Is For-Profit Managed Care an Oxymoron?

As states increasingly turn public psychiatric services over to for-profit managed care companies, we hear growing criticism of managed care. History suggests that the problem is not in managed care itself, but rather in the for-profit aspect of it. For example, in early-19th-century England, for-profit psychiatric asylums assumed responsibility for many private and public patients. As they did so, they were increasingly criticized for admitting the least sick patients, providing poor care, and keeping the patients until their families' money was used up.

In the 1980s and 1990s we learned the same lesson again. For-profit psychiatric care companies assumed responsibility for many private and public patients. And they were increasingly criticized for admitting the least sick patients, providing poor care, and keeping the patients until their insurance coverage was used up.

Having seen what for-profit companies could do with inpatient care, we decided to turn outpatient care over to them as well. The results have been predictable. In Rhode Island, United Behavioral Systems was fined $100,000 for paying incentive bonuses to the company's chief psychiatrist contingent on the company's profits. In Massachusetts, the state accused for-profit managed care companies of spending only $4 to $5 per person per month on psychiatric services despite being reimbursed $22 per person per month. In Iowa, a managed behavioral health care company was accused of earning a “commission”of $880 for each adult who applied for, but was denied admission to, a psychiatric unit.

For-profit managed psychiatric care is, in fact, a logical impossibility. For-profit managed care is merely for-profit managed costs. For-profit companies are required to place the interests of shareholders above the needs of patients to maximize profits. The less care they provide, the more money they make. One way to do so is to enroll healthy individuals and avoid people with serious or chronic psychiatric conditions.

A 1995 Wall Street Journal analysis called for-profit managed care companies “extremely profitable” with “plenty of potential for additional growth.” Such “additional growth” will come by further restricting services. The stockholders of for-profit companies will not vote for lower dividends so that additional assertive community treatment teams can be implemented. Company officers will not forgo bonuses so that new clubhouses, rehabilitation programs, and mobile emergency teams can be started. And if many people believe that this is not the case, then the potential market for antipsychotic drugs is broader than was previously thought.—E. Fuller Torrey, M.D., Stanley Foundation Research Programs, Bethesda, Maryland