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onstrated that 50 percent or more of persons who present themselves to physicians with physical complaints suffer from some component of mental or emotional illness.

Experience shows us that the elderly are especially prone to psschosomatic complaints. If provided with necessary psychiatric treatment, this population group would be lower utilizers of expensive testing and medical services.

We believe that such a demonstration project would prove that the provision of psychiatric treatment to medicaid recipients—age 22 to 64—in psychiatric hospitals will effect cost savings. This age group22 to 64-is currently covered for psychiatric care only in State mental or general hospitals.

The American Psychiatric Association testified before the House on the Medicare-Medicaid Antifraud and Abuse Amendments, H.R. 3, on March 7, 1977. We stated that fraud and abuse would be minimized through the implementation of improved administrative policies and practices.

We need to encourage competent physicians to participate in medicare and medicaid. If we discourage competent physicians from participation through excessive administrative constraints, unrealistic reimbursement, and restrictive patient benefits, we will perpetuate the prevalence of providers who deliver poor quality care and who may be abusive and fraudulent.

The medicare and medicaid benefits and reimbursement policies for the coverage of mental illness, as presently constituted, can only discourage qualified professional participation and deprive the patient of cost-effective services.

For example, psychiatrists who participate in the medicaid program in Georgia receive from $28 to $32 per hour, while in community mental health centers the medicaid program is billed in Georgia at the rate of $22 for each 15 minute segment, or at the hourly aggregate of SSS for a patient who receives service in the center, regardless of the credentials or professional qualifications of the person providing the service.

Senator TALMADGE. Do you mean the payments they make under medicaid in Georgia is not limited to a specific psychiatrist? Who else do they pay?

Dr. Davis. Directly to the community mental health center. I was given the latest payment schedule, $22 per 15 minutes, regardless of who delivers that service.

Senator TALMADGE. That is poetry, dance therapists, things of that nature?

Dr. DAVIS. Whoever that community mental health center designated to see that particular individual.

Senator TALMADGE. That is authorized by State law?

Dr. Davis. I do not know if that is the law. I know that is how they pay it out presently.

Senator TALMADGE. I appreciate your bringing that up and looking into it with the committee staff. If that is going on, it should be corrected.

Dr. Davis. I agree very much. I will send you a copy of the schedule that I recently got from the Department.

I Senator TALMADGE. Please do.

[At presstime the information was not received. The committee was informed that the information will be forthcoming.]

Dr. Davis. The classification of hospitals into separate categories is a reasonable approach. However, we feel that involved groups and associations should have the opportunity to be a part of the process which determines classification together with the Secretary of DHEW. There are numerous factors that should be considered, such as whether the facility is a teaching hospital, the intensity of the teaching facilities, and whether the hospital provides community services.

Variables such as patterns of personnel requirements in these institutions will differ markedly. There also exists a vagueness in the bill in relation to the grouping of psychiatric hospitals with geriatric, maternity or other specialty hospitals. S. 1470 states that whether or not they are to be grouped together or separately is to be determined by the Secretary of HEW.

These associations support the prospective reimbursement of hospitals, which is already being utilized successfully in a number of States and recommend continned experimentation in this area as authorized under Public Law 92–603. We also support incentive reimbursement based on routine operating costs, making exceptions for capital and related costs, energy costs, malpractice insurance expense, and so forth.

Although supportive of this approach, we wish to cantion the committee that there may be a danger that hospital administrators may move to the extremes in the incentives of 120-percent overcost reimbursement or the 5-percent rebate, since there appears little to be gained by being in the middle.

In this exemption procedure for determining reasonable costs in cases where the hospital is located in an underserved area; certified as being currently necessary by an appropriate planning agency: and underutilized, we strongly recommend that an additional exception be made for psychiatric hospitals with underutilizcil beds.

Patterns of underntilized beds in psychiatric hospitals have been established because of the lack of third-party payment mechanisms to defray the costs, and do not reflect patient needs in any particular area. However, a recent trend in state legislation mandating the coverage of inpatient and outpatient psychiatric treatment in health insurance policies is beginning to fill these beds. In the meantime, we must encourage meeting patient needs by exempting psychiatric hospitals that have had artificial barriers imposed for the inpatient treatment of mental illness.

Encouraging physicians to accept assignment through the $1 per patient administrative cost incentive has been employed by Blue CrossBlue Shield, and could be an effective incentive in some cases. However, it does not address the problem in the treatment of psychiatric outpatients where the benefits are so limited as to discourage physician participation altogether. For the outpatient treatment of psychiatric illness it only represents a token gesture and we are concerned that will not have any impact.

We wish to commend the chairman and this committee on section 11 (f) which encourages physician participation in shortage areas. We continue to hold the position that in medicare, the mechanism to determine reasonable charges for physician services should be structured in such a way as to provide usual customary and reasonable payment.


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 psy. chiatry must have ample opportunity for input into the process, and experiments should be held around the country to assess their useful

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 CHÀMPUS 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 outpātient psychiatric care rather than hospitalize them?

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. 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.

The 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 3 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 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.

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

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

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