The effects of outpatient psychiatric utilization on the costs of providing third-party coverage

Although previous studies conducted in prepaid group practice settings have indicated that the cost of providing coverage for outpatient psychotherapy may be offset by lower utilization of medical/surgical services among those who receive the benefit, no such studies have been conducted in a fee-for-service setting, nor have actual before and after claims costs been compared. This study establishes a methodology for using routinely collected Blue Cross claims data to show how the acquisition and use of a given benefit affects total utilization patterns and the overall costs of providing third-party coverage. The use and cost of outpatient psychiatric coverage in one subscriber group is the particular application given to this methodology in this report. Blue Cross claims records of 136 subjects who utilized outpatient psychiatric benefits over a 48-month period were analyzed. Results indicate that overall medical/surgical utilization is reduced for that subgroup who used the outpatient psychotherapy benefit and that average costs dropped by $9.41, from $16.47 per patient per month before outpatient psychotherapy to $7.06 after contact, with costs being adjusted to reflect parity with the base year. Factors other than psychiatric intervention which may have brought about this cost reduction as well as policy implications of these results are discussed.