A Path Forward for Michigan’s Behavioral Health System
Michigan’s decision to cancel the behavioral health system redesign RFP did not eliminate the challenges that led the state to pursue reform in the first place: uneven access to care, inconsistent standards across regions, conflicts of interest in how services are funded and delivered, excessive administrative burden, weak accountability for public dollars, and structural conditions that undermine provider stability and workforce sustainability. This blueprint represents a path forward to modernize governance, oversight, and accountability while aligning with federal Medicaid requirements and current care models.
The redesign effort acknowledged a reality that providers and communities live with every day. Michigan’s behavioral health system works best when people can access care and when those responsible for managing public dollars are accountable for how those dollars are used. In too many regions, that balance is fractured, leaving the 10 PIHPs wide discretion to interpret the law, set rates, and impose requirements that vary by region and often favor the funder over the provider network.
Today, some PIHPs and CMHSPs act as funder, regulator, and service provider at the same time. They decide who gets paid, at what rate, and under what conditions, while also competing with the very provider networks they are supposed to oversee. That structure creates conflicts of interest, destabilizes the adequacy of the provider network, and pulls resources away from care and into administration. This blueprint reinforces the principle that funding oversight and service delivery should be functionally separated to reduce conflicts of interest and strengthen accountability.
Providers supported the state’s reform effort because they want a system that is fair, transparent, and focused on outcomes, not control. They want clear and consistent rules that apply statewide. They want predictable contracting and payment. They want accountability that flows both ways. And they want public dollars to reach the people and communities they were intended to serve, free from conflicts of interest and the threat of retaliation that undermine trust, distort decision-making, and weaken the stability of the provider network. They also want the MDHHS to enforce the terms of their contracts with the PIHPs and enforce existing laws.
The cancellation of the RFP removes a procurement process, but it does not remove the state’s responsibility to address these structural problems. It also does not remove the urgency. Every delay shows up somewhere else, in emergency rooms, in courts, in jails, in schools, and in families who cannot find help when they need it.
This blueprint is meant to move the conversation forward in a practical way. It preserves the core goals of the redesign while offering solutions that are legally sound, politically feasible, and achievable within the state’s current timeframe. It focuses on guardrails rather than upheaval, clarity rather than complexity, and collaboration rather than consolidation. And it puts people first.
Nonprofit providers have carried Michigan’s behavioral health system through every transition. They adapted when the state consolidated PIHPs in 2012. They adapted during the pandemic. They continue to adapt today, even as the system around them becomes more unstable. Any effort to modernize and strengthen the system must protect the provider network that delivers care while improving accountability, consistency, and stewardship of taxpayer dollars.
This document lays out a path forward that protects continuity of care, reduces conflicts of interest, simplifies administration, strengthens accountability, and stabilizes the workforce. It is grounded in what providers are experiencing on the ground and what families need to access care.
There is a way to modernize Michigan’s behavioral health system without disrupting services or destabilizing communities. This blueprint is intended to help the state take that next step.
THE PATH FORWARD
There is a path forward. Many of the changes needed to stabilize and modernize Michigan’s behavioral health system do not require new procurement or wholesale statutory change. Others do. What follows organizes provider priorities into actions MDHHS can take now, actions that will require legislative partnership, and actions that should be prioritized this year to preserve momentum and protect continuity of care.
Actions MDHHS Can Take Now Without Legislative Changes
(Contract authority, policy guidance, enforcement, oversight)
Protect continuity of care through contracting and policy guidance
Prohibit PIHPs and CMHSPs, through contract terms and policy guidance, from taking over nonprofit-operated services unless no qualified provider exists.
Ensure no state entity provides Medicaid services at a cost greater than what in-state nonprofits provided in 2025.
Establish a moratorium on service takeovers to prevent disruption of care.
Assign an MDHHS contract manager to monitor contracts of PIHPS, in the same way that health plans are managed; require a provider appeal process for providers in the same manner that it occurs in the public health code for health plans; and, monitor payment guidelines for PIHPs such as denials, wait times for authorizations, and reimbursement timeframes.
Limit direct service expansion by funders
Establish caps through PIHP contracts on the percentage of services a funder may deliver directly.
Require independent needs assessments before any expansion of direct services.
Advise CMS not to support or advance applications by PIHPs or CMHSPs in becoming CCBHCs
Uniform credentialing, contracting, and administrative standards
Fully implement uniform credentialing reciprocity required under Public Act 282 of 2020.
Establish consistent statewide requirements for training, billing, audits, record retention, utilization management, and quality assurance.
Require PIHP acceptance of uniform audits, trainings, assessments, and billing standards across regions.
Prohibit PIHPs from imposing additional region-specific administrative requirements.
Prohibit PIHPs from having higher expectations in their own protocols than the State, the Medicaid Manual or Mental Health Code.
Issue an administrative order requiring uniform statewide interpretation of credentialing, billing, audits, utilization management, and documentation standards.
Prohibit regional deviation unless expressly authorized in writing by MDHHS.
Fair contracting and provider protections through contract terms
Require uniform contract language statewide, including good-cause termination standards.
Establish independent dispute resolution and appeals processes through PIHP contracts.
Prohibit retaliation against providers for advocacy, complaints, or participation in state initiatives.
Prohibit non-solicitation of provider staff by funders through contract provisions.
Require separation of utilization management from provider relations.
Establish a formal administrative escalation process within MDHHS for unresolved provider disputes.
Set timelines for departmental review and response.
Transparency, oversight, and reporting
Require public disclosure of provider rates, contract awards, service transfers, and expansion into direct services.
Require PIHP aggregation and reporting of real-time network intelligence including open slots, wait times, staffing constraints, crisis coverage, residential bed availability, SUD levels of care, and various specialties.
Establish enhanced reporting and oversight requirements for PIHP-operated CCBHCs.
Issue administrative guidance defining prohibited conflicts of interest in contracting and service delivery.
Require corrective action plans when conflicts are identified.
Tie noncompliance to sanctions, payment holds, or contract remedies.
Rate setting and financial transparency
Require PIHPs to adopt actuarially sound, publicly explained rate-setting methodologies informed by provider input.
Ensure transparency in how Medicaid dollars flow through the system, including access to comparative financial and performance data.
Ensure PIHP-designated CCBHCs pay fair PPS rates consistent with statewide standards.
Require disclosure of administrative overhead and percentage of Medicaid dollars passed through to direct-service providers.
Establish benchmarks or ceilings for administrative spending, with justification required for variances.
Require regular public reporting dashboards comparing PIHP administrative costs and provider pass-through rates.
Establish payment parity between SUD and mental health services for comparable levels of care, including outpatient therapy, medication review, crisis care, and residential services.
Recognize substance use disorder treatment as a clinical specialty and align reimbursement with its complexity and workforce demands.
Require future contracts and payment models to embed payor parity as a standard.
Administrative simplification
Revise Medicaid billing guidance to simplify procedures.
Standardize documentation requirements across services.
Reduce duplicative approvals and authorizations, particularly for SUD services.
Encourage adoption of interoperable EHR systems that support integrated behavioral health, SUD, and IDD care.
At the same time, prohibit PIHPs/CMHSPs from mandating the use of their HER or other technology to prevent duplication and threat of stealing proprietary information, and simply share data as needed.
Permit and support use of technology and AI-assisted documentation tools that reduce administrative burden while protecting privacy and compliance.
Ensure technology expectations are uniform statewide and not imposed inconsistently by PIHPs.
Substance Use Disorder integration and alignment
Align SUD authorization processes with mental health workflows.
Reduce duplicative approvals and administrative layers.
Support integrated, co-occurring-capable service delivery models.
Review SUD credentialing and training requirements and align where clinically appropriate.
Adjust reimbursement structures to reflect training intensity and clinical complexity.
Establish consistent statewide expectations for timely access to SUD treatment, including defined timeframes from first contact to service initiation.
Reduce duplicative screenings and intake requirements across regions and payors for SUD services.
Support data-sharing and interoperability to prevent individuals from repeating intake and assessment when moving between providers or regions.
Issue administrative guidance clarifying parity requirements between SUD and mental health services for authorization, medical necessity, and reimbursement.
Prohibit higher thresholds for SUD services absent documented clinical justification.
Children’s services protections
Amend TCM billing guidance to allow billing when a parent or guardian is present.
Commit to preserving the full children’s behavioral health continuum, including autism, trauma-informed care, residential, and home-based services.
CFA&P pause and reassessment
Pause implementation of Conflict Free Access and Planning.
Convene providers and consumers to reassess necessity, design, and impact.
Crisis Services: Clarity, Capacity, and Accountability
Establish a uniform statewide definition of crisis services, including hotline, mobile response, stabilization, and facility-based care.
Clarify, through policy and contracts, which entity is authorized to deliver each crisis function to reduce duplication and conflict.
Require each PIHP region to maintain 24/7 crisis access through contracted provider networks or CMHSP-anchored crisis hubs.
Limit expansion of non-crisis direct services by CMHSPs in regions where qualified providers exist, particularly in large population counties.
Require crisis service decisions to prioritize least restrictive settings and continuity with existing provider relationships.
Issue an administrative order establishing uniform definitions and minimum service requirements for crisis services statewide.
Require PIHP compliance as a condition of contract performance.
Advancing CCBHCs Through Provider Readiness and Fair Expansion
Establish a statewide CCBHC readiness and technical assistance pipeline for community-based nonprofit providers, including gap assessments, training, standardized readiness benchmarks, and phased preparation toward certification. Providers should be able to begin readiness activities without requiring immediate designation or funding, and MDHHS should use existing authority to support alternative preparation models when SAMHSA funding is not available.
Advance CCBHC expansion in a way that preserves fairness and provider choice by establishing guardrails that prevent entities that fund and oversee Medicaid dollars from competing with providers as CCBHCs, ensure consistent application of PPS rates across all CCBHCs, and set clear statewide standards for Designated Collaborating Organization arrangements, reimbursement equity, and client choice.
Leveraging the FY 2027 Budget to Advance System Priorities
The FY 2027 budget process presents an immediate opportunity to advance core behavioral health priorities without waiting for new procurement or comprehensive statutory change. Targeted boilerplate, line-item conditions, and reporting requirements can reinforce accountability, protect provider stability, and accelerate implementation of statewide standards. Budget actions MDHHS can pursue in FY 2027:
Provider Stability and Continuity of Care
Include budget boilerplate restricting the use of state and Medicaid funds to take over nonprofit-operated services unless no qualified provider exists and requiring cost comparisons before any service transfer.
Condition funding on maintaining continuity of care during system transitions.
CCBHC Readiness and Expansion
Allocate funding for a state-supported CCBHC readiness and technical assistance pipeline for community-based nonprofit providers, independent of federal SAMHSA grant cycles.
Direct funding to support gap assessments, training, and phased preparation without requiring immediate designation.
Require consistent PPS rate application and transparent reporting for all CCBHCs receiving state funds.
Uniform Standards and Administrative Simplification
Tie administrative funding to compliance with uniform statewide standards for credentialing, audits, billing, training, and utilization management.
Prohibit the use of funds for duplicative or region-specific administrative requirements not approved by MDHHS.
Transparency and Accountability
Require public reporting, as a condition of funding, on rate-setting methodologies, provider payments, reserves, service transfers, and network capacity.
Require PIHPs to report real-time network data, including wait times, open slots, crisis coverage, residential capacity, and workforce constraints.
Provider Protections
Condition funding on inclusion of anti-retaliation provisions, independent dispute resolution, and good-cause termination standards in PIHP contracts.
Prohibit the use of state funds for non-compete or non-solicitation practices that destabilize the provider workforce.
Prevention and Early Intervention
Require transparency and reporting on the use of opioid settlement, marijuana excise tax, and PA2 liquor tax dollars for prevention, treatment, and recovery supports.
Encourage alignment between PIHPs, providers, and community prevention coalitions to reduce relapse and downstream system costs.
Protect dedicated funding streams for evidence-based prevention and early intervention.
Oversight and Stewardship
Fund and formally establish a Provider Stewardship and Oversight framework within MDHHS to monitor provider impacts, surface early warning signs, and report to the Legislature and Department leadership.
Actions Likely Requiring Legislative Changes=
Clarify roles and conflicts of interest in statute
Amend the Mental Health Code to prohibit PIHPs and CMHSPs from providing direct services where qualified providers exist.
Codify provider-first principles and right of first refusal for community-based providers.
Prohibit self-awarding of contracts by funders where services can be competitively provided.
Provider protections in statute
Extend whistleblower-style protections to behavioral health contractors.
Prohibit non-compete clauses that restrict providers from pursuing other service opportunities.
Independent oversight and appeals
Establish an independent oversight and appeals framework to monitor PIHP and CMHSP contracting and service delivery, including a formal, independent conflict resolution and appeals process for providers.
Create a Provider Stewardship Committee within MDHHS, composed primarily of community-based nonprofit providers across mental health, SUD (recovery support, prevention, & residential), IDD, and children’s services, to monitor provider impacts of policy changes, contracting practices, and system transitions.
Charge the committee with regular reporting to MDHHS leadership on provider stability, access risks, and unintended consequences, and use it as an early warning mechanism to prevent service disruptions.
Formalize the oversight and stewardship framework through executive action or departmental order, with the option for future statutory codification.
Rate setting and reimbursement reform
Codify uniform, transparent rate-setting standards.
Provide statutory authority for fair reimbursement and reinvestment by nonprofit providers.
Value-Based Models for SUD Services
Authorize and pilot value-based reimbursement models for SUD services that reward retention, continuity of care, reduced hospitalization and incarceration, and successful care transitions.
Recognize and reimburse non-billable recovery supports such as peer coaching, care coordination, transportation, and family engagement.
Ensure value-based models include technical assistance and do not shift financial risk to providers without support.
CCBHC statutory guardrails and Readiness
Codify Certified Community Behavioral Health Clinics in state law, including clear eligibility, oversight, and conflict-of-interest protections.
Expand CCBHC eligibility to community-based nonprofit providers while prohibiting entities that fund or oversee Medicaid dollars from competing with contracted providers as CCBHCs.
Establish statutory authority for state-supported CCBHC readiness pathways independent of federal grant cycles, including funding mechanisms that support provider preparation without advantaging funders that also operate services.
Set uniform statewide standards for Designated Collaborating Organization arrangements, reimbursement equity, and equal access to data access, self-authorizing services, and direct payment mechanisms to ensure a level playing field across all CCBHCs.
Parity with Public Health Code protections
Extend to behavioral health the same legal protections afforded to physical health providers under the Public Health Code.
Actions to Prioritize While the Governor Is Still in Office
Stabilize the system during transition
Implement continuity-of-care protections immediately through contracts, policy, and the Administrative Code.
Freeze destabilizing service transfers and expansions pending independent assessment.
Lock in statewide standards
Finalize and enforce uniform credentialing, audits, billing, and training standards.
Require PIHP contractual commitments to statewide consistency across all service lines.
Set guardrails into PIHP contracts
Embed anti-retaliation protections, dispute resolution, transparency, and non-solicitation clauses into all PIHP contracts.
Align with providers on next-phase priorities
Convene structured MDHHS-provider working sessions focused on implementation, not redesign.
Align on baseline expectations for quality, compliance, and accountability.
Create a clear handoff for the next administration
Document adopted standards, guardrails, and reporting requirements.
Establish a clear implementation roadmap that does not depend on future procurement.
Executive Actions to Advance Stability and Accountability During the Remainder of the Governor’s Term
In addition to actions MDHHS can take immediately using existing authority and priorities that can be reinforced through the FY 2027 budget, the Governor may use executive authority to establish clear expectations, protect provider stability, and guide implementation during the remainder of the current administration. Executive action is particularly well suited to setting statewide priorities, formalizing oversight structures, directing departmental alignment, and preventing destabilizing actions during periods of transition. The following actions are appropriate for Executive Order and can be implemented without statutory change.
Establish Provider Stability and Continuity of Care as State Policy
Declare provider stability and continuity of care as essential components of Michigan’s behavioral health system and a priority for executive branch agencies.
Direct MDHHS to consider provider impact, continuity risks, and access implications before approving service transfers, expansions, or major policy changes.
Require MDHHS to incorporate provider stability as a core system performance consideration.
Create and Formalize a Provider Stewardship Committee
Establish a Provider Stewardship Committee within MDHHS, composed primarily of community-based nonprofit providers across mental health, substance use disorder, intellectual and developmental disability, and children’s services.
Charge the committee with monitoring provider impacts of policy changes, contracting practices, and system transitions.
Require regular reporting to the Director of MDHHS and the Governor’s office on provider stability, access risks, and unintended consequences.
Use the committee as an early warning mechanism to prevent service disruptions during transition periods.
Direct Statewide Consistency and Administrative Alignment
Direct MDHHS to finalize and enforce uniform statewide standards for credentialing, audits, billing, training, utilization management, and compliance, consistent with existing statutory authority.
Require MDHHS to ensure PIHP contracts reflect consistent statewide interpretations and expectations.
Direct acceptance of reciprocal credentialing and audits where permitted by law.
Pause or Sequence Destabilizing System Actions
Direct MDHHS to pause implementation of Conflict Free Access and Planning pending further review and stakeholder engagement.
Direct MDHHS to refrain from approving service takeovers or significant service expansions during ongoing system transition unless there is a demonstrated access gap supported by independent assessment.
Require additional review before approving actions that could disrupt continuity of care or provider stability.
Advance CCBHC Readiness and Fair Expansion
Direct MDHHS to establish a CCBHC readiness and technical assistance pathway for community-based nonprofit providers, including gap assessments and phased preparation.
Encourage the use of existing authority and resources to support readiness activities independent of federal grant cycles.
Direct MDHHS to advance CCBHC expansion in a manner that avoids conflicts of interest and preserves provider choice.
Enhance Transparency and Reporting
Require enhanced public reporting on rate-setting methodologies, provider payments, reserves, service transfers, and network capacity.
Require aggregation and reporting of real-time network data, including wait times, open service capacity, workforce constraints, crisis coverage, and residential availability.
Direct MDHHS to publish a regular summary of system stability and access indicators.
Fix the Structure. Protect the Care.
Michigan’s behavioral health system does not require another study or workgroups to whiteboard a new system. It requires clear direction, consistent standards, and steady leadership. The steps outlined in this blueprint provide a practical path forward that protects continuity of care, strengthens accountability, and stabilizes the provider network while respecting legal, fiscal, and operational realities.
Many of these actions can be taken immediately using existing authority. Others can be reinforced through the FY 2027 budget or advanced through executive action during the remainder of the Governor’s term. Some will require legislative partnership. Taken together, they offer a sequenced and achievable roadmap to modernize the system without disrupting services or destabilizing communities.
Our providers stand ready to work with MDHHS, the Governor’s office, and the Legislature to move from policy intent to implementation. With shared commitment and clear guardrails, Michigan can strengthen its behavioral health system in a way that is fair, transparent, and focused on outcomes for the people it serves. Together, we can put people first.
