Asante v. Cal. Dep't of Health Care Servs.
| Decision Date | 21 December 2015 |
| Docket Number | Case No. 14-cv-03226-EMC |
| Citation | 155 F.Supp.3d 1008 |
| Court | U.S. District Court — Northern District of California |
| Parties | Asante, et al., Plaintiffs, v. California Department of Health Care Services, et al., Defendants. |
Dean L. Johnson, Dean L. Johnson, Inc., Carlsbad, CA, Michael Steven Sorgen, Law Offices of Michael S. Sorgen, Berkeley, CA, for Plaintiffs.
Jennifer C. Addams, Susan M. Carson, State Attorney General's Office, San Francisco, CA, for Defendants.
Nineteen hospitals from Oregon, Nevada, and Arizona challenge California's Medi-Cal reimbursement policies for out-of-state hospitals. Compl. ¶ 1. Plaintiffs filed this action against California's Department of Health Care Services in June 2014. Docket No. 1 (“Compl.”). Toby Douglas, Director of the California Department of Health Care Services, removed this action to federal court. Docket No. 1 (Not. of Removal). Plaintiffs bring the following causes of action: (1) violation of the Commerce Clause, Article I, Section 8, Clause 3 of the United States Constitution
; (2) violation of the Equal Protection Clause under the Fourteenth Amendment to the United States Constitution; (3) violation of the Equal Protection Clause of the California Constitution; (4) violation of federal laws governing Medi-Cal DSH payments (42 U.S.C. § 1396a(a)(13)(A) ); and (5) violation of federal laws governing Medi-Cal payments to out-of-state hospitals. (42 U.S.C. § 1396a(a)(16) and 42 C.F.R. § 431.52 ). Plaintiffs seek a declaration that the Department violates these provisions and an injunction enjoining the Department from enforcing the law.
Medicaid is a joint federal-state program that provides for the payment of medical services pursuant to the Medicaid Act to the poor, elderly, and disabled. 42 U.S.C. § 1396 et seq .
States that choose to participate in Medicaid must submit a State Plan to the United States Department of Health and Human Services (“HHS”) for approval. The State Plan describes the policy and methods used to set payment rates for each type of service included in the program. See, e.g. , Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). The Centers for Medicare and Medicaid Services (“CMS”) administers the Medicaid Program on the Secretary's behalf, including approving State Plans and State Plan Amendments. Pharm.
Research & Mfrs. of Am. v. Walsh , 538 U.S. 644, 650, n. 3, 123 S.Ct. 1855, 155 L.Ed.2d 889 (2003) ; 42 C.F.R. §§ 430.10, 430.15(b). A state may change its plan by obtaining approval of a State Plan Amendment (“SPA”) from CMS. The amendment must meet federal requirements. 42 U.S.C. §§ 1396a(b) ; 42 C.F.R. §§ 430.10, 430.12. The CMS reviews a state's State Plan and State Plan Amendments to determine whether they comply with the statutory and regulatory requirements governing the Medicaid Program.
. If the CMS determines that a state is out of compliance with either the State Plan or the Medicaid Act, it may withhold federal funds. 42 C.F.R. §§ 430.15, 430.18, 430.35.
Medi-Cal is California's state Medicaid healthcare program. Cal. Welf. Inst. Code §§ 14000 et seq.
California's Department of Health Care Services (“Department”) is the single state agency responsible for the administration of Medi-Cal. Cal. Welf. Inst. Code § 10740. California has an extensive regulatory framework for the setting of reimbursement rates. See e.g. , Cal. Welf. Inst. Code §§ 14075, 14079, 14105. California's State Plan sets forth the standards and methods for reimbursement rates paid to Medi-Cal providers for Medi-Cal covered services. The United States makes contributions to a state's program provided the State Plan is consistent with the applicable Medicaid Act provisions. 42 C.F.R. § 430.35.
Medi-Cal is required to provide acute inpatient services that are not available in California pursuant to part 431.52(b) of Title 42 of the Code of Federal Regulations
.1
See Reimbursement to General Acute Care Hospitals For Acute Inpatient Services. D'S RJN, Ex. B, State Plan Amendment (SPA) 13-004, approved by CMS on May 31, 2013, Attachment 4.19-A at 17.52. Title 42, Code of Federal Regulations, Section 431.52(b)(4)
, and title 22 California Code of Regulations, Section 51006, subdivision (a)(4)2 recognize that it may be a common practice for Medi-Cal recipients in some areas of California to obtain medical services in adjacent areas in the states of Oregon, Nevada, and Arizona. California Regulatory Notice Register 2015, Number 25-Z, published June 19, 2015. D's RJN, Ex. B at 1007. In addition, in 2009, California amended Section 51543 of Title 22 of the California Code of Regulations. Section 51543 states:
Out-of-state hospital inpatient services which have been certified for payment at the acute level and which are either of an emergency nature or for which prior Medi-Cal authorization has been obtained, shall be reimbursed the current statewide per diem average of contract rates for acute inpatient hospital services provided by California hospitals with at least 300 beds or the out-of-state hospital's actual billed charges, whichever is less.
Cal. Code Regs. tit. 22, § 51543
According to information published by the federal Medicare Program, there are over 3,000 hospitals across the country that may occasionally render services to a Medi-Cal beneficiary and bill the Medi-Cal program for reimbursement.3 Rowan Decl. ¶ 11. The Department claims that close to 3,000 out-of-state hospitals didn't provide any Medi-Cal covered hospital inpatient services to a single Medi-Cal beneficiary during state fiscal year 2013/2014.4 Rowan Decl. ¶ 11. During that year, the nineteen plaintiff hospitals collectively rendered 859 Medi-Cal covered hospital stays resulting from admissions that were paid based on the APR-DRG methodology. Rowan Decl. ¶ 11. Twelve other out-of-state hospitals located in Arizona, Nevada, and Oregon that are within 55 miles of the California border rendered 143 Medi-Cal covered hospital stays. Rowan Decl. ¶ 12. 155 other out-of-state hospitals, not in proximity to the California border, rendered 338 hospitals stays. Rowan Decl. ¶ 12. While these stays represent only a small percentage of all Medi-Cal covered admissions paid under the APR-DRG methodology during state fiscal year 2013/2014, the amount of reimbursement at stake is not insignificant. For example, Renown Regional Medical Center Nevada Uncompensated Care Report (FY 30, 2013) states that the hospital's inpatient out-of-state Medicaid cost of care was $11,444,335; total outpatient out-of-state Medicaid cost of care was $1,385,992; total inpatient dual eligible Medicaid cost of care was $12, 710,938. Docket No. 55, Exhibit 2 at 161. The report does not break down these numbers by state. However, the Department estimates that the 15-020 Amendment will increase Medi-Cal out-of-state expenditures by $1.4 million per year. D's RJN, Ex. C at 1007.
On July 1, 2013, the Department implemented All Patient Refined Diagnosis Related Group (“APR-DRG”)5 reimbursement methodology. Compl. ¶¶ 12, 13. All hospital patients are categorized into APR-DRGs. Rowan Decl.6 ¶ 4 (Docket No. 51–3). Under the ARP-DRG methodology, the rate paid for Medi-Cal covered hospital in-patient stays is based in part on the All Patient Refined Diagnosis Related Group that a Medi-Cal patient is assigned to based on his or her diagnoses and other factors such as procedure codes, age, gender, admission date, and discharge date. Id. at ¶ 5. Each APR-DRG is assigned a numerical weight that reflects the typical hospital resources needed to care for the patient relative to the hospital resources needed to care for the average patient who is assigned an APR-DRG weight of 1.0. Vaida Decl.7 ¶¶ 5, 8. (Docket No. 39–1). Thus, a patient who consumes 5 times the hospital resources needed to care for an average patient would be assigned an APR-DRG weight of 5.0. Id .
The Department's methodology for calculating a hospital's reimbursement for a particular patient is equal to the ARP-DRG weight of that patient times the hospital's “base price” times “policy adjustors.” Id . For the base price, the Department uses either a “Statewide Base Price” or a “Remote Rural Base Price” to establish the rates for all hospitals, except hospitals paid based on a transitional base price (an incremental change in base price). Rowan Decl. ¶ 6. The current Statewide base price is $6,289 and the current Remote Rural base price is $12,768. Id. at ¶ 6.
For in-state hospitals, the Department adjusts the labor component of the “base price” of each California hospital by the highest of the following Medicare wage indices: (1) the Medicare wage index for the geographical area in which the hospital is located; (2) the California rural floor wage index; or, (3) the wage index for the area in which the hospital has been reclassified by Medicare. Vaida Decl. ¶ 10. The State Plan 13-020 provides that a uniform wage index 1.0 applies to all out-of-state hospitals, which means that the base price for an out-of-state hospital is not adjusted upward or downward. Rowan Decl. ¶ 8. In 2013, “18 of the 19 [out-of-state hospital] plaintiffs...had a wage index that was greater than 1.0.” Vaida Decl. ¶ 12. According to the Complaint, “[a] California hospital with a wage index of 1.5 would have its ‘base price’ increased by $2,141 ($6,223 times 68.8% times 0.5), or from $6,223 to $8,364.” Compl. ¶ 16. Thus, “the California hospital with a wage index of 1.5 would receive 34% more per Medi-Cal discharge (i.e., $8,364 divided by $6,223) than an out-of-state hospital with the same wage index.”...
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