March 19, 1999

Plaintiffs in a potentially precedent-setting antitrust suit against the nation's largest managed mental health care firms are refusing to retreat even though they recently suffered another legal setback.

The class-action suit, originally filed in November 1996, charged the nine largest behavioral health carveout companies (now reduced to five through a wave of mergers) with violating federal antitrust laws. It was filed by six therapists on behalf of the more than 200,000 psychiatrists, psychologists, and social workers in the U.S. whose patients' care was insured or managed by one of the firms. Among the plaintiffs are psychiatrist Edward Stephens, M.D., of New York City, and José Yaryura-Tobias, M.D., of Great Neck, N.Y.

The suit alleges that the companies formed an illegal cartel whose aim is to fix reimbursement rates and rein in mental health care procedures to maximize their profits. It also charges that clinicians suffer adverse financial consequences if they deliver care that one of the companies determines is unnecessary, which amounts to unreasonable restraint of trade and thus violates the Sherman Antitrust Act (Psychiatric News, February 7, 1997; August 7, 1998).

In November a federal appeals court in New York refused to reinstate the suit, which had been dismissed last May by U.S. District Court Judge Kimba Wood. The appeals court agreed with Wood's ruling that the suit did not provide sufficient details of the alleged conspiracy for her to allow it to go forward.

New York attorney Joseph Sahid, who represents the plaintiffs, in late February filed another appeal to have the case reinstated, this time with the U.S. Supreme Court.

A similar suit against these same companies filed in New Jersey in May 1998 is also facing an uncertain future in the courts.

Seven mental health clinicians and four professional organizations filed the New Jersey suit, which is also being shepherded by Sahid. Two of the clinicians are psychiatrists, and two of the organizations represent psychiatrists. The individuals are APA Treasurer Maria Lymberis, M.D., of California and R. Anthony Moore, M.D., of Texas. The psychiatric organizations are the Black Psychiatrists of America and the American Association of Private Practice Psychiatrists. The New Jersey Psychiatric Association is also participating in the suit.

The magistrate assigned to hear this case, which is known as Russell Holstein, Ph.D., et al. v. Green Spring Health Services, et al., sent it across the Hudson River. He agreed with attorneys for the carveout companies that since the suit was nearly identical to the New York lawsuit, it should be heard by the same court that addressed (and dismissed) that suit. He thus did not address the merits of the suit.

In New York the case has been assigned to Judge Lewis Kaplan, not to Judge Wood, who dismissed the previous case.

Sahid saw politics at work in the New Jersey and New York decisions. "You can't get away from the political overtones in litigation this complex. It often hinges on an individual judge's views," Sahid told Psychiatric News.

He added that he is looking forward to filing a suit against the companies in California after being contacted by angry individuals who are not part of either of the two suits on the opposite coast.

Sahid said he is optimistic about the chances of a California suit succeeding, since that state has experienced among the largest managed care penetration in the country and its courts have recently shown a willingness to get involved with cases charging managed care companies with abuse of patients or clinicians. He strongly believes that using the legal system to fight managed care practices is a valid and potentially successful alternative "for trying to change the environment of the health care system in this country."