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The rise and fall and rise again of Magellan

September 30, 2013
by H. Steven Moffic, MD
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Remember Magellan? If you wanted to follow the history of behavioral healthcare over the last 25 years, the almost biblical arc of the history of Magellan would present a most interesting perspective.

Founded in 1969, this for-profit company became quite well-known in the 1980s. For those who worked in our field back then, you probably remember Magellan, along with the Charters of this world, a top company in the rise of for-profit hospitals.

When private for-profit managed care followed on their heels, their hospitals were easy pickings due to their lack of accountability for long inpatient stay, both for mental disorders and substance abuse. Routine 30-day stays for detox became a relic of the past. I, after becoming a medical director in a not-for-profit managed care system, wrote about all these enterprises in The Ethical Way: Challenges and Solutions for Managed Behavioral Healthcare (Jossey-Bass, 1997). Because the challenges seemed to be still with us 15 years later, the book was subject to an unprecedented re-review in the journal Psychiatric Services.

No surprise then that many of these for-profit inpatient hospitals collapsed, as did some of the companies that owned them. If the company traded on Wall Street, their stocks had also risen, then collapsed.

Somehow, I lost track of Magellan after awhile, only to hear about it again recently, reincarnated as, guess what: a managed care company. And, perhaps a thriving one at that.

However, it is not easy to get the full picture as some information is in business sources, some in healthcare sources and, like most businesses, some is trade secrets. Here's what I have found so far (Please comment and correct if you know more.):

For the business part, you have to go no further than the Business Day section of the September 13, 2013 New York Times. In the "Company Information," it describes Magellan Health Services, Inc. as involved in the "specialty managed healthcare business." In that business, their main focus is on behavioral health management, along with a secondary focus on radiology and specialty pharmaceuticals. Quite an interesting combination. As of 2011, it reported serving over 54 million members, with over 30 million in behavioral healthcare. Apropos to behavioral healthcare is Magellan Complete Care of Arizona, which is said to have been formed to managed integrated mental and health care for the seriously mentally ill and Medicaid beneficiaries in Maricopa County.

At the same time, Magellan is in a recovery plan, which could end up including filing for bankrupcy. Referring back to the 1980s, it is selling its interest in six hospital-based joint ventures, as well as two psychiatric hospitals in London and Switzerland.

At this turning point in its business history, Magellan may be at the cutting edge of changes in behavioral healthcare. With the emerging Affordable Care Act recommending more integration, Magellan is doing just that in Arizona.

However, they have had some criticism along the way, like most for-profit managed care companies. For instance, one customer review on February 1, 2012 stated:

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H. Steven Moffic

H. Steven Moffic

H. Steven Moffic, M.D. retired from the clinical practice of psychiatry and his tenured...