Legal News
Controversy Continues Over MCO Termination Clauses
Psychiatric News
Volume 36 Number 16 page 10-10

On June 29 yet another chapter unfolded in the long-running legal battle between mental health practitioners and managed care companies. ValueOptions Inc., the country’s largest privately held managed behavioral health care organization, announced a revision to its provider handbook.

The revision stipulates that ValueOptions will not terminate clinicians from its network for advocating on behalf of their patients, filing complaints against the company, appealing ValueOptions’ decisions, or requesting reviews of or challenging termination decisions.

Don Fowls, M.D., chief medical officer of FHC Health Systems (ValueOptions’ parent company), said, "No change in ValueOptions’ practices occurred nor was any necessary because ValueOptions has always adhered to the above policy. ValueOptions values its relationships with the health care professionals who participate on its provider panels and recognizes clarification of its termination policy as a positive step in further supporting those relationships."

The revision came about after a May hearing in federal district court in follow-up to the lawsuit Russell M. Holstein, Ph.D., et. al., v. Magellan Behavioral Health Inc., et al., in which the plaintiffs challenged ValueOptions’ use of a "no cause" termination clause in its provider contracts. The plaintiffs included individual psychiatrists, psychologists, and social workers, as well as regional organizations representing mental health professionals.

According to the transcript of the hearing, Joseph Sahid, attorney for the plaintiffs, claimed that ValueOptions contracts include the clause, "This agreement may be terminated by either party for any reason upon 90 days’ written notice to the other."

He added, "They have no other version of this clause, and it appears in every contract that I have examined."

Roman Lifson, attorney for the defendant, replied, "I’m confident that my client is not trying to deceive anybody" and charged that there was no showing that providers had been terminated for any of the prohibited reasons or that plaintiffs had expressed fear of termination.

"Obviously my client is not going to violate the settlement agreement by using the general clause that exists in its contracts," said Lifson.

Judge Lewis Kaplan asked Lifson why ValueOptions insisted on using the clause, "which on its face appears to permit conduct which you agree your client may not lawfully engage in?" He expressed concern that the clause "would effect the perception of the respective strengths of position of your client and the providers. . . ."

The short hearing concluded with an instruction from Judge Kaplan "to work it out" within two weeks. Sahid told Psychiatric News that he was discussing the contract issues with representatives of United Behavioral Health, Magellen Health Services, and Foundation Health Services, which also have "no fault" termination clauses in their contracts.

Erin Somers, a spokesperson for Magellen Health Services, said, "Our company is completely in compliance with the terms of the settlement. We do not terminate providers for any of the four prohibited reasons and have received no complaints or claims that we have done so."

Somers added, "However, because our relationships with providers are important, we will be more explicit and, by August 1, will publish a statement in our online provider handbook stating that we will not terminate for the prohibited reasons. Contracts issued after August 15 and hard copies of the handbook published in October will also contain the statement."

Lisa Myers, a spokesperson for Foundation Health Services, said, "We acknowledge the plaintiffs’ concerns and are continuing to work with their lawyer on this contract issue. However, the Holstein settlement did not include a stipulation prohibiting "no cause" clauses. We have not and will not terminate providers for any of the four reasons mentioned, but we do have a ‘no cause’ clause in our contract. Among other reasons, that clause is necessary in case we have to change a geographic service area or cannot come to agreement about payment rates."

Spokespersons for ValueOptions and Magellan Health Services also said that they had not dropped the "no cause" clause.

Lawrence B. Lurie, M.D., chair of APA’s Committee on Managed Care, said, "Psychiatrists must be able to advocate for their patients. It’s very important that contracts do not inhibit us from doing what’s best for our patients."

APA Trustee Norman A. Clemens, M.D., an attendee at a postsettlement meeting between plaintiffs and the managed care companies, said, "The announced change is a welcome first step, but is only one of many steps that managed care companies must take in order to get qualified psychiatrists to work with them. We will be adopting a ‘wait and see’ attitude and paying particular attention to whether or not the change is applied to everyone."

The history of the hearing dates back to an out-of-court settlement of a lawsuit filed in 1998 by seven clinicians against the nation’s largest behavioral health carveout companies (Psychiatric News, June 16, 2000). The companies named were Green Spring Health Services, Human Affairs International, Merit Behavioral Care, CMG Health, Options Healthcare, Value Behavioral Health, United Behavioral Health, Foundation Health Services, and MCC Behavioral Care. (After the suit was filed, Merit took over CMG, and Magellan absorbed Green Spring and Merit.)

The suit charged the companies with an illegal conspiracy to restrain trade by agreeing to fix prices and reimbursement levels, which resulted in severe financial harm to the plaintiffs. It also contended that as a class, all patients whose care was affected by decisions made by these companies suffered harm as a result of reduced access to the care their treating clinicians determined they required.

The settlement did not refer to the price- and reimbursement-fixing charges, which all of the firms denied, nor did it require payments from or acknowledgement of wrongdoing by the companies named. The companies did, however, agree that they will not terminate clinicians who advocate on behalf of an insured patient, file a complaint against one of the firms with which they have a contract, appeal a decision by one of the carveout companies, or challenge or ask them for a review of a treatment-termination decision they made. That agreement was the basis for the most recent hearing. ▪

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