What Do IOP Sessions Cost an Insurance Company?

Understanding Insurance

Inside a mental health carve out, insurance people decide to deny care to people with addiction more because of the cost of that care than the total cost to the insurance company. Here’s an example. We did a study of around 100 admissions to our IOP and around 50 people who chose not to admit. We asked them two questions: How many time have you been to the emergency department (ED) since your discharge from treatment (or since your assessment if you didn’t go to treatment anywhere) and how many days have you been in the hospital in the same time period. The rest of the methodology is described here. But what I want to describe here is more about the people that came to Townsend and the effect on their insurance companies.

One more piece of background first. In our treatment we don’t have a fixed length of stay. Instead, we use our Disease Acceptance Scale (DAS) and the effect of that scale on the outcomes of the above study are described here.

In addition to what we’ve already published we also found another relationship in the study population. As you might expect, the DAS went up with the number of sessions of IOP that the patient attended. That makes sense if treatment works; more treatment, better effect. In fact we found that 12% of the variance of the DAS at discharge (DCDAS) was predicted by the number of sessions. The equation for that was DCDAS=10.61+0.18*Sessions; p=.0003. Now we need a little math.

Math Alert – the squeamish should skip this

The equation describing the relationship between the DCDAS and ED visits was EDVisits(per100days)=.29-.015*DCDAS and the equation describing the relationship between the DCDAS and hospital days was HospDays(per100days)=4.89-.26*DCDAS. Now for the math. We substitute the DCDAS equation for DCDAS to predict ED visits and Hospital days.










We valued the average ED visit at $1200 and the average Hospital Day at $1500, which is very conservative, meaning that every 100 days after DC each session saved the insurance company $3.24 in ED costs and $75 in hospital bed-day costs. That translates to $285 per year saved for every session of addiction IOP they allow, and that’s only for ED and hospital costs. So let’s think about that. If an insurance company pays $350 a day for IOP, they’re getting $285 of that back EVERY YEAR. So the first year they are getting back $285 which is an 81% return, and the next year they get another 81% return. Can you find an investment that pays that well?

No More Math – arithmaphobics may return

This leaves me wondering why it’s so difficult to get sessions approved from some insurance companies. Some will allow us 5 sessions and make us call them back every week to get more. Some give us 10 or 15 to start with, very few don’t have hoops to jump through that are designed to limit the time of treatment. And the excuses for not approving sessions are ridiculous. Here’s one, “Well, he hasn’t used drugs in the two weeks he’s been in your IOP so he can leave treatment.” And from the same company on a different patient, “Well, he hasn’t abstained from using drugs in the time he’s been in your IOP so he obviously isn’t serious and there’s no point in any more sessions.” Go figure.

The only thing I can think of is that they don’t realize they are saving money by treating addiction, but frankly I don’t know how that could be. The government has done studies, national insurance companies have done studies, academia have done studies all showing that the returns on treating addiction are huge. Other studies have shown that a great amount of healthcare costs outside of the mental health carve outs are due to untreated addiction. So I’m left with wondering why. I hope it isn’t prejudice, but there’s little else I can think of.

In fact, to that point, there is no other disease in which people who work at insurance companies talk about monetary savings. It’s always comparing treatment X to treatment Y and finding out which one costs less per life saved. The idea of saving money without regard to saving lives never occurs to anyone outside of addiction treatment. In coronary care, no one minds paying money to save lives; in pulmonary care, no one minds paying money to save lives; in cancer treatment no one minds paying money to save lives; but with people with addiction, there seems to be a strange reluctance to spend money to save lives. So we are left describing to insurance companies how much we can save them by letting us treat their insureds rather than saying that it’s okay to spend real money for good treatment.



Author: AddictionDoctor

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  1. Dr. Wetsman,

    Great post. Thank you. I would love to see a post regarding children at genetic risk of addiction. What, if anything, can be done? And let’s say we have two addict parents who have a “ADHD” child…what can we do for the child? Are ADHD symptoms ALWAYS the indicator for a child having the disease of addiction. Would it be fair to say that a child who does not display ADHD behaviors will not “become” an addict. I feel helpless and hopeless treating “adhd” kids. Is there a way we can prevent addiction? And I don’t mean “just say no” and D.A.R.E. Classes in school. Thanks.

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    • Cal,
      Thanks for the kind words. Try searching the site for ADHD; the search bar is right above my picture. I know I’ve done something, and yes, I think, with early identification we can prevent the problems associated with this illness.
      All the best,

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