On any given day last June, as in the months before, emergency rooms in Las Vegas were costly waiting rooms for patients with serious mental illnesses who needed to be hospitalized.
Unable to find inpatient space anywhere in surrounding Clark County for dozens of psychiatric patients, doctors held them in the ER for an average of 89 hours-a little more than three days--until hospital psychiatric beds became available.
Nevada added a total of $45.2 million for outpatient mobile crisis teams, psychiatric drugs, housing and payroll for another 89 clinic and mental-health employees for fiscal 2004 and 2005 combined, a 31% increase in outpatient mental-health spending when compared with fiscal 2002 and 2003. The state budgeted 70 cents of each mental-health dollar for outpatient care in fiscal 2005.
But boosting outpatient care alone won't alleviate the bottleneck in Nevada's ERs, argues Carlos Brandenburg, administrator of Nevada's Division of Mental Health & Developmental Services. "We've been there, done that," he says. Nevada needs more inpatient psychiatric capacity, he says. Closures among private providers have cut Clark County's privately owned psychiatric beds by 80% since 2000, to 36 beds, he says. To meet demand, Nevada earmarked $32.5 million for a psychiatric hospital for at least 150 patients, with the option to add another 40 beds. The state-owned hospital will open in Las Vegas in May 2006, more than doubling Clark County's current capacity of 139 public and private psychiatric beds.
Nevada's decision to expand hospital capacity may be atypical among public health agencies, but rising occupancy rates at psychiatric hospitals are increasingly common nationwide and are forcing providers to respond. Capacity to care for the mentally ill in U.S. hospitals--psychiatric or general, public or private--contracted sharply in the 1990s. In 2002, there were 483 psychiatric hospitals and 1,410 psychiatric units in general acute-care hospitals operating in the U.S., 35% and 12% declines, respectively, compared with a decade earlier.
Those declines--combined with an uneven development of outpatient treatment options and financial pressure to scale back public and private healthcare spending--have increasingly strained hospitals' capacity with a crush of patients with acute mental illness. And even proposed Medicare payment reforms for behavioral-health reimbursement will bring winners and losers among hospitals, with acute-care facilities projected to take a large hit.
As occupancy levels in public and private hospitals rise, industry experts and executives say targeted expansion of psychiatric beds and investment in outpatient services are key to alleviating this access crisis.
"There's a tremendous amount of demand," says Jamie Hopping, chief operating officer and executive vice president of Ardent Health Services, one of the largest U.S. providers of behavioral healthcare. The chain has 15 acute-care and rehabilitation hospitals and 20 psychiatric facilities.
Ardent added a total of 104 psychiatric beds to several of its U.S. hospitals in 2003 and 2004, including two 22-bed psychiatric units at its Lovelace Sandia Health System in Albuquerque. Ardent gained 146 psychiatric beds in October 2003 by acquiring Brooke Glen Behavioral Hospital in Fort Washington, Pa. Ardent's Fremont (Calif.) Hospital is slated to expand by 16 beds in 2005.
Growing demand and limited capacity are driving the expansion, says Hopping, who projects Ardent will continue its expansion through construction, acquisition and joint ventures during the next two years.
The capacity crunch comes amid changes in reimbursement that make providers increasingly dependent on state budgets and Medicaid, the safety net insurer jointly funded by federal and state tax dollars. But few states are investing in mental healthcare as Nevada recently did. The majority are cutting tax dollars controlled by state mental-health agencies and trimming Medicaid spending.
Medicare's planned overhaul to its payment for the hospitalized mentally ill is creating additional uncertainty about future capacity. The American Hospital Association warns that proposed changes, expected to reduce payment to psychiatric units within general hospitals, will make such units no longer "financially sustainable."
Encouraging provider investment requires stronger reimbursement from insurers, say mental-health providers and advocates, who continue to push for laws that expand behavioral-health insurance coverage. Though such laws gained momentum in recent years, overall healthcare inflation has hampered efforts to mandate mental-health benefits in recent years.
Don't expect the picture to improve quickly, cautions Robert Glover, executive director of the National Association of State Mental Health Program Directors, a not-for-profit organization that represents U.S. public health agencies.
In 2003, 32 states reported cuts to public mental-health programs, the result of a sluggish economy that had deflated revenue, according to a survey of 46 states published in May 2003 by the association's Research Institute. The reductions to behavioral-health spending averaged 3.8%--and at least 24 states anticipated a 7% cut, on average, to mental-health budgets this year. To cope, mental-health agencies froze hiring, laid off staff, scaled back eligibility and trimmed services. States reported targeting cuts in administration, research and services, as well as hiring freezes.
Medicaid funding also shrank in 22 states, according to the institute. Cuts to the safety-net program translated into tightened eligibility for patients, reduced payments to community mental-health providers and restrictions on some mental-health services.
"I think we are still in for some lean times in many, many states," Glover says. "I don't see that the picture will improve in the short run."
Fewer beds, few vacancies
Occupancy levels at private psychiatric hospitals rebounded from a 1992 low of 55% to a high of 89% in 2000, the most recent data available, according to a June report by the President's New Freedom Commission on Mental Health, established by the Bush administration in April 2002. Meanwhile, an annual survey by the National Association of Psychiatric Health Systems, or NAPHS, found one in four respondents had occupancy rates of at least 84% in 2002.
Public and private hospitals reduced beds for psychiatric patients in the 1990s, a trend that has continued the past four years, as managed care, Medicaid, Medicare and public policy discussions all focused on moving patients out of restrictive, isolating hospitals and into community clinics or group homes that offer medical care and better social support.
Commercial insurers and Medicare provided varying financial incentives to reduce how many and how long patients were admitted to psychiatric and general hospitals, but the net result was the same: shorter hospital stays and fewer inpatients, says Judith Lave, chairwoman of the Department of Public Health Policy and Management and health economics professor at the University of Pittsburgh.
New prescription drugs and other outpatient options greatly contributed to the movement away from lengthy hospital stays; inpatients averaged 23 days in the hospital in 1991, according to the NAPHS, compared with an average of 10.3 days in 2002.
These financial incentives and medical advances, as well as public pressure directed at keeping patients out of hospitals, have redefined inpatient behavioral healthcare as a service delivered by niche providers to stabilize the most severely ill, Glover says.
One national study of disability among U.S. patients with mental illness receiving care in hospitals or as outpatients confirmed that hospitals admit and keep those with the most severe needs and those with less serious symptoms receive care in less-restrictive settings, says Ronald Manderscheid, branch chief for the Center for Mental Health Services' Survey and Analysis Branch, which conducted the study based on 1997 data.
About 81% of hospitalized psychiatric patients reported disability that exceeds the threshold for severe mental illness, Manderscheid says. Slightly fewer patients, 77.5%, suffered from similarly disabling illness at admission, which indicates the more severe the illness, the more likely it is a patient will be hospitalized, he says. Among patients receiving less-than-24-hour outpatient services, 71%, ranked as severely mentally ill.
Decline in usage
The overall decline in hospital use significantly contributed to slow growth in mental healthcare spending, one study found. A 2003 analysis, published in the journal Health Affairs, of employers that covered 1.7 million enrollees found spending for mental-health and substance-abuse treatment lagged behind overall health insurance spending and general inflation from 1992 to 1999. Overall healthcare spending per enrollee rose 16% during the seven-year period, from $1,592 per person to $1,843 per person. Behavioral-health spending fell 18% during the same period, from $115 per enrollee to $95 per enrollee.
Researchers with consultancy Medstat Group credited a drop in hospital use among the mentally ill or chemically dependent for the sluggish spending growth. The likelihood of being admitted to a hospital fell nearly 40% during the time studied. The report also found that those patients hospitalized in 1999 were discharged at far faster rates than those admitted in 1992. In 1992, psychiatric patients spent an average of 16.9 days hospitalized. By 1999, the average stay was 7.6 days.
"When you hear about the spiraling costs of healthcare, in behavioral healthcare that's not really happening," says Mark Covall, executive director of the NAPHS. "The picture is really more demand and less dollars."
Medicaid has become a growing source of revenue for public and private behavioral-health providers. Among public providers, it's the fastest-growing source of revenue. Among private healthcare systems, it's an increasingly significant customer as well. The NAPHS' annual survey found Medicaid covered 22.8% of patients admitted to hospitals in 2002, compared with 17.8% of hospital admissions in 1996. State tax dollars covered another 6.5% of patients in 2002. During the same period, commercial insurers covered a declining number of admissions: falling to 33.8% from 44.7%.
With public funding comes uncertainty. Policy analysts consider Medicaid a potentially unstable--but significant--source of mental-health funding. Regulators give states latitude to expand benefits and eligibility beyond federal requirements--or to pare them. For example, prescription drugs, home- and community-based care and case management are not mandatory Medicaid mental-health benefits.
Moving to PPS
The growing reliance on publicly funded coverage leaves providers increasingly at the mercy of the politicians and regulators who govern payment. Providers continue to wait for a proposed overhaul of Medicare's inpatient psychiatric payment system.
The CMS issued its proposal last November, and the public comment period closed in January. The agency has yet to issue its final regulations and has not yet set a date for the final rule, a CMS spokeswoman says. The proposed change, which would be phased in over three years, moves Medicare's psychiatric hospital reimbursement from a cost-based to a prospective payment system. Under the proposal, Medicare will adjust its daily base payment for patients during the first eight days of a patient's hospital stay. The sum will be higher at admission, when services are most intense, and gradually decrease through the eighth day when it plateaus.
The University of Pittsburgh's Lave says the proposed plan takes into account patients' physical illness, as well as mental illness, a plus for providers. However, not everyone will fare well under the shift.
Providers with expenses that exceed the proposed payments--primarily psychiatric units within general hospitals--would fare the worst under the proposal; the nation's largest psychiatric hospitals?mostly public facilities ?would see the biggest boost, Lave says.
Nancy Foster, the AHA's senior associate director of policy, says psychiatric units' costs include overhead that free-standing psychiatric hospitals don't incur, which isn't reflected in Medicare's proposed schedule. Psychiatric units may have sicker patients than free-standing psychiatric hospitals, she says, and psychiatric patients with more severe physical illness may end up in an acute-care general hospital behavioral-health ward, where a greater array of medical services is available under one roof.
Governmental psychiatric hospitals gain the most, a total of $26 million in added payments per year after the proposed changes are fully implemented, followed by a $10 million bump for for-profit psychiatric hospitals and $2 million boost for not-for-profit hospitals, according to projections published in the Nov. 28, 2003, Federal Register. Acute-care hospital psychiatric units stand to lose $40 million annually after full implementation under Medicare's proposed overhaul.
In a February letter, the AHA challenged the proposed payment scheme and argued that psychiatric units would "no longer be financially sustainable," prompting closures that would strain access to inpatient care in an industry already struggling to meet demand. Covall anticipates that the regulations, if implemented as proposed, will fuel further consolidation among inpatient psychiatric providers.
Steven Sharfstein, president and chief executive officer of Baltimore-based Sheppard Pratt Health System, Maryland's largest behavioral-health provider, says policymakers need to increase outpatient reimbursement if the overflow of psychiatric patients in ERs is to stop.
Hospitals rightly have specialized in stabilizing mentally ill or substance-abuse patients in a crisis, but patients face a daunting search for outpatient acute-care or community-based providers that may help prevent a trip to the hospital, Sharfstein says. Bolstering outpatient insurance coverage stands to improve patients' access to community care for management of chronic mental illness, he says.
Medicare requires enrollees to cover 50% of outpatient mental-health expenses, he says, and private insurers' coverage inadequately covers mental illness with benefits that aren't as comprehensive as those for physical diseases; Sharfstein calls both practices discriminatory. Federal parity legislation would do the most to even out commercial coverage, he says.
In Congress, an effort to expand a 1996 law that requires insurers to offer identical lifetime and annual benefits for mental and physical illnesses has met resistance from insurers, which argue that such mandates would drive up already high premiums.
All but two states have laws that address mental-health or substance-abuse treatment coverage, according to the National Conference of State Legislatures, or NCSL. Iowa and Wyoming are the exceptions. Cost-containment concerns were obvious in U.S. legislative chambers last year, as aggressive attempts to slow overall U.S. healthcare inflation stalled--or reversed--mandates for mental healthcare, says Lee Dixon, director of the NCSL Health Policy Tracking Service. For example, in recent months, Washington state enacted a law that allows employers with fewer than 50 workers to opt out of certain mandated health benefits, including mental-health and substance-abuse treatment coverage.
Despite 1990s restrictions on provider payments and hospital admissions, at least one analysis of mental-health coverage, published in July's Health Affairs, found treatment for mental illness for adults and children rose in the 1990s, though the quality of care was inconsistent.
The study's authors, David Mechanic, director of Rutgers University's Institute for Health, Health Care Policy and Aging Research, and Scott Bilder, a senior programmer for the institute, cite findings from a 2001-02 national survey, which found patients suffering from major depression who received treatment were almost as likely to be cared for by a primary-care doctor as a mental-health specialist, despite better outcomes from psychiatric providers.
A 1999 study found schizophrenia patients with severe illness routinely receive medication, but many doctors fail to prescribe the appropriate dose or, for those battling schizophrenia and depression, failed to prescribe an antidepressant, the authors wrote.
Joining the quality movement
Quality initiatives throughout the healthcare industry--demonstrating how and how well providers care for patients and prevent medical errors--are fast gaining a foothold in mental healthcare and among insurers, looking to link payment to evidence that treatments work.
"We know we have to demonstrate more solidly what we have to do," says Christopher McGowan, director of the 12-year-old partial-hospitalization program at Akron (Ohio) General Medical Center, a not-for-profit facility. Since 1993, Akron General's partial-hospitalization program's daily census and length of stay have fallen, a decline fueled by the same forces--regulation and cost-containment by insurers--that reduced inpatient psychiatric care.
Partial-hospitalization programs, which provide hospital-based intensive therapy or rehabilitation for outpatients, also have seen admissions increase, but the average number of visits per patient fell from 2000 to 2002, according to the 2003 NAPHS survey.
On average, Akron General's program sees about 340 patients a year, primarily those with depression or bipolar disorders. "It's underused," McGowan says of the partial-hospitalization programs. But that could change as providers do more to demonstrate the quality of care they offer, he says.
"They need us, and we need them to want us," he says. Managed care can't afford to have acutely ill patients end up in expensive hospital beds because acute-care outpatient options aren't available, McGowan says. "Not everybody needs to go inpatient." Measuring quality and outcomes for outpatient care, including partial hospitalization, could bolster arguments for greater insurance coverage.
"We, as a field, have failed to prove our treatment works," says Jerry Vaccaro, president and CEO of PacifiCare Behavioral Health, a leading managed-care behavioral-health company, which routinely screens psychiatric patients' progress during treatment and pays providers based on patients' outcomes.
"We pay for performance," he says. Monitoring patients' self-reported symptoms creates a redundancy that may prevent mental-health medical errors by comparing patients' health and doctors' diagnoses and treatments against evidence-based standards for care.
Where no one standard for treatment exists--for example, providers may weigh the pros and cons of several viable therapy options to find one best suited for patients--Vaccaro says measuring the outcome is critical. He says evidence showing that treatment works and healthcare providers use therapies to their best effect is essential and should be automatic. "It's like breathing," he says.
What do you think?
Write us with your comments. Via e-mail, it's [email protected]; by fax, 312-280-3183.