Hospitals, State Settle Medi-Cal Reimbursement Suit
Under a settlement reached in a 10-year-old lawsuit, California hospitals will receive a "broad increase" in reimbursements for
Medi-Cal, marking the first such increase in 15 years, the Los Angeles Times reports. Taking effect July 1 and standing for one year, the 30% Medi-Cal rate hike covers outpatient services, including emergency room care, clinic visits and laboratory tests. After the first year, the Medi-Cal rates will increase 3.3% annually for each of the next three years. After that, the state will create a new mechanism to determine future rates. The settlement stems from a 1990 California Healthcare Association lawsuit against the state Department of Health Services over Medi-Cal's rate-setting method. As compensation for the decade of Medi-Cal reimbursement rates that in 1997 the 9th Circuit Court of Appeals deemed too low, the settlement calls for the state DHS to pay a $350 million lump sum to be divided among hospitals (Warren, Los Angeles Times, 12/6). The state's share of the settlement amounts to about $175 million, with the remainder coming from federal funds (Associated Press, 12/5). Noting that Medi-Cal had the "worst reimbursement levels in the nation," CHA spokesperson Jan Emerson called the settlement a "crucial breakthrough" for the state's financially ailing hospitals (Los Angeles Times, 12/6). Gov. Gray Davis (D) added, "This settlement is critical to the survival of some of California's busiest hospitals and will help keep emergency rooms open. Hospitals that rely on Medi-Cal reimbursement rates are key links in our health system safety net" (Office of the Governor release, 12/5).