Federal appeals court blocked California's 5 percent cut in Medi-Cal rates for hospitals
09 04 09 - 17:06
Judges block state from cutting Medi-Cal rates
Bob Egelko, Chronicle Staff Writer
A federal appeals court has halted California's 5 percent cut in Medi-Cal rates for hospitals, a reduction that was intended to save the state $80 million a year.
Legislators and state health officials lowered Medi-Cal payments, effective March 1, without examining the effects on quality of care, the economy or poor people's access to health services, as required by federal law, said the Ninth U.S. Circuit Court of Appeals in San Francisco.
A federal judge had already blocked the rate cuts for pharmacies and adult day health care centers, but allowed them to take effect for hospitals. The appeals court ruling, issued Monday, will benefit more than 300 public and private hospitals, said Lloyd Bookman, lawyer for the California Hospital Association.
He said a 5 percent reduction would cost the hospitals about $80 million a year in state funds and $120 million in federal aid. Beneficiaries of the ruling will include the 6.6 million low-income Californians eligible for Medi-Cal as well as other patients at hospitals squeezed by budget cuts, Bookman said.
"If hospitals are required to lose substantial money treating Medi-Cal patients, it affects their ability to treat other patients as well," the attorney said.
Since 1996, he said, more than 90 California hospitals have closed, and others have shut emergency rooms and trauma centers, in part because of state reimbursement rates that are among the lowest in the nation.
The state Department of Health Care Services said Wednesday it will comply with the ruling "as expeditiously as possible." The department said it hopes the courts will ultimately uphold the rate reductions.
The state, facing a huge budget deficit, reduced Medi-Cal reimbursements by 10 percent in legislation that took effect in July. Federal courts quickly blocked the law for doctors, dentists, pharmacies and most other health care providers except hospitals.
The law authorizing those cuts expired at the end of February and was replaced by a 5 percent reduction, with no expiration date.
A federal judge in Los Angeles intervened again and blocked the rate cut for pharmacies before it took effect, saying state officials and lawmakers had failed to consider the effect on poor people and had acted solely to save money.
The judge made similar findings for hospitals but allowed the state to reduce their rates, saying hospital officials had failed to show that Medi-Cal patients would suffer.
In Monday's ruling, however, the appeals court said hospitals were required only to show that they would suffer financially from a state action that probably violated federal law, and did not have to show that patients would be harmed as well.
That is a crucial distinction for hospitals, Bookman said, because they are required to treat everyone who needs care, regardless of the reimbursement rate.
The court also rejected state officials' argument that blocking the rate cuts would hurt the public by worsening the state budget crisis. "The impact ... on the budget crisis will be minimal at most," the three-judge panel said.
E-mail Bob Egelko at begelko@sfchronicle.com.