Provider Rate Cut Case May Linger

The state budget proposed by Gov. Brown counts on $488.4 million in savings from rate reductions to Medi-Cal providers in keeping with a law passed in 2011 that hasn’t yet been implemented because it’s been held up in court.

Last month, a three-judge panel in federal Circuit Court overruled previous injunctions issued by federal appellate judges. However, the injunctions will remain in place and provider reimbursements won’t be cut at least until the end of this month. Litigants in each of the four lawsuits have until Jan. 28 to file a re-hearing request.

At least one of those litigants — the California Hospital Association — is going to file a re-hearing request, according to Jan Emerson-Shea, CHA’s vice president of external affairs.

“There are four separate lawsuits, and all of them have been joined together [in the three-judge decision],” Emerson-Shea said. “I can tell you at CHA, we are right now appealing it,” Emerson-Shea said. “And if we’re not successful [in that appeal], we are seriously considering going to the Supreme Court.”

Emerson-Shea said she was surprised to see the $488 million representing the provider cuts show up in the proposed 2013-14 budget.

“Why they put that particular number in, I don’t know,” she said. “But I think that’s fairly optimistic. We think we have a case, whether or not the state puts a number into the budget.”

Francisco Silva, general counsel for the California Medical Association, another litigant planning to file for a re-hearing, said the appeals would likely take the case into late February or March.

“If it’s denied, our option at that point would be to go to the U.S. Supreme Court,” Silva said. And that process is a lengthy one, he said. “So the state can’t assume they’re going to be able to move forward with this [provider cut] anytime soon.”

The state’s budget extends into the first half of 2014, so that should be enough time to resolve this case, said Toby Douglas, director of the Department of Health Care Services. “We expect that to be resolved within the budget year,” he said.

There is one other consideration that gives Silva pause, and that’s speculation that the state might ask to make the cut retroactive, back to when it was signed into law, in March 2011.

“If we don’t manage to reverse this, they might try to make this cut retroactive, and if providers can’t do it, one option is to cut future payments, and that’s just ridiculous,” Silva said. “But that’s still up in the air.”

Emerson-Shea had a similar worry. “I was told that the state might try to make that cut retroactive,” Emerson-Shea said. “We’re very concerned because many of these facilities that would be affected are rural and safety net hospitals. Particularly if its implemented retroactively, that could mean the end of some of those facilities.”