Pointing the Way : Advisory Firms Cut Through the Confusion in Complex Field of Psychiatric Medicine

A Northrop worker ordered by his boss to seek treatment for alcoholism was told by the physician provided through the firm’s health maintenance organization simply to “go home and quit drinking.”

The administrator of employee assistance at Lockheed Aeronautical Systems in Burbank was worried that the company’s employees were not able to choose wisely among the maze of new treatment programs for mental illness and chemical dependency and that they might rely on television and billboard advertisements for direction.

Concerned about the quality and cost of treatment employees receive, and hoping to provide their employees with a more reliable compass to guide them through the complex field of psychiatric medicine, Northrop and Lockheed recently hired LifeLink, an 18-month-old company created by PacifiCare Health Systems, a Cypress-based health provider organization.

LifeLink, based in Pasadena, is one of several companies nationwide that have started to provide mental health referral and case management services on the premise that selecting the most effective treatment for mental illness or chemical dependency requires different skills and experience than selecting the best approach for curing physical ailments.

Northrop workers served by LifeLink no longer go to a general physician for help in locating the proper treatment for emotional disorders. Instead, they are advised by LifeLink’s staff of psychologists and other behavioral health professionals.

Studies by National Institute of Mental Health have found it more cost effective to send people with emotional problems to mental health specialists instead of general practitioners for treatment referrals. “They end up in the right church in the right pew,” said Ronald Manderscheid, chief of the institute’s survey and reports branch.

LifeLink and companies like it are marketing their services to HMOs, insurance companies and large self-insured employers who have become increasingly aware of the need to provide mental health benefits to employees both to increase on-the-job productivity and to comply with worker insurance requirements in a growing number of states. (Unlike some states, California has no mandated requirements for employers to purchase mental health and alcoholism treatment benefits, although insurance carriers are required to make such policies available.) At the same time employers are alarmed by the rising cost of providing mental health care--which is spiraling even faster than the cost of general medicine.

Since 1978, mental health claims as a percentage of total medical insurance claims paid by employers has ballooned from 5%-10% to 10%-25%, according to a health insurance industry survey. Meanwhile, the cost of psychiatric medicine is rising by 16% a year, compared to 8% for all medical costs.

In response, case management firms hold out the promise of controlling soaring mental health costs by carefully analyzing the needs of individuals and choosing the programs that are the most cost-effective.

They provide cost and quality control that is absent in willy-nilly shopping through the Yellow Pages, which in north Orange County alone offers seven pages of advertisements under “psychologists” for problems ranging from anxiety and depression to child molesting, drug abuse and eating disorders.

There is a downside to the case management business, according to psychiatrists who sometimes complain that the people doing the screening are unqualified and motivated more by a desire to cut costs than by a patient’s best interests.

“The concept in general is only as good as the people doing it,” said Dr. Joseph A. Pursch, a nationally known psychiatrist in the field of treating substance abuse.

Pursch, who said he is not familiar specifically with LifeLink, said nonetheless he believes that the growth of case management is a necessary trend. “Not only are we spending a great deal on health care but a large amount of it is misspent,” he said.

Some health industry experts predict that over the long term, companies like LifeLink will reshape the nation’s existing mental-health care delivery system by stopping what many criticize as widespread misuse of mental hospitals to treat patients who could instead by referred to less expensive outpatient programs.

“There is a major trend moving at breakneck speed to provide specialized utilization review and managed care services around mental health and chemical dependency,” said Donald F. Anderson, director of mental health programs for National Medical Audit, a unit of William M. Mercer-Meidinger Hansen, a company that helps to package medical insurance plans for employers.

Anderson recently told an audience of health care professionals in Orange that he believes companies like LifeLink represent “the most rational allocation of limited resources.”

LifeLink was founded in February, 1987, by PacifiCare Health Systems and a sister organization, Treatment Centers of America, in part to provide more adequate behavioral health treatment for corporate clients of PacifiCare’s own health maintenance organization.

Both PacifiCare Health Systems and Treatment Centers of America are controlled by UniHealth of America, a health care conglomerate based in Woodland Hills.

LifeLink operates much like a health maintenance organization. However, HMOs are licensed by the State Department of Corporations while “exclusive provider organizations” like LifeLink are licensed by the state Department of Insurance. Also like an HMO, LifeLink provides insurance coverage for its services. Or, as another option, it will manage mental health and substance abuse cases as an add-on to an existing insurance plan.

James G. McAlister, LifeLink’s vice president of marketing, said that when mental health care costs took off in the early 1980s, insurance companies and self-insured employers tried to save money by cutting benefits.

But their attempt to save money by reducing benefits for outpatient psychiatric care backfired by causing a shift to greater use of more expensive psychiatric hospitalization.

Advocates of mental health case management firms like LifeLink argue that in some circumstances case management firms make it easier for a patient to obtain appropriate mental health treatment--especially if the patient belongs to a health maintenance organization.

Alan R. Hoops, executive vice president and chief operating officer of PacifiCare Health Systems, said PacifiCare established LifeLink because many of PacifiCare’s large corporate clients complained that when their employees appealed for help to general medical physicians in PacifiCare’s HMO system for help, they hit a brick wall.

Like most other HMOs, which are organized to contain medical costs, PacifiCare requires all patients to be screened by primary care physicians who decide if they need specialized care.

While this system works well for general medical complaints, Hoops said, it breaks down when primary physicians are asked to diagnose behavioral problems with which they are not trained to deal.

Too often, Hoops said, physicians affiliated with HMOs decide that a patient does not need to see a psychiatric specialist.

Sally Warga, manager of corporate insurance benefits for Northrop, said that in the company’s efforts to obtain assistance for employees with chemical dependencies, it discovered that “the medical profession didn’t know what to do with these people” and that it was “an unknown area for an HMO.” So she said the company welcomed the PacifiCare HMO’s affiliation with LifeLink.

The mental health benefits offered by HMOs often are more meager than what is provided by insurance covering more traditional fee-for-service medicine, although HMOs place a greater emphasis on outpatient treatment.

“In California we are hearing employers saying, ‘We are not happy with the service we are receiving through the HMOs,’ ” said Colleen Murphy, an industry consultant on the staff of Mercer Meidinger Hansen in Los Angeles.

By contrast, LifeLink offers its clients specialized psychiatric and chemical dependency counseling for employees and their dependents.

Patients are referred to a network of 100 treatment facilities in Southern California with whom LifeLink has arranged discounted rates. These facilities vary in specialty and treatment intensity from outpatient clinics to residential centers, psychiatric hospitals and detoxification sites.

Unlike most other mental health case management companies, LifeLink also sells insurance for mental health and chemical dependency through PacifiCare’s insurance arm, Columbia General Life in Laguna Hills. For clients who buy that plan, LifeLink assumes all actuarial risks and functions similarly to an HMO specializing in behavioral health.

LifeLink charges from 60 cents a month per beneficiary for case management services to between $5.50 and $7 a month per beneficiary for case management plus an insurance package of specific benefits.

In return, LifeLink contends it can reduce the cost of insuring treatment for chemical dependency and psychiatric disorders by 25% to 40% a year, compared to insurance programs without case management controls.

The marketing of LifeLink is not limited to PacifiCare’s HMO members. While some companies like Northrop provide LifeLink’s service only to employees who belong to PacifiCare’s HMO plan, others make the service available to their entire work force. Lockheed, for instance, offers LifeLink’s case management assistance to all 16,000 employees in its Burbank division, whether they belong to traditional or HMO insurance plans.

So far LifeLink has contracts with 12 Southern California firms, including large medical groups and Health Net, an health maintenance organization based in Woodland Hills. After extensive pre-marketing and completing a pilot project in Oklahoma, LifeLink began providing services in Southern California last January. Since then the number of workers and dependents receiving its services has more than doubled to 110,000 from 43,000. And LifeLink expects to gain six to 10 more corporate contracts by January.

Hoops said the strongest calling for LifeLink services is now from large companies with work forces of at least 1,000 employees who feel an obligation to provide mental health and drug dependency benefits but can’t afford to without case management.

LifeLink is not the only psychiatric case management company that has seen its business suddenly take off like a kite in a gale of cost concerns.

David McDonnell, chief operating officer for Preferred Health Care in Wilton, Conn., said his company became a case management specialist in mental health care in January, 1987, with the signing up of 75,000 beneficiaries at General Telephone of California. Since then it has added nine more corporate clients and its beneficiary roll has grown to 750,000.

And other health maintenance organizations besides PacifiCare have also affiliated with specialized firms to handle chemical dependency and psychiatric disorders.

In March, Health Plan of America, a statewide HMO based in Orange, contracted with U.S. Behavioral Health, a case management firm based in Emeryville, Calif., to handle its substance abuse cases.

Gregory Armer, senior vice president of Managed Health Network, a health maintenance organization in Santa Monica that specializes in mental illness and chemical dependency, said he has seen interest in his company’s service blossom in the last two to three years.

“We have felt mental health benefits are a niche in the health care delivery system not well taken care of by major insurance companies or the majority of HMOs,” Armer said.