Mental Health Companies Seek Cure for Prescriptions of Managed Care

By Riley, Karen | The Washington Times (Washington, DC), March 6, 1996 | Go to article overview

Mental Health Companies Seek Cure for Prescriptions of Managed Care


Riley, Karen, The Washington Times (Washington, DC)


It was called the "28-day wonder" by health care professionals.

The four-week, inpatient regimen for people trying to shake drug or alcohol addiction became standard at substance abuse centers simply because that was what health insurers would cover, recalled Michael Pinkert, president of McLean-based Mental Health Management Inc.

"As soon as the insurance ran out, the treatment program miraculously would come to an end," Mr. Pinkert said.

The arbitrariness of the system aside, it was a certain if not lucrative source of revenue for psychiatric hospitals and drug treatment centers. The patients got their 28 days and were released, cured or not. The treatment centers got paid.

Those days are gone, Mr. Pinkert said. Now, cost-conscious managed-care health plans dominate the market, requiring approval before hospitalization and daily review of a patient's chart to root out unnecessarily long stays.

So Mental Health Management is changing with the times. Mr. Pinkert said the company is abandoning its core business - owning and running seven psychiatric hospitals and substance abuse centers - to enter the thriving field of medical practice management.

It has signed an agreement to sell five of its hospitals to Behavioral Healthcare Corp. of Nashville, Tenn., for $10 million, and last month the company announced the sale of a sixth hospital to an unnamed buyer for $2.2 million.

Mr. Pinkert, who formed the company in 1981 as a spinoff from Psychiatric Institutes of America, said he decided to give up this line of business because "it just wasn't worth it anymore."

"We're really running away from the hospital business," Mr. Pinkert said, because "managed care makes it tougher on providers."

Only one of Mental Health's hospitals was losing money, but the trend "was down," Mr. Pinkert said. He knew Mental Health could put its assets in other health care sectors and get a greater rate of return. The $48 million company lost $2 million in 1994.

The first managed-care mental health plans were launched in the mid-1980s, said Clarke Ross, executive director of the Washington-based American Managed Behavioral Healthcare Association, which represents the industry.

Today 120 million Americans are enrolled in managed-care companies that specialize in mental illness and addiction disorders, up from 78.1 million in 1992, he said.

"Managed care is trying to eliminate arbitrary benefit limits," he said.

Managed care has meant an end to the standard 28-day coverage for a stay in a substance abuse center, 30 days for a stay in a psychiatric hospital and 45 days for psychotherapy, where "lo and behold everybody got it whether they needed it or not," Mr. Ross said.

The trend has been bad news for psychiatric hospitals, which make money by filling beds. The average length of stay plummeted from 19.8 days in 1992 to 15.2 days in 1994, according to the Washington-based National Association of Psychiatric Health Systems.

Hospitals have adjusted in part by seeing more patients and handling more outpatient care, the association said. But there's more competition for the behavioral care dollar because the number of psychiatric hospitals nearly doubled in the 1980s - from 220 in 1984 to 510 in 1992.

The upshot is lower occupancy rates.

"It is a difficult business," said Carole Szpak, director of communications for the association. …

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