Psychologists Sue Managed Care Company Over Termination Practices

September 1, 1996

In what well may be a first in the managed behavioral health care industry, the New Jersey Psychological Association (NJPA) and seven psychologists filed a lawsuit against MCC Behavioral Care Inc. contesting the firm's utilization of "without cause" termination contract provisions. The case may break new ground in the way managed care companies interact with providers, and may question whether managed care companies can deselect providers despite the potential harm to patients.

In what well may be a first in the managed behavioral health care industry, the New Jersey Psychological Association (NJPA) and seven psychologists filed a lawsuit against MCC Behavioral Care Inc. contesting the firm's utilization of "without cause" termination contract provisions. The case may break new ground in the way managed care companies interact with providers, and may question whether managed care companies can deselect providers despite the potential harm to patients.

The 26-page complaint, originally filed in May in Morris County (N.J.) Superior Court, was removed in July to a federal district court. The NJPA entered the suit on behalf of all its members who have or will be terminated by MCC. The seven individual plaintiffs were among 40 psychologists terminated without cause by MCC about two years ago, said Lorryn Wahler, executive director of the NJPA.

According to the allegations, MCC uses the "without cause" termination provisions of its contract with providers in order to conceal the true reasons for termination. The plaintiffs claim that MCC maintains an "undisclosed set of standards" that it uses to determine whether a practitioner is "managed-care compatible." In implementing this practice, the complaint alleges, the managed care company in effect substitutes its judgment of what is proper mental health care for the judgment of mental health professionals who are responsible for patient care.

"The irony here is that when psychologists sign a contract with MCC or another managed care company, they are obligated by that contract to exercise their clinical judgment," said Barry Mitchell, Psy.D., NJPA president. "When they do exercise their clinical judgment and provide more services than the company wishes to reimburse, they become managed-care incompatible and are terminated... [These] terminations are in fact 'for cause,' but are veiled as 'no cause' terminations by MCC in order to avoid giving these psychologists their due process to fight these terminations."

MCC, based in Eden Prairie, Minn., is a wholly owned subsidiary of Cigna Corp., which provides behavioral health care services to more than 5.5 million people nationwide. Other than to acknowledge that MCC "did terminate contracts with providers approximately two years ago, basically as part of a general reorganization of that and other networks," MCC spokesperson Harold Drescher said, they would have no other comment on the lawsuit until a response was formally filed in court. He did say, however, that the lawsuit would cut to the heart of "the whole issue of selective contracts" as a "means of controlling the costs of operating our provider networks."

One of those costs, said Drescher, includes the expense of meeting provider credentialing requirements mandated by various accreditation organizations, such as the Joint Commission on Accreditation of Healthcare Organizations and the National Committee for Quality Assurance. He said that the criteria by which a decision is made to terminate a practitioner during a network downsizing is the issue that will be litigated.

William F. Maderer, a Newark, N.J., attorney representing the plaintiffs, sees the case as a landmark struggle to determine whether mental health practitioners or the managed care organizations will have control over decisions relating to patient care.

"I'm not sure that whatever role the managed care companies play that it should be to substitute their judgment for the judgment of a health care provider professional who has determined what is appropriate," said Maderer. "If a mental health care provider is diagnosing a certain illness and recommending certain treatment, it's certainly the psychologists' position that it's inappropriate for the managed care company to substitute its judgment."

Ultimately, the lawsuit will focus on other managed care practices that have irritated mental health practitioners for years, including "gag clauses" or practices and utilization review procedures. When invoked, the complaint alleges, patient care suffers and public policy is violated.

"The question is if psychologists know that they will be terminated if they speak too loudly or request a certain type of treatment plan, or if they write down a certain type of diagnosis, then what it's going to do is affect the way psychologists operate not because it's good medicine or good health care, but because that's what it takes to play the game," Maderer said.

The common managed care practice of hiring utilization review personnel whose credentials and experience fail to match those of the organization's providers will also be challenged. UR personnel have suggested different diagnoses and different kinds of treatment when they've never seen the patients and when they don't know the situation," Maderer said.

Although accounting for only two paragraphs in the complaint, the allegations that MCC's managed care practices violate New Jersey's law against the unauthorized practice of psychology could, if sustained, have a profound impact on the way treatment decisions are made. The NJPA and the individual psychologists will ask the court to decide whether the termination of providers without cause because of an assessment that they were not managed care compatible actually has a direct effect over the control and delivery of treatment afforded to patients. If it does, the argument goes, then MCC's practices are in fact the unauthorized practice of psychology.

"Managed care companies are making decisions about psychological and medical care and they're not just managing the benefit," said Wahler. "They are actually providing the care and they're not qualified to do so."

The constant fear, Wahler said, is that practitioners want to provide the services they believe are in the best interests of their patients, but fear they may be "dumped from a panel for no cause with no recourse." She said that the seven psychologists who joined the suit face an additional risk- concerns that other managed care organizations may blackball them as a result of the litigation.

Wahler said that the purpose of the suit is not to eradicate managed care, agreeing that its techniques have resulted in many positive changes. All of health care needs to be cognizant of controlling costs, but the solutions that [managed care] has come up with are far more dangerous to the health of people in this country than overutilization."

Russ Newman, Ph.D., J.D., executive director for professional practice at the American Psychological Association in Washington, agrees that "nobody until now has looked at the issue of termination without cause." Acknowledging that such terminations are customary business practices in many industries, he questioned whether patients' interests can be served when the "no cause" deselection process is applied to health care.

"The question is, is there a uniqueness to the patient/therapist relationship that is medically impacted by termination without cause?" said Newman. "Even if the court were to determine that it is an appropriate practice, the question is can one misuse [it]?"

Courts have tended to view managed care agreements as business arrangements, Newman said, applying traditional contract theories to their interpretation. But when courts have viewed a body of dispute as a health care relationship- for instance medical malpractice litigation- then they apply principles that require greater accountability. He sees a shift in the legal system away from a contract-oriented view of managed care.

"Is what's happening in the health care system simply the creation of a financial or business arrangement in order to then separately, but in that context, provide services, or do these business arrangements and managed costs strategies actually influence the health care that is being provided?" Newman asked. "I would argue that managed care is, in fact, the provision of health care."

Related Managed Care Articles