Partial hospitalization: when less is more - includes related article

Adding a partial hospitalization benefit for substance abuse can save money as well as provide more effective treatment.

Employers looking to cut their mental health and substance abuse costs have found that alternatives to expensive 28-day inpatient care help them make better use of their benefit dollars.

Partial hospitalization is one alternative that is gaining in popularity. Partial hospitalization is a structured intensive outpatient program for mental health and substance abuse treatment. The option can be more effective than inpatient care for substance abusers, say behavioral health specialists. At the same time, partial hospitalization can cost significantly less money than inpatient care, and reduces an employee's time away from work, say employers that have added partial hospitalization to their mental health and substance abuse benefits.

Proponents of partial hospitalization say follow-up care and the patient's continued interaction with family and friends help to reduce recidivism.

Varian Associates, Coors Brewing Co., and Shell Oil Co. have benefited by adding partial hospitalization for substance abuse to their benefits plans.

The treatment for alcohol and substance abusers in a partial hospitalization program typically consists of four- to six-hour treatments in a hospital or clinical psychologist's office at least four times a week over one to three months. As the patient improves, he or she attends fewer sessions, followed by a year of counseling.

To be considered a partial hospitalization program, the treatment must have a specific structure; be offered within a limited time; have clear guidelines for admission and discharge; provide clinically appropriate treatment; and use professional staff, according to the American Association for Partial Hospitalization, a trade organization in Alexandria, Va., that represents providers.

Employers that have implemented partial hospitalization say it's not always a cost-cutting tool that can be used for every mental health and substance abuse patient.

"Whereas people used to think about care structured in the setting in which it was delivered, they are now thinking about care in what is most appropriate to the level of need," says Mark Knight, AAPH's executive director. "The continuum ranges from inpatient acute care to outpatient care, with various levels of care in between."

To qualify for the program, an employee undergoes evaluation to assess the seriousness of his addiction. He or she must also have a supportive home environment.

A richer benefit

A company can add a partial hospitalization option by carving out its mental health and substance abuse benefits. Varian Associates, a Palo Alto, Calif., company that produces medical industry-related products, integrated its EAP with Prudential Psychiatric Management, a division of Prudential Insurance Co., Roseland, N.J. By doing so, employees who accessed the EAP could be referred for partial hospitalization, if needed. Brian Lowe, manager of Varian's employee benefits program, says the company added a partial hospitalization option through its EAP program to offer an alternative to its HMO. Its HMO covers only the dedetoxification period in the hospital. Also, the company wanted to provide for a full continuum of care for substance abusers.

Of Varian's 9,000 employees (7,000 in the United States), 3,000, plus 1,000 retirees and their dependents, are eligible for partial hospitalization under the company's self-funded health care plan. Moreover, 3,500 other employees can access partial hospitalization through Varian's EAP.

The benefits and medical departments designed a network of providers with whom Varian could establish PPO relationships. "Because of the cost of inpatient stays, we looked at alternative treatments. That included partial hospitalization, and we have approved coverage for it," Lowe says. Varjan's benefits plan pays for twice the number of days of partial hospitalization that it covers for full hospitalization.

Costs

Because Varian is self-insured, making the change, says Lowe, "was as simple as writing it into our benefits and making sure that our claims administrators recognized it." Varian's budget last year was $75,000 for treatment of employees referred for substance abuse care through its EAP.

The $75,000 budget was based on what Varian had been spending for substance abuse treatment for employees not covered by any medical plan.

Lowe is gathering numbers on the savings generated by managed care and partial hospitalization. The task is compounded by several factors. First, Varian, like many companies, has a policy of confidentiality and does not identify employees who access the medical plan directly or what treatment they receive. Second, Varian offers a different level of benefit for employees who use in-network providers than those who seek care out-of-network. And third, when it implemented its managed care program, Varian also replaced what had been a $20,000 lifetime maximum for alcohol and substance abuse with a $10,000-pertreatment course benefit. Varian requires a $100 deductible and a 10% employee copayment at the time of treatment. By including partial hospitalization as a treatment option when appropriate, the company can provide a longer period of treatment in a less intensive environment.

Lowe acknowledges that the $10,000 limit, less than the full cost for some 28-day acute care programs, has probably resulted in some treatment shifts from inpatient care to partial hospitalization. Not having partial hospitalization as an option previously meant that employees were either referred to full inpatient care or a less intensive program. "I'm not sure that the shift has saved us money," Lowe says. "The treatment is certainly less on a cost-per-day or cost-pertreatment basis, but as an aggregate, what it has done is extend the benefit, allowing a person to start with high intensity and extend future visits and follow-up."

As a general rule, most partial hospitalization plans are 40% to 60% less expensive than acute inpatient care, according to AAPH. The cost of a typical partial hospitalization program for substance abusers depends on which managed behavioral health specialist you ask. Behavioral health specialists quote dally costs of $50 to $200 per day for partial hospitalization versus $500 to $800 per day for inpatient acute care. By comparison, an intensive partial hospitalization program costs between $2,200 and $4,500.

Beyond cost savings

But, Robert Hunter, M.D., the medical director for Shell Oil Co. in Houston, is among the ranks of clinical experts who now affirm that partial hospitalization, if used appropriately, can often be more effective than acute inpatient care.

Shell has 47 health plans for its more than 26,000 employees, but 60% of them are covered by American PsychManagement, a managed mental health care vendor, based in Arlington, Va., that offers partial hospitalization.

Although Hunter concedes that Shell's HMOs and managed care programs probably had an economic motive in establishing such plans, he says, "I pushed for a partial hospitalization program because I felt there was a clinical need for such a program." Previously, he explains, the only options for substance abusers seeking treatment were AA and full inpatient treatment, neither of which was always appropriate. "I took out cost as a consideration," adds Hunter. "I wanted to make sure, from Shell's perspective, that it was there for people who could benefit from such a program."

Emile Bendit, M.D., a Baltimore psychiatrist who is chairman of the Clinical Education Task Force at the National Association of Private Psychiatric Hospitals, based in Washington, says, "Partial hospitalization is indicated when the individual has a living arrangement that he or she can go home to at night that supports the treatment and does not contribute to the problem. What partial hospitalization provides is some support and structure during the initial phases of treatment, when it is difficult for people to make a commitment without some level of support."

Norman Hoffmann, M.D., vice president of New Standards Inc., a medical research firm in Minneapolis, says that proper placement and funding for an appropriate continuum of care are critical in making partial hospitalization work. "As an employer," he says, "you are essentially wasting money if your benefits are structured such that the employee is dissuaded from using continued care and treatment for 12 months."

Follow-up care

Coors Brewing Co., the Golden, Colo. brewery and distributor, for example, has structured its program in such a way that follow-up care is covered as part of the partial hospitalization benefit. Coors has a one-time-only inpatient benefit per lifetime, set at 28 days, and no limit on outpatient or relapse programs.

"Our experience has been that it is not the intensity of the treatment that matters, so much as it is how long it lasts," says P.J. Brosmith, Coors' case management adviser. "In the intensive outpatient program, you can work through recovery crises and do some good relapse prevention."

Although the literal definition for partial hospitalization means that treatment is provided in a hospital-based setting, Coors relies on community-based programs for substance abuse treatment for its 11,000 employees and approximately 33,000 covered lives.

The community-based programs are run by alcohol and drug counselors licensed by the state, and monitored and supervised by medical personnel, including physicians and psychiatrists. Because the program is not hospital based, Coors refers to treatment as intensive outpatient care. The programs have been used by Coors since 1986, when the company stopped paying for any hospital-based alcohol or drug treatment program, other than inpatient care.

"We decided that we could get the same quality of care at a freestanding residential program that we could get at a hospital-based program for a third to half the price," explains Bob Tank, Coors' manager of counseling services.

"In full inpatient treatment, you're looking at between $400 and $800 a day [a minimum of $12,000 for a 28-day program], whereas the intensive outpatient programs cost between $2,800 and $4,800, depending on the intensity of the program," says Brosmith. "Our experience [with intensive outpatient programs] has been that people don't miss time from work and they have lower relapse rates."

How it works

The first phase for participants in Coors' partial hospitalization programs typically lasts eight to 12 weeks and includes three to four meetings a week in a drug counselor's office, and two Alcoholics Anonymous meetings. In the second phase, patients attend two weekly meetings with a drug counselor or psychologist and two or three AA meetings a week. The third phase includes one outpatient meeting, plus two or three AA meetings a week. Participants are also required to establish a firm connection with AA. Marital, family, and individual therapy is provided, as needed.

Coors, whose benefits program is self-insured and self-administered, plans to change its fee structure Jan. 1, when it will begin charging $50 a month for dependents. Currently, the company charges no premium, but there is a $50 annual deductible, and a 10% copayment. The maximum out-of-pocket expense is $1,000.

Tank and Brosmith's office, the company's in-house EAP staff, handles all preauthorizations for mental health benefits. If an employee or family member is seeking substance abuse treatment, Coors EAP counselors determine how serious the addiction is and then send the individual to an outside vendor for an independent evaluation.

Coors' monitoring system cannot break out the cost savings generated by intensive outpatient care, Tank says. However, total behavioral health care benefits costs have dropped 18% over the past six years, a savings that Tank attributes to a strong emphasis on using community-based resources. In Denver, for example, Coors relies exclusively on intensive outpatient programs.

Insurers still leery

Despite criteria issued by NAPPH and other sources that specify the appropriate care for various levels of impairment, many insurers are leery of partial hospitalization programs, claiming that they are relatively new and that some are of questionable quality. While there's little in the way of standard accreditation, some organizations do offer guidelines for selecting partial hospitalization programs.

NAPPH offers guidelines for psychiatric hospital programs and determining the level of care a patient requires, as well as guidelines on partial hospitalization programs. The Joint Commission on Accreditation of Health Care Organizations, a health care standards setting and accrediting body in Oakbrook Terrace, Ill. accredits partial programs. And the AAPH offers guidelines for partial hospitalization programs.

Factors to consider

Until accreditation programs are more widespread, how do employers determine when adding a partial hospitalization benefit is appropriate? David Levine, vice president of marketing and customer management for Human Affairs International, an Aetna Life and Casualty Co. subsidiary, headquartered in Salt Lake City, says employers considering partial hospitalization or managed care should consider the following factors:

* Claims experience: Do your claims for mental health and chemical dependency run about average, or are they significantly higher or lower? What has your proportion of inpatient to outpatient care been? If your claims are very low or your outpatient ratio very high, you may not need to offer your employees a partial hospitalization benefit.

* Plan design: Are there incentives for employees to seek less expensive care, or interest in building incentives into the plan design?

* Your objectives: Do you want to offer the best treatment, no matter what the cost, or do you want to control and manage your health care costs as much as possible?

Richard Kunnes, vice president in charge of mental health for Prudential Psychiatric Management, offers some final notes of caution. "Make sure the benefit design for partial hospitalization is at least equal to inpatient coverage," he says. "For example, you shouldn't have inpatient covered at 90% and partial hospitalization at 80%, because then you encourage people to use inpatient treatment."

Xerox adds a partial hospitalization benefit

The company that made itself a household name in the duplicating business does not simply copy other companies' mental health and substance abuse benefits plans. With 1991 total health care costs of $254.7 million and mental health and substance abuse accounting for 11% of its claims payments, Xerox Corp. executives believed the stakes were high enough to warrant a tailored health care plan.

The Stamford, Conn., company will undertake a major shift to a network model, effective Jan. 1, 1993. The company's health program now includes preauthorization. The network model will include financial incentives to use the provider network. About 18,000 of the company's 55,000 domestic employees will be covered by the plan. The rest are in HMOs. Partial hospitalization will be a component of the network plan to be administered by Preferred Health Care, Wilton., Conn.

Appropdate care

"We believe strongly in insuring access to the least restrictive, least intensive level of care that is medically appropriate," says Helen Darling, manager, Xerox health care strategy and programs. Such options include partial hospitalization, structured out-patient care, residential treatment centers, and brief therapy.

Darling believes that partial hospitalization for substance abuse can be both an effective treatment and a cost-saver. Consequently, she says employers should seriously consider all alternatives to inpatient hospitalization. "If, however, you end up paying for both, you should look hard for a managed care vendor to help make certain that it is not adding more services instead of substituting some services for others."

The network model will include case management, precertification, an EAP program, and a requirement that, if employees want full benefits, they must use a network provider.

Employees accessing the network for pre-authorized treatment will get an 80% reimbursement after their deductible, which is 1% of pay. Employees going out-of-network, but for pre-authorized care, will get a 50% benefit. If the care is not pre-authorized and employees do not use a network provider, they get no reimbursement.

Darling says the switch from managed care under American PsychManagement, a managed mental health care vendor, based in Arlington, Va., is being made partly in the belief that careful selection and use of network providers will render quality care to Xerox employees. The company wants to encourage the use of mental health providers that have "the appropriate continuum of treatment options available and that are committed to using them and willing to be measured on patient satisfaction, outcome, and other research on effectiveness," she adds.

In addition to changing its mental health and substance abuse program, Xerox also is strengthening its EAP program and will conduct its own study of after-care programs. The study, currently being designed under contract with a psychologist and academic researcher from Fordham University, New York, will follow patients who have been discharged from programs and examine absenteeism, recidivism, and other measures that might indicate the effectiveness of after-care programs. The twoyear study will begin Jan. 1.

Because Xerox is self-insured in all its domestic locations except Rochester, N.Y., "all we have to do is make sure that the plan amendment meets our own requirements under ERISA and then change all our written documents and announcements to employees and give out communication materials so people understand what the changes are," says Darling.

Stretching benefit dollars

The Xerox executive is unsure what savings will result from switching to a network model, since the company is adding benefits along with increasing management. "Two good things we believe will happen," she says. "First, we'll be paying for different things--more partial hospitalization, structured outpatient care, and outpatient and residential treatment centers--even as we are paying less for traditional inpatient hospital programs, Second, we will be getting a lot more mental health out of the dollars we are spending."

Nancy Bader is a freelance writer in Boca Raton, Fla. This is her first story for B&H.

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