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Cost-Cutting Firms Monitor Couch Time, As Therapists Fret The 33-year-old, Ohio state employee, Scot Dusenberry was a heavy beer drinker who had been...

Cost-Cutting Firms Monitor Couch Time, As Therapists Fret

The 33-year-old, Ohio state employee, Scot Dusenberry was a heavy beer drinker who had been directed into treatment. Many traditional insurance plans would have covered a 28-day inpatient stay at a detox center. But Ohio had turned over mental-health coverage to a managed-care firm that promised to cut the state’s costs dramatically. For Mr. Dusenberry, that meant outpatient treatment at a clinic 40 minutes from his home, and driving alone to and from his sessions. It came as no surprise to people who knew him that alcohol was found in his blood after he crashed his car into a house and was killed.

There are rewards and risks involved in the nationwide stampede toward managed care for mental illness and substance abuse. Under such plans, in which “gatekeepers” strictly control the type and amount of care, employers can save as much as 30 percent in treatment costs. Roughly 85 percent of companies with more than 1,000 employees have turned over mental-health coverage to managed care concerns. Despite increasing competition, such firms are profitable, boasting margins of 15 percent and more. But critics complain about the potential price: less-effective treatment and greater costs later if psychological problems persist and lead to absenteeism or medical emergencies. Across the country, therapists tell horror stories about the refusal of managed-care firms to cover suicidal patients’ admission to hospitals or to approve adequate treatment for victims of child abuse. Very short-term psychotherapy and drug treatment are in; hospitalization is definitely out.

The Ohio Department of Administrative Services commissioned an audit that reviewed 833 patient charts plus service and staff credentials of 54 facilities and 25 percent of the clinicians. Despite the guarantee of county-by-county coverage, the audit found that there were no substance abuse providers in 32 percent of the counties and no therapists in 16 percent. It took about 14 days to respond to employees, rather than five days, as promised. It was also found that measures were often taken to keep employees out of expensive treatment programs. Ironically, when Ohio’s contract was renegotiated with the cost-cutting managed-care firm managing state-wide mental health services, it was decided to switch to another firm that advocated paying less—instead of paying $140 per patient, it planned to pay only $79—a decision dictated by price, not by quality.

Source: Carol Hymowitz, “Cost-Cutting Firms Monitor Couch Time, As Therapists Fret,” Wall Street Journal, July 13, 1995, A1 & A4.

What pricing objectives are being pursued by Ohio's managed care of mental-health patients?
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Pricing objectives or goals give direction to the whole pricing process. In the above case, it was
found that, the main objective of the company was to reduce the expenses on health. The
company is...

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