A landmark legal challenge to practices by the country’s largest behavioral carveout managed care companies has moved to a new stage.

The lawsuit, which charges nine managed care firms (now down to five thanks to a wave of mergers in the insurance industry) with violating federal antitrust laws, was filed in New Jersey in 1998 and eventually shifted by the New Jersey court judge to a U.S. district court in New York. A judge in that New York court had dismissed an identical suit earlier that year, but this one will be heard by a different judge, and the plaintiffs—psychiatrists, mental health professionals, and their patients whose mental health care these companies managed—are more optimistic about winning. APA will spend $140,000 from its Litigation Fund to support this suit.

The suit, Russell Holstein, Ph.D., et al., v. Green Spring Health Services, et al., alleges that the carveout companies are direct competitors who conspired to restrain trade by meeting secretly to set reimbursement rates in violation of federal antitrust statutes. The result of these actions, the plaintiffs charge, has been reduced access to care and a major escalation in cost to consumers. It has also meant reduced income for the clinicians who deal with these companies.

The five remaining carveout firms—Magellan Behavioral Health, MCC Behavioral Care, Managed Health Network, United Behavioral Health, and Value Options—deny the charges and succeeded in convincing the judge in the previous case that the allegations in the suit lacked sufficient detail to proceed any further.

U.S. District Court Judge Lewis Kaplan, who got the case from the New Jersey court, decided that there was in fact sufficient detail in the plaintiffs’ charges and ruled that the case can thus move on to the discovery phase.

The plaintiffs are now about midway through the discovery phase, said their attorney, Joseph Sahid. He and his staff are "going through hundreds of boxes of documents" supplied by the defendant companies looking for evidence to support the alleged antitrust violations. "It’s like doing detective work," he said.

Also under way is a round of depositions in which the plaintiffs are giving sworn testimony in response to questions by the managed care company defendants, Sahid said. The depositions have taken place in Los Angeles, Dallas, and New York City. Depositions are conducted in the presence of a court reporter rather than a judge or hearing examiner, he noted, and plaintiffs are questioned about why they are suing and why they maintain that the defendants should be held legally responsible for the harm the plaintiffs allege they have suffered.

After both sides have completed discovery and depositions, the next step is for the judge to set a trial date.