The Provision of

MENTAL HEALTH

SERVICES in

 MANAGED CARE 

ORGANIZATIONS
C2 blank
U.S. Department of Health and

Human Services

Substance Abuse and Mental Health

Services Administration

Center for Mental Health Services

Office of Managed Care

5600 Fishers Lane

Rockville, MD 20857

Constance M. Horgan

Elizabeth Levy Merrick

Deborah W. Garnick

Dominic Hodgkin

Robert E. Cenczyk

R. William Lusenhop

Sarita Bhalotra

Special Report

 The Provision of

MENTAL HEALTH

SERVICES in

 MANAGED CARE 

ORGANIZATIONS
ii Special Report

Acknowledgments

The preparation of this report on mental health was supported by a contract (#98M0028601) by the Substance Abuse and Mental Health Services Administration (SAMHSA),

U.S. Department of Health and Human Services (DHHS) with the Schneider Institute for

Health Policy, Heller School for Social Policy and Management, Brandeis University. Primary

support for the overall project was provided by the National Institute on Drug Abuse (NIDA)

(Grant #RO1 DA10915) and the National Institute on Alcohol Abuse and Alcoholism

(NIAAA) (Grant #RO1 AA10869). We thank our project officers, especially Jeffrey Buck at

SAMHSA, who provided the initial concept for this report; as well as William Cartwright at

NIDA and Michael Hilton at NIAAA, who each provided guidance and support throughout

this project. William L. Wallace assisted in the preparation of this report.

The authors acknowledge the contributions of our Brandeis colleagues, Della Faulkner,

David Goldin, Michele King, Grant Ritter, Kate Skwara, Terri White, and Galina Zolotusky.

We appreciate the interest and support provided by the executive directors, the medical

directors, and their colleagues in the managed care organizations included in our study.

We also thank individuals in the managed behavioral health care organizations that helped

with this study. 

We thank the members of our expert advisory panel: Laura Altman, John Bartlett, Kenneth

Cohen, Bruce Davidson, Thomas Dial, Richard Frank, Suzanne Gelber, Thomas McLellan,

Claire Sharda, and Kenneth Wells. Numerous other advisors and colleagues also provided

useful input at various stages of the project, including Steve Adelman, Stuart Altman, Paula

Breslin, Audrey Burnam, James Callahan, Mady Chalk, Thomas D’Aunno, Spencer Falcon,

Judy Feldman, Robert Fusco, Eric Goplerud, Dennis McCarty, Margaret O’Kane, David Osser,

James Sabin, Rebecca Smart, and William Zwick.

Staff members from Mathematica Policy Research, Inc.—especially Charles Denk, Todd

Ensor, Marcia Giletto, Marsha Gold, Patricia Nemeth, Joanne Pascale, Frank Potter, Julie

Rothbard, Richard Strouse, Sally Waltman—and the interviewers provided invaluable expertise

in helping to design the survey instrument and sample, and in collecting the data.

Disclaimer

The content of this publication does not necessarily reflect the views or policies of SAMHSA

or DHHS.

Public Domain Notice

All material appearing in this report is in the public domain and may be reproduced or copied

without permission from SAMHSA. Citation of the source is appreciated. However, this publication may not be reproduced or distributed for a fee without the specific, written authorization

of the Office of Communications, SAMHSA, DHHS.
The Provision of Mental Health Services in Managed Care Organizations iii

Electronic Access and Copies of Publication

This publication can be accessed electronically through the following Internet World Wide

Web connection: www.samhsa.gov/. For additional free copies of this document, please call

SAMHSA’s Mental Health Services Information Clearinghouse at 1-800-789-2647.

Recommended Citation

Horgan, C. M., Merrick, E. L., Garnick, D. W., Hodgkin, D., Cenczyk, R. E., Lusenhop, R. W.,

& Bhalotra, S. (2003). The provision of mental health services in managed care organizations.

DHHS Pub. No. (SMA) 03-3797. Rockville, MD: Center for Mental Health Services,

Substance Abuse and Mental Health Services Administration.

Originating Office

Office of the Associate Director for Organization and Financing

Center for Mental Health Services

Substance Abuse and Mental Health Services Administration

5600 Fishers Lane, Room 15-87

Rockville, MD 20857

Printed 2003

DHHS Publication No. (SMA) 03-3797.

The Provision of Mental Health Services in Managed Care Organizations v

Table of Contents

I. Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. Background and Study Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. Products and Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

IV. Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

V. Screening and Treatment in Primary Care . . . . . . . . . . . . . . . . . . . . . . 29

VI. Entry Into Specialty Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

VII. Treatment Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

VIII. Quality Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

IX. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

X. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

XI. Appendix A. Summary of Survey Content . . . . . . . . . . . . . . . . . . . . . . 59

Figures

II.1 Pathways to MBHOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III.1 Frequency of Commercial Managed Care Product 

Types (Percentage of Products) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

III.2 Types of Commercial Products Offered by MCOs . . . . . . . . . . . . . . . . 11

III.3 Frequency of Behavioral Health Contracting 

Arrangements (Percentage of Products) . . . . . . . . . . . . . . . . . . . . . . . . 12
vi Special Report

III.4 Contracting Arrangements by Product Type . . . . . . . . . . . . . . . . . . . . . 12

III.5 Functions Included by Different Contracting Arrangements . . . . . . . . . 13

III.6 Risk-Sharing Arrangements in MCO Specialty Contracts . . . . . . . . . . . 14

IV.1 Percentage of Products Covering Selected Mental Health Services . . . . . 20

IV.2 Types of Limits on Mental Health Benefits . . . . . . . . . . . . . . . . . . . . . . 20

IV.3 Percentage of Products Using Copayment or 

Coinsurance for Outpatient Mental Health 

Visits (by Product Type) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IV.4 Percentage of Products Using Copayment or Coinsurance 

for Outpatient Mental Health Visits 

(by Contracting Arrangement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

IV.5 Average Coinsurance and Copayments for Outpatient 

Mental Health and General Medical Visits . . . . . . . . . . . . . . . . . . . . . . 24

IV.6 Average Coinsurance and Copayment Rates for 

Prescription Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

IV.7 Distribution of Copayment Amounts for Prescription Drugs . . . . . . . . . 27

V.1 Percentage of Products Reporting Screening for 

Mental Health Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

VI.1 Percentage of Products With Direct Self-Referral or 

Phone Center Referral for Specialty Mental Health Services 

(by Product Type and Contracting Arrangement) . . . . . . . . . . . . . . . . . 34

VI.2 Percentage of Products With PCP or EAP Gatekeeping 

for Specialty Mental Health Services (by Product Type 

and Contracting Arrangement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
VI.3 Availability of 24-Hour Mental Health Crisis Services . . . . . . . . . . . . . 36

VII.1 Percentage of Products With Standards for Maximum 

Time to Initial Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

VII.2 Percentage of Products With Standards for Time to 

Follow-up Visits After Inpatient/Residential Discharge . . . . . . . . . . . . . 39

VII.3 Percentage of Products With Specialized Approaches to 

Dually Diagnosed Patients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

VII.4 Organizational Responsibility for Utilization 

Review and Appeals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

VII.5 Percentage of Products With a Mental Health 

Case Management Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

VII.6 Percentage of Products Providing Specific Case 

Management Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

VIII.1 Prevalence of Quality Management Activities by Product Type . . . . . . . 44

VIII.2 To Whom Patient Satisfaction Survey Results Are Reported . . . . . . . . . 44

VIII.3 Provision of Practice Guidelines for Selected 

Mental Health Disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

VIII.4 Sources of MCOs’ Mental Health Practice 

Guidelines (Percentage of Products) . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

VIII.5 Percentage of Products With Quality Assurance 

Committee for Mental Health and Substance Abuse Services . . . . . . . . 47

The Provision of Mental Health Services in Managed Care Organizations vii
Tables

III.1 Percentage of Specialty Contracts for Claims and 

Administration With Written Performance Standards . . . . . . . . . . . . . . 15

IV.1 Distribution of Annual Limits on 

Outpatient Mental Health Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

IV.2 Distribution of Annual Limits on Inpatient 

Mental Health Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

IV.3 Distribution of Lifetime Dollar Limits on Plan 

Payments for Mental Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

IV.4 Average Coinsurance and Copayment Rates for 

Outpatient Mental Health (by Product Type) . . . . . . . . . . . . . . . . . . . . 23

IV.5 Distribution of Outpatient Coinsurance and 

Copayment Amounts Across All Products . . . . . . . . . . . . . . . . . . . . . . 25

V.1 Percentage of Products That Distribute Practice 

Guidelines to PCPs, by Product Type and 

Contracting Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

V.2 Percentage of Products With Practice Guidelines 

That Address Specific Topics, Among Those Requiring 

Guideline Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

VI.1 Percentage of Products Requiring Prior Authorization 

for Mental Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

VIII.1 Participation in MCO Quality Assurance 

Committees Overseeing Behavioral Health Services . . . . . . . . . . . . . . . 46

viii Special Report
I.

This study reports on a nationally representative survey of

managed care organizations (MCOs) regarding how mental

health services were provided in 1999, and how the provision

varies by product type and contracting arrangement.

Executive Summary

“Product type” refers to how the MCO

organizes or packages the health services

it sells. This paper refers to three types of

products: 

■ health maintenance organizations (HMOs)

■ point-of-service (POS) plans

■ preferred provider organizations (PPOs)

“Contracting arrangement” refers to

whether mental health services are delivered

internally by the MCO (through salaried

providers or a network managed by the

MCO) or delegated to another organization

through contractual arrangements. A specialty

contract indicates that mental health services

are contracted to a vendor such as a managed

behavioral health care organization (MBHO)

that specializes in the delivery and management of behavioral health services. A comprehensive contract includes both mental

health services and general medical services

from a single vendor or network. Key findings are reported below.

Products and Contracting

■ HMOs are most likely to report using

specialty contracts with MBHOs. 

■ Products with specialty contracts are

more likely than those with comprehensive

contracts to delegate functions such as

formation of provider networks, claims

processing, utilization management,

and operation of quality improvement

programs. 

■ About half of products with specialty

contracts place the MBHO at some risk

if claims costs exceed targeted amounts.

■ HMOs are more likely than PPOs to

include performance standards in their

contracts with MBHOs. 

■ PPOs are the only product type that

makes extensive use of comprehensive

contracts. 

Benefits

■ A majority of products have annual limits

on outpatient mental health visits (most

often 20 or 30 visits) and on inpatient days

(most often 30 days). Outpatient visits

are subject to substantial cost sharing. 

■ Cost sharing for outpatient visits is

notably higher for mental health than

for general medical care. 

The Provision of Mental Health Services in Managed Care Organizations 1
Screening and Treatment

in Primary Care

■ Fewer than 10 percent of products require

screening in primary care settings for

mental health disorders using standard

screening instruments. 

■ About half of products distribute practice

guidelines for selected mental health

disorders to primary care providers. 

Entry Into Treatment

■ The vast majority of products feature

either direct self-referral or phone center

referral for specialty mental health care. 

■ Even among HMOs, few require approval

of primary care gatekeepers to access

specialty mental health care.

■ Prior authorization generally is required

for inpatient care. HMOs and specialty

contract products are much more likely

to require preauthorization for outpatient

care.

Treatment Process

■ Most products have standards for how

long one must wait for a first appointment. 

■ HMO and specialty contract products are

more likely to have specialized programs

for patients with co-occurring mental

health and substance abuse disorders. 

■ Products with specialty contracts usually

delegate initial utilization review to the

MBHO. 

Quality Management

■ About three-quarters of products conduct

patient satisfaction surveys, track performance indicators, and have practice

guidelines regarding behavioral health.

■ Half of all products conduct clinical outcomes assessment.

■ These activities are more common among

HMO and specialty contract products. 

This study shows that MCOs provide

mental health services in diverse ways.

Elements of this diversity include whether

to contract out mental health services to a

specialty vendor, which utilization review

responsibilities to delegate, whether to

require primary care providers to screen

patients for mental health problems, and

which quality-of-care activities to conduct.

Understanding issues related to access, cost,

and quality of mental health treatment services requires knowledge about the service

variation that is related to product type and

contractual arrangements.

2 Special Report
II.

Despite the fact that most privately insured individuals in the

United States receive their health care under managed care, little is known about how individuals receive mental health services under these arrangements. This study reports on a national survey of

managed care organizations (MCOs) regarding mental health services—the

first such survey conducted since 1989 (Interstudy, 1992). Tremendous

growth and tumultuous change occurred during the 1990s. This report

provides an in-depth update about mental health service provision under

managed care. The goal of this report is to provide an understanding of

MCOs’ provision of mental health services for privately insured enrollees.

Background and

Study Methods

Background

The organization and financing of mental

health services have changed dramatically in

recent years. MCOs are now the predominant form of private health plan coverage in

the United States, enrolling almost 90% of

those with employment-based health insurance (Gabel et al., 2000). Simultaneously, the

managed behavioral health care industry—

managed behavioral health care organizations (MBHOs) specializing in mental health

and substance abuse services—has experienced huge growth. Two-thirds of Americans

with health insurance now are enrolled in

some type of managed behavioral health care

program, with enrollment increasing 86%

since 1995 (Oss, Jardine, & Pesare, 2002). 

The growth in the managed behavioral

health industry has occurred because some

employers, government purchasers, and

health plans have looked to MBHOs as a

way to control costs and/or to improve the

quality of care. Employers and government

purchasers can choose to separate (“carve

out”) mental health and substance abuse services from the rest of the medical care package and contract directly with MBHOs for

behavioral health services (Figure II.1).

Alternatively, they can follow the traditional

approach and purchase behavioral health

coverage along with general medical benefits

from the MCO. The MCO can choose to

manage and provide (make) behavioral

health services within its own organization

or to contract out (buy) these services from a

specialty MBHO. This report is based on a

survey of MCOs focusing on how the MCO

provides behavioral health services—that is,

the right-hand portion of Figure II.1. We do

not report on direct employer or government

purchaser contracts with MBHOs, which

require different data sources such as

employer surveys (including Buck et al.,

1999; Horgan et al., 2000; Salkever &

Shinogle, 2000) or studies of state Medicaid

programs (including Callahan et al., 1995;

The Provision of Mental Health Services in Managed Care Organizations 3
McGuire, Hodgkin, & Shumway, 1995;

Rosenbaum, Shin, & Smith, 1997).

The ways that MCOs structure and deliver mental health care, including decisions

to contract out these services, can affect the

experience of enrollees seeking and receiving

treatment. Given the fact that most people

with mental health problems do not receive

care despite the availability of effective treatments, it is crucial to facilitate access to and

continuation of necessary and appropriate

services (Regier et al., 1993; DHHS, 1999).

Gatekeeping requirements to access specialty

mental health care, utilization review procedures, provider practice guidelines, and

screening for mental health problems in

primary care settings are all examples of

delivery system features that can influence

the care that people receive. 

The growth of managed care in general,

as well as managed behavioral health care in

particular, has raised both hope and concern.

Some observers note that MBHOs may

improve the quality of behavioral health care

through the development of comprehensive

services, coordination of care, improved networks of care, and increased use of “best

practices” (Jeffrey & Riley, 2000). Because

they are specialized, MBHOs may have a

greater level of expertise, which would make

achievement of these goals more likely.

Others are concerned that financial arrangements with MBHOs may lead to limited

access or undertreatment, and that the

administrative separation of behavioral

health from general medical services may

lead to fragmentation of care (Strosahl &

Quirk, 1994; Sederer & Bennett, 1996).

A substantial body of research has been

published on employer or government purchaser carve-outs (Grazier & Eselius, 1999;

Sturm, 1999; Horgan et al., 2000). However,

little recent information was available

regarding MCOs’ provision of behavioral

health services in relation to contracting

choice until the current study, which was

designed to help address this gap in the literature (Garnick et al., 2001; Garnick et al.,

4 Special Report

Internal Provision

Payer

Managed Behavioral

Health Care Organization

Managed Care

Organization

Make

Buy

Figure II.1: Pathways to MBHOs 

Source: Adapted from Hodgkin, Horgan, & Garnick, 1997.
2002; Hodgkin et al., 2002; Hodgkin et al.,

2002; Merrick et al., 2002). For an overview

of the full study, see Horgan et al. (2000).

The overarching purpose of this report is

to present key findings about how MCOs

provide mental health services and how this

varies both by type of MCO and by whether

the MCO carves out service provision to a

specialty vendor. The study concentrates on

MCOs’ commercial products, since Medicare

and Medicaid managed care has various

special characteristics, discussed elsewhere

(Buck, 2001; Hanson & Huskamp, 2001).

The current study focuses particularly on

aspects of MCOs’ mental health care

arrangements that can clearly affect

enrollees’ experience of accessing and receiving mental health services. MCOs face a

myriad of decisions with respect to these

issues. The outcomes of these decisions have

the potential to support or hinder the use

and quality of behavioral health services for

large numbers of people. While the study is

organizational in nature and therefore cannot provide information about utilization

patterns or quality of care in MCOs, the

results provide a comprehensive picture of

how MCOs (and their vendors, when applicable) currently finance and organize their

delivery systems for mental health services.

The results will help to inform policymakers, consumers, advocacy organizations,

and other stakeholders (including MCOs and

MBHOs themselves) in the ongoing debate

over the promises and pitfalls of managed

mental health care in its various forms.

Methods

Data Sources and Sample

The primary data source for this report is

Brandeis University’s Survey on Alcohol,

Drug Abuse, and Mental Health Services in

Managed Care Organizations (hereafter

referred to as the “Brandeis survey”). The

Brandeis survey was funded by the National

Institute on Drug Abuse (NIDA) and the

National Institute on Alcohol Abuse and

Alcoholism (NIAAA) for primary data collection and analysis, and was supplemented

by the Substance Abuse and Mental Health

Services Administration (SAMHSA) for

additional data analysis and case studies on

mental health services. This nationally representative survey collected information from

434 MCOs in 60 market areas regarding

behavioral health services during 1999,

achieving a 92% response rate. Each MCO

was asked about its top three commercial

managed care products. The Brandeis survey

included an administrative module addressing contracting arrangements, benefits, and

provider payment; and a clinical module

addressing utilization management, treatment entry mechanisms, prescription drug

formularies, quality improvement, and other

clinically oriented topics. This report presents the Brandeis survey data on the provision of mental health services only; information regarding alcohol and drug service

provision is reported elsewhere (Garnick

et al., 2002; Hodgkin et al., 2003). 

The Brandeis survey is linked methodologically to the Community Tracking Study

(CTS), a longitudinal study of health system

change funded by the Robert Wood Johnson

Foundation and described more fully elsewhere (Kemper et al., 1996). The CTS sample

design contained strata for large metropolitan,

small metropolitan, and nonmetropolitan

market areas. Within strata, nearly all sites

were randomly selected, with probability

proportional to size. The primary sampling

units for the survey were the 60 market areas

The Provision of Mental Health Services in Managed Care Organizations 5
selected for the CTS to be nationally representative. The second sampling stage consisted of selecting MCOs within market areas.

MCOs serving multiple markets were defined

as separate MCOs for the survey, and data

were collected with reference to the specific

market area.

Within each market area, the sample

frame of the Brandeis survey was based on

the CTS follow-back survey, which used

information from household survey respondents to question insurers and health plans

regarding health plan characteristics. The

follow-back survey yielded approximately

1,000 entities categorized as managed care

plans across all sites. Based on information

from Web searches and industry directories,

the Brandeis survey excluded entities that

were only indemnity plans as well as MCOs

that were no longer present within market

areas. This left 944 MCOs as the sample

frame. The sampling allocation of MCOs

within market area was stratified by two

categories: preferred provider organization

(PPO) only and health maintenance organization (HMO)/other (including HMO only

and multiproduct). 

Responses were sought from a sample of

720 market-specific MCOs, but 247 were

categorized as ineligible because they had

low enrollment (less than 300 subscribers) in

the market area, did not offer comprehensive

health care products, served only Medicaid

and Medicare, or offered only indemnity

products in the market area. This left 473

eligible MCOs, of which 434 (92%)

responded. They reported on 787 eligible

products for the administrative portion of

the Brandeis survey. For the clinical module,

417 MCOs completed those items regarding

752 products. When an MCO had multiple

products that were similar in terms of out-ofnetwork coverage, referrals, and role of primary care physicians, they were collapsed

into a single product for the purposes of the

survey. Collapsed eligible products were categorized as HMO, PPO, or point-of-service

(POS) products.

Data Collection

The telephone survey was conducted by

Mathematica Policy Research on behalf of

Brandeis University. Typically, two respondents (executive director and medical director, or their designees) were questioned at

each MCO. For some national or regional

MCOs, respondents were interviewed at the

corporate headquarters level regarding multiple sites. In some cases, the MCO referred

interviewers to the MBHO for more detailed

information. All survey questions applied to

individual products within each market areaspecific MCO.

Scope of Survey Content

The Brandeis survey covered a wide range

of administrative and clinical topics. The

administrative module gathered data on the

following:

■ Plan characteristics, which included products offered, enrollment, ownership, and

affiliation with a national chain.

■ Contracting with vendors, which included

contracting arrangements with both specialty behavioral health vendors and comprehensive networks (general medical and

specialty providers alike), which vendors

were used, functions included in the contract, and performance standards.

■ Benefit design, which included mental

health and alcohol and drug abuse benefits, in the most commonly purchased

package for each product. This section

6 Special Report
included extent of covered services, lifetime and annual limits, consumer costsharing requirements, and prescription

drug coverage.

■ Personnel and provider selection, which

included factors used in hiring or selecting

providers.

■ Payment methods and risk sharing, which

included vendor payment mechanisms

(administrative services only, capitation),

level of financial risk, and practitioner

payment methods.

The clinical module examined the following areas:

■ Entry into specialty treatment, which

included direct self-referral and phone

center referral, as well as primary care or

employee assistance program gatekeeping

approaches. 

■ Utilization management techniques,

which included the services requiring prior

authorization, organizational responsibility

for different levels of review, the appeals

process, types of personnel used to conduct utilization management, and case

management programs.

■ Treatment process for behavioral health

in primary care settings, which inquired

about required screening and use of primary care-oriented practice guidelines. In

the specialty treatment section, informants

were asked about which types of clinicians

provide treatment, standards for maximum wait time to first appointment,

follow-up after discharge policies, specialty

practice guidelines, and prescription drug

formularies.

■ Quality assurance/improvement, which

included the use of patient satisfaction

surveys, clinical outcomes assessment,

and performance indicators.

A complete summary of the Brandeis survey content may be found in Appendix A.

Statistical Analysis

The results presented here are weighted for

selection probability and nonresponse to be

representative of MCOs’ commercial managed care products in the continental United

States. Statistical analyses were implemented

using SUDAAN software (Shah, Barnwell, &

Bieler, 1997) to allow correction of standard

errors for our complex survey design. To test

the significance of bivariate differences in

means or distributions, t tests (for continuous variables) and chi-square tests (for categorical variables) were conducted. When

conducting pairwise tests for product type

and contracting arrangement differences,

multiple comparisons were corrected for by

using the Bonferroni correction; only corrected p values are reported. Most analyses

were conducted at the product level. 

Case Studies

Team members conducted six case studies in

order to place findings from the Brandeis

survey in context. We selected organizations

that represented a range of contractual

arrangements, organizational structures,

product offerings, and geographic locations.

Organizations were also chosen because of

previous connections with senior personnel

on their staff, ensuring cooperation and a

willingness to express opinions candidly.

Because of the small sample size, findings

from these case studies cannot be generalized; but they do contain some important

insights from significant players in managed

care. The information that these experts

shared was used both to illustrate specific

points in this report and to add insight to

the general discussion of findings.

The Provision of Mental Health Services in Managed Care Organizations 7
8 Special Report

Organization of the Report

The chapters that follow present major findings from the Brandeis University Survey on

Alcohol, Drug Abuse, and Mental Health

Services in Managed Care Organization.

Chapter III examines MCOs’ product offerings and behavioral health contracting

arrangements. Chapter IV describes mental

health benefits, including limits and costsharing features. Chapter V reports on

MCOs’ policies regarding mental health

screening and treatment guidelines in primary

care settings. Chapter VI focuses on entry

into specialty treatment, including gatekeeping mechanisms and prior authorization.

Chapter VII describes aspects of the treatment process, such as standards for time to

first appointment, types of clinicians providing services, and utilization management and

appeals procedures. Chapter VIII presents

findings on MCOs’ behavioral health quality

management activities. Chapter IX summarizes the conclusions of the study and discusses implications for various stakeholders.
III.

Consumers’ experiences in receiving mental health care are

influenced by key characteristics of how care is organized,

such as the type of insurance product and whether their

mental health care is managed through an external contract. The main

types of products offered by MCOs include HMOs, POS products, and

preferred PPOs. For each product, the MCO must choose whether to

deliver mental health services within the MCO (internal arrangements)

or to contract with an outside organization, such as an MBHO.

Understanding these two basic concepts—product type and contracting

arrangement—will be key to understanding the findings from this study

and to appreciating the often unseen forces that affect consumers’ experiences with seeking and receiving mental health treatment. 

Products and

Contracting 

“Product” Definitions 

Within the broad spectrum of managed

care, three general “product” types are

most commonly discussed: HMO, POS,

and PPO products. The Brandeis survey

employed the same definitions used by the

Community Tracking Study (Kemper et al.,

1996): 

■ HMO: A product in which enrolled

individuals are provided health care

services by a network of affiliated

providers. Services provided to enrollees

outside the network are generally not

covered, other than for some specialized

services or in emergencies.

■ POS: A product in which enrollees

may select in-network or out-of-network

physicians at the “point of service,”

usually with significant differences in

coinsurance or deductibles.

■ PPO: A product in which enrollees

are given a financial incentive to use

a “preferred” network of providers,

usually through differences in

coinsurance or deductibles.

The differences between HMO, POS, and

PPO products have become blurred over

time, but often they are described as points

on a continuum ranging from more managed

to less managed according to a series of

dimensions (Grembowski et al., 2000;

Horgan & Merrick, 2001). HMOs generally

are seen as exerting a greater degree of control by restricting enrollees to a particular

list (often called a network) of participating

providers, requiring assignment to primary

care gatekeepers, or using preauthorization

for specific services. POS products fall in

the middle of the continuum, with enrollees

similarly restricted to a provider network

but with the option to seek care from

The Provision of Mental Health Services in Managed Care Organizations 9
out-of-plan providers for an additional cost.

PPO products generally manage care by

creating incentives for enrollees to use innetwork providers but typically do not use

primary care gatekeepers or manage referrals

to specialists (Greenberg, 2001). The issue of

product definitions is made more complex

by the fact that differences also exist within

each product type. For example, HMOs can

operate using a salaried staff, can contract

with a single large provider group, or can

use a network of providers. Previous research

has shown that most MCOs offer more than

one type of product, although they may use

the same provider networks to service the

various products (Gold & Hurley, 1997).

In sum, the type of product an individual

enrolls in can affect choice of providers, level

of copayment and coinsurance rates, steps

needed to access care, and degree to which

entry into and continuation in treatment are

managed.

This report focuses on HMO, POS, and

PPO products, since they are the three predominant managed care products. MCOs

were asked about only their commercial

products—that is, products serving Medicare

and Medicaid populations were excluded.

(See Chapter II.) Figure III.1 shows the distribution of commercial managed care product

types across MCOs. HMOs are the most

commonly offered product (39%), followed

by PPOs (37%) and POS products (24%).

Most MCOs offer multiple types of products,

with 28% offering PPO only, 17% offering

HMO only, and only 0.2% offering a POS

product alone (Figure III.2). Almost a quarter

of MCOs (24%) offer all three product types. 

MCOs’ Choice to Either “Make”

or “Buy” Mental Health Services

The contractual arrangements MCOs use

also can influence the access to, delivery of,

and quality of mental health services. MCO

decisions regarding contractual arrangements

can involve all covered services or be limited

to certain types of specialty care. This section examines elements within contractual

arrangements that can affect consumer experiences in seeking and receiving specialty

mental health care. 

Both employers and MCOs have the

option of contracting with specialty MBHOs

for the management of mental health services

(generally along with substance abuse services), as illustrated in Figure II.1. This study

focuses on MCOs, so the relevant decision is

depicted on the right-hand side of the figure:

whether to provide mental health services

internally or to contract externally for these

services. When MCOs contract with another

external organization for behavioral health,

this may be part of a wider contract for all

medical services called a “comprehensive”

10 Special Report

PPO

37%

POS

24%

HMO

39%

Figure III.1: Frequency of

Commercial Managed Care

Product Types 

(Percentage of Products)
contract, or it may be a contract with a

specialty MBHO, which is often called a

carve-out of behavioral health services. 

The prevalence of the different contracting

arrangements that MCO products use in the

provision of behavioral health services was

assessed by applying these concepts and

using the following three categories: 

■ Specialty contracting arrangements, in

which MCOs carve out mental health

services to a vendor, such as an MBHO,

that specializes in the delivery and management of behavioral health services

■ Comprehensive contracting arrangements,

in which MCOs contract with a single

vendor or network for both behavioral

health and general medical services 

■ Internal arrangements, in which MCOs

provide behavioral health services and

medical services within the organization,

either through salaried providers or

through a network managed by the MCO 

Note that an MCO may have contracts

with individual facilities, an arrangement still

classified as an internal arrangement, since

the MCO retains the overall management

of mental health.

Depending on how seamless the process

is for accessing mental health care, consumers may never be aware that their services

are being managed and provided by an

organization other than their health plan.

Contractual arrangements, however, can

affect consumers’ experiences, and each

approach has its potential advantages. For

example, specialty contracts, because of

their focus on behavioral health, may offer

the opportunity to improve the quality of

mental health services. This could occur

if the MBHO has established specialty

provider networks, offers experience in

matching clients with providers and at

the appropriate treatment levels, and uses

practice guidelines to support providers’

decisions (Mihalik & Scherer, 1998).

Alternatively, because they do not focus

exclusively on behavioral health, comprehensive contracts and internal arrangements

offer the potential for greater coordination

The Provision of Mental Health Services in Managed Care Organizations 11

0.2

7 8

15

17

24

28

0

30

Percentage of MCOs

PPO only HMO, PPO & HMO only HMO & PPO PPO & POS HMO & POS POS only

POS

Figure III.2: Types of Commercial Products Offered by MCOs
of general medical and mental health services, although sharing a similar network

of providers or administrative entity does

not necessarily guarantee integration of

these services (Jeffrey & Riley, 2000). 

Contracting Arrangements for the

Delivery of Mental Health Services

Figure III.3 shows the frequency of different

contracting arrangements across all products.

Specialty contracts (60%) are the most commonly reported arrangements, followed by

internal arrangements (25%) and comprehensive contracts (15%). The contracting

approach chosen differs markedly by type of

product (Figure III.4). HMOs are the most

likely to report using specialty arrangements

(82% of HMO products), while PPOs are

the only product type that makes extensive

use of comprehensive contracting arrangements (28% of PPO products). 

12 Special Report

25%

Internal

15%

Comprehensive

Contract

60%

Specialty

Contract

Figure III.3: Frequency

of Behavioral Health

Contracting Arrangements

(Percentage of Products)

42

32

12

28

7

6

30

61

82

HMO POS PPO

Percentage of Products

0

100

Specialty Contract Comprehensive Contract Internal

Figure III.4: Contracting Arrangements by Product Type 
Functions Delegated in

Contracting Arrangements

Even within a particular contracting

approach, MCOs often vary in terms of

which administrative and clinical functions

to delegate, how much financial risk to

hold or to transfer, and which, if any,

performance standards to include. MCOs

may choose to delegate the following

functions to external organizations: 

■ Formation and Maintenance of Provider

Networks. This function can entail

identifying mental health and substance

abuse providers who will be available to

enrollees, negotiating payment arrangements, checking provider credentials,

profiling patterns of care, and maintaining up-to-date information for enrollees

about how to access their providers. 

■ Processing of Enrollees’ Claims for

Payment. This administrative function

involves payment for services rendered.

■ Utilization and Case Management.

Utilization management is an approval

process for patients’ entry into treatment,

amount of treatment, and mode of treatment. Case management provides a

more intensive clinical review of care

and tends to focus on high users of care.

■ Operation of Quality Improvement

Programs. These programs, which vary

widely, may include external accreditation by organizations such as the

National Committee for Quality

Assurance, in-house monitoring of

adherence to clinical guidelines and

best practices, and periodic review of

outcomes.

The Provision of Mental Health Services in Managed Care Organizations 13

Percentage of Products

0

100

Specialty Comprehensive

Provider Network Claims

Processing*

Utilization

Management*

Quality

Improvement*

Case

Management*

96

79

97

85

94

54 52

56

19

97

Figure III.5: Functions Included by Different Contracting Arrangements

*Significantly different, p < 0.01.

Note: Based on the 75% of products with external contracts.
Almost all products with specialty contracts delegate all of the functions described

above to MBHOs, while products with

comprehensive contracts almost always

delegate the formation and maintenance

of provider networks (97%). Under comprehensive contracts, delegation of claims

processing, utilization management, quality

improvement, and case management services is far less frequent than under specialty

contracts (Figure III.5). 

Risk Sharing 

Risk sharing in mental health contracts

refers to the degree of the vendor’s responsibility for cost overruns or cost savings

(Frank et al., 1996). The sharing of financial

risk in carve-out contracts can be classified

both by the amount of risk shared and by

whether claims costs are included. Contracts

often are referred to as “risk based” when

some degree of risk for the costs of claims

above a target is transferred from the MCO

to the MBHO. When claims costs exceed

targeted amounts, the contract may require

the MBHO to bear all or none of the cost

overruns, or they may opt to share risk,

based on the MBHO’s performance and the

extent of losses incurred. Similarly, when

costs of care fall below annual targets,

MCOs may opt to allow MBHOs to keep

all, none, or a portion of any savings. For

example, a partial risk contract might stipulate that for every dollar spent above the

target, the MBHO must bear 50 cents.

Even under administrative services only

(ASO) contracts, the MBHO also may

bear some risk if claims costs exceed the

target. Moreover, some portion of MBHOs’

payments may be tied to meeting specific

performance standards. 

Contracts involving risk may also place a

limit on the MBHO’s liability for costs over

a specified amount. With respect to savings

and profits, contracts may specify that an

MBHO will be allowed to keep all savings

without a cap, all savings with a cap, or

some or none of the savings (Garnick et al.,

2001). A “full risk with limits” contract

might specify that if total spending exceeds

the target by $1 per member per month, the

MBHO must bear that cost, but if it exceeds

the target by more than $3, the MBHO

bears only the first $3.

14 Special Report Percentage of Products

0

60

No Risk Partial Risk Full Risk

With Limits

Full Risk

With No Limits

18

52

13

2

Figure III.6: Risk-Sharing Arrangements in MCO Specialty Contracts 

Note: Based on the 51% of products that had specialty contracts for claims and administration; this question was

not answered for 15% of eligible products. 
An examination of risk-sharing arrangements in MCO products’ contracts with

MBHOs shows that a majority of products

(52%) place the MBHO at full risk with

some limits (Figure III.6). A smaller number

of products place the MBHO at full risk with

no limits (18%) or at only partial risk (13%).

Only rarely (in 2% of products) do MCOs

report that their products retain responsibility

for all financial risk for mental health care.

Performance Standards

In behavioral health contracts, performance

standards identify acceptable levels of performance for various aspects of service

delivery, including both administrative and

clinical responsibilities. The standards may

range from requirements for the scope and

timing of reports on utilization to the

achievement of specific levels of satisfaction

rates in patient surveys. Performance standards serve to formalize purchaser expectations and MBHO accountability. Further,

they may be used to monitor and to counter

any incentives to limit access or otherwise

contain costs that might emerge from the

contractual risk-sharing arrangements.

Among products with specialty contracts,

93.7% report at least one standard of any

type (Table III.1). The ten standards included

The Provision of Mental Health Services in Managed Care Organizations 15

HMO POS PPO Total

Administrative

Claims processing (if yes to claims processing function) 50.9% 32.4%** 12.5%** 40.4% 

Staffing/network (if yes to provider network function) 71.7 84.3** 16.6** 66.4

Administrative reporting 91.9 90.9 22.8** 80.5

Member services phone response 87.6 85.8 15.3** 75.6

Any administrative 93.2 90.9 24.5** 81.6

Quality Related

Quality assurance system 73.3 87.4** 15.8** 67.6

HEDIS behavioral health measures 66.9 78.9* 12.6* 61.2

Patient satisfaction 85.4 78.8 14.3** 72.4

Provider satisfaction 81.1 74.9 8.3** 67.8

Any quality related 92.6 90.6 18.0** 80.1

Enrollee Focused

Disenrollment 33.0 5.3* 2.5* 21.3

Complaints and appeals 87.6 82.2 94.9 87.4

Any enrollee focused 87.6 82.2 94.9 87.4

Total (any performance standards) 93.2 90.9 100.0 93.7

1

The answer category “don’t know” was under 2.0% with the exception of claims processing in HMOs (14.6%); claims processing

in total (8.3%); staffing in HMOs (3.6%), POS plans (7.2%), and total (3.8%); provider satisfaction in PPOs (2.6%); and disenrollment

in HMOs (3.6%).

*Different from HMO value at p < 0.05 level. 

**Different from HMO value at p < 0.01 level.

Note: HEDIS = Health Plan Employer Data and Information Set.

Source: Garnick et al., 2001.

Table III.1. Percentage of Specialty Contracts for Claims

and Administration1 With Written Performance Standards
in this survey were classified by three broad

areas: administrative, quality related, and

enrollee focused. Overall, 81.6% had one or

more administrative performance standards,

with the two most common being administrative reporting (80.5%) and member services

phone response (75.6%). Across all administrative performance measures, PPO products

were significantly less likely to include performance standards in their contracts with

MBHOs, while the percentages of HMO and

POS plans were more often similar. 

Eighty percent of products had at least

one quality-related standard, with patient

satisfaction standards most commonly used.

Again, PPOs were significantly less likely to

report quality-related performance standards.

Standards for handling enrollees’ complaints

and appeals also were very common, being

used by 87.4% of products overall, and

94.9% of PPO products.

Discussion

The type of managed care product, and that

product’s contracting approach, can have

important implications for consumers’ experiences in obtaining mental health care. This

chapter demonstrates that different products

are more or less likely to choose certain contracting approaches. These systematic differences can make it challenging to interpret

some results in this report. For example,

HMOs are the most likely to contract with

specialty MBHOs. Thus, the fact that HMOs

are more likely than PPO or POS products to

require a specific action may be a characteristic of HMOs per se or of specialty MBHOs

that those HMOs contract with. In the

report, results often are presented separately

by product type and by contracting status.

The issue of distinguishing these separate

effects is revisited in Chapter IX. 

MCOs’ contracts with MBHOs often contain cost-savings incentives, but these may be

tempered by some protections for enrollees.

Nationwide, three-quarters of MCO products

contract externally for mental health care,

mostly with specialty MBHOs. Specialty contracts are particularly common among HMO

products. These findings are surprising given

the original ideology of HMOs, which

stressed integration and internal provision

(which is now used by only 25% of MCO

products). However, one industry observer

explains that HMOs have more to lose when

mental health costs go up, because employers

usually buy HMO products on a capitated

basis. He also notes that if mental health

costs go up for PPOs and POS plans, they

have less to worry about because they are

often paid ASO, which protects them from

financial risk. 

The rapid growth of specialty contracting

may reflect the emergence of specialized

techniques for managing mental health care

that MCOs do not regard as part of their

“core technologies.” MCOs also are concerned about their own ability to manage

mental health costs (particularly in response

to parity laws). One industry expert indicated

that state parity laws are driving the trend

toward MCO carve-outs: “Requiring unlimited parity is scaring the health plans, makes

[sic] them more likely to carve out, because

they are worried about increased demand

and higher costs.”

Most MCOs place the MBHO at full risk

for cost overruns, albeit with upper limits

on profits and/or losses. If MBHOs respond

to profit opportunities by using overly strict

review criteria and overmanaging providers,

individuals with mental health problems

may be undertreated. On the other hand,

MCOs with internal provision may face

16 Special Report
these same incentives if they are themselves

capitated by employers. Also, the effect of

strong risk incentives may be partially

counterbalanced by national accreditation

requirements or the retention of final

decision-making authority by MCOs in

cases of disputes over treatment authorization (Hodgkin et al., 2000; Sturm, 2000).

In addition, the widespread use of performance standards in contracts suggests

that MCOs are typically attempting to

monitor vendor performance in selected

areas, although few of the common standards are closely tied to clinical quality of

care. Lower use of performance standards

in PPO products may occur because until

recently PPOs were not being accredited

by the National Committee on Quality

Assurance and therefore had less need to

monitor their contractors. In the future,

however, more attention may be focused

on performance measures for mental health

in carve-out contracts as more national

attention is focused on quality of care in

general (Institute of Medicine, 2001) and

new consumer survey approaches to monitoring the quality of mental health services

are adopted (e.g., ECHOTM, 2002).

The Provision of Mental Health Services in Managed Care Organizations 17

IV.

The kinds of mental health services that managed care

enrollees receive, and the amounts they must pay out of

pocket, are influenced by what their insurance covers. In private insurance plans, the benefits package remains an important determinant of service availability, although its impact on access to services

has become increasingly influenced by other insurer activities, such as

utilization management (Frank & McGuire, 1998), described in

Chapters VI and VII. This chapter reports on the types of services covered, the generosity of the benefits offered in terms of annual or lifetime

limits, and the level of out-of-pocket expenses (cost sharing) that an

enrollee must pay for services. It also discusses the extent to which mental health coverage is less generous than general medical coverage—the

“parity” question—which has been a focus of legislative initiatives at the

Federal level and in many States (Gitterman, Sturm, & Scheffler, 2001).

Finally, the chapter reports on the extent of coverage for prescription

drugs, which have become increasingly central to mental health treatment in recent years as a result of pharmaceutical innovations. 

Benefits

Types of Mental Health Services

Covered

The great majority of managed care organization (MCO) products (96% or more)

cover inpatient hospital, intensive outpatient

(including day treatment and partial hospitalization), and regular outpatient care

(Figure IV.1). The proportion covering

nonhospital residential care, such as group

homes or acute residential care, is somewhat

lower (71%). 

Coverage Limits

Insurers typically only pay for types of care

covered in the benefit package, but inclusion

does not guarantee that the full cost of treatment will be covered for a particular episode

of care. This is because benefit packages often

have limits, including annual and lifetime

limits, for behavioral health services. These

limits can be defined in terms of episodes,

days of treatment, or dollar amounts. Limits

also may be imposed on specific service

types, such as inpatient hospital and regular

outpatient care.

About 27% of products use a lifetime

limit on mental health benefits: 21% have a

lifetime dollar limit, and 6% have a lifetime

limit on covered inpatient days (Figure IV.2).

Annual limits are imposed by 92% of products and are much more commonly used

The Provision of Mental Health Services in Managed Care Organizations 19
20 Special Report

Percentage of Products

0 100

Inpatient

Nonhospital

Residential

Intensive

Outpatient

Outpatient 99

96

71

99

Figure IV.1: Percentage of Products Covering Selected Mental Health

Services

Note: Percentages are based on products for which these questions were answered; missing data are less than 5%.

Percentage of Products 0 100

Annual

Outpatient

Limit

Annual

Inpatient

Limit

Lifetime

Limit

Dollars Days/visits No limit

8

8

21

80

78

6

12

14

73

Figure IV.2: Types of Limits on Mental Health Benefits 

Note: Based on products for which limits were reported; missing data are 9% for lifetime, 13% for annual inpatient,

and 8% for annual outpatient.
than lifetime limits. Annual limits for inpatient care usually restrict the number of

days (78% of products) rather than the total

spending (8% of products). A similar pattern

is observed for outpatient care, with limits

on visits much more common than limits on

spending. These patterns may reflect plans’

responses to the Federal 1996 Mental Health

Parity Act, which regulated dollar limits but

not day and visit limits. The act prohibited

insurers from applying lower dollar limits on

covered services for mental health than for

general medical care (General Accounting

Office, 2000). 

For this report, variation in the three most

commonly used types of limits (outpatient

visits, inpatient days, lifetime spending) was

examined. Among plans applying annual

limits to outpatient visits, the most common

limits are 20 visits (found in 41.0% of products) and 30 visits (46.1% of products). Only

2.3% of these products have limits of fewer

than 20 visits (Table IV.1). Among products

that limited inpatient days, the most common limit is 30 days (56.2% of products).

However, 26.8% of these products have

limits lower than 30 days (Table IV.2).

Among products with lifetime dollar

limits, 14.5% have limits of more than

$1 million, but most have much lower limits,

with 41.3% of these products having limits

of $25,000 or less (Table IV.3).

Copayment and Coinsurance

Requirements for Outpatient Care

Private insurers often require enrollees to

pay part of the cost of care, either as coinsurance (a set percentage of charges) or as

The Provision of Mental Health Services in Managed Care Organizations 21

Table IV.1. Distribution of Annual Limits on Outpatient Mental Health Visits

Visits Covered Percentage of Products With Limit* Percentage of All Products

Less than 20 2.3 1.9

20 41.0 32.8

21–29 3.8 3.0

30 46.1 36.9

More than 30 6.8 5.4

Total 100.0 80.0

*Based on the 80% of products that had annual limits on outpatient visits. 

Table IV.2. Distribution of Annual Limits on Inpatient Mental Health Days

Days Covered Percentage of Products With Limit* Percentage of All Products

10 or less 7.4 6.0

12–16 8.9 7.2

20 9.3 7.5

21–25 1.2 1.0

30 56.2 45.6

More than 30 17.0 13.8

Total 100.0 81.1

*Based on the 81% of products that had annual limits on inpatient days.
copayments (a flat dollar amount per

encounter or prescription). Several studies

have shown that demand for mental health

services is affected by the level of cost sharing (Horgan, 1986; Keeler, Manning, &

Wells, 1989; Simon et al., 1996), suggesting

that the burden created by high levels of

cost sharing may deter enrollees from seeking needed care.

The vast majority of MCO products

(97%) require either copayments or coinsurance for outpatient visits (Figure IV.3). Cost

sharing varies widely by product type.

Coinsurance is much more common in PPOs

(55% of products use it) than in HMOs

(12%). Conversely, HMOs and POS plans

are much more likely to use copayments.

POS plans do not differ significantly from

22 Special Report

Table IV.3. Distribution of Lifetime Dollar Limits 

on Plan Payments for Mental Health

Maximum Plan Payment Percentage of Products With Limit* Percentage of All Products

$5,000 or less 17.1 3.6

$10,000-$20,000 12.7 2.7

$25,000 11.5 2.4

$30,000 or $50,000 4.4 0.9

$1 million 39.8 8.3

More than $1 million 14.5 3.0

Total 100.0 20.9

*Based on the 21% of products that had lifetime dollar limits on plan payments.

5

0 3 3

55

12 13

30

40

87 85

67

Percentage of Products

0

100

None Coinsurance Copayment

 Total HMO POS PPO

Figure IV.3: Percentage of Products Using Copayment or Coinsurance

for Outpatient Mental Health Visits (by Product Type) 

Note: Based on products that reported on mental health cost sharing; missing data are 9%. 
HMOs with respect to the use of coinsurance

or copayments for mental health services.

Figure IV.4 shows that those products with

specialty contracts for mental health care

report a greater use of copayments (84%)

than do products with comprehensive (18%)

and internal (63%) arrangements.

Among plans with coinsurance for mental

health services, consumers were required to

pay an average of 35.7% (Table IV.4).

Among plans requiring copayments, the

mean copayment was $18. Differences in

mean cost-sharing by product type are not

statistically significant. 

Comparison of Cost Sharing for Mental

Health and General Medical Care

For outpatient general medical care, the average coinsurance rate is 20% and the average

copayment is $12 (Figure IV.5). These levels

are substantially lower than those for outpatient mental health care detailed above. 

The Provision of Mental Health Services in Managed Care Organizations 23

0

None Coinsurance Copayment

Total Specialty Comprehensive Internal

Percentage of Products

100

0

11

2 3

37

71

14

30

63

18

84

67

Figure IV.4: Percentage of Products Using Copayment or Coinsurance

for Outpatient Mental Health Visits (by Contracting Arrangement) 

Note: Based on products that reported on mental health cost sharing; missing data are 9%.

Table IV.4. Average Coinsurance and Copayment Rates

for Outpatient Mental Health (by Product Type)

Product Type Average Coinsurance Average Copayment

HMO 40.1% $17.67

POS 35.1% $18.00

PPO 35.0% $18.62

All 35.7% $18.00

Note: Average coinsurance is the average (across products using coinsurance) of the consumer’s share of cost,

expressed as a percentage of total cost. Average copayment is the average across products using copayments. 
Given policy concerns about the impact

of high cost sharing, one should consider not

only the mean levels but also the distribution

of copayments and coinsurance, including a

comparison with coinsurance and copayments for medical services. Forty-six percent

of all products require copayments of $20 or

more for mental health care, as compared

with only 9% of products that have copayments this large for general medical care

(Table IV.5). Similarly, 18% of products

require enrollees to pay 30% or more for

mental health services, compared with only

2.5% of products requiring this much coinsurance for general medical care. These

findings highlight the potentially higher

burden placed on enrollees seeking mental

health services compared with general

medical services depending upon the actual

cost of services (Hodgkin et al., 2003). 

Prescription Drug Cost Sharing

Prescription drugs are an important part of

mental health care because of significant

advances in the use of pharmaceuticals in the

treatment of mental disorders over the past

several years, with a corresponding increase

in their use and costs (Foote & Etheredge,

2000). Thus, any discussion of the extent

of mental health insurance coverage must

include information about how prescription

drugs are covered.

For prescription drugs, as for other services, plans can choose whether to require

enrollees to pay a share of the cost (coinsurance) or a fixed amount (copayment), usually per prescription. Another key issue is

that many plans use different cost-sharing

levels for brand-name and generic drugs.

More recently, many plans have been identifying one brand in a drug class as “preferred,”

relegating the other brands to a “third tier”

with even higher copayments (e.g., $25

rather than $10). This practice was not

addressed in this survey, as it was not yet

widespread at the time of survey design.

In the study sample, copayments for prescription drugs were much more common

than coinsurance. Among products with

drug cost sharing, 93% require copayments

for generic drugs and 92% for brand-name

drugs. Most of the remainder require coinsurance. Cost-sharing arrangements are

consistently higher for brand-name drugs.

Among products requiring copayments, the

mean is $8 for generic drugs and $13 for

brand-name drugs (Figure IV.6). This reflects

a widespread practice among health insurers

24 Special Report

0

General

Medical

Mental

Health

Average Average

Coinsurance Copayment

Average Coinsurance/Copayment

50

$18

36%

$12

20%

Figure IV.5: Average Coinsurance

and Copayments for Outpatient

Mental Health and General

Medical Visits 

Note: Average coinsurance is computed for plans

using coinsurance. It is the average (across

products) of the consumer’s share of cost.

Average copayment is computed for plans

using copayment.
of using differential cost sharing to steer

consumers toward generic drugs. Similarly,

the mean coinsurance rate is considerably

higher for brand-name drugs (46%) than for

generics (34%), although as noted, coinsurance is much less common. The distribution

of copayment amounts shows that 93% of

products with copayments charge consumers

$10 or less per generic prescription, but only

50% charge $10 or less for brand-name prescriptions (Figure IV.7). At the other end,

20% of products charge more than $15 for

a branded prescription, but only 1% of

products do so for a generic prescription.

Discussion

Substantial restrictions on mental health

benefits coverage are common in many

managed care plans. This chapter reports

that about one-third of products do not

cover mental health care in residential facilities. A majority of plans have annual limits

on outpatient visits (most often 20 or 30

visits) and on inpatient days (most often

30 days), and dollar limits are less common

than was reported in previous studies.

Furthermore, outpatient visits are subject

to substantial cost sharing, which is notably

higher for mental health than for general

medical care. Most plans require copayments for prescription drugs, averaging

$13 for brand drugs and $8 for generics.

These restrictions and limitations exist

despite the presumed ability of MCOs to

control costs by other means (e.g., precertification, network selection). 

The Provision of Mental Health Services in Managed Care Organizations 25

Mental Health General Medical 

Cost-Sharing Approach (Percentage of Products) (Percentage of Products)

No Cost Sharing 3.0 3.3

10% coinsurance 2.6 4.0

15% coinsurance 1.5 3.6

20% coinsurance 7.1 13.7

30%–35% coinsurance 1.8 0.5

40% coinsurance 0.9 0.0

50% coinsurance 15.6 2.0

Coinsurance Total 29.6* 23.8

$5–$7 copayment 1.1 3.0

$10 copayment 12.6 39.9

$15 copayment 7.8 10.2

$20 copayment 39.2 8.3

$25 copayment 5.3 0.9

$35–$50 copayment 1.3 0.0

Copayment Total 67.4* 62.4*

Not Known 0.0 10.4

Grand Total 100.0 100.0

Note: Based on products that reported on mental health cost sharing; missing data are 9%.

*Sum of individual entries may not match reported subtotals or totals exactly, due to rounding.

Table IV.5 Distribution of Outpatient Coinsurance and Copayment Amounts

Across All Products
Covered Services

It is noteworthy that nearly one-third of

products do not cover mental health care in

residential facilities. This is an improvement

compared with at least one other study,

which found that two-thirds of employers

in a 1995 survey did not cover nonhospital

residential care (Buck & Umland, 1997). The

persistence of noncoverage may be because

mental health insurance evolved from medical

insurance, and not all insurers adapted the

benefits to cover settings unique to behavioral

health care. In contrast, almost all products

cover inpatient and outpatient settings, which

are part of traditional medical coverage. 

Limits

The study reports less use of dollar limits

than in previous research conducted before

implementation of the Federal parity law in

1998 (the law was passed in 1996). Only 8%

of products in this study used annual dollar

limits for inpatient care and for outpatient

care; in contrast, a previous study found that

in 1997 around a quarter of plans used annual dollar limits in their most prevalent product (Buck et al., 1999). Continued use of dollar limits for mental health was legal under

federal law as long as they were not tighter

than limits for medical care. It appears that,

as reported elsewhere, many plans have

moved from using dollar limits to using day

or visit limits (Sturm & Pacula, 2000).

MCOs also are subject to State regulation

of benefits for their non-self-insured products, and many States have passed their own

parity laws. In interviews, one respondent

from a multistate MCO expressed concern

about the “patchwork” character of State

regulation of benefits and that these differences provided an incentive to contract out,

allowing the contractor to worry about compliance within States. 

Copayments and Coinsurance

The cost-sharing requirements documented

here for outpatient mental health care are

substantial, with around 46% of products

requiring copayments of $20 or more and

another 15% of products requiring enrollees

to pay half the cost of care (50% coinsurance). Both types of cost sharing tend to discourage people from seeking or continuing

treatment, or impose sizable burdens if treatment does continue for long. 

Mental Health Versus General Medical

Outpatient Cost Sharing

It is not surprising that outpatient cost-sharing

requirements are considerably lower for

general medical care than for mental health.

26 Special Report

$8

34%

$13

46%

0

Generic Brand Name

Average Average

Coinsurance Copayment

Average Coinsurance/Copayment

50

Figure IV.6: Average Coinsurance

and Copayment Rates for

Prescription Drugs 

Note: Mean copayment is computed only for products

requiring copayment. Mean coinsurance is computed only for products requiring coinsurance.
Cost-sharing differences were not addressed

by the 1996 Federal parity law, and although

some States have laws that require equal cost

sharing, the laws do not apply to self-insured

employer plans. 

Prescription Drug Cost Sharing

This study finds that among plans that

require cost sharing for prescription drugs

to treat mental health conditions, most

require copayments rather than coinsurance. Apparently, many products require

copayments for drugs even though they

use coinsurance for visits to providers. The

dominance of copayments may have eroded

somewhat since our survey, as some plans

are reportedly turning to coinsurance for

drugs as a way to increase consumer costconsciousness (Katz, 2001). Copayments

in this study were $5 higher on average for

brand-name drugs than for generics, foreshadowing the more recent emergence

of three-tier plans that charge even higher

copayments for nonpreferred brands.

One informant noted in an interview that

“mental health drugs are more likely to

be in the third [i.e., costliest] tier of threetier programs.”

Through a variety of routes—ranging from

exclusion of some services from coverage,

to limits, to cost sharing—MCOs continue

to exercise control on the type and amount

of services their enrollees receive. Despite

systematic variation in their approaches

(with health maintenance organizations

and point-of-service products more likely

than preferred provider organizations to

use copayments, for example), all MCOs

use the benefit structure to influence mental

health treatment.

The Provision of Mental Health Services in Managed Care Organizations 27

0

$1–5 $6–10 $11–15 $16–25

Percentage of Products

100

51

6

1

15

35

31

20

42

Generic Brand Name

Figure IV.7: Distribution of Copayment Amounts for Prescription Drugs

Note: Based on the 53% of products for which questions about drug cost sharing and required copayments

were answered.

V. Screening

and Treatment

in Primary Care

Primary care offers the opportunity to

identify mental health problems at early

stages and to treat or refer patients for care.

Estimates suggest that 20% to 40% of all

patients seen in primary care settings have

a diagnosable mental disorder or distress

that could interfere with daily functioning

(Higgins, 1994; Barrett, Oxman, & Gerber,

1998). In 1996, the U.S. Preventive Services

Task Force found insufficient evidence to

recommend for or against routine screening

for depression with standardized questionnaires (U.S. Preventive Services Task Force,

1996). In May 2002, however, the updated

recommendation by the task force is for

“screening adults for depression in clinical

practices that have systems in place to

assure diagnosis, effective treatment and

follow-up” (Pignone et al., 2002; U.S.

Preventive Services Task Force, 2002).

Moreover, formal screening tools increasingly are available to assess mental health

problems (e.g., Zung Self-Assessment

Depression Scale, Beck Depression Inventory,

General Health Questionnaire, or Center

for Epidemiological Study Depression Scale

[Williams et al., 2002]), and a recent review

article recommends screening of select

patients whose profiles suggest increased

risk (Whooley & Simon, 2000). These

instruments are not widely used, however,

and PCPs generally have a difficult time

detecting mental disorders such as anxiety

and depression (Von Korff et al., 1987;

Wells et al., 1989; Heneghan et al., 2000). 

Requirements for Mental Health

Screening in Primary Care

Overall, 21% of products require PCPs

to conduct screening for mental health

disorders, including 2% that require

specific mental health screening only,

The Provision of Mental Health Services in Managed Care Organizations 29

This study is one of the first to explore MCOs’ policies on the

screening and treatment of mental health disorders in primary

care settings, including the requirements for screening, conditions that trigger screening for mental health disorders, and support for

primary care practitioners (PCPs) through the distribution of relevant

practice guidelines (Garnick et al., 2002). MCO medical directors were

asked whether PCPs are required to use standard screening questionnaires, such as the Zung Depression Index, or questionnaires on mental

health developed by their MCO.
13% that require general screening instruments that include mental health, and 6%

that require both approaches. It is also

important to note that for 12% of products, respondents did not know if specific

mental health screening was required

(Figure V.1). Of the small number of products that require screening for mental

health disorders, 93% report allowing

PCPs’ clinical judgment to determine what

types of patients to screen. Around 63%

report requiring screening of all new

patients and 67% report relying on specific conditions to trigger screening. Only

28% of those products that require any

screening for mental health problems in

primary care settings also report that

they require such screening for all patients

on a periodic basis. For the 5% of products

that report screening requirements as a

result of trigger conditions, the most commonly cited conditions are chronic pain,

the presence of a substance abuse problem,

and sleep problems.

Practice Guidelines for Mental Health

Treatment in Primary Care

Practice guidelines, defined as “systematically

developed statements to assist practitioner

and patient decisions about appropriate

health care for specific clinical services” have

been published in recent years for the primary care treatment of mental disorders in

both children and adults (Birmaher, Brend,

& Benson, 1998; ICSI, 1999). Practice guidelines can offer direction and support to PCPs

in providing appropriate mental health care

or referring patients to mental health specialists. While MCOs were not asked what

organization wrote the practice guidelines for

primary care, the study did find that most

MCOs with specialty behavioral health

guidelines used self-developed ones. (See

Chapter VIII.) It also examined the distribution of behavioral health practice guidelines

to PCPs, the topics covered by those practice

guidelines, and whether there were differences in the distribution of guidelines

depending on screening requirements.

Overall, guidelines were distributed in 51%

of products, with PPO products less likely to

do so (Table V.1). In addition, products with

comprehensive contracts were less likely than

either products with specialty contracts or

those with internal provision of mental health

services to distribute guidelines. For products

that distribute practice guidelines, we compared the topics covered in the guidelines for

those products that require screening and

those that do not (Table V.2). Among products with required mental health screening,

85% or more distribute guidelines addressing

the provision of brief interventions, consultations with specialty practitioners, and patient

education. Only 66% distribute guidelines

addressing the prescribing and monitoring of

psychotropic medications. The proportion of

30 Special Report

No

 80%

Yes

8%

Don’t

Know/

Missing

12%

Figure V.1: Percentage of Products

Reporting Screening for Mental

Health Problems
products distributing each guideline topic was

not significantly different between products

that did and did not require screening.

Discussion

Few MCO commercial products require

mental health screening activities in primary

care settings. MCO executives did not find

the national statistics on screening to be surprising. According to an MCO executive,

“There is very low attention to the detection

of mental health and substance abuse problems. Welcome to the real world.” 

The medical literature includes recent

review articles supporting the effectiveness of

primary care screening in identifying individuals with mental health problems such as

depression (Williams et al., 2002) and providing guidance for treatment in primary

care settings (Whooley & Simon, 2000;

Pignone et al., 2002). Thus, the infrequent

requirement for mental health screening by

MCO products represents a lost opportunity

to identify people whose mental problems

otherwise may go unnoticed and untreated. 

Discussions with MCO representatives

also shed light on why mental health screening is not more often required. Among reasons for low screening rates, MCO executives reported that many believe that it is

difficult to find a screening instrument that

is brief, easy to score, and easy to interpret.

Also, they reported that it is difficult to monitor whether screening is done in primary

care and that PCPs may not feel competent

to address mental health issues once those

issues are detected. Nonetheless, with the

recent publication of national recommendations endorsing screening for depression

in primary care, MCOs may now feel a

stronger imperative to require screening than

they did at the time of our survey in 1999.

The Provision of Mental Health Services in Managed Care Organizations 31

Product Type Contracting Arrangement

N Total HMO POS PPO Specialty Comprehensive Internal

Yes 3,091 51.0 62.0a 61.2b 31.7a, b 64.4a, b 28.2a 32.8b

No 2,348 38.8 17.0 32.7 67.4 18.8 71.0 66.9

Don’t know/

missing 620 10.2 20.9 6.1 0.8 16.8 0.7 0.3

Total 6,059 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

Note: Pairs that share superscript letter within row and section are significantly different, p < 0.01. Not all totals equal 100% owing

to rounding. 

Table V.1. Percentage of Products That Distribute Practice Guidelines to PCPs,

by Product Type and Contracting Arrangement 

Provision of

Screening Provision Prescribing Consulting With Criteria for Educational 

Required for of Brief and Monitoring Specialty Referring Out to Materials

Mental Health Interventions (%) Medications (%) Practitioners (%) Specialty Care (%) to Patients (%)

Yes 84.9 65.5 92.7 60.7 92.5

No 93.6 80.8 96.0 52.8 85.1

Note: Based on the 51% of products that distribute guidelines.

Table V.2. Percentage of Products With Practice Guidelines That Address

Specific Topics, Among Those Requiring Guideline Distribution 

VI.

Previous studies have documented the overall use of specialty

mental health care (Regier et al., 1993; Kessler et al., 1999) and

examined the effects of various managed care approaches on

behavioral health services. (See review articles by Mechanic, Schlesinger,

& McAlpine, 1995; Grazier & Eselius, 1999; Sturm, 1999.) However,

no national estimates of specialty mental health treatment entry arrangements in commercial managed care plans have been documented. This

chapter reports key findings regarding referral and prior authorization

procedures for enrollees in managed care products.

Entry Into

Specialty Treatment

Facilitating entry into mental health care

is important, since two-thirds of people with

mental disorders do not obtain treatment

(Regier et al., 1993). Possible reasons for

this unmet need include stigma, lack of

recognition of mental disorders by both

individuals and providers, discriminatory

and inadequate insurance benefits, lack of

awareness that effective treatments exist,

added barriers for subgroups such as racial

and ethnic minorities, and confidentiality

concerns (DHHS, 1999).

MCOs use a variety of managed care

techniques to structure access to specialty

mental health services. MCOs may allow

enrollees to self-refer to specialty mental

health care by calling specialty providers

directly for an appointment, have telephone

referral centers, or require enrollees to

obtain referrals from a primary care physician (PCP) or an employee assistance

program (EAP). Furthermore, prior authorization or precertification may be required

for treatment to be covered. 

Referral Process

Direct Self-Referral and Phone Center Referral

Overall, 90% of products allow direct selfreferral or require enrollees to call a designated phone number for referral (Figure VI.1).

Enrollees’ opportunity to self-refer or access

specialty mental health treatment via a phone

center is significantly more likely in PPO

products (97%) than in HMO products

(91%), although the large majority of all

product types have one of these features.

A greater proportion of products with specialty contracts (95%) than products with

comprehensive contracts (91%) or internal

arrangements (88%) report these approaches. 

Primary Care and EAP

Gatekeeping Mechanisms

Although primary care gatekeeping was a

hallmark of HMOs earlier in the evolution

of managed care, we found that only about

8% of products overall and 11% of HMO

products require enrollees to obtain a

The Provision of Mental Health Services in Managed Care Organizations 33
referral from a PCP in order to access specialty mental health treatment (Figure VI.2).

Another 2% of all products required EAP

referral for access to specialty mental health

services. HMO products are significantly

more likely than PPOs to report the need

for a referral from a PCP or an EAP. No

significant differences were found by contracting arrangement.

Prior Authorization Requirements

Regardless of the referral process, prior

authorization or precertification may be

required for different levels of care. This

may involve providers, rather than patients,

needing to seek authorization for services

before initiating them. Prior authorization

may include a range of procedures, from

calling a phone center for essentially automatic authorization of outpatient care to

undergoing a clinical assessment and triage

process prior to accessing care.

The study asked about four levels of

mental health care: inpatient hospital, nonhospital residential, intensive outpatient

(including day treatment), and outpatient

counseling. Prior authorization for inpatient

hospital care is virtually universal, regardless

of product type (Table VI.1), while for most

other levels of care, PPOs are significantly

less likely to require prior authorization.

For instance, among products that cover

outpatient counseling, 90% of HMOs

require prior authorization, compared with

74% of point-of-service (POS) products

and 40% of PPOs. Requirements for prior

authorization also differ by contracting

arrangement. Products with specialty contracts are much more likely to require prior

authorization than comprehensive contract

34 Special Report

0 Percentage of Products 100

Product Type

Total

Internal

Comprehensive

Specialty

PPO

POS

HMO

Contracting

Arrangement

92

88

91

95*

97

89

91#

Figure VI.1: Percentage of Products With Direct Self-Referral

or Phone Center Referral for Specialty Mental Health Services

(by Product Type and Contracting Arrangement)

# HMO different from PPO, p < 0.05.

* Specialty different from comprehensive and internal, p < 0.05.

Note: Missing data are less than 5%.
or internal products, for all settings except

inpatient hospital care. 

Availability of 24-Hour Crisis Services 

Entry into mental health care may be precipitated by (or ongoing treatment marked

by) a sudden crisis. The vast majority of

products offer emergency room (ER) (96%)

and telephone triage (82%) services (Figure

VI.3). A smaller number of products, 58%,

report having in-person crisis services available. HMO products were significantly

more likely to offer phone triage/referral

and in-person services compared with PPOs.

The Provision of Mental Health Services in Managed Care Organizations 35

2

2

2

1

3

8

14

10

6

3

11

2*

11#

Product Type

Total

Internal

Comprehensive

Specialty

PPO

POS

HMO

Contracting

Arrangement

0 2 4 6 8 10 12 14 16

0

PCP Referral EAP Referral

Figure VI.2: Percentage of Products With PCP or EAP Gatekeeping

for Specialty Mental Health Services (by Product Type and

Contracting Arrangement)

# HMO different from PPO, p < 0.01.

*HMO different from PPO, p < 0.05.

Note: Missing data are less than 4% in all categories.

Product Type Contracting Arrangement

Total HMO POS PPO Specialty Comprehensive Internal

Inpatient hospital 93.1 94.8 90.0 93.3 93.8 93.5 91.2

Nonhospital residential 69.7 69.8a 91.2a 58.1a 80.7a 45.0a 50.0

Intensive outpatient 75.8 90.7a 83.9b 53.2a,b 93.1a 37.9a 55.9a

Outpatient counseling 68.4 90.3a 73.9a 39.8a 90.6a,b 36.2a 35.0b

Note: Products not covering service are excluded. Missing data are less than 15% for each category except: nonhospital residential,

PPO (23.3%), internal (45.8%); intensive outpatient, internal (26.4%); outpatient counseling, internal (20.4%). Products within

row and section that share superscript letters are significantly different, p < 0.01.

Table VI.1. Percentage of Products Requiring Prior Authorization

for Mental Health Services
Discussion

The large majority of products feature either

direct self-referral or referral through a

phone center. This was true for all product

types and contracting arrangements. While

the HMO model often is associated anecdotally with primary care gatekeeping, this survey found that this approach was infrequent

for mental health, probably due to the high

rate of specialty contracting among HMOs.

Required EAP referral also was rare. Prior

authorization is usually required for all

levels of care but is most prevalent among

HMO and specialty contract products.

For some enrollees, the possibility of referral to specialty mental health providers without primary care or EAP gatekeeping will

be experienced as freedom from constraints

or privacy concerns and may increase the

likelihood of seeking needed care. As one

managed behavioral health care organization

executive said, “There are already too many

barriers preventing people from seeking

mental health treatment. The best thing to

do both clinically and economically is to

remove the barriers that limit access to

care.” However, we do not know how direct

self-referral differs from phone center referral

from the enrollee point of view. Furthermore,

some may benefit from the triage that phone

centers or primary care gatekeepers can provide. One industry expert reported: “When

someone calls the phone center number for

a mental health referral, it is virtually guaranteed that they will get a referral for care.

The only question is what type of treatment. The goal is to connect the person

with appropriate care, not to deny care.”

36 Special Report Percentage of Products

0

100

 In-Person Services #

82

58

96

94

66

97

82

68

95

68

44

97

Phone ER Services

Triage/Referral*

Total HMO POS PPO

Figure VI.3: Availability of 24-Hour Mental Health Crisis Services

*All pairs different, p < 0.01. # PPO different from HMO and POS, p < 0.01.

Missing data are less than or equal to 5% in all categories.
VII.

The treatment process is multifaceted and is shaped by both

administrative and clinical factors. For managed care

enrollees who need mental health services, their experiences

can be greatly affected by MCO policies and practices. For example, the

time an enrollee must wait until a first appointment may influence

whether he or she follows through. The kinds of questions asked when

an enrollee calls a phone center referral line may hinder or facilitate getting needed care. Because of the potential impact on enrollees, therefore,

it is critical to understand the range of MCOs’ approaches to policies

that influence care for people with mental health problems.

Treatment Process

The survey inquired about aspects of the

treatment process that MCOs have direct

influence over, including policies setting standards for timely first appointments, the types

of clinical personnel providing treatment,

standards regarding prompt follow-up after

discharge from inpatient care, and special

services for patients with dual diagnoses of

mental health problems and substance abuse.

Another area that can affect the specialty

mental health treatment process—the use of

practice guidelines—is discussed in Chapter

VIII as a quality management activity.

Data also were collected regarding utilization management, “a set of techniques

used by or on behalf of purchasers of health

care benefits to manage mental health costs

by influencing patient care decision-making

through case-by-case assessments of the

appropriateness of care prior to its provision” (Institute of Medicine, 1989). These

techniques may include mechanisms to

control initial access to care (such as the

gatekeeping and precertification procedures

discussed in Chapter VI), periodic or concurrent review and authorization for treatment, and case management for specific

categories of patients. MCOs vary by the

type of professionals and organizations used

to perform initial review and by who has

authority to deny care for outpatient and

inpatient treatment. There is also variation

in the types of case management programs,

the types of professionals working as case

managers, and the different functions that

case managers perform.

A number of studies have examined the

process and effects of utilization management for behavioral health services. (Recent

examples include Frank & Brookmeyer,

1995; Howard, 1998; Wickizer & Lessler,

1998; Liu, Sturm, & Cuffel, 2000.) These

studies generally suggest that certain strategies do result in a lower quantity of treatment—sometimes directly through denials

or approving less treatment than requested,

The Provision of Mental Health Services in Managed Care Organizations 37
but sometimes through a “sentinel effect”

in which the very existence of the utilization

management system seems to deter higher

use of services. However, this study is the

first to describe the prevalence of a variety

of treatment process factors within MCOs

on a national basis. This chapter presents

some key findings on this topic.

Providers of Mental Health Treatment 

Mental health practitioners have different

training and backgrounds. They include

psychiatrists, doctoral-level psychologists,

clinical social workers, clinical nurse specialists, nurse practitioners, marriage and

family therapists, and master’s-level psychologists and counselors. For both individual and group counseling, master’s-level

clinicians and doctoral-level psychologists

were most often reported to “frequently”

provide these services. The lower frequency

of psychiatrists in both categories may

reflect a decreasing role for psychiatrists

in the provision of psychotherapy and an

increasingly exclusive focus on providing

psychopharmacology services. 

Standards for Wait Time

to Appointments

An important aspect of access to treatment

is to provide timely initial appointments

once individuals request services. About

three-quarters of all products report having

formal standards for maximum wait time

from request for treatment to initial

appointment (Figure VII.1). Continuing

treatment in an outpatient setting following

discharge from a psychiatric hospitalization

is also generally accepted as necessary.

Close to half of all products (43%) reported

having standards regarding time limits for

follow-up mental health visits after discharge

from hospital or residential care (Figure

VII.2). HMOs and specialty contract products are most likely to have both types of

standards (data not shown).

38 Special Report

76

76

74

Percentage of Products

0 100

Emergency

Care

Urgent

Care

Routine

Care

Figure VII.1: Percentage of Products With Standards for Maximum Time

to Initial Appointment 

Note: Missing data are less than 4% per category. 
Services for Patients

With Both Mental Health

and Substance Abuse Problems

A substantial proportion of people with

mental health problems also have substance

abuse disorders. For patients with mental

disorders who are seen in specialty treatment

settings, about one-fifth have had a substance

abuse disorder within the past six months

(Regier et al., 1990). For those persons with

co-occurring mental illness and substance

abuse, diagnosis and treatment can be especially complex, and integrated treatment

approaches are promising, although additional research is needed on their effectiveness (RachBeisel, Scott, & Dixon, 1999;

Herman et al., 2000; Primm et al., 2000;

Watkins et al., 2001).

We found that about half of all products

reported having specialized providers or

treatment programs to treat this dually diagnosed population (Figure VII.3). HMOs

were more likely (71%) to have these compared with PPOs (39%) or POS products

(35%). Comprehensive contract products

were less likely to have specialized providers

or treatment programs (data not shown).

One-sixth of all products had specific treatment guidelines for the dually diagnosed,

and one-quarter had special criteria or

procedures for treatment authorization. 

Utilization Review Personnel

This study asked about the types of personnel who conduct initial reviews of requests

for additional mental health care. Master’slevel clinicians were most often reported to

“frequently” perform this review, followed

by registered nurses. Only 2% of products

report that administrative staff perform

this function. As it is generally known that

physicians rarely perform this first level

of review, the study did not ask with what

frequency they do so.

If reviewers decide that the treatment

requested is inappropriate or unnecessary,

often they do not have authority to implement

that denial themselves. Psychiatrists are the

professionals most often “frequently” granted

authority to deny care for both inpatient

and outpatient treatment, followed by other

physicians and doctoral-level psychologists.

In about two-thirds of products, master’slevel clinicians and registered nurses are never

authorized to deny care for either inpatient or

outpatient treatment. HMO products are less

likely to authorize nonpsychiatrist physicians,

and comprehensive contract products are less

likely to authorize psychiatrists.

Organizational Responsibility for

Initial Utilization Review and Appeals

Across all products, more than half delegate

initial utilization review MBHOs (Figure

VII.4). The MCO retains direct responsibility

for initial review for roughly one-quarter of

The Provision of Mental Health Services in Managed Care Organizations 39

DON'T KNOW/

MISSING

6%

YES

43%

NO

 51%

Figure VII.2: Percentage of

Products With Standards for

Time to Follow-up Visits After

Inpatient/Residential Discharge 
all products, and about 11% use a utilization

review vendor for this purpose.

When a denial results from this initial

review, an enrollee or provider may appeal.

External review programs to provide an

independent review of an MCO’s decision

to deny, reduce, or terminate treatment have

been proliferating quickly and have been the

focus of attention from managed care accrediting organizations (Dallek & Pollitz, 2000).

Overall, MCOs usually delegate initial

appeals to other organizations; only about

one-third decide initial appeals themselves

(Figure VII.4). Among products with specialty

contracts, over half report that MBHOs

review initial appeals. For products with

comprehensive contracts and internal products, more than half delegate this responsibility to utilization review vendors or other

external organizations, including independent

review organizations (data not shown). 

While products typically allow an external

vendor or MBHO to rule on initial appeals

of the denial of care, 70% of products retain

the responsibility for final appeals decisions.

There is little variation by product type,

although there is variation for products with

different contractual arrangements. Products

with specialty contracts are most likely to

report that the MCO is the organization

responsible for the final appeals decision. 

Mental Health Case

Management Programs

Case management for persons with mental

disorders is common. Overall, 87% of

40 Special Report

51

16

25

71

16

29

35

22 23

39

14

21

Percentage of Products

0

100

Total HMO POS PPO

Specialized Providers or

Treatment Programs*

Specific Treatment

Guidelines

Special Criteria/Procedures

for Treatment Authorization

Figure VII.3: Percentage of Products With Specialized Approaches

to Dually Diagnosed Patients 

*HMO different from POS and PPO, p < 0.01.

Note: Missing data are less than or equal to 8% except specialized providers or treatment programs/POS are 12%,

specialized providers or treatment programs/PPO are 9%, and special criteria/procedures for treatment

authorization/POS are 10%. 
products report having a case management

program (Figure VII.5). Coordination of

services is the most commonly provided case

management activity (85% of all products),

followed by helping patients to access community resources (76%), flexing or extending

client benefits (62%), and finally, meeting

regularly with clients in person or over the

phone (46%) (Figure VII.6). Across all products, master’s-level clinicians are “typically”

used more often than doctoral-level psychologists or registered nurses to provide case

management services. 

Discussion

The study found that MCOs implement a

number of measures to influence aspects of

the treatment process, including standards

for maximum time to first appointment,

timely follow-up after inpatient discharge,

The Provision of Mental Health Services in Managed Care Organizations 41

28

32

70

58

41

1

11

5

0

18 17

3 4

12

Percentage of Products

0

100

Initial Utilization

Review*

Initial Appeals Final Appeals

MCO MBHO Utilization review vendor Independent review organization Missing

Figure VII.4: Organizational Responsibility for Utilization Review

and Appeals 

*Not asked regarding independent review organization.

YES

 87%

NO

9%

DON'T KNOW/

MISSING

4%

Figure VII.5: Percentage of

Products With a Mental Health

Case Management Program
and special services for patients with cooccurring mental and substance abuse disorders. Utilization review responsibilities

vary considerably depending on the level

of review and appeals. In terms of issuing

denials of care, psychiatrists and other

physicians are far more likely to carry out

these functions than other professionals.

Organizationally, the higher the level of

review and appeal, the more common it

is for responsibility to be found with the

MCO rather than delegated to external

organizations. Regarding treatment provision, master’s-level clinicians and doctorallevel psychologists “frequently” provide

treatment more often than psychiatrists.

The degree of control exerted over

the treatment process may be positive in

some cases—for instance, in ensuring that

enrollees have timely access to care. On

the other hand, some providers and patients

may find tight utilization review systems to

be an obstacle rather than a useful assurance of appropriate care. However, it is

clear that the range of treatment process

factors can have potentially important

effects. An industry expert pointed out:

“In many ways, individual providers cannot

control how patients are treated. You have

to consider the effects of utilization management, benefits, payment mechanisms,

and other factors in the overall system.”

While an organization-level survey such as

this study cannot describe what happens

in the actual clinical encounter, the results

provide a picture of the degree to which

MCOs attempt to influence important

aspects of the treatment process.

42 Special Report

46

62

76

85

Percentage of Products

0 100

Meet regularly with

patients in person

or via phone

Flex or extend

benefits

Help patients access

community resources

Help with coordination

of services

Figure VII.6: Percentage of Products Providing Specific Case

Management Functions

Note: Missing data are less than 5% except 15% for flex or extend benefits.
VIII.

I

n recent years, the health care industry has focused on assessing

health care quality in behavioral health and other arenas

(Edmunds et al., 1997; McCorry et al., 2000; Merrick et al.,

2002). This stems in part from the move to managed care in general and

the growth of the managed behavioral health care industry, which have

both raised concerns and held out the promise of improved quality.

Accreditation organizations such as the National Committee for Quality

Assurance (NCQA), MBHO industry groups such as the American

Managed Behavioral Healthcare Association, consumer- and purchaseroriented organizations such as the Foundation for Accountability, and

purchasers themselves have played a role in driving the adoption of quality management approaches through accreditation and performance

measurement systems (FACCT, 2001; NCQA, 2001). While a literature

on specific quality improvement initiatives exists, this study is the first

to provide estimates of MCOs’ use of a range of behavioral health quality management activities based on a nationally representative sample

(Merrick et al., 2002).

Quality Management

Out of the range of possible activities

that MCOs can conduct to measure and

ultimately improve quality, we asked about

four commonly mentioned activities:

whether patient satisfaction surveys that

ask about behavioral health services are

conducted at least annually, whether clinical

outcomes are assessed for at least some

behavioral health patients, whether behavioral health performance indicators are

tracked, and whether there are practice

guidelines for major depressive disorder,

schizophrenia, and panic disorder. This

chapter reports key findings regarding

these quality management activities.

Prevalence of Behavioral

Health Quality Activities 

Most products use at least one of these four

quality-related activities (Figure VIII.1).

More than two-thirds of products conduct

patient satisfaction surveys that ask about

behavioral health services (70%), track

behavioral health performance indicators

(73%), and have practice guidelines for

at least one of the three mental disorders

selected (67%). Fewer than half (49%)

conduct clinical outcomes assessments. 

The prevalence of quality activities differs

across product types. Significantly fewer

PPOs than HMOs participate in qualityThe Provision of Mental Health Services in Managed Care Organizations 43
44 Special Report

70

49

73

67

88

61

95

74

82

79

56

75

46

31

44

49

0

Percentage of Products

100

Patient Satisfaction

Surveys*

Clinical Outcomes

Assessment # Track Performance

Indicators*

 Practice

Guidelines*

Total HMO POS PPO

Figure VIII.1: Prevalence of Quality Management Activities

by Product Type 

*All pairs significantly different, p < 0.05. # PPO significantly different from HMO and POS, p < 0.01.

Note: Missing data are less than 7% within categories. POS = point-of-service plan.

Percentage of Products

0 100

Clinicians Regarding

own patients

Enrollees

External

Organizations 

MCO's QA

Committee

Clinicians Regarding 

Overall Results

17

66

78

85

100

Figure VIII.2: To Whom Patient Satisfaction Survey Results Are Reported 

Note: Based on the 70% of products conducting patient satisfaction surveys. Missing data are less than 5% in each

category except “clinicians regarding own patients” missing data are 15%. QA = quality assurance.
related activities. For example, less than half

of PPOs conduct patient satisfaction surveys,

compared with almost 90% of HMOs. With

respect to contracting arrangements, products with specialty contracts are most likely

to conduct each of the quality activities (data

not shown). 

MCOs’ Reporting of Results

MCOs report quality-related findings to

a variety of stakeholders (Figure VIII.2).

When patient satisfaction surveys are conducted, for example, results most frequently

are reported to the MCO’s quality assurance committee (100%), followed by external organizations (85%), clinicians (regarding overall results, 78%), and enrollees

(66%). Few of the products that conduct

these surveys (17%) report providing

patient satisfaction results to individual

clinicians regarding their own clients. 

Practice Guidelines for Selected

Mental Health Disorders

The study asked whether MCOs had practice

guidelines for any of three mental disorders.

Most products (66%) provide guidelines for

major depressive disorder (Figure VIII.3).

Less than half report having guidelines for

the treatment of panic disorder and schizophrenia. The most common source of guidelines for each disorder is self-developed

guidelines only (Figure VIII.4). Very few

products report using only commercially

developed practice guidelines, while substantial proportions use federal agency or professional organization guidelines only, or a

combination of sources. 

Quality Assurance Committees

for Mental Health Services

Three-quarters of all products reported having

an MCO-level committee to oversee quality

The Provision of Mental Health Services in Managed Care Organizations 45

Percentage of Products

0 100

Schizophrenia

Panic Disorder

Major Depressive

disorder

38

43

66

Figure VIII.3: Provision of Practice Guidelines for Selected Mental Health

Disorders 

Note: Missing data are less than 5% except 8% for panic disorder and schizophrenia.
46 Special Report

18%

2%

13%

34%

5%

29%

5%

8%

49% 1%

29%

Major Depressive Disorder Panic Disorder

8%

27%

7%

54%

3%

1%

Schizophrenia

Federal Agency or Professional

Organization Only

Commercially Produced Only

Self-Developed Only

From a Combination of Sources

No Guidelines

Data Missing

8%

Figure VIII.4: Sources of MCOs’ Mental Health Practice Guidelines

(Percentage of Products)

Table VIII.1: Participation in MCO Quality Assurance Committees Overseeing

Behavioral Health Services 

Products With Listed Participants (%)

Missing/

Committee Participants Yes No Don’t Know

Specialty mental health and substance abuse providers 90.9 8.3 0.9

Primary care practitioners 47.7 51.3 1.0

Enrollees who are behavioral health consumers, 

or their family members 5.2 93.9 0.9

Other enrollees 3.5 95.7 0.9

Note: Based on the 75% of products that had an MCO-level quality assurance committee overseeing mental health and substance

abuse treatment. Not all totals equal 100% owing to rounding.
assurance programs for mental health and

substance abuse services (Figure VIII.5).

Nearly all such committees include specialty

mental health and substance abuse providers,

while close to half include primary care

providers (Table VIII.1). Very few include

consumers or other enrollees.

Discussion

Most managed care products conduct patient

satisfaction surveys, track performance indicators, and have practice guidelines for the

mental health disorders the study asked

about. Clinical outcomes assessment was less

common. One MBHO executive told us:

“It’s no wonder that less emphasis is placed

on measuring outcomes. Outcomes are difficult to measure, members and providers are

often reluctant to participate, and outcomes

measurement can be very costly.”

The higher proportion of HMOs using

these activities suggests that the traditionally

“more managed” products may have structures that facilitate quality management,

or that these products have responded to

external pressures such as accreditation

organizations, which until recently focused

on mainly HMOs. Alternatively, the fact

that specialty contract products more often

conduct these activities raises the possibility

that this contracting arrangement (more

common in HMOs) affects the prevalence of

activities. It is also important to understand

that while these activities seem useful by

providing tools with which quality can be

improved, our results cannot tell us about

differences in the actual quality of care that

may result from quality management efforts.

The Provision of Mental Health Services in Managed Care Organizations 47

YES

75%

NO

 14%

DON'T KNOW/

MISSING

11%

Figure VIII.5: Percentage of

Products With Quality Assurance

Committee for Mental Health and

Substance Abuse Services 

IX.

The study has reported on a nationally representative survey of

MCOs and described in detail differences in the provision of

services by product type and contracting arrangement. To

understand the impact of managed behavioral health care on patients, it

is important to understand the structure and rules under which services

are provided. 

Conclusion

The major conclusion from this study is

that there is diversity in the mental health

services that MCOs provide. MCOs must

decide whether to carve out to a specialty

vendor or to provide services internally,

which utilization review responsibilities to

delegate and which to retain, whether to

require primary care providers to screen

patients for mental health problems, and

which quality of care activities to conduct.

Because MCOs answer these and other

important questions differently, MCO products vary greatly. Therefore, managed behavioral health care should not be viewed generically. Understanding issues related to the

access to, the cost of, and the quality of mental health treatment services requires knowledge about the variation in the provision of

services owing to both product type and

contractual arrangements.

In this chapter, selected key findings are

reviewed and related to the interests of particular stakeholders. Overall limitations to

the study are described, and suggestions are

offered for future studies.

Key Findings and

Stakeholder Perspectives

MCOs’ provision of mental health services

varies across a broad range of dimensions,

each of which has important implications

for the numerous stakeholders in the delivery system: enrollees, purchasers, policymakers, providers, and MCOs or MBHOs

themselves. Key findings of particular

interest to various stakeholders include

the following:

■ Behavioral health contracting arrangements vary greatly depending on the

managed care product type. The study

found that HMOs are far more likely

to contract with specialty MBHOs,

while PPOs are the only product type

to frequently contract with comprehensive vendors. Employers and other purchasers, as well as consumers, will find

this information useful in going beyond

traditional managed care labels to consider the specific structures through

which mental health care is delivered.

The Provision of Mental Health Services in Managed Care Organizations 49
■ Mental health benefits generally include a

broad continuum of care but are typically

subject to limits and to cost sharing that

is greater than for general medical care.

Purchasers, consumers, and policy-makers

with an interest in parity will be interested

to know that all managed care product

types still (in 1999) rely substantially on

benefit restrictions to contain costs.

■ MCOs seldom require standardized

screening for mental health problems in

primary care settings but frequently provide practice guidelines for mental health

treatment in primary care. This should

provide important data for dialogue

among providers, MCOs, and others concerning how best to improve the diagnosis

and treatment of mental health disorders

within primary care settings.

■ Primary care gatekeeping is unusual but

does vary by product type. HMOs are

most likely to require this, but for all products direct self-referral and phone center

referral are typical. Employers and other

purchasers as well as consumers should be

aware of these differences as they consider

which plans best meet their needs.

■ A substantial proportion of MCOs aim

to control aspects of the specialty treatment process such as time to initial

appointment and follow-up after inpatient

discharge. HMOs and specialty contract

products are generally more likely to

have such policies. Providers, consumers,

employers and other purchasers, and

MCOs or MBHOs themselves, can factor

this into their assessments of mental

health care delivery systems.

Thus, the main findings cover a broad

spectrum of areas related to mental health

services in MCOs, each particularly salient

to certain groups of stakeholders, and all

results should prove useful as a benchmarking tool for MCOs themselves. The survey

results can shed light on many aspects of

the debate about the changing landscape of

mental health services under managed care. 

Service Delivery Models

As shown, product type and contracting

arrangement are associated with certain features of the specialty mental health delivery

system. To illustrate, here are two common

scenarios based first on product type and

then on contracting arrangement.

If an enrollee in a typical PPO product

seeks specialty mental health services, he or

she will—

■ Have those services delivered through

the PPO’s internal network or through

a contracted comprehensive network

(in contrast to other product types,

which usually have specialty contracts).

■ Not need prior authorization for outpatient care (while HMOs almost

always require this).

■ Lack access to specialized providers

or treatment programs for dual mental

health and substance abuse disorders

(in contrast to HMOs, where this

access is more common).

■ Not be provided some 24-hour crisis

services such as phone triage/referral

assistance (again in contrast to other

product types).

If an enrollee in a typical managed care

product with a specialty MBHO contract

seeks mental health services, he or she will—

■ Need prior authorization to access all

levels of care (which is more stringent

than in other contracting arrangements).

50 Special Report
■ Find that the MBHO is responsible for

initial utilization review.

■ Have access to 24-hour services such as

telephone triage/referral.

These are examples of prevalent patterns

that the study results have revealed, although

there is variation within each product type or

contracting arrangement. Thus, it is important to recognize both the general differences

and the individual variations that exist. 

Interaction of Product Type

and Contracting Arrangement

This report has examined separately the

effects of product type and of contracting

arrangement, capturing the decisions that

consumers, employers, and MCOs need to

make. For example, when selecting commercial health insurance plans, usually coordinated through their employer, consumers

will find it helpful to know how HMO,

PPO, and POS plans are likely to operate.

Consumers also may wish to inquire further

into the mental health contracting arrangements for the health plan, knowing that

there are likely to be differences based upon

that variable as well.

However, because different product types

are more or less likely to choose particular

contracting arrangements, the differences

observed may be inherent in the product

type itself, driven by the contracting

arrangement, or affected by both factors.

As seen in Chapter V, the distribution of

practice guidelines in primary care is lower

in PPOs than in HMOs, for instance, but it

is not possible to discern whether this is due

to some aspect of PPOs themselves or due

to PPOs’ different contracting arrangements.

To explore this issue for targeted topics, we

used statistical techniques that allow the

effects of both product type and contracting

arrangement to be taken into account simultaneously and the independent effect of each

to be estimated. Using either logistic or ordinary least-squares regression as appropriate,

we analyzed cost-sharing level, primary care

screening, availability of dual-diagnosis programs, and use of specialty mental health

practice guidelines. In all cases, both product

type and contracting arrangement variables

had significant independent effects. Thus,

both product type and contracting arrangement make a difference across a range of

mental health system features.

Limitations

The study is subject to various limitations

that should be considered when interpreting

its results. First, the study focused on organizational respondents, not individual clients,

and therefore cannot address how client

experiences and outcomes may vary across

the different organizational arrangements.

However, information from organizational

surveys like this one can be helpful to those

designing client studies by focusing on key

structural aspects of care delivery. Second,

the survey does not include indemnity health

plans. Given their dwindling market share,

this limitation may be of decreasing importance. Third, on some topics, arrangements

may have evolved further since 1999, when

this survey was done; for example, prescription drug benefits have changed rapidly with

the emergence of three-tier benefit designs.

This is one reason for the planned resurvey

in 2003.

Future Research

Two major directions are needed in terms

of future research. First, an updated examination of the same issues reported on here

The Provision of Mental Health Services in Managed Care Organizations 51
is needed because of the rapid changes in

the context in which MCOs operate, including changes in legislation on parity for mental

health care, downturns in the economy, and

new developments in the clinical treatment of

mental health problems. Second, this project

has focused on an organizational level by

surveying managed care plans and talking

with management and clinical decision makers at each MCO. Clearly, the next step will

be to relate the findings reported here directly to enrollees’ experiences in accessing mental health services, by linking these results

with information from surveys of enrollees.

52 Special Report
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58 Special Report
XI. Appendix A. Summary

of Survey Content

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C3 blank
DHHS Publication Number (SMA 03-3790)

Printed 2003 Substance Abuse and Mental

Health Services Administration