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We understand that the payment mechanism in S. 1470 is even more restrictive than it was in S. 3205 inasmuch as no prevailing charge level for physicians' services shall be increased to the extent that it would exceed by more than one-third the statewide prevailing charge level after the economic index is applied. We are concerned that such a measure will not encourage physician acceptance of assignment.

Relative value schedules have been the subject of much debate in psychiatry. If these schedules are to be developed, the specialty of psychiatry must have ample opportunity for input into the process, and experiments should be held around the country to assess their useful

ness.

In reference to visits away from institution by patients of skilled nursing or intermediate care facilities, that is analagous to therapeutic leave which is used in many psychiatric facilities and held to be an important and efficacious tool in the treatment of the mentally and emotionally ill. Therapeutic leave can be an excellent indicator of the progress that a mental patient is making, and can provide valuable information for the further effective treatment of the patient, that cannot be developed in any other way.

It also enables the patient who has progressed beyond a certain point in treatment to establish his initial capabilities to reintegrate into the community, but not precipitously.

Programs such as CHAMPUS do provide for hospital therapeutic leave for psychiatric illness, and we believe that this committee should consider psychiatric therapeutic leave in the medicare program.

The outpatient psychiatric benefit in medicare of $250, or 50 percent of cost, which ever is less, is both unrealistic because of the demonstrably low utilization of psychiatric care in medicare, and because it causes mentally ill patients, who could be treated in the community, to be hospitalized. In the absence of outpatient benefits, mental conditions can become exacerbated and require hospitalization, or physicians wishing to treat patients without outpatient psychiatric benefits may have no other alternative but to hospitalize them.

Moreover, the 190-day lifetime limitation in psychiatric hospitals under medicare, results in mentaly ill patients being treated in more costly general hospital settings. The average per diem rate in psychiatric hospitals runs between $58 to $174, as compared with $250 and $350 for medical/surgical hospitals.

In the latest year for which data are available, medicare expenditures for hospital care for mental conditions amounted to $4.40 per person covered $3.30 in general hospitals and $1.10 in psychiatric hospitals. There is no indication that more recent data will show these figures have risen other than proportionately to the rise in the elderly population since that time.

Both the American Psychiatric Association and the National Association of Private Psychiatric Hospitals stand ready to give this committee every possible assistance in the full consideration of the matters that have been raised in our testimony.

Senator TALMADGE. Thank you very much, Doctor.

Is the thrust of your argument that the Government could have money by permitting more outpatient psychiatric care rather than hospitalize them?

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Dr. DAVIS. Yes. I know the medicaid and medicare reimbursement schedule, there is some pressure, almost, to treat a patient in a way that might be more expensive, since there is such a limited benefit available for outpatient. It might force the physician to hospitalize the person, where he possibly could be treated in a day patient or outpatient setting.

Senator TALMADGE. Would you submit data to the committee staff to support your argument that we can actually save money? The reluctance of the Committee on Finance and the Ways and Means Committee to expand the coverage for psychiatric care, has been in large part based on cost and no one to date has been able to submit any evidence to what the cost might be, $100 million, $5 million-so if you can submit some reasonable argument that it would save money by including some of what you have recommended, we would certainly like to have

evidence of that.

Thus far, no one who has ever appeared before one of our committees has had the slightest idea of what it would cost if we would write a check that said "unlimited psychiatric treatment."

Dr. DAVIS. I understand your concern.

This is the reason we are recommending the amendment to include a demonstration project which would be funded by the Federal Government, and I think it would have a great deal of credibility. These other studies are pretty good and pretty indicative. I will send them along to you.

Senator TALMADGE. Thank you.

Senator Dole?

Senator DOLE. I am just curious about the number of psychiatric patients who are hospitalized in general hospitals as opposed to psychiatric hospitals.

Dr. DAVIS. You are asking about the number?

Senator DOLE. Yes. If you do not have it, furnish it for the record. [The figures requested by Senator Dole and information previously requested by Senator Talmadge follow. Oral testimony continues on p. 432.]

There are 28,706 psychiatric beds in non-Federal general hospitals, and 16,091 beds in private psychiatric hospitals, out of a grand total of 332,127 psychiatric beds in all types of facilities in the United States. The preponderant number of psychiatric beds (222,202) are in State and county mental hospitals. Other settings include VA hospitals, CMHC's, residential treatment centers, etc.

The utilization of beds in all of these settings ranges from approximately 63 percent to 89 percent.

Source: Hospitals Statistics, 1976 edition, American Hospital Association; from the 1975 annual survey.

BENEFITS OF MENTAL HEALTH CARE FOR HEALTH SERVICE UTILIZATION

I would like to bring to your attention four studies which directly address the issue of benefits of mental health care. These studies show substantial savings in the cost of non-mental health care within Health Maintenance Organizations and health insurance plans that provide mental health benefits. The first study took place in Group Health Association of Washington.1 This

1 Goldberg. Irving D. et al. "Effect of a Short-Term Outpatient Psychiatric Therapy Benefit on the Utilization of Medical Services in a Prepaid Group Practice Medical Program." Medical Care 8: 419-428 (September-October 1970).

Clerk's Note.-Reprinted in this hearing at page 423.

study indicated that patients treated by mental health providers reduced their non-psychiatric physician usage within the HMO by 30.7 percent in the year after referral for mental health care compared to the preceding year. Use of laboratory and x-ray services declined by 29.8 percent. These cost savings were compared to the direct costs of providing care and it turns out that GHA has actually saved money by providing mental health services.

TH second study took place in a Kaiser Plan in California. This study took a look, over a long time period, at the utilization experience of a group of mental health users and a comparison group. The conclusion of this study was that the net cost of psychiatric care in the year of therapy was $22 or about two cents per enrollee per month (approximately 1 percent utilization). The return on this cost is a savings in subsequent years of $200 to $250 per case or about 20 cents per enrollee per month.

Third study: The West German Psychoanalytic Studies. A number of studies ** took place about 20 years ago in the Federal Republic of Germany which are of great significance today in U.S.A. discussions of psychiatric coverage under National Health Insurance. The most significant studies were done by Annemarie Duehrssen, M.D. and colleagues of the Central Institute of Psychogenic Illness of the Berlin General Health Insurance office. She and her colleagues did a most extensive followup of patients after analytic psychotherapy or psychoanalysis by developing an evaluation system at the onset and the end of treatment and then followed up on nearly a thousand patients after five years.

The criteria used for evaluating patients in this particular study included (1) a precise description of the symptoms of illness as well as duration; (2) utilization of health care especially in-hospital care; (3) the work capacity of the individuals; and (4) self-evaluation by the patients themselves of their own treatment.

Of the 1,000 4 study patients who underwent individual analytic psychotherapy or psychoanalysis the average number of hours of treatment were 100. 13 percent ended treatment prematurely, 12 percent continued privately after their limits of 200 treatments ran out and 10 percent desired further treatment after 200 visits but could not afford further treatment. One hundred one of the study patients could not be found at five-year followup, 13 had died and of the ensuing 890 reachable patients 845 were evaluated, certainly an extremely high response rate. Only 45 refused followup. Six hundred forty-seven were followed up in five years by direct interviews, 104 returned detailed questionnaires and 94 had home visits by a social worker.

In terms of outcome 13 percent of the patients were felt to have had at least one relapse during the five-year followup period. The most interesting statistic was that of the 845 followed up patients the hospital rate was .78 hospital days per year which compared to the pretreatment average of 5.3 days per year and a general average for the insured population of 2.5 hosiptal days per year. This is hospital days for any illness not just mental illness. Prognostic measures, built in at the onset of treatment, also had a high degree of validity and reliability: that is those with favorable prognosis had excellent outcome measures at the termination of treatment which held true a five-year follow-up. Those with unfavorable prognosis may have had an excellent or good evaluation after termination of treatment but that seemed to disappear at five-year followup. Therefore, the prognosis variables seem much more reliable at five-year followup than at termination.

The explanation for this was that it was much more observer biased at the termination of evaluation. The observer problem, I think, was inadequately addressed in these studies. It looked like there were at least three examiners, an initial examiner who determined the prognosis, a treater who did the followup at termination and a third and different five-year followup doctor. There was also a very high degree of patient satisfaction, 81 percent feeling strongly at five-year followup that they had been helped by the treatment.

Although there may be some methodological problems with this particular study, it is clear that followups had been conducted on a large number of patients with a sufficiently long interval between treatment and followup and

2 Follette, William and Cummings. Nicholas A. "Psychiatric Services and Medical Utilization in a Prepaid Health Plan Setting." Medical Care 5: 25-35 (January-February 1967.)

Reprinted in this hearing at page 415.

Dnehrssen, Annemarie: Katamnestische Ergebnisse bei 1004 Patienten nach anaIvtischer Psychotherapie. Zschr. Psycho-som. Med VIII, 2/62. Verlag Fuer Medizinische Psychologie (Goettingen).

Duehrssen, Anne marie: Die Beurteilung des Behandlungserfolges in der Psychotherapie. Zdehr. Psycho-som. Med III, 3/57. Verlag Fuer Medizinische Psychologie (Gottingen).

it was this kind of research which helped both preserve and extend the National Health Insurance benefit for the mentally ill in West Germany and led to a more efficient and effective prior authorization and peer review system throughout that country.

5

The fourth study is a more recent study by the Research Department of Blue Cross and Western Pennsylvania which assessed the medical/surgical utilization of a group of subscribers (N:169) who used a psychotherapy outpatient benefit in community mental health centers with a comparison group of subscribers. The findings showed that medical/surgical utilization was reduced significantly for the group who used the psychiatric benefit. The monthly cost per patient for medical services dropped by $9.41, from $16.47 to $7.06. This was well below the average per capita cost for the control group. Both medical/ surgical inpatient days per month and outpatient visits per month were down by more than 54 percent. Further, this phenomenon or reduced medical/surgical utilization with exposure to outpatient psychotherapy was found to be independent of age, sex, or employment level.

The above four studies suggest that significant benefits accrue to an insurance or prepaid system when mental health benefits are available and accessible. Any discussion about coverage for mental health under national health insurance must take these findings into account.

STEVEN S. SHARFSTEIN, M.D.

[From Medical Care, January-February 1967, Vol. V, No. 1]

PSYCHIATRIC SERVICES AND MEDICAL UTILIZATION IN A
PREPAID HEALTH PLAN SETTING

(By William Follette, M.D.,* and Nicholas A. Cumming, Ph.D.**)

In two previous studies [5, 6] the psychiatric practitioner's contention that emotionally disturbed patients do not seek organic treatment for their complaints following the intervention of psychotherapy have been investigated. Although it has long been recognized at a large number of the physical complaints seen by the physician are emotionally, rather than organically, determined, the more precise relationship between problems in living and their possible expression through apparent physical symptomatology has been difficult to test experimentally. As noted in the previous study, the GHI Project [1] demonstrated that users of psychiatric services were also significantly frequent users of medical services, but the Project was not able to answer the question of whether there is a reduction in the use of medical services following psychotherapy.

Because the facilities and structure of the Kaiser Foundation Health Plan accord an experimental milieu not available to Avnet, the original pilot project in San Francisco was able to demonstrate a significant reduction in medical utilization between the year prior to psychotherapy, and the two years following its intervention. Certain methodologic problems inherent to the pilot study indicated caution and the need for refinement and replication to avoid arriving at premature conclusions. The lack of a control group of what might be termed psychologically-disturbed high-utilizers who did not receive psychotherapy was a serious omission in the first experiment. † Furthermore, an error in the tabulation of in

5 Jameson, John. Shuman, Larry J., and Young, Wanda W. "The effects of Outpatient Psychiatric Utilization on the Costs of Providing Third-Party Coverage. Res. Series 18. December. 1976.

*Chief Psychiatrist, Kaiser Foundation Hospital and the Permanente Medical Group, San Francisco, Calif.

**Chief Psychologist, Kaiser Foundation Hospital and the Permanente Medical Group, San Francisco, Calif.

Presented at one of the Contributed Papers Sessions sponsored by the Medical Care Section at the 94th Annual Meeting of the American Public Health Association, San Francisco, Calif., Oct. 31-Nov. 4, 1968.

This study was primarily financed by Grant PH 108-64-100 (P), U.S. Public Health Service. The authors gratefully acknowledge the assistance and cooperation of Mr. Royal Crystal. Deputy Chief. Health Economics Branch. Secondary financial support for this study was through Grant No. 131-7241. Kaiser Foundation Research Institute.

This paper is a report of the first of two investigations seeking to develop and test methods of assessing the effect of psychiatric services on medical utilization in a comprehensive medical program. Part II deals with prospective, rather than respective, methodology, and will be reported later.

The authors acknowledge their debt to Dr. M. F. Collen for this and other suggestions, and to Mr. Arthur Weissman. Medical Economist, Kaiser Foundation Medical care entities, for his expert consultation.

patient utilization was discovered after the experiment had been concluded. †† In addition, the question was raised whether the patients studied might, subsquent to the two years following psychotherapy, revert to previous patterns of somatization or, as a new pattern, merely substitute protracted and costly psychotherapy for previous medical treatment,

THE PROBLEM

This study investigated the question of whether there is a change in patients' utilization of outpatient and inpatient medical facilities after psychotherapy, comparing the patients studied to a matched group who did not receive psychotherapy.

Psychotherapy was defined as any contact with the Department of Psychiatry, even if the patient was seen for an initial interview only. The year prior to the initial contact was compared with the five subsequent years in both groups.

The problem can be stated simply: Is the provision of psychiatric services associated with a reduction of medical services utilization (defined as visits to other medical clinics, outpatient laboratory and x-ray procedures, and days of hospitalization)?

METHODOLOGY

The setting. The Kaiser Foundation Health Plan in the Northern California Region is a group-practice prepayment plan offering comprehensive hospital and professional services on a direct service basis. Professional services are provided by the Permanente Medical Group-a partnership of physicians. The Medical Group has a contract to provide comprehensive medical care to the subscribers, of whom there were more than a half million at the time of this study. The composition of the Health Plan subscribers is diverse, encompassing most socioeconomic groups. The Permanente Medical Group comprises all major medical specialties; referral from one specialty clinic to another is facilitated by the organizational features of group practice, geographical proximity and use of common medical records. During the years of this study (1950-1964), psychiatry was essentially not covered by the Northern California Health Plan on a prepaid basis, but in some areas of the Northern California region psychiatric services were available to Health Plan Subscribers at reduced rates. During the six years of the study, the psychiatric clinic staff in San Francisco consisted of psychiatrists, clinical psychologists, psychiatric social workers, resident psychiatrists at the third- or fourth-year level, and psychology interns, all full-time. The clinic operates primarily as an out-patient service for adults (age eighteen or older), for the evaluation and treatment of emotional disorders, but it also provides consultation for non-psychiatric physicians and consultation in the general hospital and the emergency room. There is no formal "intake" procedure, the first visit with any staff member being considered potentially therapeutic as well as evaluative and dispositional. Regardless of professional discipline, the person who sees the patient initially becomes that patient's therapist unless there is a reason for transfer to some other staff member, and he continues to see the patient for the duration of the therapy. An attempt is made to schedule the first interview as soon as possible after the patient calls for an appointment. There is also a "drop-in" or non-appointment service for emergencies so that patients in urgent need of psychiatric help usually can be seen immediately or at least within an hour or two of arrival at the clinic.

One of the unique aspects of this kind of associated health plan and medical group is that it tends to put a premium on health rather than on illness, i.e., it makes preventive medicine economically rewarding, thereby stimulating a constant search for the most effective and specific methods of treatment. The question of how psychiatry fits into comprehensive prepaid medical care is largely unexplored; there are not many settings in which it can be answered. Another feature of group practice in this setting is that all medical records for each patient are retained within the organization.

Subjects.-The experimental subjects for this investigation were selected systematically by including every fifth psychiatric patient whose initial interview took place between January 1 and December 31, 1960. Of the 152 patients thus selected, 80 were seen for one interview only, 41 were seen for two to eight

At that time days of hospitalization per patient and by year were tabulated from each patient's outpatient medical records. Subsequent investigation has revealed that only about a third of the outpatient charts reviewed contained summaries of hospital admissions, and that tabulation of inpatient utilization must be made directly through the separatelykept inpatient records.

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