Bloomberg News

California Hospitals Sue State, U.S. to Block Medi-Cal Rate Cuts

November 04, 2011

Nov. 3 (Bloomberg) -- Hospitals in California sued the state and the U.S. Department of Health and Human Services to block cuts to government reimbursements for health-care providers that serve low-income people.

The cuts of more than 20 percent, including for skilled nursing services, resurrect previous reductions that the courts have found to be in violation of the federal Medicaid Act, the California Hospital Association said in a complaint filed Nov. 1 in Los Angeles. The lobby group, which represents dozens of hospitals in the state including St. Jude Medical Center and Shriners Hospitals, seeks a court order that the new cuts are unlawful.

“With the action being challenged here, the state has effectively rolled three unlawful cuts and limitations into one, and then cut the rates even further for good measure, all in the name of budgetary savings,” lawyers for the hospital group said in the complaint.

The California Department of Health Care Services said Oct. 27 that the federal Centers for Medicare and Medicaid Services approved the state’s proposal to reduce Medi-Cal reimbursement rates. The cuts are part of state’s 2011-12 budget and represent $623 million in savings, according to the California department’s Oct. 27 statement.

The reductions will threaten the ability of many hospitals to operate skilled nursing units, which will particularly harm patients in medically underserved, rural areas, the hospital group said in the complaint.

Norman Williams, a spokesman for the California Department of Health Services, said in a phone interview today that the agency doesn’t comment on pending litigation. The department submitted an analysis to CMMS that showed the reductions would allow sufficient access for beneficiaries and it will monitor access after the cuts are implemented, Williams said.

“We believe our rate reductions are appropriate,” Williams said.

The rate reductions, which will be implemented in the next one to two months, are retroactive to June 1, and the department is currently working out a payment plan for providers, Williams said.

The case is California Hospital Association v. Toby Douglas, 11-9078, U.S. District Court, Central District of California (Los Angeles).

--Editors: Peter Blumberg, Mary Romano

To contact the reporter on this story: Edvard Pettersson in Los Angeles at

To contact the editor responsible for this story: Michael Hytha at

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