Bloomberg News

California Barred by Judge From Cutting Medi-Cal Rates

December 30, 2011

(Updates with ruling on pharmacy rate cuts in eighth paragraph.)

Dec. 29 (Bloomberg) -- California can’t cut reimbursements hospitals receive for the skilled-nursing services they provide to low-income people, a federal judge ruled.

U.S. District Judge Christina Snyder in Los Angeles yesterday granted the request from the California Hospital Association for an order to stop California from imposing the reductions, saying the hospitals had shown there would be irreparable harm if she didn’t halt the cuts temporarily.

“The state’s fiscal crisis does not outweigh the serious irreparable injury the plaintiffs would suffer absent the issuance of an injunction,” the judge said in her ruling.

The hospital group said in a Nov. 1 complaint that the cuts of more than 20 percent would resurrect previous reductions that the courts have found to be in violation of the federal Medicaid Act. The cuts would threaten the ability of many hospitals to operate skilled nursing units, the group said.

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 the state’s 2011-12 budget and would save $623 million, according to the Oct. 27 statement.

Norman Williams, a spokesman for the state’s Health Care Services Department, said yesterday in an e-mail that the state “strongly disagrees with the ruling” and will appeal it.

Sufficient Access

Williams said last month that the department submitted an analysis to the Centers for Medicare and Medicaid Services that showed the reductions would allow sufficient access for beneficiaries and that it would monitor access after the cuts were implemented.

Snyder said in her decision that the monitoring plan “at best presents a potential remedy after an access or quality problem has been detected.” The judge said irreparable harm is adequately demonstrated if there’s evidence that at least some Medi-Cal recipients might lose services as a result of the cuts.

In a separate ruling yesterday, the judge also blocked the state from cutting Medi-Cal reimbursement rates for pharmacies by 10 percent, saying there was enough evidence that pharmacies may have to reduce services or shutter their doors and that Medi-Cal beneficiaries would lose access to medication. Both the hospital and pharmacy cuts were to be retroactive to June 1.

The cases are California Hospital Association v. Douglas, 11-09078, and Managed Pharmacy Care v. Sebelius, 11-9211, U.S. District Court, Central District of California (Los Angeles).

--Editors: Peter Blumberg, Stephen Farr

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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