Magellan completes bankruptcy reorganization

Magellan Health Services Inc., the nation's largest behavioral health insurer, announced earlier this month that it had emerged from Chapter 11 bankruptcy.

Psychiatrists, however, are wondering which Magellan will emerge -- the one that was often difficult to deal with before the financial problems surfaced, or the one that was responsive to their questions and complaints during the bankruptcy process.

"When they filed, they actually were treating clinicians better than before," said James P. O'Neill, MD, a psychiatrist in Wall, N.J., and president of the New Jersey Psychiatric Assn. "They had been notoriously bad. They actually were good [after filing for bankruptcy] because they had to keep their network."

Magellan, which filed for bankruptcy last March under the weight of $1 billion of debt, said it was able to reduce that debt by about $600 million through financial restructuring. The Columbia, Md.-based firm also added about $150 million in new equity.

"The 'new Magellan' delivers unparalleled service, strength and solutions to all of our stakeholders, and our organization is energized to grow," said Steven J. Shulman, Magellan's CEO, in a prepared statement. "With our debt concerns behind us, we can completely focus management's time and energy on our business and providing a platform for growth and enhanced service."

Magellan, which accrued its debt while it grew in the 1990s, became the victim of its own aggressive strategy in 2002, when declining membership and rising costs created its financial crisis. Its stock price fell so low that it was kicked off the New York Stock Exchange that year.

Magellan returned to the Nasdaq Stock Market in January under the symbol "MGLN" and was trading for about $27 a share earlier this month.

In its last quarterly report, filed in November 2003, Magellan reported that it covered about 58.7 million lives, a decline from the 67.4 million insureds it reported at the end of 2002.

Physicians said Magellan still was slow in its credentialing of new doctors and tended to overestimate its psychiatry network, but they said the company had been willing to address their complaints. Members of the Maryland Psychiatric Society meet regularly with Magellan representatives with hopes they can convince the insurer to eliminate treatment plans for routine cases, said Robert P. Roca, MD, president of the society.

Psychiatrists hope the open communication continues, especially since they know they'll be dealing with a revamped Magellan, and not a new company.

"We're hopeful as they emerge from Chapter 11, they will make an effort to provide service," said Dr. Roca, who also is vice president and medical director of Sheppard Pratt Health System in Baltimore. "As long as we have the system where insurance companies are intermediaries, I don't know if most have felt that blowing up and starting over would have led to a better outcome."