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

A federal appellate court ruled Monday that courts must consider whether Medi-Cal cuts hurt patient access to care.
A federal appellate court ruled Monday that courts must consider whether Medi-Cal cuts hurt patient access to care.
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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.

"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.