Magellan completes bankruptcy reorganization

Psychiatrists hope the responsiveness showed by the behavioral health giant during Chapter 11 will continue.

By Mike Norbut, AMNews staff. Jan. 26, 2004.

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."