By Zach Gorchow
Gongwer News Service
Several organizations that manage and provide mental health services filed last Thursday in the Michigan Court of Claims to stop the Michigan Department of Health and Human Services' rebidding what organizations serve as the system's de facto insurers.
Filed by one of the current pre-paid inpatient health plans and several county mental health agencies, the lawsuit charges that DHHS is violating the Mental Health Code with how it designed the request for proposals.
Currently, the state is divided into 10 regions. A pre-paid in-patient health plan (PIHP) functions as the managing entity in each region for Medicaid funds, disbursing them to county mental health agencies for services and assuring compliance with the law.
DHHS has designed the RFP to reduce the number of regions to three and, in effect, prevent the existing 10 PIHPs from bidding because PIHPs, under statute, only have authority in their service areas.
"This violates the clear statutory right of CMHSPs to elect to form regional entities of their choosing and of those entities or CMHSPs to serve as the PIHPs for their designated service areas," the lawsuit says. "State agencies cannot repeal or rewrite this legislative framework through procurement design. The Legislature set the model; executive agencies must operate within it."
The county mental health agencies, under the Mental Health Code, have the statutory authority to form the regional PIHPs and serve as the PIHP for a region, the lawsuit contends.
The plaintiffs in the case are Region 10 PIHP, Southwest Michigan Behavioral Health and the Mid-State Health Network, all PIHPs, as well as three county mental health agencies – the St. Clair County Community Mental Health Authority, Integrated Services of Kalamazoo and the Saginaw County Community Mental Health Authority.
The lawsuit asserts that DHHS drew the three new regions so that none of the existing PIHPs had a matching service area. One covers Macomb, Oakland and Wayne counties (which currently each have their own PIHP). Another covers the Lower Peninsula from Mason, Lake, Osceola, Clare, Gladwin and Arenac counties south to the state line. The other covers the Upper Peninsula and the rest of the Lower Peninsula.
"No provision of the Mental Health Code, the Social Welfare Act, or any other Michigan statute authorizes MDHHS or DTMB to unilaterally redefine regions in a manner that excludes CMHSPs or existing regional entities from eligibility," the lawsuit states. "MDHHS cannot use the RFP as an end run around plaintiffs Region 10, SWMBH, and/or MSHN's Legislative grant of authority to operate as the PIHP in their respective regions. The RFP's structure, if implemented, would effectively abolish existing PIHP arrangements created under MCL 330.1204b by making it impossible for
statutorily authorized regional entities to fulfill their role."
The plaintiffs requested an expedited ruling before the Sept. 29, 2025, deadline for bids. They asked the court to declare the RFP in violation of the Mental Health Code and issue an injunction prohibiting the RFP from proceeding.
Robert Sheehan, CEO of the Community Mental Health Association of Michigan, praised the lawsuit. The association represents the county mental health agencies and has warned against the rebid.
"This lawsuit is being filed because of the gravity of the threat, posed by this bid out, to persons served and the system upon which they have relied for over sixty years," he said in a statement.
"Michiganders have expressed their opposition to similar plans in the past, with those plans being shelved in the face of this growing opposition in communities across the state This plan must also be shelved and replaced with a redesigned system that involves all people served by the system, their families, advocacy groups, the Michigan Department of Health and Human Services and the providers and payers of the public system."
DHHS Director Elizabeth Hertel has said the restructuring will improve service options for patients with fewer PIHPs, enabling more choice.
Gongwer News Service
Several organizations that manage and provide mental health services filed last Thursday in the Michigan Court of Claims to stop the Michigan Department of Health and Human Services' rebidding what organizations serve as the system's de facto insurers.
Filed by one of the current pre-paid inpatient health plans and several county mental health agencies, the lawsuit charges that DHHS is violating the Mental Health Code with how it designed the request for proposals.
Currently, the state is divided into 10 regions. A pre-paid in-patient health plan (PIHP) functions as the managing entity in each region for Medicaid funds, disbursing them to county mental health agencies for services and assuring compliance with the law.
DHHS has designed the RFP to reduce the number of regions to three and, in effect, prevent the existing 10 PIHPs from bidding because PIHPs, under statute, only have authority in their service areas.
"This violates the clear statutory right of CMHSPs to elect to form regional entities of their choosing and of those entities or CMHSPs to serve as the PIHPs for their designated service areas," the lawsuit says. "State agencies cannot repeal or rewrite this legislative framework through procurement design. The Legislature set the model; executive agencies must operate within it."
The county mental health agencies, under the Mental Health Code, have the statutory authority to form the regional PIHPs and serve as the PIHP for a region, the lawsuit contends.
The plaintiffs in the case are Region 10 PIHP, Southwest Michigan Behavioral Health and the Mid-State Health Network, all PIHPs, as well as three county mental health agencies – the St. Clair County Community Mental Health Authority, Integrated Services of Kalamazoo and the Saginaw County Community Mental Health Authority.
The lawsuit asserts that DHHS drew the three new regions so that none of the existing PIHPs had a matching service area. One covers Macomb, Oakland and Wayne counties (which currently each have their own PIHP). Another covers the Lower Peninsula from Mason, Lake, Osceola, Clare, Gladwin and Arenac counties south to the state line. The other covers the Upper Peninsula and the rest of the Lower Peninsula.
"No provision of the Mental Health Code, the Social Welfare Act, or any other Michigan statute authorizes MDHHS or DTMB to unilaterally redefine regions in a manner that excludes CMHSPs or existing regional entities from eligibility," the lawsuit states. "MDHHS cannot use the RFP as an end run around plaintiffs Region 10, SWMBH, and/or MSHN's Legislative grant of authority to operate as the PIHP in their respective regions. The RFP's structure, if implemented, would effectively abolish existing PIHP arrangements created under MCL 330.1204b by making it impossible for
statutorily authorized regional entities to fulfill their role."
The plaintiffs requested an expedited ruling before the Sept. 29, 2025, deadline for bids. They asked the court to declare the RFP in violation of the Mental Health Code and issue an injunction prohibiting the RFP from proceeding.
Robert Sheehan, CEO of the Community Mental Health Association of Michigan, praised the lawsuit. The association represents the county mental health agencies and has warned against the rebid.
"This lawsuit is being filed because of the gravity of the threat, posed by this bid out, to persons served and the system upon which they have relied for over sixty years," he said in a statement.
"Michiganders have expressed their opposition to similar plans in the past, with those plans being shelved in the face of this growing opposition in communities across the state This plan must also be shelved and replaced with a redesigned system that involves all people served by the system, their families, advocacy groups, the Michigan Department of Health and Human Services and the providers and payers of the public system."
DHHS Director Elizabeth Hertel has said the restructuring will improve service options for patients with fewer PIHPs, enabling more choice.
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