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Lawsuit challenges proposed $10 million gift to behavioral health contractor

Experts: Prolonged unemployment putting strain on mental health

Magellan Health Services has a new ally in its battle over a multibillion-dollar contract for behavioral health services in Maricopa County.

A conservative political group is challenging the Maricopa County Special Health Care District’s decision to award $10 million to Mercy Maricopa Integrated Care, the district’s new behavioral health services manager. MMIC is a partnership between the Maricopa Integrated Health System and Mercy Care Plan, and won the three-year, $3 billion contract which Magellan sought.

The Arizona Public Integrity Alliance, a non-profit organization, filed suit in Maricopa County Superior Court on July 16. The group alleged that the payment to MMIC, to which the Arizona Department of Health Services awarded the contract to oversee the county’s mental health system, is illegal because it violates the district’s legally defined authority.

The district is authorized by state law to levy property taxes to maintain and operate the district’s facilities, and to make payments for professional services. Attorney Christopher LaVoy, of the firm Tiffany & Bosco, argued that the district exceeded its authority when it approved a $10 million payment to MMIC so it would meet the capital requirements it needed to compete for the contract.

“They cannot create another entity and fund it with $10 million in Maricopa County taxpayer funds, especially where that other entity’s business is substantially different than the district’s mission as defined by statute. In other words, the district is trying to present this as an extension of its mission to care for the indigent sick in Maricopa County. But that’s an overgeneralization of what it was created to do,” LaVoy told the Arizona Capitol Times.

MMIC is a partnership between the Maricopa Integrated Health System and Mercy Care Plan. LaVoy took issue with the district’s decision to create a private entity to compete with the private sector – MMIC won the contract over Magellan Health Services, which has overseen the county’s behavioral health system since 2007 – but said the lawsuit is focused purely on the $10 million gift.

“The District is not a venture capital business or in business at all for that matter. The voters formed it to operate and staff Maricopa Medical Center and its related clinic system to care for the indigent sick in Maricopa County and nothing more,” the lawsuit read.

The MIHS board approved the $10 million at a Dec. 17 special meeting. According to minutes of the meeting, MMIC was to receive $5 million within 30 days of receiving the contract, and another $5 million by June 30, 2014.

LaVoy described the alliance as an organization with a “small government, low tax” focus that seeks to limit government overreach. According to state and federal records, it was formed in late July 2012 and spent about $21,000 to support Kirk Adams’ unsuccessful campaign against Matt Salmon in the GOP primary for the 5th Congressional District.

Magellan and LaVoy would not say whether Magellan provided any funding to the alliance for the lawsuit. But both said the alliance initially proposed the lawsuit and later contacted Magellan about the pending legal action. Magellan spokeswoman Mary Ehlert said the company is cooperating with the alliance on the lawsuit.

“We collaborated with them on giving them information,” Ehlert said.

MIHS spokesman Michael Murphy defended the district’s decision to award $10 million to MMIC, and said the district’s attorneys believe the action will survive legal scrutiny.

“We carefully researched this question with our attorneys and are confident in our position,” Murphy said.

The lawsuit comes as Magellan is in the midst of a legal battle of its own. Magellan is challenging ADHS’s decision to award the contract the MMIC. The case is currently before the Office of Administrative Hearings.

Unlike the expiring Magellan contract, the new contract awarded to MMIC calls for integrated services, meaning the organization will provide both behavioral and physical health services to about 12,000 seriously mentally ill patients in Maricopa County.

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