Am. Indian Health & Servs. Corp. v. Kent

• Citation: 234 Cal.Rptr.3d 583,24 Cal.App.5th 772
• Decision Date: 19 June 2018
• Docket Number: C081338
• Court: California Court of Appeals
• Parties: AMERICAN INDIAN HEALTH & SERVICES CORPORATION et al., Plaintiffs and Respondents, v. Jennifer KENT, as Director, etc., et al., Defendants and Appellants.

24 Cal.App.5th 772

234 Cal.Rptr.3d 583

AMERICAN INDIAN HEALTH & SERVICES CORPORATION et al., Plaintiffs and Respondents,

v.Jennifer KENT, as Director, etc., et al., Defendants and Appellants.

C081338

Court of Appeal, Third District, California.

Filed June 19, 2018

Xavier Becerra, Attorney General, Julie Weng-Gutierrez, Assistant Attorney General, Susan M. Carson, Gregory D. Brown, and Dane C. Barca, Deputy Attorneys General, for Defendants and Appellants.

Hanson Bridgett, Kathryn E. Doi, Rachael E. Blucher, Sacramento, and Ann Mary Olson, San Francisco, for Plaintiffs and Respondents.

DUARTE, J.

The State Department of Health Care Services and its director (collectively, the Department) appeal from a judgment in favor of plaintiffs on a petition for a writ of mandate. Plaintiffs are 23 federally qualified health centers (FQHC's) and rural health clinics (RHC's) that serve medically underserved populations (the Clinics). ( 42 U.S.C. §§ 254b(a)(1), 1396d(l )(1), (2), 1395x(aa)(2), (4).) The dispute is over coverage for adult dental, chiropractic, and podiatric services the FQHC's and RHC's provided to Medi-Cal patients for a period between 2009 and 2013.

Prior to July 1, 2009, the Department processed and paid claims for these services. In 2009, in a cost-cutting measure due to budget problems, the Legislature enacted Welfare and Institutions Code section 14131.10¹ to exclude coverage for these services (and others) "to the extent permitted by federal law." ( § 14131.10, subd. (d).) After the Department stopped paying claims for these services, various FQHC's and RHC's challenged the validity of section 14131.10, claiming it conflicted with federal Medicaid law.

In California Assn. of Rural Health Clinics v. Douglas (9th Cir. 2013) 738 F.3d 1007 ( CARHC ), the Ninth Circuit held section 14131.10 was invalid to the extent it eliminated coverage for these services when provided by FQHC's and RHC's because the federal Medicaid Act imposed on participating states the obligation to cover these services by these providers.

In response to CARHC , the Department announced it would reimburse FQHC's and RHC's for these services for dates of service only on or after September 26, 2013, the date of the Ninth Circuit's mandate. Seeking reimbursement for services provided prior to September 26, 2103, the Clinics petitioned in Sacramento County Superior Court for a writ of mandate to compel the Department to accept, process, and pay claims for these services for the period July 1, 2009, to September 26, 2013. The trial court granted the petition in part and entered judgment for the Clinics. The court issued a peremptory writ commanding the Department to process and pay for adult dental, chiropractic, and podiatric services provided by FQHC's and RHC's between July 1, 2009, and September 26, 2013, and to follow existing regulations regarding late claims.

The Department appeals. Characterizing the Clinics' writ petition as a suit for damages, it contends (1) sovereign immunity bars the Clinics' claims for retroactive payment; (2) the CARHC decision is not—and cannot be—retroactive because the Medicaid Act is spending clause legislation and its terms were not sufficiently clear as to the requirement to cover adult dental, chiropractic, and podiatric services provided by FQHC's and RHC's; and (3) retroactive relief violates the separation of powers doctrine because it forces the Legislature to appropriate money.

We disagree with the Department's characterization of the Clinics' lawsuit. Rather than a suit for damages, the lawsuit seeks an order to compel performance of a mandatory duty and did not result in a money judgment. Under well-settled California law, such a mandamus proceeding is not barred by sovereign immunity. The Department's contentions based on spending clause legislation and separation of powers are new arguments raised for the first time on appeal. We exercise our discretion to consider only the spending clause argument. We reject it because the Department has not shown its obligations under Medicaid law, as determined by CARHC , came as a surprise. The separation of powers argument raises factual issues about appropriations that should have been presented in the trial court and we decline to consider this new argument.

Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Medicaid and Medi-Cal

"Medicaid is a cooperative federal-state program through which the Federal Government provides financial assistance to States so that they may furnish medical care to needy individuals. [Citation.] Although participation in the program is voluntary, participating States must comply with certain requirements imposed by the Medicaid Act ... and regulations promulgated by the Secretary of Health and Human Services (Secretary). To qualify for federal assistance, a State must submit to the Secretary and have approved a ‘plan for medical assistance,’ [citation], that contains a comprehensive statement describing the nature and scope of the State's Medicaid program. [Citation.] The state plan is required to establish, among other things, a scheme for reimbursing health care providers for the medical services provided to needy individuals." ( Wilder v. Virginia Hosp. Assn. (1990) 496 U.S. 498, 502, 110 S.Ct. 2510, .)

"To qualify for federal funds, States must submit to a federal agency (CMS [Centers for Medicare & Medicaid Services], a division of the Department of Health and Human Services) a state Medicaid plan that details the nature and scope of the State's Medicaid program. It must also submit any amendments to the plan that it may make from time to time. And it must receive the agency's approval of the plan and any amendments. Before granting approval, the agency reviews the State's plan and amendments to determine whether they comply with the statutory and regulatory requirements governing the Medicaid program. [Citations.]" ( Douglas v. Independent Living Center of S. Cal., Inc. (2012) 565 U.S. 606, 610, 132 S.Ct. 1204, .)

A state Medicaid plan must provide payment for services rendered by FQHC's and RHC's. ( 42 U.S.C. § 1396a(bb) ; see Three Lower Counties Community Health Services, Inc. v. State of Maryland (4th Cir. 2007) 498 F.3d 294, 297 ; Pee Dee Health Care, P.A. v. Sanford (4th Cir. 2007) 509 F.3d 204, 207.) FQHC's are health centers that serve a medically under-served population and RHC's are health centers that provide services in rural areas with insufficient numbers of healthcare practitioners. (CARHC, supra, 738 F.3d at p. 1010.)

Medicaid requires participating states to cover certain mandatory services. ( 42 U.S.C. § 1396a(a)(10).) States may also receive federal funding for other optional services. (See 42 U.S.C. § 1396d(a)(1)-(29) [defining medical care and services for which payment is available].)

"The Medi-Cal program (§ 14000 et seq.) represents California's implementation of the federal Medicaid program [citation], through which the federal government provides financial assistance to states so that they may furnish medical care to qualified indigent persons. [Citation.] The Department is the single state agency designated to administer the Medi-Cal program. (§ 14203.)" ( Robert F. Kennedy Medical Center v. Belshé (1996) 13 Cal.4th 748, 751, 55 Cal.Rptr.2d 107, 919 P.2d 721.)

In 2009, California faced a budget crisis and sought to reduce Medi-Cal funding. The Legislature enacted section 14131.10 to exclude certain benefits it deemed optional from coverage under the Medi-Cal program. A bill analysis explained: "This bill contains necessary statutory changes to reduce expenditures for 2009-10 as directed to mitigate the fiscal emergency of the state declared by the Governor." (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 5XXX (2009-2010 3d Ex. Sess.) as amended Feb. 14, 2009.) Section 14131.10 provided: "[I]n order to implement changes in the level of funding for health care services, specific optional benefits are excluded from coverage under the Medi-Cal program." ( § 14131.10, subd. (a).) As relevant here, the excluded services included certain adult dental services, chiropractic services, and podiatric services. ( § 14131.10, subd. (b)(1)(A), (D), & (F).) Recognizing the role of federal law in the Medi-Cal program, the statute further provided: "This section shall only be implemented to the extent permitted by federal law." ( § 14131.10, subd. (d).)

Challenge to Section 14131.10 in Federal Court: The CARHC Decision

An association of RHC's and a FQHC brought suit in federal court to stop the implementation of section 14131.10. In the federal action, the parties agreed "physicians' services" provided by RHC's and FQHC's were entitled to Medicaid reimbursement. They disagreed as to the definition of "physician" and whether the definition in Medicaid law or Medicare law applied. ( California Assn. of Rural Health Clinics v. Maxwell-Jolly (E.D.Cal. 2010) 748 F.Supp.2d 1184, 1191 ( Maxwell-Jolly ), revd. & remanded sub nom . CARHC, supra, 738 F.3d 1007.) The federal district court ruled the Medicaid definition applied and section 14131.10 was not in conflict with federal Medicaid law. ( Maxwell-Jolly, supra , at p. 1198,.) It also ruled that the Department violated federal law by implementing section 14131.10 prior to receipt of federal approval of the state plan amendment (SPA) and thus enjoined implementation of section 14131.10 until federal approval was received. ( Maxwell-Jolly, supra , at pp. 1199-1201,.)

The RHC's and the FQHC appealed, challenging the district court's holding that section 14131.10 was consistent with the federal Medicaid Act. Prior to briefing on appeal, CMS approved California's SPA, thus rendering the Department's cross-appeal of the injunction moot. ( CARHC, supra, 738 F.3d at pp. 1011, 1017-1018.)

The Ninth Circuit held the Medicaid Act prohibited the limitations adopted in section 14131.10. ( CARHC, supra, 738 F.3d at pp. 1010.) The court fou...