Case 1:10-cv-00527-CKK Document 12-8 Filed 04/14/10 Page 1 of 10
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
)
COALITION FOR PARITY, INC. )
)
Plaintiff, ) No. 1:10-cv-00527 (CKK)
v. )
)
KATHLEEN SEBELIUS, et al., )
)
Defendants. )
)
STATEMENT OF UNDISPUTED FACTS PURSUANT TO LOCAL RULE 7
Pursuant to Rule 56 of the Federal Rules of Civil Procedure and Local Rule 7(h), Plaintiff
Coalition for Parity, Inc. (the “Coalition”) respectfully submits this Statement of Undisputed
Facts in connection with its Motion for Summary Judgment.
STATEMENT OF MATERIAL FACTS
I. The Coalition.
The Coalition is comprised of managed behavioral healthcare organizations
(“MBHOs”)1 that support the principle of parity and strongly advocated for the passage of the
Paul Wellstone and Pete Domenici Mental Health Parity and Addition Equity Act of 2008, Pub.
L. No. 110-343, §§ 511-512 (2008) (“MHPAEA” or the “Statute”). The Departments expressly
acknowledge that MBHOs, like the Coalition members, are “affected entities” under the Statute
and IFR. 75 Fed. Reg. 5421 (recognizing that “at least 120 MBHOs providing mental health or
1
MBHOs exist both as stand-alone specialty healthcare organizations and as organizations
within full service health plans.
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substance use disorder benefits to group health plans are expected to be affected” by the statute
and regulations).
The Coalition members typically contract with managed care organizations (“MCOs”) or
with employers and states to manage behavioral healthcare benefits on behalf of a group health
plan or the employer. In both scenarios, the Coalition member is responsible only for managing
the mental health and substance abuse benefits of health plan members. It does not manage
medical or surgical benefits. Where an MBHO enters an arrangement with an MCO, it manages
the behavioral health benefits on behalf of the MCO. In situations where the Coalition member
contracts directly with an employer, the employer may contract with multiple MCOs to
administer medical and surgical benefits while contracting with only one MBHO to administer
behavioral health benefits. Declaration of Anthony M. Kotin, M.D. ¶ 2 (Ex. 2); Declaration of
Michael J. McGreal ¶ 2 (Ex. 3).2
The Coalition members have built their own national networks of contracted behavioral
healthcare providers. These provider networks are valuable assets reflecting goodwill and high
quality services. Kotin Dec. ¶ 3; McGreal Dec. ¶ 7. Unlike medical care that is predominated by
facilities and physicians, there are many different and distinct types of behavioral health
providers and treatment settings, including hospitals, residential treatment centers, psychiatrists,
psychologists, psychotherapists, therapists, and clinical social workers. Kotin Dec. ¶ 4; McGreal
Dec. ¶ 9. The Coalition members have spent many years and devoted substantial resources to
2
The Coalition relies on affidavits in this motion solely for purposes of providing the Court with
background context and to demonstrate that there are substantive disagreements over certain
provisions of the IFR. Obviously, the Coalition does not seek for the Court to interpret or
adjudicate the disputed provisions. Rather, the question to the Court – whether the Departments
were required to comply with the APA’s notice-and-comment provisions – is a purely legal one
that is properly disposed of by summary judgment.
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develop specialized behavioral health provider networks that offer a broad spectrum of providers
and care settings in the geographical areas where they contract to provide services. Id.;
Declaration of Matthew Miller ¶ 5 (Ex. 4).
The Coalition members contract with over 125,000 behavioral health providers, including
facility locations, providing various levels of care nationwide. See Miller Dec. ¶ 2; McGreal
Dec. ¶ 2. The Coalition members negotiate the rates that they pay their contracted network
providers. In exchange, the network providers typically are provided access to the members of
health plans that contract with the MBHO. The reimbursement methodologies for behavioral
healthcare providers are often quite different than those used to pay medical and surgical
providers. The Coalition members typically pay their network providers on a “fee-for-service”
basis under fee schedules that account for factors unique to behavioral health. Kotin Dec. ¶ 9;
McGreal Dec. ¶ 10. MCOs use several different reimbursement methodologies, including
capitation, case rates, percentage of Medicare rates, and percentage of billed charges, to pay
medical and surgical providers. Id.
The Coalition members develop their own utilization management tools and techniques
along with guidelines and criteria that reflect the most current evidence-based clinical literature
specific to behavioral health conditions. For example, the Coalition members typically employ a
practice known as pre-authorization for outpatient treatment. Kotin Dec. ¶ 8; McGreal Dec. ¶ 4;
Declaration of Daniel McCarthy ¶ 6 (Ex. 5). A patient with a behavioral health issue often does
not know the extent of his problem, the type of care needed or the most appropriate mental health
provider to deliver it. Kotin Dec. ¶ 8; McGreal Dec. ¶ 4. Unlike outpatient medical care--
typically provided by a physician--outpatient behavioral care is provided by a wide range of
licensed professionals, including psychiatrists, physicians, psychologists, socials workers,
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counselors, and other therapists. In addition, the frequency of treatment visits and the duration of
therapy for behavioral health conditions are vastly different than for medical conditions. See
Kotin Dec. ¶ 8; McCarthy Dec. ¶¶ 6-8. Through tools such as outpatient pre-authorization, the
Coalition members work with the patient and his or her behavioral health providers to identify
the patient’s needs and evaluate the type of initial care needed, and then continue monitoring the
level and frequency of care to achieve successful and cost-effective outcomes through a process
known as concurrent utilization review.
MBHOs provide unique services that facilitate cost-efficient management of behavioral
health benefits. The Departments themselves tout the practices of entities like the Coalition
members and expressly rely on such organizations to contain costs under the parity regime:
Since the early 1990s, many health insurers and employers have
made use of specialized vendors known as behavioral health carve-
outs to manage their mental health and substance abuse benefits. . .
They use information technology, clinical algorithms and selective
contracts to control spending on mental health and substance abuse
treatment. There is an extensive literature that has examined costs
savings and impacts on quality of these organizations. Researchers
have reviewed this literature and estimated reductions in private
insurance spending at 20 percent to 48 percent compared to fee-
for-service indemnity arrangements. Also, it appears that the rate
of utilization of mental health care rises under behavioral health
carve out arrangements. The number of people receiving in patient
psychiatric care typically declines as does the average number of
outpatient visits per episode….
* * * *
This is because of the ability of behavioral health carve-outs to use
utilization management tools to control utilization and spending in
the face of reductions in cost-sharing and elimination of limits.
Thus, parity in a world dominated by carve-outs has meant
increased utilization rates, reduced provider fees, reduced rates of
hospitalization and fewer very long episodes of outpatient care.
Intensive treatment was more closely aligned with higher levels of
severity.
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75 Fed. Reg. 5422 (Feb. 2, 2010). As explained below, the IFR has a direct effect
on the Coalition members ability to maintain these important practices.
II. Congress Enacts The Parity Statute.
In 1996, Congress enacted the Mental Health Parity Act, which required parity in
aggregate lifetime and annual dollar limits for mental health benefits and medical and surgical
benefits. Those parity provisions, which apply to employer-sponsored group health plans and
health insurance coverage offered in connection with a group health plan, were codified in
Section 712 of the Employee Retirement and Income Security Act (“ERISA”), 29 U.S.C.
§ 1185a, Section 2705 of the Public Health Services Act, 42 U.S.C. § 300gg-5, and Section 9812
of the Internal Revenue Code, 26 U.S.C. § 9812.
On October 3, 2008, with the full support of the Coalition members, Congress enacted
the MHPAEA, which greatly expands the scope of the 1996 law. The Statute requires employer-
sponsored group health plans to cover mental illness and substance abuse on the same basis as
physical conditions. While the MHPAEA does not require employers to provide benefits for
mental health or substance use disorders, group health plans with 50 or more employees that
choose to provide mental health and substance use disorder benefits must do so in parity with
medical and surgical benefits.
Behavioral health and medical and surgical health are not mirror images of each other.
They involve different kinds of conditions and treatments. For example, attempting to liken the
treatment of severe congestive heart failure to major depression is an impossibility. Likewise,
the treatments of colon cancer and of schizophrenia involve disparate therapies, prescription
medications and healthcare professionals with divergent expertise and training. As a result, the
utilization management and treatment protocols for behavioral versus medical conditions are
generally not comparable. See McGreal Dec. ¶ 3; McCarthy Dec. ¶ 5.
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Recognizing that there is not an “apples to apples” comparison between behavioral and
medical health, Congress sought only to ensure that the quantitative aspects of medical/surgical
and behavioral health benefit plans are equalized to ensure level access. For example, the Statute
requires that “the financial requirements applicable to such mental health or substance use
disorder benefits are no more restrictive than the predominant financial requirements applied to
substantially all medical and surgical benefits. . .” MHPAEA § 512(a)(1), codified at 29 U.S.C.
§ 1185a(a)(3)(A)(i). This simply requires that financial requirements such as deductibles and co-
payments, which can be empirically compared on an “apples to apples” basis, be equalized for
medical and behavioral health services. This is a purely quantitative determination.
The Statute also requires parity in “treatment limitations.” Section 512(a)(1), codified at
29 U.S.C. § 1185a(a)(3)(B)(iii), defines the concept of “treatment limitations” as limits on “the
frequency of treatment, number of visits, days of coverage or other similar limits on the scope or
duration of treatment.” Congress clearly intended to ensure that, where quantitative differences
exist between medical and mental health benefits, differences are equalized so that limits on
behavioral health benefits are not more restrictive. For example, group health plans may limit
the number of days a person may spend in an in-patient mental health care facility in one year
but may not have a corresponding limitation on the number of days spent in a hospital for
medical treatment. Under the Statute, the plan would either have to abandon the limitation on in-
patient mental health facility days or adopt a similar limitation on hospital stays for medical care.
Given the differences between behavioral health and medical and surgical health, assessing and
implementing quantitative limitations for thousands of plans is a time-consuming and expensive
endeavor requiring complex, labor-intensive, administrative solutions. See Declaration of Gary
Anderson ¶¶ 5-6 (Ex. 6).
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The changes made by the MHPAEA are generally effective for plan years beginning after
October 3, 2009. In Section 512(d) of the MHPAEA, Congress instructed the Secretaries of the
Treasury, Labor and Health and Human Services to issue regulations “[n]o later than 1 year after
the date of enactment of this Act.” The Departments, however, failed to issue final regulations
by the October 3, 2009 deadline. Irrespective of that deadline, the Statute itself is self-executing,
and its terms went became effective on that same one-year anniversary date. See MHPAEA
§ 512(e)(1). Since October 3, 2009, in lieu of regulatory guidance, Coalition members have
adhered to the Statute in good faith. Indeed, since the Statute’s 2008 enactment, the Coalition
members, based on the Statute’s plain requirements, have focused their financial, administrative
and information technology resources on identifying and adjusting the quantitative components
of benefit plans to ensure parity between the medical and behavioral health benefits. See
Anderson Dec. ¶¶ 5-6; McCarthy Dec. ¶ 4.
III. The Departments Wait Six Months and Then Merely Issue a Request for
Information.
Despite the fact that Congress enacted the Statute on October 3, 2008 and ordered
implementing rules issued by October 3, 2009, the Departments took no immediate action to
gather the information necessary to issue an informed rule. In fact, the Departments did nothing
for six months. Even then, on April 28, 2009, the Departments merely published a “request for
information” in the Federal Register. 74 Fed. Reg. 19,155 (April 28, 2009). The request for
information is a four-page document seeking general information pertaining to the clinical and
financial effects of implementing the statute. The request does not set forth the language of any
proposed regulation. Eventually, the October 3, 2009 deadline for the regulations mandated by
the MHPAEA passed without further comment from the Departments.
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IV. The Departments Issue The IFR Without Notice And Comment.
On February 2, 2010 – four months after the statutory deadline and without prior notice
in the Federal Register – the Departments issued the IFR. 75 Fed. Reg. 5410-5451. The
Departments dispensed with mandatory rulemaking procedures requiring public notice of a
proposed rule followed by an opportunity for affected parties to comment and make suggestions
for improvement. See 5 U.S.C. § 553(b), (c). According to the Departments, they promulgated
the IFR without notice or comment for the following reason:
some members of the regulated community may not know what
steps to take to comply with the requirements of MHPAEA, which
may result in an adverse impact on participants and beneficiaries
with regard to their health benefits under group health plans and
the protections provided under MHPAEA. Moreover, MHPAEA’s
requirements will affect the regulated community in the immediate
future…. Plan administrators and sponsors, issuers, and
participants need guidance on how to comply with the new
statutory provisions….. For the foregoing reasons, the Departments
find that the publication of a proposed regulation, for the purpose
of notice and public comment thereon, would be impracticable,
unnecessary, and contrary to the public interest.
75 Fed. Reg. at 5419.
Contrary to the Defendants’ purported rationale for circumventing their notice and
comment obligations, the MHPAEA already affected the regulated community as of October 3,
2009. Efforts to comply with the Statute’s plain requirements had been well under way prior to
that date. See Anderson Dec. ¶¶ 5-6; McCarthy Dec. ¶ 2. In any event, the Defendants made no
effort to explain why, if the regulated community allegedly required additional guidance carrying
the force and effect of law, they failed to promulgate the IFR prior to the Statute’s effective date
four months earlier, or why they failed to engage in notice-and-comment rulemaking in the
intervening 16 months since passage of the Statute.
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V. The IFR Would Effect Far-Reaching Changes Not Contemplated By The
MHPAEA.
In the Statute’s “Definitions” section, Congress gave examples of the type of “treatment
limitations” for which parity would be required – limits on “the frequency of treatment, number
of visits, days of coverage or other similar limits on the scope or duration of treatment.” Id.
Notably, every one of these examples is a quantitative limitation. The Coalition members,
accordingly, have spent the past 16 months engaged in efforts to equalize quantitative limitations
between behavioral heath and medical benefits. See Anderson Dec. ¶¶ 5-6; McCarthy Dec. ¶ 2.
The Departments, however, promulgated a number of far-reaching, ambiguous provisions
not authorized by the Statute. For example, the IFR requires parity for undefined, subjective
and seemingly unlimited “nonquantitative limitations.” See 75 Fed. Reg. 5413. The
Departments provide an “illustrative list of nonquantitative treatment limitations” that
demonstrates its breadth:
Nonquantitative treatment limitations include – (A) Medical
management standards limiting or excluding benefits based on
medical necessity or medical appropriateness, or based on whether
the treatment is experimental or investigative; (B) Formulary
design for prescription drugs; (C) Standards for provider admission
to participate in a network, including reimbursement rates; (D)
Plan methods for determining usual, customary and reasonable
charges; (E) Refusal to pay for higher-cost therapies until it can be
shown that a lower-cost therapy is not effective (also known as
fail-first policies or step therapy policies); and (F) Exclusions
based on failure to complete a course of treatment.
75 Fed. Reg. 5443.
The scope of these examples reaches virtually every policy, procedure, practice and
management tool, including pre-authorization and concurrent review, utilized by the Coalition
members to efficiently and appropriately manage behavioral healthcare benefits. These
“illustrations” create new and unforeseen compliance challenges without any guidance or
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statutory support. See e.g McGreal Dec. ¶ 8; Kotin Ded. ¶¶ 7-8. The expansion of parity to
include nonquantitative treatment limitations affects the very viability of the tools the
Departments praise the MBHOs for providing and fails to grasp the fundamental difference
between all aspects of behavioral health and medical and surgical health. See 75 Fed. Reg. 5422.
Indeed, the Departments admit that these examples do not provide guidance or reflect reality:
The facts in the examples reflect simple situations for purposes of
better illustrating the application of the rules rather than reflecting
the realistic, complex facts that would typically be found in a plan.
75 Fed. Reg. 5416.
The Departments do not understand the reality of the situation because they did not
subject these complex rules to public notice and comment. The purported guidance provided by
these simplistic examples serves only to further confuse the issue to the detriment of mental
health parity.
April 14, 2010 Respectfully submitted,
/s/ Jeffrey L. Poston
Jeffrey L. Poston (D.C. Bar No. 426178)
Christopher Flynn (D.C. Bar No. 446235)
William J. Flanagan (D.C. Bar No. 311035)
(admission pending)
April N. Ross (D.C. Bar No. 500488)
(admission pending)
CROWELL & MORING LLP
1001 Pennsylvania Avenue NW
Washington, DC 20004
(202) 624-2500 (phone)
(202) 628-5116 (fax)
Counsel for Plaintiff
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