Pennsylvania psychiatrists recently learned to their chagrin that a federal judge has dismissed their landmark legal challenge to the way several of the state’s managed care companies do business.

The Pennsylvania Psychiatric Society (PPS) had filed suit against Highmark Inc., Magellan Health Services, Magellan’s Green Spring mental health carveout subsidiary, and Keystone health plans, charging that the companies engaged in several illegal practices. These included interfering in the relationship between doctors and patients, violating the terms of contracts with psychiatrists who treat plan beneficiaries, unlawfully removing psychiatrists from provider panels, and misrepresenting the extent and types of care available to subscribers.

U.S. District Court Judge Gary Lancaster decided on March 24 to accept an earlier recommendation from a magistrate whose report found no legal basis for the PPS’s suit to go forward. In Pennsylvania, magistrates are responsible for hearing motions and evidence in the early phases of a legal proceeding and then making a recommendation to the judge about the merits of a particular case.

In February, the magistrate, Kenneth Benson, rejected a PPS motion calling on him to issue an injunction forcing the insurance and managed care firms to halt the practices that PPS claimed were illegal. In a report to Benson, Magellan and Green Spring conceded that they made errors involving terminations of psychiatrists from provider panels, which stemmed, the company said, from its misinterpretation of Medicare rules.

PPS’s attorneys filed written objections to the magistrate’s initial ruling, as is permitted by Pennsylvania law, but were unable to convince the magistrate that there were still other unlawful practices going on, some of which could result in harm to patients seeking psychiatric care. Benson said that instead of turning to the courts, individual PPS members should follow through on the arbitration mechanism described in the insurers’ contracts with psychiatrists to settle their grievances.

Benson also recommended dismissal because he believed that the PPS did not have standing to sue the insurance firms for equitable relief or damages. He indicated that for such a suit to proceed, charges would have to be filed by individual psychiatrists who allege these companies harmed their practices.

In its written objections to Benson’s report, the PPS responded, "This conclusion overstates the amount of individual participation (if any) necessary to prove PPS’s claims for injunctive relief and disregards [a federal appeals court ruling] that permits the participation of some association members to prove broad-based claims of systemic wrongdoing." Neither Benson nor Lancaster was swayed by this argument, however.

PPS Executive Director Gwen Lehman told Psychiatric News that the district branch "respectfully disagrees with the magistrate’s ruling that we as a society don’t have standing to sue on behalf of our members. We believe case law supports our standing."

Magellan Behavioral Health’s general counsel, Joyce Fitch, said after Judge Lancaster accepted the recommendation to dismiss the suit that his decision showed "that the courts are not an appropriate forum for an organization such as the Pennsylvania Psychiatric Society to seek resolution of their members’ individual grievances with managed care."

In a press release issued after the judge’s ruling, the company’s medical director, psychiatrist Jonathan Book, M.D., took the PPS to task for filing "such a vague lawsuit as this." He said that these types of disagreements "are better resolved through honest and collaborative communication among mental health professionals."

Lehman said that despite its disappointment over the judge’s dismissal of its suit, the PPS believes it has a good case and is not about to let the matter die. District branch leaders quickly decided to appeal the judge’s ruling, and on April 13 PPS attorneys filed an appeal with the U.S. Court of Appeals for the Third Circuit. In addition, the Pennsylvania Medical Society is preparing an amicus curiae brief to support the PPS’s appeal.—K.H.