Shifting to Outpatient Care? Mental Health Care Use and Cost Under Private Insurance

OBJECTIVE: Concern over rising health care costs has put pressure on providers to reduce costs, purportedly by reducing inpatient care and increasing outpatient care. METHOD: Inpatient and outpatient claims were analyzed for adult users of mental health services (180,000/year on average) from a national study group of 3.9 million privately insured individuals per year from 1993 to 1995. Costs and treatment days per patient were compared across diagnostic groups and stratified by whether patients were hospitalized. RESULTS: Inpatient mental health costs fell $2,507 (30.4%) over the period, driven primarily by decreases in hospital days per patient per year (19.9%), with smaller changes in the proportion of enrollees who received inpatient care (increase of 0.8%) and a decrease in per diem costs (9.1%). Outpatient mental health costs also declined over the period, falling 13.6% for patients also using inpatient services and 14.6% for patients receiving only outpatient care. Patients whose primary diagnosis was mild to moderate depression saw the largest decrease in inpatient cost per patient (42.8%); those diagnosed with schizophrenia experienced the smallest decrease (23.5%). For patients using outpatient services only, those diagnosed with substance abuse experienced the largest decrease in costs (23.5%); those diagnosed with schizophrenia experienced the smallest decrease (8.6%). CONCLUSIONS: Substantial cost reductions for mental health services are primarily a result of reductions in inpatient and outpatient treatment days. Declines in inpatient service use were not accompanied by increases in outpatient service use, even for severely ill patients requiring hospitalization. Managed care has not caused a shift in the pattern of care but an overall reduction of care.