The parties in a major anti-trust lawsuit against the nation’s largest behavioral health care companies reached an out-of-court settlement announced in May. It dashes the hopes of some psychiatrists that the suit would be precedent setting and impose severe financial penalties against the carveout firms.

The suit was filed in 1998 by seven clinicians, including two psychiatrists, and several organizations representing psychiatrists, psychologists, and social workers. They charged the carveout companies, which directly compete with one another, with illegally conspiring to set prices and reimbursements for mental health care services. This, they maintained, constitutes restraint of trade under the Sherman Antitrust Act.

An almost identical suit had been dismissed earlier in 1998 in the same court, the U.S. District Court for the Southern District of New York, because the judge said it lacked sufficient detail to back up the charges. This suit, originally filed in New Jersey but later shifted to the New York court because it was so similar to the earlier suit, ended up, however, before a different judge.

Last June the second New York judge, Lewis Kaplan, gave the plaintiffs in Russell Holstein et al. v. Magellan Behavioral Health Inc. et al. some reason to feel hopeful when he refused to grant the carveout companies’ request to have the suit dismissed. The suit had the potential to cost the companies billions of dollars if a judge or jury found them guilty of the antitrust charges and then imposed the maximum penalties.

The settlement does not make any reference to the price- and reimbursement-fixing charges, which all of the firms denied, nor does it require any payments from or acknowledgement of wrongdoing by the companies named in the suit. There is no provision for the companies to compensate the plaintiffs for their legal fees.

The managed care firms did, however, agree to remedy several managed care practices that psychiatrists and others say interfere with their ability to provide optimal care for their patients. One such issue concerns termination of psychiatrists and mental health professionals from participation in the carveout firms’ provider networks. The defendant companies agreed 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.

The companies also agreed that they would not take punitive steps against any of the plaintiffs who brought this suit. In addition, they said they will not impose so-called "gag clauses" that limit the ability of psychiatrists and others to discuss "treatment options or modalities" with a "patient or potential patient."

The managed care firms also agreed "to convene a six-hour discussion forum" in New York whose participants will be representatives from each of the defendant companies and 15 individuals chosen by the plaintiffs’ counsel, New York attorney Joseph Sahid. The purpose of the meeting is to provide an opportunity for the plaintiffs to discuss "changes in the provider-credentialing process and suggestions regarding administrative processes for payment of claims."

The provisions detailed in the settlement agreement are to be in effect until December 31, 2004.

[Holstein et al. v. Magellan Behavioral Health Inc. et al., No.98 CV2453 (NP)]