IV. THE RELATIONSHIP BETWEEN EMPLOYEE ASSISTANCE PROGRAMS AND MANAGED CARE

Health care costs consume an estimated 13 percent of our nation's gross national product and have risen unabated since early 1970 (Luthans and Davis, 1990). Until recently, private employers and unions have almost exclusively borne the brunt of the escalation in prices through higher health insurance premiums or in the payment of direct claims.

The cost of health care is eroding the competitiveness of United States' industry. Germany, Britain, Japan, Canada and several other industrialized nations spend less on health care and have better health indicators. In today's changing organizational environment, two competing corporate goals present employers, unions, and providers of health care services with what appears to be an unresolvable dilemma. In order to maintain their competitive edge, organizations must reduce health care costs; at the same time, they must also continue to provide prompt and effective treatment to the workforce, particularly in the mental health and substance abuse areas. Such treatment retains its importance in the business community because it has had a demonstrably positive impact on workers' productivity. To help resolve this predicament, many employers have turned to managed care.

Contrary to the beliefs of many health care providers, most managers do not adopt managed care for cost containment reasons alone. The quality of care provided also concerns the majority of employers, who have come to understand that cost and quality are related, and that poor treatment services can lead to additional care, at added cost, to address the same problem.

This chapter focuses on the reasons for managed care's emergence, and discusses how employee assistance efforts can be integrated into such an approach. The information presented here (and referenced at the end of the chapter) synthesizes the ever increasing literature and research on the emergence of managed care, and the role of employee assistance within it. A glossary of managed care terms has also been included.

A. The Rising Costs of Health Care

The critical need for cost containment has lead directly to the emergence of managed care. In 1969, per capita expenditures for health care in the United States were $268. By 1990, expenditures had swelled to $2,567 (HIAA, 1991). During the same period, health expenditures as a percentage of GNP rose sharply from 6.8 percent to 12.2 percent, or from $65.7 billion to $666.2 billion.

Throughout the 1980s, the rate of increase in national health expenditures (NHE) exceeded the rate of inflation as measured by the consumer price index (CPI). Between 1987 and 1990, for example, the CPI ranged from between 3.6 to 5.4 percent, while the medical price index ranged from 6.6 to 9 percent, or almost twice the rate of inflation. The U.S. Department of Commerce estimates that NHE will reach $756.3 billion in 1991, and predicts that if trends persist, health care costs will rise 12 to 15 percent annually for the next five years (HIAA, 1991).

In 1989, employers paid $145 billion in health insurance premiums for their employees (HIAA, 1992). This figure should rise to $149 billion in 1992 (Steuerle, 1992). Medical benefits now cost the average employer 13 percent of payroll, compared with less than five percent a decade ago. All of this, obviously, creates thorny problems for both companies and human resources departments, since these costs increasingly impact both company profits and competitiveness (Luthans and Davis, 1990).

A basic understanding of factors underlying the cost structure of health care reveals the range of strategies used to contain health care costs. Put simply,

total costs = (unit price) x (units used).

This formula indicates that spiraling health care costs result from both increasing prices, or fees charged for health services, and increasing health care utilization (Broskowski, 1991).

Health costs first began to spiral after Congress enacted the Hill-Burton initiatives following World War II in the hopes of making adequate health care services and facilities available throughout the United States. The initiatives provided necessary funds for the construction of regional and community hospitals throughout the country (Luthans and Davis, 1990).

Meanwhile, hospitals received payment for care until 1983 on the basis of cost reimbursement plus markup for overhead and profit. Employers, encouraged by favorable tax laws, historically shouldered the costs of insurance, providing employees with generous health benefits.

As a consequence of all of these factors, hospitals had few incentives to control costs. The continuing supply of government money stimulated the building of more hospitals, and the addition of more beds to existing hospitals, long after demand had been exceeded. As rising insurance costs overwhelmed possible tax breaks, however, employers began seeking out less expensive means of care, including more outpatient-based service. When hospitals proved unable to reduce capacity in response to shrinking demand, they had to raise the average cost per patient per day to divide their fixed costs among the finite number of patients. Patients, meanwhile, sheltered from knowledge of the actual and prohibitive costs of health care by longstanding employer benefits plans, continued to avail themselves of expensive inpatient service. Physicians, too, found hospital-based practice convenient, remunerative and conservative f rom the perspective of patient safety. The insurance industry, too, compounded the problem by historically instituting co-payments for outpatient treatment, but covering full cost for hospital-based care. Blended together, these ingredients ignited, creating the current explosion in health care costs.

Service providers have been able to maintain their cost structures to date because (a) consumers lack the information or expertise to judge quality of care; and (b) insured consumers have traditionally been insulated from the costs of health care services, and, consequently, have not had to make painful choices between different potential providers or treatment strategies based on cost. Because they have not been involved in the process, consumers cannot properly ascertain the cost ramifications of competing service delivery options. EAPs, too, have been sheltered from having to consider the costs of alternative treatment modalities by all-encompassing company insurance benefits, and, consequently, they have tended, to date, to make referrals without attention to cost as well.

Increasing wages for health care workers, the high cost of medical technology, rising malpractice insurance rates, changing demographics, and a shift in consumer attitudes have contributed to escalating health care costs too. For example, the baby boom generation has now reached middle age when use of medical services usually increases and the type of health care required changes. Young people typically need acute treatment for time-limited diseases or accidents, but health care for the middle-aged and older entails long-term care for chronic diseases and functional disabilities (Broskowski, 1991).

In addition, the American public's expectations for what health care can accomplish have increased, along with the belief that health care should always be of the highest quality, regardless of cost. This attitude in effect restricts most metropolitan area health care providers to utilizing only the most modern, technically advanced care available for fear of being sued for malpractice. Recent court decisions condemning doctors whose patients have not fully recovered, and the proliferation of the so-called "Marcus Welby" complex (Luthans and Davis, 1990), which assumes that doctors can perform magical cures, further the spread of unrealistic expectations among users and purchasers of health care.

The lifestyle of many Americans now entering middle age has provided one final boost to the cost of health care. Smoking, poor nutrition, overeating, stress, over-consumption of alcohol, and drug abuse all lead to increased health care use. Approximately one-half of the heavy users of health care have illnesses that stem from lifestyle choices. Thus, a relatively small number of patients consume an inordinately high percentage of health care dollars. One study found that the 13 percent of health-care recipients classified as high-cost users devoured as many resources as the other 87 percent of the population (Broskowski, 1991).

Increased utilization can be directly attributed to the incentives of a fee-for-service system and to the fact that many health care benefit plans promote overuse of services. The fee-for-services system, which has formed the foundation of most contemporary medical care, has encouraged doctors to prolong their patients' hospital stays, write more prescriptions, and provide more treatment, thereby earning more money for both the physician and the health care facility. Perversely, then, health care providers profit from their patients' illnesses rather than from their health (Luthans and Davis, 1990).

Given these factors, it is little wonder that costs have now reached a crisis level, consuming more resources each year and threatening the competitiveness of the nation's economy. The concept of managed care, rooted in the idea of containing costs and bringing accountability to the health care system, can only gain in popularity under current circumstances. Section C addresses issues of cost containment further.

B. Cost Considerations in Behavioral Health Care

Since the late 1980s, behavioral health care costs have risen by up to 60 percent per year. This rate is even faster than costs in other medical fields (England and Vaccaro, 1991). Not surprisingly, mental health and substance abuse services have become prime targets for managed care.

Historically, behavioral health care costs had averaged only two to five percent of reimbursed insured medical care. By the mid-1980s though, they represented 10 to 20 percent (Wallace, 1987). In 1989, treatment of mental illness and substance abuse cost an estimated $105 billion -- 17 percent of national health expenditures that year. At that time, nearly two million Americans suffered from some form of mental disorder. According to the National Mental Health Association, 68 percent of people with diagnosable mental disorders received some ambulatory medical treatment, while 22 percent visited mental health specialists, and 10 percent consulted general family practitioners. The large majority of annual psychiatric admissions are actually readmissions (HIAA, 1991).

Costs for mental health and substance abuse care get unevenly distributed among treatment settings and users. While an estimated 65 to 80 percent of these costs are incurred in inpatient and residential treatment settings, only a small fraction (10 to 20 percent) of users of mental health care utilize such treatments (Taube, Kessler, and Feuerberg, 1984). The dramatic increase in utilization of behavioral health care services, and hospital stays in particular, is largely responsible for the increase in the cost of behavioral health care services.

Utilization has increased in part because of increased use of drugs and alcohol, but also because mental health and substance abuse programs no longer carry the same stigma they once did. More people, therefore, feel comfortable seeking treatment. Popular culture has demystified many forms of psychotherapy, too, and attached to the process the alluring halo of potential personal growth. Government support for community-based mental health treatment and financial support for training and educating mental health professionals have prompted the proliferation of treatment providers. This proliferation has led to increased competition for a finite number of insured patients. In ordinary markets, an increase in supply (i.e., providers) would create a downward pressure on unit prices. For unknown reasons, health care has not always followed accepted principles of supply and demand. The major effect of the increased number of providers available today, for example, has been primarily an increase in utilization without the decrease in costs one would expect. This has contributed to the rising price of health care described overall. (Broskowski, 1991).

C. Strategies to Contain Health Care Costs

Efforts to contain health care costs began in the late 1960s and early 1970s, with the introduction of federal mandates. The mandates allowed health maintenance organizations (HMOs) free access to employees of large corporations, providing them with health care benefits on a capitated basis (see Glossary). Utilization review, unit price setting, and a variety of other cost containment mechanisms were also inaugurated at this time.

Unit price settings establish, in advance, the cost per type of disease or disorder, replacing the fee-for-service basis with a fixed amount. In 1983, the government introduced the prospectively fixed price reimbursement scheme, based on diagnostically related groupings for Medicare patients (Broskowski, 1991). Eventually, this concept led managed care in private insurance plans.

Managed care is an umbrella term describing health insurance plans designed to manage the cost, utilization, quality, and outcome of the health care services plan that participants receive. This is accomplished by exercising control over health care providers rather than patients (Rendell-Baker, 1990).

Managed care represents not just one program, but many, and subsequently, no one definition of a managed care program exists. The concept encompasses a wide range of control strategies: minimal control of utilization such as exercised, to date, by EAPS; utilization review as the sole measure of cost control (such as performed by utilization firms); programs that exercise considerably more control through preferred provider networks and carved-out behavioral benefits; and the more restrictive control wielded by HMOs. Sponsors (e.g., employers and insurance companies) choose a plan, either by redesigning existing plans or developing new ones, that provide increased control over benefit costs, utilization of care, and the accountability of doctors, hospitals, and other treatment providers (Rendell-Baker, 1990).

A recent survey by Foster Higgins (WSJ, 1992) found that 75 percent of the 2400 employers surveyed offered some kind of managed care plan in 1992, documenting the popularity of this relatively new system. However, only 45 percent of all employers with health insurance are covered by HMOs or other plans limiting the choice of providers; 35 percent are still enrolled in traditional indemnity plans. Foster Higgins also found that 41 percent of employers believe HMOs control costs, up slightly from 39 percent in 1989. While there is no conclusive statistical evidence of managed care's effectiveness, the average health care cost for a worker in a managed care plan in 1991, according to some sources, ranged from $3,046 to $3,355 -- six to 15 percent less than costs for workers enrolled in traditional indemnity plans (WSJ, 1992; Freudenheim, 1992).

The prevalence of managed care organizations varies from region to region. In San Diego County, for example, managed care plans insure 90 percent of the insured population. By contrast, West Virginia, Alaska, Mississippi, and Wyoming have no locally based HMOs (Freudenheim, 1992).

D. How Managed Care Works

1. Managed Health Care

Managed health care generally refers to the organizational management of health care as a system of either medical delivery and a system of utilization review, or utilization management and benefit control. While both systems may exist as part of a given managed health care company, many independent firms exclusively offer utilization review and benefit management.

All managed care programs or program variations are defined as alternative delivery systems and collectively known as managed care organizations (MCOs) . MCOs seek to reduce utilization and/or control prices by various means, including pre-authorization, concurrent utilization review, benefit plans that furnish financial incentives for receiving care from efficient providers, and increased requirements for employee/user cost sharing. Cost management techniques referring specifically to price control include: capitated payments for a defined group of beneficiaries; negotiated fee-for-service payments for preferred providers selected for quality and efficiency; prospective fixed payments for DRGS; claims review; coverage for less expensive but equally effective treatment alternatives; and a redistribution of risks for utilization and costs among the potential user population of employees, the employer, the care provider, and the insurer or managed care firm.

All alternative delivery systems place some sort of restriction on hospitalization and choice of physician. These restrictions help make the plan less expensive for employers than traditional indemnity plans. Most managed health care plans will also pay for more wellness activities, such as routine physical examinations and well-baby care. Consequently, these plans appeal especially to young families.

As mentioned, the most controlled service delivery system is the HMO. HMOs receive a fixed, pre-paid amount per employee from the employer it serves for all in- and outpatient care. Usually, employees make no co-payments and need to fill out few forms when seeing a medical professional, but they do pay a small per-visit fee. On the other hand, the employee typically receives no reimbursement if he or she goes outside the HMO for treatment. HMOs generally come in three basic shapes: the group model HMO, in which a physician medical group practice contracts with a managed health care entity financially responsible for covering enrollees; a staff model, in which the HMO employs physicians directly (HIAA, 1991); and an independent practice association or IPA model, in which a network of independent practitioners forms a corporation for the purpose of contracting with an HMO.

Along with HMOs, preferred provider organizations (PPOs) flourished in the experimental mood that permeated the health care provider field during the 1980s. Unlike the HMO, a PPO collects no prepaid fee for providing medical benefits to a specific group of employees. Instead, employers arrange for their employees to receive benefits on a discounted fee-for-service basis. The employee retains the option of seeking care outside the network of services in return for a co-payment (usually 20 percent of the charges).

Many types of hybrid HMOs and PPOs have also developed. Point-of-service (POS) plans, a kind of open-ended HMO, use an assemblage of selected, contracted, participating providers. Benefit recipients of POS plans select a primary care physician from the list of selected providers, and that physician controls any further referrals to medical specialists. As long as the beneficiary receives care from a plan provider, he or she will face little or no out-of-pocket cost.

Case management organizations (CMOs) apply many of the same mechanisms used in HMOs or PPOs (prepayment, capitation, discounted provider networks), but combine them into a service product for sale to insurers and health care providers. Some CMOs specialize in specific disorders, such as substance abuse or work-related disabilities, but others offer generic medical and surgical case management (Broskowski, 1991).

Recently, small companies have joined together to form multiple employer trusts (METs), enabling them to buy health insurance at lower rates than they could have contracted for individually. METs secure rates from service providers similar to those received by large organizations (Luthans and Davis, 1990).

Unfortunately, prof it-making objectives of HMO and IPA/medical group investors have sometimes taken precedence over quality of care concerns. In some cases, efforts to maximize profits have resulted in reduction of services or the inappropriate treatment of diseases and disorders (Caper, 1988). Research reveals that HMOs have frequently limited their programs to employed persons, by definition younger and healthier, avoiding the unemployed, elderly and poor in order to minimize financial risk (Sederer and St. Clair, 1990; Luthans and Davis, 1990; Bloom, 1990).

Other disadvantages cited in current literature about managed care in general, and managed behavioral health care (MBHC) in particular, include an apparent bias toward medication as opposed to long-term care and increased administrative costs. Patients and physicians, meanwhile, often regard managed care programs as too intrusive into their relationship with patients, while treatment providers have at times found relationships with managed care companies downright adversarial. While managed care aims to provide available, accessible, affordable, and acceptable care, it does not always succeed in delivering optimal medical care (Sederer and St. Clair, 1990).

However, managed care plans can design and ensure a broader benefits package by shifting treatment away from the more expensive hospital inpatient variety and toward affordable outpatient care, thereby freeing more benefit dollars for additional services. Refinement may ultimately make them the health benefit systems of the future.

2. Managed Behavioral Health Care

Like managed care, managed behavioral health care attempts to control mental health and substance abuse treatment utilization, quality, and cost through a variety of strategies discussed in the above section. In the case of MBHC, coverage for managed health care incorporates a mental health review process that professionally evaluates mental health services and authorizes only necessary and appropriate treatment.

Due to their ambiguous nature, however, mental health and substance abuse problems often prove more difficult to manage and evaluate. Diagnoses for behavioral health problems have become only slightly more scientific over the last few years, and standards of treatment have never been fully agreed upon (Montgomery, 1988).

The strategy of case management, which allows for active surveying of alternative treatment options based on individual patient needs, has to date demonstrated the most potential for providing cost-effective behavioral health care while maintaining quality and access.

MBHCs might also make use of one of the following cost-containment strategies (Bartlett, 1989):

• Plan design. An employer can choose to alter his benefit plan to allow for true flexibility in accommodating inpatient, outpatient and group services. In the past, most benefit packages placed virtually no limits on inpatient benefits, but restricted paid use of outpatient services. Financial incentives can encourage employees to employ the managed care system's point-of-entry vehicle, or gatekeeper, for their mental health and substance abuse treatment. The plan might also incorporate constraints such as benefit limits and copayments after the first incident;

• EAP. An organization-based EAP can help to reduce direct and indirect costs of personal problems affecting employee attitudes, attendance, and productivity;

• Claim services. This service can provide specialized tracking of all claims;

• Quality control. This feature might include clinical supervision, peer review, and case review by an outside panel of professionals. Conducting consumer-based reviews of all services, to discover whether the system acts responsively, and as an advocate, also helps ensure quality;
• Reporting. Reporting on usage, costs, and quality on a regular and comprehensive basis helps build accountability into the MBHC system;

• Provider relations networks. Such networks provide MBHC systems -Wit-h comprehensive knowledge of community treatment resources and a working relationship with a network of well-qualified providers;

• Utilization review (UR). This component provides a formal process for reviewing behavioral health care abuse cases, and includes admission review, concurrent review, and discharge review;

• Appeal system. Resolving conflicts between case reviewers and treatment providers during the UR process can be aided by the implementation of this mechanism.

3. Carve-Outs

"Carve-out" plans refer to health care programs that separate funding of behavioral health benefits from the rest of the medical benefits package. The popularity of behavioral carve-outs (especially those containing a risk-sharing component) has steadily increased particularly with large employers (Oss, 1991). Usually, an employer instituting a behavioral health carve-out also employs an MBHC provider to administer benefits.

Behavioral health carve-outs typically involve an outside program, such as a health provider network or pre-paid group. The psychiatrists, psychologists, and other mental health professionals working within these programs charge discounted fees for services. Thus, large employers may impact their expenditure in this high cost-benefit area through the use of carve-outs.

Carve-out programs often use EAPs as gatekeepers, referral sources, and case managers to identify and refer employees experiencing mental health or substance abuse problems. In order to encourage troubled employees to seek treatment through the company EAP, carve-out programs often include built-in financial incentives. For example, if an employee receives treatment through referral by an EAP, he or she might get reimbursed 80 to 100 percent of the fees charged. Bypassing the EAP might result in only 60 percent or less reimbursement.

However, several problems remain with the carve-out concept as a cost-containment tool. Current literature cites the carve-out program's lack of integration with the rest of the patient's medical care (Rendell-Baker, 1990). The most complex and expensive of cost-management strategies to initiate, these programs can also incur additional administrative costs for the organization.

On the other hand, carve-out benefit programs offer significant control over cost, quality, and outcome while providing beneficiaries with professional services specializing in behavioral health care and review procedures. Carve-outs may also preserve mental health care benefits otherwise threatened by corporate cutbacks.

E. Effectiveness of Managed Care Efforts

The application of utilization review and selective contracting has drastically changed mental health practices. A 1991 utilization management survey conducted by the National Association of Private Psychiatric Hospitals found that most health care is now managed, with 78 percent of admissions requiring precertification and 74 percent undergoing concurrent review (NAPPH, 1991). Another survey found that 28 percent of employers use special behavioral health care provider networks, and that 22 percent of EAPs are integrated with mental health benefits to facilitate early access and continuity of care (Foster Higgins and Buck, 1991).

A recent survey conducted by Towers Perrin (Winslow, 1992), a benefits consultant, discovered that companies encouraging employees to use managed care networks for health care services have slowed the swelling of health care costs by one-third. Foster Higgins and Company, another benefits consultant, reports similar results (Winslow, 1992). However, until these studies can be performed with more scientific rigor, the assertion that managed care saves money in the long term will remain unproven.

The dearth of comparable data has made rigorous research difficult. Outcomes research has become more and more critical to the survival of managed care firms though, and the industry has begun investing large sums in computer technology. A number of managed care firms have now created management information systems (MIS) to track clinical and financial results.

While the core managed care technology -- utilization review, case management, and the use of specialized provider networks -- has demonstrated effectiveness at containing costs by reducing unnecessary inpatient use and its associated expense, the growth of managed care has been problematic (Anderson, 1989; Feldstein, Wickizer, and Wheeler, 1988). Early attempts at cost containment frequently called for restrictions such as prior outpatient failure, hospitalization only for detoxification or suicide attempts, and short-term crisis stabilization treatment. All of these cut costs, but none of them served the interests of either the patient or the employee. Ineffective managed care and the bias against inpatient and longer-term treatment led, in specific cases, to continued performance problems and additional sick leave and medical costs.

Numerous mechanisms within managed care have developed to counterbalance the potentially adverse impact of cost containment tactics and financial incentives offered to participating providers. Professional standards, ethical principles, and the threat of malpractice suits all pose obvious deterrents to behavior undercutting quality of care. More importantly, the implementation of effective management controls, including quality assurance and utilization review, provider credentialing, medical record-keeping, patient satisfaction review, and grievance procedures can discourage risky cost-cutting (GAO, 1988; Newman and Bricklin, 1991).

F. Key Issues When Deciding to Use a Managed Behavioral Health Care System

Before deciding whether an MBHC is appropriate for a given organization, benefits and HR managers need to seek answers to a number of basic questions. Managers may wish to first determine their organization's behavioral health care claims, and compare those claims with relevant national norms by industry, employee population, and benefit program design.

Once managers have identified a definite need for an MBHC program, they can examine their organization's benefits to determine what changes the existing structure requires. It might also prove necessary to ensure that their organization has -- and will provide -- adequate financial resources to support the increased administrative costs of an MBHC plan.

A clear understanding of their organization's goals in implementing an MBHC should also help HR managers address the question of whether the organization can reduce behavioral health care costs and still provide a quality benefits package. Discovering whether the organization seeks to improve employee health, relations, and productivity, or simply manage costs, will also help managers choose the most appropriate plan from the various available options.

Before soliciting proposals from MBHC vendors, HR managers must consider whether to include all or only part of the workforce in the new plan. Finally, the role of the organization's EAP must be decided.

G. How EAPs and Managed Care Can Improve the Effectiveness of Behavioral Health Care

In a broad context, EAPs constitute a form of managed care, because they assess, refer, and monitor mental health and substance abuse treatment. By 1987, 80 percent of the Fortune 500 companies had EAPs intended to better control the cost of crisis intervention and short-term therapy, and to avert inappropriate inpatient treatment (Montgomery, 1988).

Emerging evidence suggests that service delivery systems integrating EAPs and new, more expansive models of managed care can produce realistic solutions to the cost/quality-of-care dilemma faced by employers. This is especially true when management has a role in the system. Owens Corning Fiberglass and McDonnell Douglas Corporation have had comprehensive EAPs that provide case management, in effect practicing managed care.

One type of integrated program places the EAP at the center of a health cost-containment/quality oriented system. The EAP manager and staff perform face to face needs-assessments with their clients, and then act as case managers, matching clients to therapists and programs. By following the client's case from problem identification through treatment and resolution, the EAP can assure that each employee receives the highest quality, least restrictive, and most appropriate care, while, ideally, still managing costs. The EAP thus becomes each individual client's advocate, while still serving the interests of the organization.

Current trends, however, show EAPs playing only a minor part in cost-control, with managed care firms shouldering most of these responsibilities. Many managed care companies view EAPs as having the potential to "stir up unnecessary utilization," while some EAP clinicians respond with an adversarial attitude toward managed care initiatives (Dixon, 1992). Naturally, the differing perspectives and objectives of the managed care provider and the EAP often clash, working at cross purposes and undermining the service delivery system. Not surprisingly, employers have begun seeking new methods for relieving this impasse. Fortunately, the process of integrating a cost-sensitive EAP into a progressive managed care strategy offers one seemingly achievable solution, as long as each program agrees to learn from the other's perspectives.

EAPs can no longer ignore the cost implications of treatment recommendations, and managed care firms can not focus solely on the bottom line. The twin dilemmas of cost containment and quality care access can and should be approached as part of a single problem on which managed care and EAPs can collaborate to resolve.

For the purpose of assisting organizations seeking to integrate EAPs with MBHC, the managed care committee of the Employee Assistance Professionals Association (EAPA) has developed a core design of a comprehensive integrated effort, consisting of the following elements (EAPA, 1990; Yandrick, 1990):

• Program design and administration which minimizes payor risk exposure while promoting cost-effective us e of medical services. For example, financial incentives in the form of lower deductibles and co-insurance rates would encourage employees and their dependents to access the MBHC system through the EAP;

• Problem prevention and early intervention services, as well as clinical gatekeeping, which performs the initial differential diagnosis, assessment, treatment planning and triage functions;

• Case management systems, which typically include pretreatment authorization, concurrent treatment review, and retrospective review;

• Quality assurance systems, including case review and case management supervision, peer review, expert medical consultation, and medical appeals procedures;

• Provider networks of clinicians and facilities including the full range of clinical professionals, from counselors to social workers to psychologists and specialist psychiatrists, as well as contracted fee discounts for volume referrals;

• Evaluation measures facilitated through information systems which collect and analyze individual and group clinical and financial data to assist management and reporting functions; and

• Claims processing and payment systems linked to retrospective review and claims adjudication procedures, enabling behavioral health plans to function as third party administrators and/or single-specialty HMOs.

Clearly, the relative strength and effectiveness of the EAP component of such systems depends upon how the responsibilities for the above elements are assigned, and the degree to which the internal or external EAP is integrated into the ultimate system.

A range of possible models for an EAP-MBHC system actually exists on the EAP continuum. At one end, the EAP-MBHC might consist of an EAP restricted to a case-finding capacity, while the managed care entity handles referrals. The opposite end of the continuum might represent a model in which the EAP provides all managed care services and contracts with a treatment provider network. In between, many different programs exist, each assigning various degrees of responsibility for the system's operation to the EAP. Naturally, the needs and limitations of a given organization will determine which model is best suited. Those needs may change over time, and the program should be flexible enough to change with them. An illustration might be helpful here. General Motors has designed its EAP and managed behavioral health care provider functions to further control the cost of behavioral mental health care services. Specifically, the United Auto Workers at GM recently negotiated to expand the MBHC's gatekeeper role into a network of local central diagnostic and referral (CDR) centers. While working in cooperation with GM's EAPS, these CDRs act as independent, up-front managed care providers, creating an interface between the workplace and local treatment vendors. The CDRs perform face-to-face differential diagnosis in a neutral setting away from the workplace, and act as the client's advocate while managing their treatment. Thus, while GM's EAPs continue performing the organizational aspects of their role, including referral to the CDRS, the latter now take on clinical functions previously assumed by the EAP.

The "choice points" below should aid management in determining the appropriate mix of responsibilities for operation of a combined EAP-MBHC (Yandrick, 1990):

• Who will provide supervisory training and consultation with an emphasis on early detection of emerging job performance problems? This is traditionally an EAP function;

• Who will promote the managed behavioral health care program through seminars, employee orientation, mailings, etc.? This, too, is traditionally an EAP function;

• Who will choose the treatment provider (another traditional EAP function)?

• Who should perform assessment and referrals? The EAP has usually handled this, too;

• Who should perform the gatekeeping or gateway function, enforced through financial incentives (i.e. review and appropriate treatment decisions)? Either managed care or the EAP usually takes on this responsibility;

• Who should perform the pre-certification (utilization review) function? This is usually a managed care function;

• Who should provide concurrent reviews (if desired) to monitor treatment progress? Managed care generally does this, but EAPs also monitor treatment when acting as case managers;

• Who should review treatment provider charges (if desired) and handle relapse prevention activities? These are usually EAP functions;

• Who should run return-to-work seminars and relapse prevention activities? The EAP usually performs these tasks, often in conjunction with the treatment provider.

The role of the EAP (internal or external) in a given organization will obviously influence these choices, as will the objectives and capabilities of the individuals managing the EAP.

Currently, EAPs and MBHC services are still provided primarily by separate entities. A carefully planned and monitored relationship between the two services will help smooth potential conflicts. Therefore, in order to promote integration, the HR manager might want to bring all parties together to define mutual goals and discuss issues such as selection of providers, delineation of agreed upon treatment standards, responsibility for referrals, the design of assessment and management services, final authority in the decision-making process, and accountability. (For more specific advice about implementing an EAP-MBHC program, consult EAPA's 1991 step-by-step guide, How to Establish an, Integrated EAP-Managed Behavioral Health Care Program.)

H. Selecting a Compatible Managed Mental Health Care Provider

There are several categories of programs providing MBHC services, including (Oss, 1991):

• Specialty managed behavioral health organizations which, having recognized the importance of EAP activities in patient intake, duplicate EAP services. Some of these groups have established separate EAPs or affiliated themselves with EAP vendors;

• Traditional EAP organizations that have incorporated managed behavioral health care program components;

• Insurance carriers that have developed or bought managed health care programs;

• Utilization review or general medical cost-containment organizations with specialized MBHC programs; and

• Provider-sponsored managed behavioral health organizations.

Employers, unions, managed health care providers, and EAPs may all have differing perspectives about who can supply the most appropriate and effective services.

To begin selection of an option, an HR manager might want to identify the owner or operator of the MBHC company under consideration--venture capital firms, insurance companies, hospitals, EAP companies, case management firms, groups of providers, health insurance organizations, and many other entities now offer MBHCs--and so reveal any possible conflict of interest.

Next, to minimize potential for additional conflicts, the entities involved, particularly the HR manager, EAP, and selected MBHC provider, should seek agreement on a number of issues. if, for example, the organization has established goals concerning employee treatment services and has set expectations and perhaps budget limitations, its best hope for achieving those goals lies in seeking consensus and cooperation among the various programs and systems it has selected (insurers, the EAP, treatment providers, and prospective MBHC) concerning values and implementation procedures.

The most important criteria for choosing a managed health care provider remains, of course, the provider's level of expertise and skill in delivering services. The hiring organization should therefore check the list of preferred or network treatment providers many managed care firms maintain. Such an investigation affords insight into a given managed care firm's selection process, risk management, and ability to work with additional providers. The prospective vendor should also have an adequate number of clinicians and facilities that are well dispersed geographically and have proper licensing, insurance and credentials. Studying these and other elements will help an organization evaluate both the quality of care and potential liability issues it may encounter when employing a given MBHC provider.

The organization may also want to ask prospective managed care providers whether they use internal staff for their services, what percentage of care they refer out, whether their staff works full or part-time, what amount of supervision the staff receives, and whether or not training is ongoing. Contacting other treatment providers and inquiring about their relationship with the managed care vendor under consideration might also provide useful information.

Since operational design ultimately controls access to care, an organization should find out about the screening process for services employed by the managed care firm under consideration. For organizations committed to early intervention and easily accessible care, this is a critical issue. The MBHC firm's staff should base decisions concerning coverage and denial on well developed and properly executed sets of criteria that are clinically sound, easily available, and clearly communicated.

The question of who assumes the risk for treatment must be answered at the outset. In traditional plans, insurers assume that risk, but many MBHC plans shift some of it to the patient, who pays when costs exceed certain limits. HMOs, on the other hand, transfer risk to the service provider, an action which sometimes causes providers to hoard resources and balk at extending treatment.

If an organization intends to contract for an MBHC system on a fully capitated risk agreement, management must pay special attention to client drop-out, no-shows, and cancellation rates. These cases can mean increased profits for the MBHC firm, but real losses to the employer. organizations should therefore obtain data about their prospective managed care firm's past and expected future performance, as well as evidence of proper utilization patterns, in order to ensure that neither over- nor underutilization of benefits occurs.

Beyond these concerns, several other features of MBHC plans may raise additional questions, including how much a particular plan will intrude on the patient-provider relationship. A clinician agreeing to provide services as part of an MBHC incurs obligations to both plan provider and patient. These obligations perpetuate a never ending tug-of-war, dragging the clinician back and forth between loyalty to the patient and responsibilities as an agent of the MBHC program.

Other plan features requiring evaluation are (Haas and Cummings, 1991):

• Provisions to allow for exceptions to the rules;

• Referral resources if patients' needs should exceed plan benefits;

• How the plan minimizes economic incentives to hospitalize patients;

• Ways in which the plan is open to provider input; and

• How the plan informs policyholders of benefits limits.

By addressing each of these concerns, employers can create a truly integrated EAP-MBHC program that provides numerous benefits for the workforce. Such a program will have a unified philosophical approach, with managers and clinicians working together to achieve common goals. Integration of EAP-MBHC services also (Geraty, 1991):

• Discourages counter-productive competition between vendors (EAP and managed care) and within the organization's human resources and benefits;
• Facilitates creation of a single policy which, ideally, is implemented by one vendor;
• Is less expensive than two separate contracts with two overheads;
• Promotes the use of cost-effective alternatives to hospitalization by setting expectations up front;
• Eliminates potential provider bias toward the provider's own treatment options and skills because integration relies on face-to-face assessments of the employee instead of reviews of the provider assessment by telephone;
• Eliminates conflicting messages to employees about what treatment would be most effective or appropriate, because the EAP now assists workers seeking treatment through the maze of benefits, access, and provider selection (employee relations also improve as a result);
• Creates a workplace linkage which results in more visibility of the EAP-MBHC program, as well as improved productivity.

I. Concluding Remarks

MBHC is a system for controlling costs, seeking to provide only clinically necessary and appropriate care through the least intrusive and restrictive means possible. Like medical and surgical services, MBHCs exist as part of the health care system and not, like some EAPS, as an integral component of an organization's management system.

The EAP, through its unique role within an organization, can act as an intermediary. In many organizations, the internal or external EAP already has a working relationship with all workplace divisions (including the medical, training, and development departments, as well as the industrial/labor relations and benefits functions), whose cooperation is essential for effective MBHC integration. Involving EAP management, therefore, in decisions regarding the MBHC can facilitate integration, with EAPs bridging the gaps between various interests. Successful integration will go a long way toward resolving the dilemma of how to contain health care costs while continuing to offer employees appropriate and effective treatment.

As of now, unfortunately, relationships between managed care companies, treatment providers and contracting organizations generally remain confrontational, due in large measure to the employer's understandable desire to reduce health care costs. This desire leads HR managers to threaten managed care providers with defection to another entity if premiums rise above a certain percentage per year, in turn forcing managed care companies to focus almost exclusively on obtaining discounts from treatment providers, creating gatekeeping systems, narrowing definitions of "medical necessity," and reducing inpatient length of stay via utilization review. At the same time, managed care companies have kept their clinical criteria inaccessible to those who provide treatment, leading to the development of increasingly sophisticated skills of avoidance and deception on the part of managed care reviewers, treatment providers, and others involved in the process. Meanwhile, treatment and administrative costs continue to mushroom (Dixon, 1992).

Unable to determine the values of managed care systems for their organizations, benefits managers have begun expressing the desire to eliminate benefits for chemical dependency treatment altogether. Only then, they reason, will the organization be able to slow the drain on resources, while preserving a health plan for other medical and mental health treatment (Dixon, 1992).

In response, managed care companies now gravitate toward smaller, more limited provider panels. The managed care industry has apparently begun to realize that most premium increases result from the enormous financial burden of administrating large provider panels. The lack of leverage over these panels and the adversarial relationship between managed care and providers also causes cost increases. The new, smaller provider panels identify themselves exclusively with a managed care firm and work to build more cooperative relations with case managers.

The move to more exclusive partnerships may reduce costs, but it also conflicts with the HR and benefits managers' desire to offer their organization's employees the largest possible provider network. The employees often find the smaller panels of treatment providers distasteful, too, because of the obvious restrictions such a system imposes on their freedom of choice for care.

The EAP, with its intimate organizational knowledge, seems ideally situated to become a mechanism for moderation, fashioning compromises between all the conflicting desires now causing such chaos in the health care field. To do so, the EAP would transform from an assessment and referral function into a unit that performs a more preventative role within the organization. Evolving naturally out of the wellness program concept, these new EAPs would seek to reduce the incidence and prevalence of problems in the workforce that have become so costly to treat and manage. The EAP could then ally with the managed care firm, rather than remain in an adversarial position.

GLOSSARY

The definitions are those of the authors and consistent with those used in the literature referenced at the end of this chapter.

Appeal System: When utilization review is being carried out, an appeal system offers a way to review conflicts between case reviewers and treatment providers.

Benefits: The amount that is payable by the insurance company to a claimant, assignee or beneficiary under each insurance coverage.

Capitation: A fixed, per capita amount paid to a physician or hospital for each person served regardless of the actual number of health services provided to each person.

Carve-Out: A health care plan in which the employer separates the funding for, and requirements to receive, certain medical benefits (for example, mental health care) from the general medical benefits plan.

Co-Insurance: Both the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 percent by the insurer and 20 percent by the insured. This is a provision frequently found in major medical insurance policies.

Co-Morbidity: Accompanying medical illness.

Concurrent Review: The process by which hospital admissions for elective and emergency treatment are certified for appropriateness within 24 hours after admission, and by which continued stays are verified for medical necessity and level of care. Discharge audits are performed on hospital bills to screen for duplicate procedures and inappropriate services before the bill is forwarded to the claimant.

Co-Pay: Percentage of a patient's medical bills not reimbursed under an insurance plan. Refer to co-insurance.

Cost Containment: Strategies to control or reduce inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs.

DRGs: Diagnostic-related groups that classify illnesses and designate a reimbursement ceiling, representing the average expenditure for each particular service.

EPOs: Exclusive Provider Organizations which are a group of fee-for-service providers who have agreed to provide medical or psychological care services to a defined group of individuals at a negotiated rate. The beneficiary has no coverage outside the network of contracting providers.

Fee-for-Service: In the traditional fee-for-service model, the health service provider bills the patient for a specified amount, typically on the basis of the amount of time spent delivering the service.

Gatekeeper: The role of the gatekeeper is to establish the patient's diagnosis, formulate a treatment plan, and refer the individual to the appropriate medical provider. The gatekeeper might also monitor care, reassess periodically the patient's status to determine necessary changes in care, as well as maintain a watchful eye over the provider to ensure quality care.

HMOs: Health Maintenance Organizations provide comprehensive health care services to a voluntarily enrolled population in return for a predetermined, prepaid per capita premium that does not fluctuate according to the number or extent of services provided.

Indemnity: A predetermined amount of benefits are paid in the event of a covered loss.

Indemnity Insurance: Traditional group health plan; fee-for-service system provided by private insurers, e.g., Blue Cross/Blue Shield.

Insurance Risk: Any chance of financial loss.

MCOs: Managed care organizations are alternative health care delivery systems that use mechanisms to reduce utilization and/or control prices. MCOs provide financial incentives or constraints to encourage the use of efficient providers of medical care.

Point-of-Service: A type of managed care plan that offers members a choice of using a doctor within or outside an approved network each time they need health services. If network doctors are used, a patient pays a low fee and no deductible. If out-of-network doctors are used, the deductible and reimbursement rates are similar to the more traditional group indemnity plans.

PPOs: Preferred Provider Organizations generally consist of a network of independent health care providers who usually offer first dollar coverage of 80 percent or more. Consumers may decide whether to opt for a preferred provider on a case-by-case basis. Approximately 80 percent of charges are covered when a non-PPO provider is chosen.

Preadmission Certification: A health care professional evaluates an attending physician's request for a patient's admission to a hospital by using established medical criteria.

Primary Care Physician (PCP): A doctor designated by a managed health care company to be the first physician a patient contacts for any medical problem.

Prospective Payment: Fixed prices paid in advance for treatment of each of 468 diagnosis related groups (DRGS) to hospitals on the basis of a client's diagnosis coded at discharge, regardless of the amount of service actually provided. Attempts are being made to establish DRGs for mental disorders as well.

Reasonable and Customary Charge: The going rate or charge for health care in a certain geographical area for identical or similar services.

Self-Insurance: A group insurance program that provides benefits financed entirely through the internal means of the policyholder. It is used in place of purchasing coverage from commercial insurance carriers.

Third-Party Administration: Some person or firm other than the insurer or the policyholder who administers a group insurance plan.

Utilization Review: Evaluation of the necessity, appropriateness, and efficiency of the use of medical services, procedures, and facilities based on pre-set criteria. A comprehensive utilization review system includes admission review, concurrent review, and discharge review.

REFERENCES

Anderson, D.F. (1989), "How Effective is Managed Mental Health Care?" Business and Health, September, pp. 34-35.

Bartlett, Douglas M. (1989), "Cutting Costs, Not Quality," EAP Digest, March/April, pp. 21-24.

Bloom, Bernard L. (1990), "Managing Mental Health Services: Some Comments for the Overdue Debate in Psychology," Community Mental Health Journal, Vol. 26, No. 1, February, pp. 107-124.

Broskowski, Anthony (1991), "Current Mental Health Care Environments: Why Managed Care is Necessary," Professional Psychology: Research and Practice, Vol. 22, No. 1, pp. 6-14.

Caper, P. (1988), "Solving the Medical Care Dilemma," The New England Journal of Medicine, Vol. 318, pp. 1535-1536.

Dixon, Keith (undated), EAP and Managed Care Integration: New Systems and New Values, Vista Hill Foundation, San Diego, California.

Employee Assistance Professionals Association, Inc. (EAPA, 1990), EAP Solutions to the Employer Health Cost Crisis, Arlington, Virginia.

England, Mary Jane, and Veronica A. Vaccaro (1991), "New Systems to Manage Mental Health Care," Health Affairs, Winter, pp. 129137.

Feldstein, P.J. , T.M. Wickizer, and J.R.C. Wheeler (1988), "The Effects of Utilization Review Programs on Health Care Use and Expenditures," The New England Journal of Medicine, Vol. 318, pp. 1310-1314.

Foster Higgins and Buck Consultants (1991), Mental Health and Substance Abuse Benefits Survey, Employer-Sponsored Alcohol, Substance Abuse, and Mental Nervous Disorders Treatment Benefits, Buck Consultants, Secausus, New Jersey.

Freudenheim, Milt (1992), "The Physicians' View When Managed Care Comes to Town," The New York Times, June 14, p. 4.

General Accounting Office (GAO, 1988), Medicare Incentive Payment by Prepared Health Plans Could Lower Quality of Care, U.S. Government Printing Office, Washington, DC.

Geraty, Ronald (1991), "EAPs Need Integrated Managed Care," Business Insurance, June 24, p. 54.

Haas, Leonard J., and Nicholas A. Cummings (1991), "Managed Outpatient Mental Health Plans: Clinical, Ethical, and Practical Guidelines for Participation," Professional Psychology: Research and Practice, Vol. 22, No. 1, pp. 45-51.

Health Insurance Association of America (HIAA, 1991), Source Book of Health Insurance Data, 1991, Department of Policy Development and Research.

Luthans, Fred, and Elaine Davis (1990), "The Healthcare Cost Crisis: Causes and Containment," Personnel, February, pp. 24-30.

Montgomery, John S. (1988), "Shrink Mental Health Care Costs," Personnel Journal, May, pp. 86-91.

National Association of Private Psychiatric Hospitals (NAPPH, 1991), Utilization Management Survey, Washington, DC, June.

Newman, Russ, and Patricia M. Bricklin (1991), "Parameters of Managed Mental Health Care: Legal, Ethical, and Professional Guidelines," Professional Psychology: Research and Practice, Vol. 22, No. 1, pp. 26-35.

Oss, Monica E. (1991), "Managed Behavioral Health Benefits - Trends in Buying, Packaging, and Delivery," EAP Digest, September/ October, p. 36.

Rendell-Baker, Helen (1990), "Curbing Mental Health and Chemical Dependency Costs," Pension World, November, pp. 24-26.

Sederer, Lloyd I., and R. Lawrence St. Clair (1990), "Quality Assurance and Managed Mental Health Care," Psychiatric Clinics of North America, Vol. 13, No. 1, March, pp. 89-97.

Steuerle, C. Eugene (1992), "The Search for a Better Approach," The American Enterprise, January-February, pp. 67-70.

Taube, C., L. Kessler, and M. Feuerberg (1984), "Utilization and Expenditures for Ambulatory Mental Health Care During 1980," National Medical Care Utilization and Expenditure Survey: Data Report 5, U.S. Department of Health and Human Services, Washington, DC.

Wall Street Journal (WSJ, 1992), "Managed-Care Plans Gain More Popularity, But Slowly," April 7, p. Al, column 5.

Wallace, C. (1987), "Employers Turning to Managed Care to Control Their Psychiatric Care Costs," Modern Healthcare, July, pp. 82-84.

Winslow, Ron (1992), "Managed-Care Networks Show Promise," The Wall Street Journal, March 24.

Yandrick, Rudy M. (editor) (1990), "From Out of the Vicissitudes of Managed Care Comes a Clearer Direction for EAPS," EAPA Exchange, July, pp. 18-20.

Continue to: EAP Handbook - Chapter 5 - PROGRAM EVALUATION

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