Does the impact of managed care on substance abuse treatment services vary by provider profit status

This paper extends our previous research by determining whether, and how, the impact of managed care (MC) on service offerings varies by the profit status of the substance abuse treatment (SAT) facility (Olmstead, White, and Sindelar 2004). It adds to the literature on the impact of profit status on the provision of health care and extends this literature to the relatively less studied area of SAT. This topic is important for several reasons. Substance abuse is an important and costly problem, harming abusers as well as their families, friends, and society (Harwood, Fountain, and Livermore 1998; ONDCP 2001). Effective treatment can reduce many of these costs (IOM 1990; ONDCP 1996; National Consensus Development Panel on Effective Medical Treatment of Opiate Addition 1998; NIDA 1999; French et al. 2000; Jofre-Bonet and Sindelar 2001). In addition, MC has been growing rapidly in the SAT field, and there is some concern that MC's emphasis on cost-containment may result in fewer services offered, thus reducing treatment effectiveness (Alexander, Lemak, and Campbell 2003; Olmstead, White, and Sindelar 2004). Reduced effectiveness, in turn, could have a negative impact on society through increases in crime, welfare dependency, and spread of infectious diseases. Importantly, the impact of MC on SAT service offerings may differ systematically by provider profit status. SAT is provided by a mix of for-profit (FP), not-for-profit (NFP), and public providers. The majority of the providers in the SAT market are NFPs and the fewest number are publics. However, publics tend to be larger in terms of people treated per clinic. Characteristics of SAT facilities vary systematically by ownership type. This may occur for several reasons, including differences in mission, client mix, and opportunities and constraints imposed by their profit status. FPs, for example, tend to serve clients who have relatively fewer comorbidities and are privately insured or able to pay for care out-of-pocket, while publics tend to treat clients who have relatively more comorbidities and whose care is supported by government financing (Rodgers and Barnett 2000; Wheeler and Nahra 2000; Ettner et al. 2003). These differences suggest that the impact of MC may vary by profit status. This paper focuses on how MC differentially affects the range of services offered by providers with different ownership types. Range of services is a key measure of treatment effectiveness (Olmstead, White, and Sindelar 2004). Treatment effectiveness is improved by the availability of a range of services, including social and medical services, necessary to meet the wide spectrum of needs faced by drug-dependent individuals (McLellan et al. 1993, McLellan et al. 1998, McLellan et al.1999; Milby et al. 1996; Gould, Levine, and McLellan 2000; Marsh, D'Aunno, and Smith 2000; Smith and Marsh 2002). While there is a growing interest in the effects of MC on SAT generally, relatively few studies have focused on the effects of MC on the number and type of SAT services offered, and none of these examine whether and by how much the effect varies by the ownership type of the provider. This study presents empirical evidence on these issues. Data from more than 10,000 SAT facilities in the U.S. are used in these analyses. We use the instrumental variables (IV) approach to identify the effects of MC on SAT service offerings. We examine the offerings of 26 different services grouped into five categories: assessment, therapy/counseling, medical testing, transitional, and other ancillary services. Because our dataset is large and covers most SAT facilities in the U.S., our statistical power is high and our results are likely to be widely generalizable. Our findings should be of interest to policy makers, researchers, patients, public and private payers, clinics and clinicians.