California hospitals score a win in suit over Medi-Cal cuts

Published Aug 8, 2017 5:05 PM

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PANORAMA CITY, CA - JANUARY 28: Dr. Jason Greenspan (L) and emergency room nurse Junizar Manansala care for a patient in the ER of Mission Community Hospital where doctors held a press conference outside on a class action lawsuit against the state of California by a coalition of emergency room physicians claiming that without additional funding, the entire emergency healthcare system is on the verge of collapse on January 28, 2009 in Panorama City, California. According to the coalition, the cost of providing emergency room treatment has nearly doubled over the past decade and patient load increased by more than 28 percent while Medi-Cal reimbursements have remained largely unchanged. During that time, 85 California hospitals in California have closed and an additional 55 facilities have shut down their emergency rooms. California now reportedly ranks worst in the nation for access emergency care and last in emergency rooms per capita. California has seven emergency rooms per million people while the national average is 20 emergency rooms per million people. (Photo by David McNew/Getty Images) *** Local Caption *** Junizar Manansala;Jason Greenspan

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California hospitals have won a round in their legal fight to force the state to repay them hundreds of millions of dollars in withheld Medi-Cal reimbursements. A federal appeals court has overturned a lower court's ruling against the hospitals and sent the case back for further consideration.

The case dates to the Great Recession, when California temporarily cut its already low Medi-Cal reimbursement rates to health care providers by 10 percent. Fifty-seven hospitals sued. A lower court ruled against the hospitals, saying the U.S. Department of Health and Human Services was justified in approving the reduction.

But on Monday a three-judge panel of the 9th U.S. Circuit Court of Appeals ruled that the lower court's decision was "arbitrary and capricious."

In sending the case back to the lower court, the 9th Circuit ruled that reimbursement rates "must be sufficient to enlist enough providers to ensure adequate beneficiary access." In other words, the lower court must take into account whether the lower reimbursement rate led to a shortage of doctors willing to accept Medi-Cal patients.

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"I think it’s an important decision that gives health care providers an ability to challenge state Medicaid rates," says Robert Leventhal, the hospitals' attorney.

"When you have a large group of patients whose services aren’t paid for at the appropriate rates, it creates distortions in the entire health care system," he says.

The lawsuit is one of several filed over cuts to Medi-Cal during the recession.

"This decision will help ensure that California’s 14 million Medi-Cal beneficiaries have continued access to care," the California Hospitals Association said in a written statement.

Representatives from Health and Human Services did not respond to requests for comment. The department could ask the panel to reconsider its decision, ask for a hearing before the full 9th Circuit or appeal to the Supreme Court.

Officials at the California Department of Health Care Services say they're reviewing the court’s ruling.