Michigan paid consultants $2.9M for failed mental health redesign

Michigan paid McKinsey & Co. about $2.9 million to design a restructuring of its Medicaid-backed behavioral health system
A judge ruled the resulting bid conflicted with Michigan law, and the state pulled it
The state maintains about $39 million in active contracts with McKinsey, which the state had previously sued for its role in the opioid crisis

Michigan public health officials paid nearly $2.9 million to an outside consulting firm for the failed redesign of the state’s behavioral health management system.

In late January, the state withdrew a request for proposal to contract out the administration of about $4.9 billion in Medicaid-backed mental health services after a judge deemed the bid to be in conflict with Michigan law.

The Michigan Department of Health and Human Services hired the global management consulting firm McKinsey & Co. to support its efforts to draft the now-cancelled request for proposal.

McKinsey was awarded last year a $2.45 million contract with the state to support its efforts “to design and implement a new procurement process for behavioral health contracts,” according to a Bridge review of health department financial reports.

The money was paid through the Okemos-based Michigan Public Health Institute, a state-created nonprofit that works with various government agencies, universities and local health organizations in its goal to address the state’s health disparities. MDHHS contracts with the nonprofit to support “public health projects and related activities.”

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The Michigan Public Health Institute was selected by the state health department to work on the bid project, according to the nonprofit’s leadership.

“McKinsey was selected prior to us being asked, which is typical,” Michigan Public Health Institute chief strategy officer Paul Elam told Bridge. “We just facilitate procurement projects for the state.”

The state’s request for proposal went live in August and outlined a plan to reduce and effectively shut out the current slate of regional entities managing behavioral health in Michigan. Ten Prepaid Inpatient Health Plans, or PIHPs, collectively manage the funding of some 300,000 Medicaid members to support intellectual and developmental disabilities, substance use disorders and serious mental illnesses.

McKinsey received another $447,000 in October 2025 as some PIHPs sued the state following the release of the new framework. The consulting firm’s funding for the project is expected to continue through this September.

Neither MDHHS, state agencies that oversee government contracts, nor McKinsey responded to Bridge Michigan’s requests for comment in time for publication.

Community mental health leaders worry the state will submit a new bid before the end of the year and disrupt the current system. Some providers who contract with the regional entities to provide mental health services believe the structure needs major reform and support the state’s intervention.

Following the money

McKinsey, which operates in over 130 cities, has faced conflict of interest criticism for working with both governments and private companies, and for its role in the American opioid crisis.

After advising pharmaceutical companies, McKinsey paid over $600 million to settle federal investigations into its efforts to “turbocharge” sales of OxyContin. Michigan has received more than $19.5 million in opioid settlement funds from the firm.

a sign for McKinsey & Company — Michigan has received more than $19.5 million in opioid settlement funds from McKinsey & Co. and has $39 million in active contracts with the consulting firm. (Konektus Photo / Shutterstock)

The state maintains about $39 million in active contracts with the firm to support “human centered design,” grant consulting, digital tools and operational consulting services.

The $2.9 million McKinsey received for the PIHP bid design is not reflected in state contracts as it was allocated through the Michigan Public Health Institute. McKinsey has received millions of dollars through the nonprofit for various efforts in recent years, including the analysis of food benefits and “strategic support” across multiple Medicaid mental health services.

The nonprofit has received more than $200 million from the state in the current fiscal year as its revenue has doubled since 2019, according to IRS records.

The Michigan Public Health Institute’s role as a financial intermediary for the McKinsey contracts comes as state Republicans seek to investigate the nonprofit.

Michigan House Speaker Matt Hall has called the Michigan Public Health Institute a “government scam to work around transparency laws” whose funding he scrutinized during the COVID-19 emergency.

“We’re coming back and we’re investigating this,” Hall said in a Feb. 4 press conference. “And we’re going to get to the bottom of what’s going on there.”

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