Federal District Court Bars Medicaid Non-Contract Hospital Payment Rates

A federal district court judge in California November 18th enjoined the California Department of Health Care Services from continuing a 10 percent reduction in the Medi-Cal (California's Medicaid program) reimbursement rate for non-contract hospitals (Santa Rosa Memorial Hospital v. Maxwell-Jolly, N.D. Cal., No. 08-5173 SC, injunction 11/18/09).

At issue in all the cases was the 10 percent Medi-Cal reimbursement rate cut contained in 2008 legislation (A.B. 5) aimed at addressing California's budget deficit. The hospitals argued that the rate cuts violated federal law because they were implemented solely for financial cost savings, and did not take into account a federal requirement that the state DHCS set hospital reimbursement rates to bear a reasonable relationship to hospitals' costs. The courts agreed, essentially finding that the DHCS had to rely on responsible cost studies before it could provide reliable data to justify the reductions. In his order, U.S. District Judge Samuel Conti of the Northern District of California noted that, ordinarily, the court would hold a hearing on the appropriateness of granting the non-contract hospitals' motion for a preliminary injunction barring the cuts. However, largely on the basis of the rulings by a federal district court in Los Angeles in August 2008, and the Ninth Circuit in July 2009, Conti found it was suitable to make his ruling without oral arguments. In July, the Ninth Circuit affirmed the lower court's ruling in Independent Living Center of Southern California Inc. v. Maxwell-Jolly (131 HCDR, 7/13/09).

“Based on the Ninth Circuit's decision, the Court finds that Plaintiffs are likely to succeed on the merits of their claim that these rate reductions violate state law,” Contin wrote. The ruling is available at http://op.bna.com/hl.nsf/r?Open=sfak-7y3unz.