Plan Data Needed to Assess Behavioral Health Costs

by Dr. Les Ruthven, Ph.D. President, Preferred Mental Health Management
(This particular article is reprinted in its entirety)

Typically, benefit plans have, in conjunction with their payer, the following data, all of which are needed in the assessment of the plan’s behavioral health costs.

1. Number of covered employees/insureds and number of covered lives.

2. Annual paid claims for in-patient psychiatric treatment, number of different patients treated, number of admissions, total number of hospital days, Average Length Of Stay (ALOS) per patient and ALOS per admission.

Note: Whether your plan has a behavioral health carve-out or not, the above gives adequate data to help guide decision-making. One should know, for example, the readmission rate, what percent have a third admission, etc. With these data some simple arithmetic will give the benefit manager such useful information as cost per admission, cost per patient, cost per day, and the like.

3. Partial hospitalization and intensive outpatient program (e.g., substance abuse treatment). Often, these services/claims are combined with the in-patient costs, but they should be looked at separately. Psych and SA claims should be looked at separately (not combined), and, for each category, the following are needed: amount of annual paid claims, number of patients receiving services, total number of sessions/days, cost per treated patient, and number of patients who also received in-patient behavioral health treatment.

4. For substance abuse in-patient services/claims, the same breakdown of data is needed as in No. 3, above, for in-patient psych services/claims. In addition, the payer needs to report SA in-patient admissions who also had one or more in-patient psych admissions.

5. Information on outpatient services/claims should be treated separately for mental health and substance abuse services/claims. The data needed for each category is (1) total annual paid claims, (2) number of patients receiving out-patient treatment, (3) total number of out-patient sessions for each category, (4) average number of out-patient sessions, (5) the number who also received in-patient treatment, partial hospitalization/intensive outpatient program or both, and (6) the cost per treated out-patient.

The above are considered necessary in order to understand what is going on in any benefit plan with regard to cost/utilization of behavioral health services, but a specific plan may have needs for additional information. A particular plan may, for example, want to break their data down into gender, age (e.g., what percent of in-patient mental health admissions/costs are attributed to children/adolescents?), or perhaps retirees considered separately.

One might have noted in the above how frequently the number of covered members receiving services for each category is requested. Historically, TPAs have not reported to benefits managers the number of patients receiving services, especially out-patient services, and without such utilization data one has no way to compare plan-to-plan costs.

If one compares per-member-per-month costs alone between two or more plans withoututilization data one can come to some erroneous conclusions, as the following data demonstrates:

Figure I
Behavioral Health Costs

(Comparable Benefits)




Costs pmpm




From the above data, without utilization data, it looks as if Group C would be the most cost-effective choice and, unfortunately, many behavioral health management decisions are made on per-member-per-month costs alone.

Utilization is defined as the number (or percentage) of the total covered members having a paid claim (one or more) in any calendar year. Utilization of behavioral health services varies from plan to plan due to a number of demographic and other factors, such as socioeconomic level, age, education, occupation, amount of stress in the workforce, and the like. Utilization rates vary from 1-1/2 to 12 percent or more annually of covered members using a behavioral health service. With such a large variation, one can see that a figure without utilization, such as per-member-per-month cost, is meaningless and, many times, misleading.

Adding the utilization data to Figure I paints a whole different picture than the per-member-per-month (pmpm) costs alone.

Figure II
Behavioral Health Costs




Costs pmpm




Utilization Rate




Total # Patients Treated




Cost per Treated Patient




Adding the utilization data completely changes our perception of the three groups. Group C, on per-member-per-month costs alone, might seem the best buy, but with the utilization data included, it is clearly the most, rather than the least, costly. The cost per treated patient per year is the best measure of behavioral health costs because it eliminates utilization differences between plans. In Figure II, Group B per-member-per-month costs are 45% higher than Group C costs ($6.90 per-member-per-month vs. $3.75), but Group B’s costs per treated patient are 117% less than Group C’s costs per treated patient. Group B is spending more dollars than Group C on behavioral health costs, but it is treating four times the number of patients at less than the costs of Group C.

In today’s computer age, there is no reason why a benefits manager should not have utilization data to better evaluate per-member-per-month costs. One is working completely in the dark unless one has the utilization data and the costs per treated patient per year, which is the most meaningful description of one’s behavioral health costs.

All of the above addresses behavioral health plan expenditures, but there are remaining behavioral health costs in a benefit plan that are not included in the claims data. These unincluded costs are the pharmacy costs for those drugs (psychotropic drugs) that are used in the treatment of various emotional disturbances/distress. Prozac, for example, is typically the most frequently prescribed drug in the formulary. In some plans, these psychotropic drugs account for 12% or more of total drug costs but, again, utilization varies from plan to plan and, since psychotropic drug costs are rising faster than non-psychotropic drug costs, they should be tracked separately for each plan and the costs added to the behavioral claims costs. Again, it would be important to monitor psychotropic utilization as well as cost data.

If requested, PMHM would be pleased to forward a current list of psychotropic medications for a benefit plan to your company’s pharmacy management firm to track these mental health costs.

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The Medical Disease Model vs. The Behavioral Model

by Dr. Les Ruthven, Ph.D. President, Preferred Mental Health Management

Article2GraphicThe behavioral health management industry as a whole endorses the “medical model” for behavioral health problems, that is, the disease model of general is transferred to mental health. In the medical model, mental health problems are seen as diseases for which medication is the primary, if not the exclusive, treatment.

Scientific research shows that medication is indispensable in the treatment of some mental disorders, such as schizophrenia, correctly diagnosed bipolar disorder, and correctly diagnosed cases of Attention Deficit Disorder. The vast majority of those who seek treatment, the 50% to 60% or so with depression and stress/anxiety problems, are treated most effectively with cognitive-behavioral psychotherapy rather than medication.

The chemical view of depression is so common that it has become the politically correct view, a belief so engrained in society that it does not have to be supported by any evidence. Increasingly, patients tell us they do not have depression — they have a chemical imbalance in the brain. There is simply no support in the scientific literature for the disease model of depression and using drugs for the first line of treatment for either anxiety or depression.

From the scientific literature on treating depression:

Antidepressants are not superior to placebos in treating depression.
In controlled studies, 30% of the clinically depressed show full recovery on the basis of placebo effects alone.
Researchers reviewed 56 controlled studies and found psychotherapy (by trained professionals) to have about twice the effectiveness of antidepressants.
Psychotherapy alone is as effective in treating clinical depression as when it is combined with drugs.
Psychotherapy is less expensive than drugs in treating depression.
The above research does not support a “disease” model of depression, the widespread practice of using drugs alone, or favoring drugs over psychotherapy. Successful treatment of depression requires a change in one’s behavior and, frequently, a change in one’s thinking – hence the need for a trained psychotherapist and not just a pill.

When drug therapy is used to treat depression, patients are often advised to stay on medication for the rest of their lives at a cost of $80 to $100 per month. Yet there is a substantially higher relapse rate with drug therapy compared to psychotherapy, which teaches the patient strategies to prevent relapse.

The medical model promotes victimization (“you have poor brain chemistry”), promotes passivity (“take these pills twice a day”), and undermines the person’s responsibility for one’s behavior.

PMHM believes that all health outcomes are better when the patient is empowered with the information and tools to control their health.

Disease Model History

Much of medicine including psychiatry focuses on treating diseases with pharmaceuticals as the primary treatment – an antibiotic for an infection, insulin for diabetes, an antidepressant for complains of depressed mood. Unfortunately, this disease model has been transferred to the behavioral health industry as a whole with drugs regularly sued as the primary method to treat anxiety, mood, or behavior-related problems such as panic disorders, ADD, or depression. This drug-first approach is expensive and often ineffective.

PMHM’s Behavioral Healthcare Model

The majority of people who seek behavioral health treatment are emotionally normal people reacting with stress or depression to an abnormal life situation. For individuals experiencing family difficulties, job uncertainty, financial stress, substance abuse or other situations that thrown their mental health out of balance, PMHM provides immediate care by guiding them to an appropriate experienced provider for brief therapy.

For more serious anxiety and depressive disorders, PMHM uses a cognitive-behavioral model of treatment, which rarely requires medication. Psychotropic drugs are necessary to treat severe disorders such as schizophrenia and bipolar disorder. However, using medication for less severe problems easily solved with appropriate psychotherapy is not only an unnecessary expense, but also compromises the quality of care.