Palmdale Hospital Medical Center v. Department of Health Services

• Decision Date: 20 August 1992
• Docket Number: No. B055961,B055961
• Citation: 8 Cal.App.4th 1306,10 Cal.Rptr.2d 926
• Court: California Court of Appeals Court of Appeals
• Parties: , Medicare & Medicaid Guide P 40,863 PALMDALE HOSPITAL MEDICAL CENTER, et al., Plaintiffs and Respondents, v. DEPARTMENT OF HEALTH SERVICES, Defendant and Appellant.

Page 926

10 Cal.Rptr.2d 926

8 Cal.App.4th 1306, Medicare & Medicaid Guide P 40,863

PALMDALE HOSPITAL MEDICAL CENTER, et al., Plaintiffs and Respondents, v. DEPARTMENT OF HEALTH SERVICES, Defendant and Appellant.

No. B055961.

Court of Appeal, Second District, Division 4, California.

Aug. 20, 1992.

Rehearing Denied Sept. 2, 1992.

Review Denied Oct. 29, 1992.

Daniel E. Lungren, Atty. Gen., Charlton G. Holland, III, Asst. Atty. Gen., Stephanie Wald, Supervising Deputy Atty. Gen., Harlan E. Van Wye, Deputy Atty. Gen., for defendant and appellant.

Hooper, Lundy & Bookman, Inc. and Patric Hooper, Los Angeles, for plaintiffs and respondents.

EPSTEIN, Associate Justice.

The California Department of Health Services (Department) appeals from a judgment granting a Peremptory Writ of Mandate. The writ prohibits the Department from altering its final Medi-Cal settlements

with plaintiffs Palmdale Hospital Medical Center and Vista Hill Hospital because the Department's adjustments were made more than three years after the hospitals submitted cost reports. We reach the merits of the case after deciding that the Department is not collaterally estopped from challenging this ruling by a previous adjudication against the Department, on the same issue but in another action involving a different health care facility. On the merits, we conclude that the three-year period in Welfare and Institutions Code section 14170 applies only to the Department's audit or review of the cost report of a Medi-Cal provider, and is not a general statute of limitations applicable to the final determination of the amount of reimbursement due to the provider. For this reason, the Department was not precluded from adjusting the amount of reimbursement due to the hospitals after the three-year period had expired. We therefore reverse the judgment.

FACTUAL AND PROCEDURAL SUMMARY

Plaintiffs are acute care hospitals providing inpatient services under the Medi-Cal program. This case concerns the finality of the determination of reimbursement owed to the hospitals for the Medi-Cal services provided during the fiscal years 1983 and 1984.

In May 1984, Palmdale Hospital Medical Center submitted its Medi-Cal cost report to the Department for the fiscal period ending April 30, 1983. On August 6, 1986, the Department issued its audit report for that fiscal period, reflecting audit adjustments and an audited Medi-Cal reimbursement settlement.

In April 1985, Palmdale submitted its Medi-Cal cost report for the fiscal period ending April 30, 1984. The Department issued its audit report for that period on January 14, 1988, reflecting audit adjustments and an audited reimbursement settlement.

On February 10, 1989, the Department issued a determination of Palmdale's Medi-Cal Inpatient Reimbursement Liability (MIRL) for the fiscal periods ending April 30, 1983 and April 30, 1984. These figures, designated as final settlements, reduced the reimbursement amounts for both periods. Palmdale requested an administrative adjustment, asserting as one ground that the MIRL notice for both fiscal years was untimely because it was not issued within three years of Palmdale's submission of its cost reports for those years. This claim was premised on the hospital's position that the three-year period set forth in Welfare and Institutions Code section 14170 ¹ applied to the issuance of a final settlement. The Department did not accept this position as an appealable item. Other substantive claims regarding the final settlement remain pending.

A similar pattern occurred at Vista Hill Hospital. In September 1984, Vista submitted its Medi-Cal cost report for the fiscal period ending December 31, 1983. On January 12, 1987, the Department issued its audit review of the cost report, and on October 10, 1989, it issued a MIRL determination reducing Vista's Medi-Cal reimbursement for the 1983 fiscal year. Vista requested an administrative adjustment, asserting as one ground that the notice of determination was not issued within three years of the submission of Vista's cost report and was therefore untimely. As with Palmdale, this contention was not accepted by the Department.

The two hospitals filed a petition for writ of mandate (Code Civ.Proc., § 1085) seeking an order directing the Department to rescind and void any notices issued outside of the three-year period of section 14170 of the Welfare and Institutions Code, and to pay the hospitals in accordance with the settlements issued within that period.

The hospitals asserted that the Department was collaterally estopped from relitigating the issue of its authority to alter Medi-Cal final settlements after the conclusion of the three-year period because the issue had been previously adjudicated by a Court of Appeal in a case entitled Modesto City Hospital v. Department of Health Services (Mar. 2, 1990) B042317. In an unpublished opinion in that case, another division of this district rejected the Department's position that it could alter final reimbursement settlements after the expiration of the three-year period of Welfare and Institutions Code section 14170. The Supreme Court denied the Department's petition to review the Court of Appeal decision.

The trial court ruled that the Department was estopped from contesting the application of the three-year limitation period, and granted the writ of mandate. It did not reach the merits of the parties' arguments about application of section 14170 of the Welfare and Institutions Code. The Department has appealed from the ensuing judgment.

DISCUSSION

I Collateral Estoppel

The Department asserts that it is not collaterally estopped by the Modesto City Hospital case from litigating the merits of its position regarding the limitations period in section 14170. We agree.

Generally, a party to a prior action is collaterally estopped from relitigating issues which have been finally decided against it in the earlier action. (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 874, 151 Cal.Rptr. 285, 587 P.2d 1098.) "But when the issue is a question of law rather than of fact, the prior determination is not conclusive either if injustice would result or if the public interest requires that relitigation not be foreclosed." (Consumers Lobby Against Monopolies v. Public Utilities Com. (1979) 25 Cal.3d 891, 902, 160 Cal.Rptr. 124, 603 P.2d 41.)

In City of Sacramento v. State of California (1990) 50 Cal.3d 51, 64, 266 Cal.Rptr. 139, 785 P.2d 522, the Supreme Court held that the public interest exception precluded application of collateral estoppel against the state. In a previous published opinion, the Court of Appeal had decided that the state was obligated to reimburse the City of Sacramento and the County of Los Angeles for the cost of providing state-mandated unemployment insurance coverage. (See City of Sacramento v. State of California (1984) 156 Cal.App.3d 182, 203 Cal.Rptr. 258, hereafter Sacramento I.) The Supreme Court denied review in Sacramento I.

After the Legislature failed to fund the reimbursement costs, the City of Sacramento brought a class action against the state on behalf of all local governments in the state, seeking reimbursement of the funds paid for unemployment compensation (City of Sacramento v. State of California, supra, 50 Cal.3d 51, 266 Cal.Rptr. 139, 785 P.2d 522, hereafter Sacramento II ). Plaintiffs claimed that because Sacramento I was a final determination that the unemployment compensation requirement was a reimbursable state mandate, the state and its agents were collaterally estopped from relitigating that issue.

In rejecting that assertion, the Supreme Court observed that while the state was the only losing party in Sacramento I, the consequences of any error in that case "transcend those which would apply to mere private parties. If the result of Sacramento I is wrong but unimpeachable, taxpayers statewide will suffer unjustly the consequences of the state's continuing obligation to fund the chapter 2/78 costs of local agencies. On the other hand, if the state fails to appropriate the funds to meet this obligation, and chapter 2/78 therefore cannot be enforced [citations], the resulting failure to comply with federal law could cost California employers millions. Under these circumstances, neither stare decisis nor collateral estoppel can permanently foreclose our ability to examine the reimbursability of chapter 2/78 costs." (Sacramento II, supra, 50 Cal.3d at pp. 64-65, 266 Cal.Rptr. 139, 785 P.2d 522, fns. omitted.)

A similar result was reached in California Optometric Assn. v. Lackner (1976) 60 Cal.App.3d 500, 131 Cal.Rptr. 744, in which the court refused to collaterally estop the director of the Department of Public Health from challenging a judgment identical to that imposed against his predecessors in office. The court explained: "The courts will not apply [collateral estoppel] to foreclose the relitigation of an issue of law covering a public agency's ongoing obligation to administer a statute enacted for the public benefit and affecting members of the public not before the court." (Id. at p. 505, 131 Cal.Rptr. 744; see also City of Berkeley v. Superior Court (1980) 26 Cal.3d 515, 520, fn. 5, 162 Cal.Rptr. 327, 606 P.2d 362; Rutherford v. State of California (1987) 188 Cal.App.3d 1267, 1284, 233 Cal.Rptr. 781.)

Here, too, while the State Department of Health Services was the only losing party in Modesto City Hospital, that opinion, if wrong but unimpeachable, would shift to state taxpayers the cost of overpayments to Medi-Cal provider hospitals. And, as asserted by the Department in its unsuccessful petition for Supreme Court review ² in the Modesto City Hospital case, a decision on this issue "affects virtually all the health care facilities in California who provide services to Medi-Cal beneficiaries."

This case also involves a public agency's ongoing obligation to administer statutes and regulations which were enacted for the...