A Furor Over Mental Health

For as long as retired DuPont Co. executive Jack R. Salley can remember, his daughter Danielle was a troubled kid. In elementary school, she struggled with dyslexia and motor-control problems. As a teen, her learning disabilities made her angry and frustrated: She lashed out at teachers, classmates, and her family and fantasized about killing herself. After a psychiatrist diagnosed her as severely depressed, Danielle entered Louisiana's DePaul Northshore Hospital. In the fall of 1990, at age 13, she checked in for the third time--after two relapses. Her "potential for suicide was immense," says Salley.

Though Danielle's illness devastated her family, Jack Salley took comfort in the fact that DuPont's benefit plan covered the roughly $150,000 in bills from her first two hospital stays. In 1988, however, DuPont had hired Preferred Health Care in Wilton, Conn., to curb its mental-health costs, which were rising 15% or more a year. Preferred case managers had been pressuring Danielle's doctors to keep her hospitalizations brief. When during her third visit a doctor said Danielle had stabilized, Preferred refused to pay any more--despite the doctor's warning that Danielle could kill herself if released. Fearing for her life, Salley kept Danielle in the hospital three more months. As some $40,000 in bills piled up, he sued.

In 1992, a federal appeals court in New Orleans sided with the Salleys, ruling that by not thoroughly reviewing Danielle's files before cutting off her benefits DuPont "abused its discretion." Danielle eventually went to a special boarding school and is doing well now. Still, DuPont stands by its handling of the case: Having to review every record in every case is a "needless burden," argues Dr. Bruce W. Karrh, Du-Pont's vice-president of integrated health care. Besides, adds Laurence E. Best, a DuPont outside attorney, "the only way companies can keep these costs in control is to manage the cases."

A troubled teen. A heartsick family. An employer struggling to offer appropriate benefits without letting costs soar. Doctors second-guessed by distant third parties. The Salley case is a microcosm of the frustration and turmoil in the mental-health-care industry, which is being transformed--by employers. As with conventional medicine, companies are turning to managed care to rein in mental-health costs that doubled in the 1980s, to 10% of the average large employer's health-care bill. Frustrated by the ambiguous nature of the therapeutic process, employers are embracing the same rigid cost and treatment guidelines that now govern everything from heart surgery to flu shots.

Managed care is indeed curbing mental-health spending--which the American Psychiatric Assn. and others put at about 10% of the nation's $900 billion health bill. But in the cost-cutting frenzy, critics say, employers are going too far: More and more, moves made in the name of efficiency are wreaking havoc in the lives of emotionally troubled employees and their families. "There really are some shoddy operations out there that say they're going to manage your mental-health costs," says Bill Hoffman, who oversees benefit programs for members of the United Auto Workers.

Problems with managed care aren't unique to mental health--just thornier because of its complex and delicate nature. Patients and therapists cite denial of treatment, privacy violations, and other abuses. In the past four years, the American Psychiatric Assn. has fielded 7,000 complaints over managed-care issues. A dozen states have passed laws regulating managed-care practices, and others are considering bills to do so. And in Washington, lawmakers debating health-care reform are weighing the allure of managed mental-health care against the growing criticisms of it.

"PENNY-WISE." Increasingly, too, lawsuits are revealing disturbing--even egregious--behavior. And plain- tiffs are seeking to hold employers accountable, a trend that could mean dire consequences for companies: If the perceived abuses continue, they risk losing a federal liability exemption that has shielded them from big damage awards. "Companies are focusing too much on cutting costs," says attorney Dennis Coleman, a partner in the New York benefits firm Kwasha Lipton. "They may be trading one set of problems for another."

Almost nonexistent 10 years ago, managed-mental-health-care companies are now a $2 billion industry, says industry researcher Open Minds in Gettysburg, Pa. Open Minds estimates that such players as Merck & Co. subsidiary Medco Behavioral Health Systems, Value Behavioral Health, Human Affairs, plus scores of smaller companies and health-maintenance organizations offer mental-health coverage to 100 million people. As of 1992, two-thirds of all employers had managed care for mental-health benefits, says benefit consultants Wyatt Co., and the number is rising. At the same time, five states have converted their Medicare systems to managed care, and 20 more are mulling it. "Companies have designed a model that's being adopted by the public sector," says Monica E. Oss, Open Minds' president.

Companies were once loath to get involved in employees' emotional lives. But they've decided that "to not do good mental-health care is penny-wise and pound-foolish," says Patricia M. Armstrong, manager of employee assistance programs at Wells Fargo Bank. "With fairly brief interventions, you can get people back on the job and save a bundle." Troubled workers are distracted and even violent. Depression is the No.1 cause of corporate absenteeism, says the Washington Business Group on Health.

Yet employers have reason to reject the old system. Before, patients picked their own doctors, and companies wrote checks for treatment that didn't exceed the time or visit limits in benefit plans. Some providers exploited the plans, especially for adolescent hospitalizations and substance abusers. In a dramatic case, Santa Monica (Calif.)-based National Medical Enterprises Inc. on June 30 agreed to pay $379 million to settle charges it provided enormous amounts of unneeded inpatient psychiatric care.

The initial efforts of some employers to clamp down weren't successful. When Xerox Corp. liberalized outpatient benefits to avoid the abuses of inpatient care, its mental-health spending soared 55%, from $216 per covered employee in 1988 to $368 in 1990. Average annual outpatient visits per covered employee ballooned to 36--at least three times the national average. Helen Darling, who oversees health-care programs for 55,000 Xerox workers and their families, blames the rise partly on the "Woody Allen syndrome," an expression some benefits managers use to describe therapy as a self-indulgent hobby. But it wasn't always the consumer's fault: "There was a powerful incentive [for therapists] to find problems," says Darling.

Managed mental-health care keeps costs down by tracking each patient's care. In return for referrals, providers must follow set rules and try to keep people out of the hospital. Patients don't choose therapists but request referrals from a "gatekeeper." Says Alan J. Shusterman, president of CMG Health, a behavioral-health firm in Owings Mills, Md.: "We are agents of transformation for mental-health treatment. We're not only lowering costs but restructuring the way care is given."

INSENSITIVE. So far, the systems are raking up big savings in such companies as Federal Express, Pacific Bell, and Dow Chemical. After IBM hired Value Behavioral Health, mental-health spending per employee dropped from $521 in 1990 to $375 in 1993. Similarly, managed-care company Integra Inc. helped Sterling Winthrop slash its mental-health spending 47% from 1992 to 1993--while increasing utilization (chart, page 68).

Still, providers such as San Francisco psychiatrist Mark Levy say managed care amounts to "the lowest level of expertise, for the shortest amount of time, with a bias toward medication." And that means either therapists come up with a quick diagnosis and succinct treatment plan or risk losing business. "It's very important that practitioners get trained in this," says Dr. Ian A. Shaffer, chief medical officer of Value Behavioral Health. "They're going to be expected to practice this way." Simon H. Budman, director of mental-health training at Harvard Community Mental Health Plan, is responding. His consulting firm trains therapists in "time-effective" care.

Critics say the shortcut approach is too insensitive for ailments of the mind. "Corporations don't understand what mental health is about," argues Karen Shore of the New York-based Coalition of Mental Health Professionals & Consumers, an anti-managed-care group. "Since they don't understand it,

they should not be dictating treatment."

Companies may not even realize the angst they're causing. BUSINESS WEEK spoke with more than two dozen patients, most of whom refused to be named. "One of the devious aspects of this is that if you work for a big company, you're not going to go complain to personnel because you don't want to be identified as a mentally ill person," says Boston psychiatrist Frederic Schiffer.

COPING. In March, Schiffer filed a class action on behalf of therapists and patients against the Bay State Health Care offered by Blue Cross/ Blue Shield of Massachusetts. The suit includes depositions from eight anonymous patients who allege that the HMO denied or interfered with care. Bay State is fighting the case. But in June, it announced changes, partly in response to the suit: It will release provider lists to give patients more options. It also said it will make it easier to get at least an initial block of seven outpatient visits.

To M.J. Merrick, a former data analyst from Park Ridge, Ill., such changes can't come soon enough. For the past 20 months, Merrick, who suffers from severe depression and agoraphobia (a fear of open spaces), has been fighting her insurer for reimbursement of her five-day-a-week psychotherapy treatments that she feels she needs to avoid constant crises, plus $20,000 in past charges she says the company denied retroactively. "The pressure makes you feel like you're going to explode," Merrick says. "The irony is you have to be more functional than a non-ill person to cope with the process."

Benefit managers concede that HMOs skimp on mental-health care. According to Interstudy, a Minneapolis consultant, many HMOs spend just 3% of their treatment budgets on mental health--less than half what experts say they should. Pacific Bell and several other major California employers, including Chevron Corp. and Wells Fargo, say their HMO coverage for mental health was so inadequate that they had to employ specialty companies to supplement it.

Concern over the quality of care is heightened by the increasing reliance of managed plans on clerks who answer employee calls. These gatekeepers, critics say, often lack appropriate training in psychotherapy and are instructed to base decisions on whether to authorize care on rigid guidelines. Many of the people interviewed by BUSINESS WEEK cited access problems as a primary frustration.

A New York City woman, for example, says she recently sought care for her husband--a recovering alcoholic who feared a relapse--and called the 800 number for PruCare, the managed-care arm of Prudential Insurance Co. The PruCare clerk said because her husband had been "dry" for more than a year, he was considered cured and ineligible for counseling. "Are you trying to tell me unless he goes out and gets drunk, you won't help him?" the woman asked. She says the reviewer said yes, then added: "But I wouldn't

recommend it." Richard Kunnes, president of Prudential Psychiatric Management, says PruCare has no such policy and that such a conversation would be "outrageous. Our philosophy is affirmative access. Care should be managed after the person is evaluated."

NEW LAWS? One complication for patients is that the line between managed mental-health care and employee-assistance programs (EAP) is blurring--with disturbing privacy implications. Started in the 1950s, EAPs were mainly designed to help alcoholics. They now offer short-term counseling on everything from marital woes to stress. More than 70% of large companies have these programs, says Open Minds' Oss. While EAPs are advanced as confidential, employees must sign waivers letting the company dig into their files in the event of a lawsuit or workers' compensation claim. And if the employee admits to violent or self-destructive behavior, the EAP counselor legally must alert appropriate parties, such as the person's family or manager and the police.

The trouble is that such policies can be exploited. For instance, more companies are making EAP counselors the gatekeepers for access to all mental-health care. At DuPont, EAP counselors assemble their own networks of providers. And in order to qualify for the richest benefit--90% of the treatment cost covered--an employee or dependent must first contact the EAP to explain the problem. EDS, Campbell Soup, and others also are giving their EAPs more gatekeeping power. DuPont Vice-President Karrh concedes that EAPs "can be used as a sword by an unscrupulous employer against an employee." But he adds that at DuPont, if the EAP professionals "do the right thing for the patient, their job is fine."

The question is, who defines "the right thing"? For independent providers--doctors, social workers, and other professionals--the answer is state practice laws and professional ethics that are enforced largely by the threat of malpractice suits. But managed-mental-health-care companies have generous protection from liability.

In fact, one of the remarkable things about the Salley case was that it went to court at all. Because DuPont is self-insured, the 1974 Employee Retirement Income Security Act (ERISA) exempts it from state laws providing for punitive and other damages for companies found negligent. And plaintiffs who lose must pay company legal fees. It was only because

Salley and a friend were attorneys that they could pursue the suit.

The courts have extended the exemption to managed-care outfits operating on the self-insured's behalf. Since about 75% of the nation's largest 1,000 companies are self-insured, critics say employers have not worried as much as they would have otherwise about the outfits they've hired to manage cases.

Such freedom may soon end. Courts in recent rulings are expressing frustration with the limited redress patients have, and that has led to bills in Congress aimed at amending ERISA, says Kwasha Lipton's Coleman. One of the two health-care-reform bills pending in the Senate would let beneficiaries sue employers and collect punitive and other damages for improperly denied claims. Coleman now urges companies to view their actions in the managed-care arena through the "lens of liability." Providers, meantime, are pushing states to better police managed care in general, including mental health.

In the face of such pressures, benefit experts are urging companies to shape up their plans now. Mary Jane England, president of the Washington Business Group on Health, says more companies already are building quality standards into managed-care contracts to offset "the incentives to undertreat." At a minimum, experts say, companies should review their mental-health plans. "We're constantly evaluating it and getting more feedback," Hoffman says of the UAW. "That's not my sense of what's happening across the country. You really have to put some money and effort in to do it right." Managed-mental-health care has proven it can cut costs. Now, it's up to companies to show that it can do so without hurting employees.

                 GROWING GRIEVANCES
      The American Psychiatric Assn.'s four-year-old managed-care hotline logged 7,000 complaints. Among the most common:
      -- Denial of care for long-accepted disorders
      -- Excessive demands for sensitive patient data
      -- Untrained clerks following rigid rules denying cases
      -- Deceptive advertising of benefits
      -- Interruption of treatment
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