Health Care Providers Sue State of California Over Cuts in Medi-Cal Payments

Class Action Lawsuit Aims at Preventing 10 Percent Cuts from Taking

Effect July 1; Providers Say Cuts Will Reduce Timely Access to Care

May 05, 2008, 01:00 ET from California Hospital Association

    SACRAMENTO, Calif., May 5 /PRNewswire-USNewswire/ -- In an effort to
 ensure that all Californians have continued access to vital health care
 services, a coalition of health care providers today filed a lawsuit
 against the state of California to prevent a planned 10 percent cut in
 Medi-Cal and Denti-Cal payments from taking effect on July 1.
     In February, the Legislature approved and the Governor signed into law
 a total of $1.3 billion in cuts to the Medi-Cal program in an effort to
 stem the state's budget crisis. The cuts are scheduled to take effect July
 1 unless the court intervenes. In addition, the June 19 and August Medi-Cal
 payments to hospitals, pharmacists and adult day health care providers are
 slated to be delayed. For some providers -- such as rural hospitals and
 individual caregivers -- the delay in Medi-Cal payments may result in
 employees not receiving their paychecks and food service, pharmaceutical
 and other vendors not being paid.
     The class action lawsuit seeks an immediate injunction to block the
 reduction in Medi-Cal payments. The suit was filed jointly by the
 California Medical Association (CMA); the California Hospital Association
 (CHA); the California Dental Association (CDA); the California Association
 for Adult Day Services (CAADS); the American College of Emergency
 Physicians, State Chapter of California (Cal/ACEP); the California
 Pharmacists Association (CPhA); and the California Association of Public
 Hospitals and Health Systems (CAPH).
     Cuts Will Reduce Access to Health Care Services
     The lawsuit, filed in Los Angeles County Superior Court, contends that
 the planned payment cuts violate state and federal laws that require that
 Medicaid (Medi-Cal) payments "must be sufficient to enlist enough providers
 so that services under the (state's Medicaid) plan are available to
 recipients at least to the extent that those services are available to the
 general public." 42 C.F.R. Section 447.204 "Medi-Cal already doesn't cover
 the cost of providing care," said Richard Frankenstein, M.D., president of
 the California Medical Association (CMA). "This chronic underfunding is
 forcing many doctors to leave the Medi-Cal program, which in turn deprives
 these vulnerable patients access to primary and preventative medical care.
 If these cuts take effect, Medi-Cal patients will be forced to seek care in
 already overcrowded hospital emergency rooms, which undermines access to
 care for all Californians."
     According to the complaint, the reimbursement cuts authorized in
 February were implemented "solely due to state budgetary woes, without
 regard to the impact on the availability of Medi-Cal services." Such cuts
 are illegal, according to the complaint, and are "being imposed on a system
 already in crisis, wherein inadequate payment levels have resulted in a
 scarcity of willing providers, creating serious access hurdles for Medi-Cal
 beneficiaries." If the cuts are allowed to take effect, the lawsuit
 continues, additional health care providers will withdraw from the Medi-Cal
 program, which in turn will lead "to additional crowding of hospital
 emergency departments."
     "California's emergency rooms are overburdened and chronically
 overcrowded," said Michael Salomon, M.D., president of the American College
 of Emergency Physicians, State Chapter of California (Cal/ACEP). "Ambulance
 diversions and patient wait times are on the rise -- with many patients
 having to wait hours, or even days, for a hospital bed. Slashing Medi-Cal
 payments will make things even worse."
     California already ranks dead last in the nation when it comes to
 funding health care for Medicaid patients. According to the Kaiser Family
 Foundation, California spends $2,701 per Medicaid beneficiary -- the lowest
 rate in the nation. The national average is $4,662 per Medicaid
     Patients in rural areas of California may be particularly affected by
 the planned Medi-Cal payment cuts, where there may be only one pharmacy and
 the local hospital also serves as a skilled nursing facility.
     "It is almost impossible to grasp the real impact of these cuts on
 small rural health care providers," said Charles R. Guenther, CEO of
 Eastern Plumas Health Care District, which operates two small hospitals in
 Portola and Loyalton in Plumas County, located in northeastern California.
 "Our organization has already been through bankruptcy once -- we can't go
 through it again. We have no operating cash on hand and we owe $1.5 million
 in accounts payable. We are the only health care provider for about 1,500
 square miles. We are having great difficulty in getting essential supplies
 and keeping qualified staff even at the current level of Medi-Cal
 reimbursement. If the state pulls the rug out from us by implementing these
 cuts, we will have no choice but to reduce services and close facilities."
     Reductions Violate Medicaid Regulations
     The lawsuit also contends that under federal Medicaid law, the
 Secretary of the U.S. Department of Health and Human Services (HHS) must
 approve the policies and methods used for setting payment rates and that
 such changes may not be implemented by the state prior to HHS' approval.
 According to the complaint, California has yet to submit what is known as a
 State Plan Amendment (SPA) to the federal government, requesting approval
 of the reduced Medi-Cal rates.
     Additionally, federal regulations require the state to establish
 Medicaid payment rates for hospitals and other institutional providers
 through a public process that includes publishing the proposed rates and
 the methodologies and justifications used to establish those rates. No such
 process took place before the 10 percent rate reduction was approved,
 according to the lawsuit. Rather, the rate reductions were based solely on
 an across-the-board slashing of the state's budget.
     When it comes to Medi-Cal payments to physicians and other individual
 health care providers, the lawsuit charges that "state law requires that
 Medi-Cal fee-for-service rates be adopted pursuant to the regulatory
 process and requires the Department (Department of Health Care Services) to
 annually review Medi-Cal rates for physician and dental services, taking
 into account Consumer Price Index cost increases, reimbursement levels
 under Medicare and other third-party payors, prevailing customary charges
 and other factors." As with the cuts imposed upon hospitals, the lawsuit
 points out that no such regulatory process occurred before the rate
 reductions for physicians and other providers were approved.
     The Providers intend to seek an injunction to stop the cuts from going
 into affect before July 1. We anticipate a court hearing on the request for
 an injunction within the next thirty to forty-five days.
     Ned Wigglesworth
     California Medical Association
     (916) 551-2873
     Regina Collins
     California Dental Association
     (916) 554-5317
     Elena Lopez-Gusman
     American College of Emergency Physicians,
     State Chapter of California
     (916) 325-5455
     Amy Weitz
     California Association of Public Hospitals and Health Systems
     (510) 874-7113
     Jan Emerson
     California Hospital Association
     (916) 552-7516
     Lydia Missaelides
     CA Assoc. for Adult Day Services
     (916) 552-7400
     Cathi Lord
     California Pharmacists Association
     (916) 799-1400

SOURCE California Hospital Association