Over the last two decades, Washington -- the beneficent god-mother of psychiatry -- has done more than just line the pockets of an ever-swelling herd of private psychiatrists. It's given birth to the nation's largest chain of profit-making psychiatric hospitals.
The Psychiatric Institute of America, which owns three local psychiatric hospitals and 15 others across the United States, was born to instant success in Washington in 1967. Psychiatric Institute, better known as PI, offered flashy new techniques for treating mental patients. It plugged into an insurance network under which tens of thousands of federal workers and their families had complete coverage for up to a year in mental hospitals. As it prospered, PI projected a concerned image, sponsoring lectures on drug abuse and running a poster contest in District of Columbia schools. The contest asks children to explain how: "I feel good about myself when..."
Behind all this sweetness and growth, PI has stubbornly refused to compromise on the key to its success -- astoundingly high prices.
The average bill for a child who stays at the Psychiatric Institute of Washington for five months is $ 73,350. That's the bare-bones price. Doctor fees, laboratory tests and drugs are extra. Weekly psychotherapy with a psychiatrist costs at least $ 50. Daily group sessions with a doctor cost patients $ 35. Psychiatrists earn $ 270 an hour meeting with the standard eight-member group. The same fee is charged when groups of parents meet with a doctor, as they do at least once a week.
After nearly 15 years, PI's prices, consistently the highest of any psychiatric hospital in the area, have lost none of their dazzle:
"I sit with my husband and look at the bills and we get hysterical," says a Montgomery County woman whose teen-age doughter spent five months at PI in Washington, running up a $ 72,000 bill.
"The people at PI have an extraordinary talent for extracting the maximum remuneration for services rendered. They have discovered and exploited the secrets of the multiplication table," said Dr. Zigmond Lebensohn, a past president of the Washington Psychiatric Society and one of the area's most respected senior psychiatrists.
"I think people are abashed about finding out what this kind of hospitalization costs. It is abashing," say Dr. Barton Kraff, director of administrative and intake service at PI of Washington.
The bills have proved so abashing, as well as maddeningly complex, that PI in the past six months has begun "orientation" sessions with families to explain sample bills and head off indignant phone calls.
"They [the management of the Psychiatric Institute] are probably quite good at what they do," says Lebensohn, echoing sentiments of a score of local psychiatrists asked about PI. "They have very sophisticated public relations people. They spend a lot of money on community lectures. All these things are very good in projecting a good image. But there is no question that PI has led the spiral in psychiatric costs in this city."
That cost spiral is best seen in the 72 percent increase over the past five years in mental health benefits paid by Blue Cross/Blue Shield, Washington's major insurer of federal workers and the preferred choice of more than half the patients at local PI hospitals. Having watched in disbelief as mental health benefits grew from $ 90 million in 1975 to $ 157 million in 1980, Blue Cross this fall managed to put on the brakes. Beginning in January, those covered under the high-option Blue Cross plan will find benefits slashed from 365 to 60 days of full-coverage inpatient psychiatric care.
Like fried chicken, tacos and automobile mufflers, psychiatric hospitals in this country have fallen prey to chain ownership. Corporations, including five chains, now own 88 of the nation's 180 private psychiatric hospitals.This is an 80 percent increase in 10 years in private psychiatric hospitals operated for profit, rather than on a non-profit basis.
Psychiatric hospitals have become part of what Dr. Arnold S. Relman, editor of the New England Journal of Medicine, calls the "new medical-industrial complex," a growing pattern of doctor-owned corporations that force physicians to be both businessmen and healers. With gross income exceeding $ 40 billion a year and net earnings rising by up to 35 percent a year, the medical-in-dustrial complex has made millionaires of thousands of doctors and raised sticky ethical questions about conflicts of interest.
Relman, a professor at Harvard Medical School, warned the medical profession that it could easily betray the trust of the American public if it loses sight of its contract with society, which is to serve patients, not to "market useless, marginal or unduly expensive services."
The Psychiatric Institute of America's 18 hospitals are owned by psychiatrists who hold stock either in the individual hospitals, in the Washington-based parent corporation or both. PI of Washington, the first hospital in the chain, was founded in 1967 by six psychiatrists at George Washington University. After the initial success of the hospital, the doctors shrewdly fashioned a psychiatric empire.
The empire, a complex web of interlocking companies involved in ventures ranging from real estate finance to malpractice insurance, has been highly lucrative. Although PI refuses to discuss its profits, documents it presented in a successful attempt to buy a North Carolina psychiatric hospital show the company's after-tax earnings jumped from $ 145,000 in 1972 to $ 1.1 million by 1978. During the period, PI had a 38 percent increase in annual pre-tax profits. Psychiatrists in North Carolina were told by PI that if they joined the organization they could increase their earnings from $ 80,000 up to $ 300,000 a year.
In Washington, PI has been the major factor in an unprecedented increase in psychiatric hospitalization. Between 1973 and 1980, as the area population increased 4 percent and total days of hospital care increased 16 percent, the number of inpatient psychiatric days jumped by 60 percent.
On its fast track to growth and riches, PI has made enemies. Many psychiatrists in Washington disdainfully, and perhaps jealously, accuse PI of practicing assembly-line psychiatry. They call it "Kentucky Fried Cortex" and the "Howard Johnson's of psychiatry." According to some of its enemies, PI has made a habit of promising to meet local mental health needs, obtaining state and local approval for hospital construction and then charging prices so high that only the very rich or the very insured can afford treatment.
Dr. Jesse Rubin, medical director and president of PI in Washington and one of the original partners in the company, denies any bait-and-switch allegations."I think we have a very good track record of saying exactly what we are going to do and doing it. I think in all of our hospitals the amount of concern directed to the general community is excellent. I don't see how more could be asked of us."
PI's record in the Washington area, however, does raise questions:
In Loudoun County, the Springwood Psychiatric Institute opened in 1977 with promises that it would be "psecifically designed to meet the mental health needs of Loudoun County and immediately adjacent areas." But Springwood now charges $ 352 a day for adults, $ 409 a day for adolescents and only one-quarter of its patients come from Loudoun County. The hospital caters to the wealthy, offering a putting green, access to indoor tennis courts, riding stables and limousine service to Washington-area airports. Loudoun County mental health director Sarah Stanley says Springwood is too expensive for local residents. To meet demands for moderately priced inpatient psychiatric care -- demands that Springwood, despite its promises, has failed to meet -- Loudoun Memorial Hospital has been given state approval to open a 12-bed psychiatric unit.
PI's newest area hospital, the Psychiatric Institute of Montgomery County (PIMC), opened this spring with the help of a $ 4.2 million low-interest, tax-free bond that the county issued with the understanding that savings would be passed on to patients. But PIMC now charges $ 261 a day for adults and $ 322 a day for adolescents, the highest rates for any psychiatric hospital in Maryland. The rates would have been 16 percent higher except for the Maryland Health Services Cost Review Commission, which cut the rates and criticized the hospital for projecting administrative costs that were too high and occupancy rates that were too low.
As part of its deal with the cost commission, PIMC promised to accept 5 percent of its patients on a reduced-fee basis. But psychiatrists at Montgomery County hospitals say PIMC seems reluctant to accept any patient who isn't rich or fully insured. "They [officials at PIMC] have made it pretty clear to us that unless somebody can afford their rates, we might as well not waste our time calling," says Dr. Edmond J. Donnellan, chairman of the psychiatric department at Shady Grove Adventist Hospital in Rock-ville. Echoing reaction in Loudoun, administrators at Shady Grove Hospital say PIMC is too expensive to meet local mental health needs and have applied to the state for permission to open an additional 10 to 15 psychiatric beds.
In spite of all the sniping over high prices, most people -- including parents of former teen-age patients, competing psychiatric hospitals and envious outside psychiatrists -- say that PI hospitals are competent.
PI of Washington, the largest private psychiatric hospital in the city, hospitalizes 1,500 patients a year, more than half of them disturbed teen-agers who've been referred by the courts or who've proved too unruly for their parents.
Patients are treated by "milieu therapy" in a "therapeutic community" that was originally devised by a British psychiatrist to help ex-prisoners of war after World War II. The approach uses group therapy and constant contact between patients and staff members to modify behavior through self-insight, peer pressure and institutional discipline. A teen-ager in the hospital, for example, has to make his bed and show up at group sessions on time or lose "points" that could add up toward a weekend's leave from the hospital. Teen-agers are also placed on "teams" that meet for a range of therapies. By failing to abide by hospital rules, a teen-ager loses points that can take away not only his own privileges but those of other members of his "team."
Teen-agers attend school in the hospital and have group sessions with their parents at least once a week. In addition, parents meet among themselves in "collateral therapy" to discuss mutual problems in rearing disturbed teen-agers.
PI's own surveys of patients show that 85 percent of child and adolescent patients and about 65 percent of adult patients express satisfaction with their treatment in the hospital. In a series of critical stories on billing complaints and high prices at PI, WRC-TV (Channel 4) in Washington this year asked dissatisfied patients to call in. The station received a total of just 12 calls.
Those who do complain are usually parents of teen-age patients. They point to dubious PI bills showing, among other things, that a teen-age girl was charged for $ 28 worth of laxatives and $ 28 worth of Tylenol in just two days and that a teen-age boy was charged for psychotherapy on a day when he wasn't in the hospital. The bills are confusing and sometimes impenetrable: Parents who want to know what drugs their child has been getting must learn to read an unexplained code that refers to drugs only by number, not name.
Angry patients, upset that they were rarely allowed to have individual sessions with a psychiatrist in the hospital, this year forced PI to increase the number of one-on-one sessions to at least one a week.
But the most logical consumer complaint against PI -- high prices -- is muted by Washington's widespread mental health insurance. Just about all of PI's patients are covered by insurance.
"We never even could have considered PI it is wasn't for our insurance. But what do you do? You've got a kid who can't decide whether she wants to live or die," says a Montgomery County mother whose 16-year-old daughter last year ran up a $ 93,300 bill during seven months at PI in Washington. The woman and her husband, an accountant at a company with insurance under the Northwestern National Life Insurance Company, have been billed personally for only $ 2,240 of the entire amount due.
The insurance companies act as insulators between the hospital and the consumers. The consumer has no incentive to demand lower prices," says Dr. Hal Gillespie, a psychiatrist who fought PI's purchase of Highland Hospital in Asheville, N.C. "PI is taking advantage of a situation that does not respond to the laws of supply and demand."
Gillespie and Dr. Tom Smith, another former psychiatrist at Highland, claim that when Psychiatric Institute of America executives showed up in Asheville in 1979 to take over the hospital they talked almost exclusively about money.
"They made a presentation to the nine staff psychiatrists at Highland and asked us to join with them in a partnership. Practically all one day was spent talking about how much money we could make and about two or three sentences [was spent] on patient care," says Smith, who refused to join the partnership and now works at a mental health clinic in Franklin, N.C.
Since PIA took over the hospital, prices have jumped from a uniform day rate of $ 89 to $ 186 for adults and $ 202 for adolescents.
"When someone at the presentation asked a question about whether it was legitimate to raise prices, they told us that, after all, if anybody is getting ripped off in this kind of a situation it is the insurance companies and the government," says Smith.
The executives who made the presentation, John Silverman and Norman Zober, refused comment on the takeover of Highland Hospital.
PI maintains that while its per-day charges are higher than most psychiatric hospitals, they are fully justified. PI claims it employs 30 percent more clinical staff than the average psychiatric hospital, utilizes the most modern facilities and offers patients "state-of-the-art" care. Although its day rates are considered higher than those at well-known private psychiatric hospitals like Chestnut Lodge in Rockville and Sheppard and Enoch Pratt in Towson, Md., patients at PI have shorter average stays. At PI, teen-agers are hospitalized for an average of two and a half months and are charged $ 36,200, including doctors' fees. At Sheppard Pratt, teenagers are hospitalized for an average of 10 months and are charged $ 66,555.
There are no objective ways to compare the cost-benefit performance of psychiatric hospitals. Treatments vary widely and cures for severely ill mental patients are both rare and hard to measure. PI's solid reputation among a large number of mental health experts in Washington is the best available indication of the quality of its care.
But critics warn that the high cost of mental health hospitalization will boomerang on PI and that the cuts in insurance are just the beginning.
"The bubble is going to burst on this sooner or later and the public will have some righteous indignation," says Gillespie, the disaffected psychiatrist from North Carolina. "I think they will go after the doctors who allowed this to happen."