On March 11, Magellan Health Services Inc. announced that it had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
Magellan is the one of the leading managed behavioral health and wellness organizations in the country, with a total enrollment of 67.4 million people.
Magellan CEO Steven Shulman said in a press release that same day that creditors had committed to make an investment of $50 million in a reorganized Magellan. The proposed restructuring plan submitted to the bankruptcy court outlines actions that are intended to reduce its indebtedness of $1 billion by more than $500 million by fall 2003.
Aetna Inc. agreed to extend its contract with Magellan through 2005, according to a March 11 press release.
Aetna provides medical services to 13.7 million people, and its contract with Magellan was scheduled to end at the close of 2003. According to the new contract, Magellan must establish three customer-service call centers for Aetna members.
The release said, “Aetna’s new strategic focus and agreement with Magellan will feature clinical enhancements designed to promote a stronger integration of care between mind and body, and provide a better way to detect and facilitate the treatment of behavioral health issues associated with chronic medical illnesses.”
According to the March 12 Washington Post, Shulman said that the bankruptcy filing “will not affect [Magellan's] services” to 67.4 million people through its contracts with 2,300 health insurers, government agencies, unions, and businesses.
Stock analyst Eliezer J. Radinsky of Jefferies & Co. was quoted in the Post as saying, “Magellan is still doing a good job with its providers.”
Irvin (Sam) Muszynski, J.D., director of APA’s Office of Healthcare Systems and Financing, has had numerous meetings and phone conversations with Magellan’s staff since the prospect of bankruptcy became apparent.
On March 14 Shulman sent a letter to professionals who offer mental health services through Magellan. He wrote, “We do not expect any disruptions to customer or member services or any changes to member programs as a result of the filing.”
Shulman referred practitioners to www.MagellanProvider.com for further information.
On January 9 Muszynski sent a letter, signed by APA President Paul Appelbaum, M.D., to the commissioner of each state’s department of insurance to attempt to alert them to the problem and to determine the role that agency could play in assuring payment to providers if Magellan declared bankruptcy.
Staff are reviewing the responses, which have come from 18 states at press time.
Muszynski said that any pertinent news about Magellan would be posted quickly on APA’s Web site at www.psych.org. He urged APA members to report any problems or ask questions to staff at APA’s Help Line at (800) 343-4671. ▪
