MAGELLAN BEHAVIORAL HEALTH CARE UPDATE

March 17, 2003

Magellan Behavioral Health Care filed for Chapter 11 bankruptcy protection on March 11, 2003,  in an attempt to reduce a debt of almost $1 billion.   Magellan has reached an agreement with key creditors on its proposed financial restructuring plan which would reduce its debt by $500 million, and therefore be out of Chapter 11 by the fall of 2003.  Magellan reports that it is “operating as usual, without interruption, and has sufficient cash to fund all of its ongoing obligations and operations during the reorganization process, including obligations to employees, providers, and customers.’’  It has renewed its contract with Aetna, its largest contractor, through December 2005.

Magellan is the largest provider of mental health services in the nation, specializing in managed mental health and substance abuse services and employee assistance programs.   It maintains a provider network of over 58,000 practitioners  and includes clinical social workers as one of its major mental health providers.  During the fall of 2002, Magellan made major news headlines because of financial problems. They were removed from the New York Stock Exchange when the stock price and market capitalization became insufficient for listing and they filed a Form 10-Q with the Securities and Exchange Commission.

Magellan attributes its financial problems to bank debt and their inability to comply with some of the financial agreements with bank lenders.  The company stresses that its cash flow operations are positive and it remains current on payments to their providers, vendors, and suppliers.  It has launched a campaign to reduce not only its debt but to improve its capital structure. 

Clinical social workers should continue to bill for all services rendered under their Magellan contract.  NASW is monitoring implications for clinical social workers through discussions with Magellan and state regulatory officials.  Clinical social workers may contact NASW’s Program, Policy & Practice Unit at 202-408-8700  or e-mail mcoleman@naswdc.org. if they encounter any problems with reimbursement and/or  other issues with Magellan. 

RESOURCES

• Financial restructuring moves forward.   (2003, March).  Magellan Health Services
• Focus on change:  overview of Magellan’s finances and action plan.  (2002, October).  Magellan Health Services.
• Frequently asked questions about Magellan’s financial status.  (2002, October).  Magellan Health Services.
• Magellan files for chapter 11 to reduce debt. (2003, March 12).  The Washington Post, p. E1.
• Magellan files for bankruptcy. http://www.psych.org/news.
• Magellan health services inc. (2003, March 12).   The Wall Street Journal, p. B8.