is in flux.
Some companies, including the largest, are having financial problems.
Others say they are making money. Some psychiatrists and psychologists,
frustrated by low fees and bureaucratic hassles, are leaving
managed-care networks all together. Other providers, meanwhile, are
joining them.
Among the defectors from the system is one of the largest mental health
practices in the Washington area, a group associated with George
Washington University Hospital. The group's decision last year meant 200
of its 1,000 patients had to find other therapists. Those who stayed had
to pay for their visits themselves.
Market-leader Magellan Health Services Inc., which covers more than 68
million Americans, is more than $1 billion in debt. It recently told
investors it may not be able to immediately repay its creditors. Experts
in the field say they consider the decline of the Columbia company an
aberration because it got overextended in an acquisition binge in recent
years.
"Magellan simply hasn't raised rates fast enough," said
Kenneth S. Abramowitz, a Carlyle Group analyst. He said the company was
locked into too many long-term contracts and couldn't deal with the
higher costs of more visits to therapists in the months after the Sept.
11, 2001, terrorist attacks.
Magellan acknowledges it has had "operational problems" but
says its members have few problems finding providers. As its customer
base has grown, so has its provider network, a spokesman said. The
company now has about 4,500 psychiatrists, psychologists, social workers
and other certified therapists for its 2.3 million members in the
District, Maryland and Virginia alone.
Other large managed-care companies, such as United Behavioral Health
(which covers about 21 million people), Falls Church-based ValueOptions
Inc. (25 million) and PacifiCare Behavioral Health Inc. (4 million), say
they are profitable. None of the three publicly reports financial
results -- ValueOptions is privately held, and United and PacifiCare are
subsidiaries of publicly traded companies.
The vast majority of Americans receiving mental health therapy are
covered by managed-care plans, experts said. The explosion of mental
health coverage over the past decade has brought with it a new approach
to treatment as well as a host of new competitors. The number of
Americans with access to mental health and employee assistance program
benefits was about 86 million in 1993, according to Open Minds, a
consulting firm. That number is now 227 million.
The managed-care approach requires therapists to submit treatment plans
after initial visits with patients. But shaping a plan for someone with
mental illness can be more challenging than treating a broken arm,
experts say. And the concern among employers, insurers and middlemen
like Magellan is that, without some scrutiny, too many people will want
to unnecessarily see a therapist.
"There's this fear among managed-care companies that if you give
people unlimited access to psychotherapeutic services that everybody is
going to want to do long-term psychotherapy, that you're going to have
the 'worried well' getting into psychoanalysis for years and years and
years," said Daniel Z. Lieberman, a psychiatrist with the George
Washington group.
That is indeed a fear of many employers, said Pamela Greenberg,
executive director of the American Managed Behavioral Healthcare
Association. "That's one of the reasons we have managed behavioral
health care," she said.
Some companies have been better than others at predicting their costs
and charging insurers and employers enough to make a profit.
ValueOptions founder and chief executive Ronald I. Dozoretz said his
company is "poised for growth and excited about future
opportunities." He declined to cite figures, but he said that the
company has been profitable since it started in 1983 and that he expects
revenue will exceed $1 billion this fiscal year.
Jerome V. Vaccaro, chief executive of PacifiCare Behavioral Health,
said, "You very definitely have good and bad managed care in
behavioral health." He said his company is profitable in the face
of an 18 percent increase in health-care costs over the past year.
"We were either very smart or very lucky," he said. "We
predicted a lot of these trends [of increased costs]. So we have been
able to price for that and decrease our other internal
costs."
Other smaller companies haven't been as fortunate. This summer, Integra
Inc. of King of Prussia, Pa., filed for Chapter 11 bankruptcy
protection. It then announced plans to sell assets to a larger
competitor, APS Healthcare Inc. of Bethesda.
Early this month, APS scrapped plans to become a public company, citing
"current market conditions." The company's executives declined
comment. But the company said in a Securities and Exchange Commission
filing early last year that most of its business came from "at
risk" contracts with employers and insurers. That meant that for a
fixed fee per member per month, it assumed financial responsibility for
all costs of treatment and
administrative and management services, regardless of the amount . APS
said it had not made a profit since it made managed behavioral care its
core business in 1997.
The rebellion by George Washington's mental health practice offers
insights into how the industry has become, in some respects, a
survivalist's game, pitting therapists who complain about low fees and
cumbersome pre-treatment authorization requirements against those who
pay the bills and are charged with keeping costs down.
As each year passed, Lieberman said, he grew increasingly frustrated
with the fees being paid by managed-care companies.
Psychiatrists typically bill insurers more than $100 for a consultation.
George Washington University Medical Faculty Associates was being paid
as little as $50. Last year, the mental health group began telling
patients that while it would continue to participate in the public
Medicare and Medicaid programs it would no longer accept private
insurance.
The practice -- 12 psychiatrists, 21 residents, four psychologists and
four licensed clinical social workers -- began withdrawing from
managed-care networks in July 2001. It wasn't an easy decision,
Lieberman said.
When reimbursement rates began dropping in the mid-1990s, "we began
looking at alternatives," he said. The most obvious was cutting the
time they spent with patients. So the group experimented with cutting
"psychiatric management" sessions, in which patients'
medications and general levels of functioning are assessed, from 30
minutes to 15 minutes.
"We were going to be paid the same amount of money . . . and double
the amount of money we would be bringing in," Lieberman
said.". . . But we found we weren't able to give the kind of care
that we wanted to. . . . We found that we had to rush patients."
While the practice lost 20 percent of its patients, it gained others and
business without managed care has been "terrific," he said.
There's less paperwork, more time to spend with individual patients and
"substantially" higher fees.
He added: "A lot of the patients that come to us are sort of
'managed-care refugees.' That is, they have been to these managed-care
offices where they feel like they've been [told]: Ah, here's your damn
prescription. Get the hell out of my office!"
Individual therapists also have been leaving networks.
"The employers want to save money," said Laurence Miller, a
psychologist in College Park, who last year pulled out of the CareFirst
Blue Cross Blue Shield's HMO network, which is managed by Magellan.
"The managed-care companies want to save both themselves and the
employers money. And the best way to do that is to restrict the amount
you're paying your provider."
Magellan is trying to keep its providers happy. It has been holding
drawings this year to give away new Dell computers to "lucky"
therapists, according to a note in the company's provider newsletter.
"Winners will be selected at random," the note said, but you
must be a Magellan network provider to win.
Good
luck!"
© 2002 The Washington Post Company
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