Higher Therapy Costs Cause Loss at Magellan

Magellan Health Services Inc. warned that unexpectedly high mental health care costs after Sept. 11 will result in a loss in the fourth quarter, sending its shares down more than 30%.

Magellan, the nation’s largest managed-care mental health and substance abuse treatment company and a major provider of employee assistance programs, said the need for psychiatric care and counseling soared after the terrorist attacks. It estimated that 1,800 requests for counseling sessions, mostly from employees and managers, came in between Sept. 11 and Sept. 30. Magellan typically receives less than 125 such requests a week.

Magellan said it expects to report a loss from continuing operations of 2 cents a share for the quarter ended Sept. 30, with revenue virtually flat at $433 million. Analysts on average were expecting a profit of 17 cents, according to Thomson Financial/First Call.

Shares of Columbia, Md.-based Magellan, which will report its results on Tuesday, plunged $2.74 to $7.24 on the New York Stock Exchange.