APA and the New Jersey Psychological Association (NJPA) announced in October the settlement of a lawsuit filed in 1996 against MCC Behavioral Care Inc., now known as CIGNA Behavioral Health, Inc. (CIGNA).

The NJPA and seven psychologists brought the legal action over MCC's termination of numerous psychologists from the company's provider panel. MCC relied on a clause in its contracts with health-care professionals allowing for "no cause" termination. The complaint charged that MCC terminated the psychologists on grounds they were "not managed-care compatible" and further alleged that the action was unfair and violated public policy.

After the NJPA filed suit, MCC revised its standard contract with psychologists early in 1997 and eliminated the "no cause" termination provision, at a time when such provisions were standard in the managed-care industry. In September of that year, the NJPA survived MCC's motion to dismiss the lawsuit when the federal court ruled that the plaintiffs could pursue their claims of public policy, fundamental fairness and interference with the psychologist-patient relationship.

According to APA Executive Director for Professional Practice Russ Newman, PhD, JD, this case is important not only because of the very favorable settlement, but also because of the 1997 ruling from the federal court.

"This ruling has implications well beyond this particular case and CIGNA," says Newman. "In essence, a federal court determined that if a managed-care company uses 'no cause' terminations to retaliate against providers who advocate for their patients to secure needed care, this would be an illegal act in violation of public policy."

Good news for psychologists

The settlement agreement has five major components. First, there is an undisclosed financial settlement. Second, the company has agreed to abide by and keep in place the following current policies of CIGNA:

* Contracts with psychologists providing services as part of the network will renew automatically after expiration of the initial one-year term.

* If a contract with a psychologist is not renewed, it will be for explicit business and/or professional reasons. CIGNA agrees to continue not to use "not managed-care compatible" as a reason for nonrenewal, though the company said it had not done so in the past.

* CIGNA will allow nonrenewed psychologists to continue treating existing patients until the patient has completed treatment or is safely transferred to another psychologist.

* CIGNA will continue to provide psychologists participating in its network with access to all clinical guidelines used in coverage determinations. CIGNA also will also provide individual practitioners with statistical evaluations and reports compiled with respect to the psychologist's practice.

Third, CIGNA Behavioral Health has also agreed to treat a psychologist's alleged failure to meet administrative requirements as a "for cause" termination, thereby giving that psychologist the opportunity to respond to claims of noncompliance.

Fourth, the company will offer the seven psychologist plaintiffs the opportunity to rejoin CIGNA's professional network.

Finally, the parties agreed that a member of the NJPA will represent the association on CIGNA's professional advisory panel that advises on quality of care and professional relations issues.

Newman extended special thanks and congratulations to NJPA Executive Director Lorryn Wahler and Don Bernstein, PhD, NJPA's director of professional affairs who, along with the Practice Directorate's legal and regulatory affairs attorneys, spearheaded the tremendous effort leading to the lawsuit's successful conclusion. Wahler observed that "providers, patients and public policy in New Jersey will be better served by the terms of this settlement."

Just one in a series of cases

The New Jersey lawsuit was the first in a series of legal "test cases" brought by the APA in collaboration with selected state psychological associations. All of the test cases target alleged abusive managed-care practices and procedures that harm psychologists and their patients. This past summer, the California Psychological Association settled its false advertising lawsuit against Aetna U.S. Healthcare.

The test case brought by the Virginia Academy of Clinical Psychologists (VACP) alleges that Blue Cross Blue Shield of the National Capitol Area (BCBS) marketed its plan to psychologists and consumers by touting a large stable panel of mental health professionals, and then slashed payment rates in violation of provider contracts, causing many psychologists to leave the panel, thereby reducing the plan's costs.

VACP recently won a motion to compel BCBS to produce its documents and has completed more than 25 depositions with good results; the association anticipates a trial in 2001.

Another test case in Florida alleges that Magellan retaliated against a psychologist by cutting off further treatment for existing patients without providing safe transfer to another mental health professional for patients in crisis. This case recently became the fourth test case to survive the defendant managed-care organization's motion to dismiss.

Attorneys in the APA Practice Directorate's legal and regulatory affairs office continue to evaluate additional potential cases in consultation with state psychological association leaders. APA members have supported this ongoing initiative through contributions to the association's Legal Action Fund, but substantial resources are required to sustain the test cases. Any member who wishes to make a donation may do so at any time by sending a check payable to the American Psychological Associaiton and mailing it to: APA Legal Action Fund, Attn.: Cash Receipts, 750 First Street, NE, Washington, DC 20002-4242.

Alan Nessman is special counsel and Paul Herndon is director of communications in APA's Practice Directorate.