Santa Ana Hospital Medical Center v. Belshe

• Decision Date: 23 July 1997
• Docket Number: No. C024834,C024834
• Citation: 56 Cal.App.4th 819,65 Cal.Rptr.2d 754
• Court: California Court of Appeals Court of Appeals
• Parties: , 97 Cal. Daily Op. Serv. 5876, 97 Daily Journal D.A.R. 9377 SANTA ANA HOSPITAL MEDICAL CENTER, Plaintiff and Appellant, v. S. Kimberly BELSHE, as Director, etc., Defendant and Respondent.

Page 754

65 Cal.Rptr.2d 754

56 Cal.App.4th 819, 97 Cal. Daily Op. Serv. 5876,

97 Daily Journal D.A.R. 9377

SANTA ANA HOSPITAL MEDICAL CENTER, Plaintiff and Appellant, v. S. Kimberly BELSHE, as Director, etc., Defendant and Respondent.

No. C024834.

Court of Appeal, Third District, California.

July 23, 1997.

[56 Cal.App.4th 821] Douglas S. Cumming, Los Angeles, for Plaintiff and Appellant.

Daniel E. Lungren, Attorney General, Dennis Eckhart and Barbara Haukedalen, Deputy Attorneys General, for Defendant and Respondent.

SIMS, Associate Justice.

Appellant Santa Ana Hospital Medical Center appeals from the trial court's denial of its petition for a writ of mandate (Code Civ. Proc. § 1085) against S. Kimberly Belshe, as director of the California Department of Health Services (for ease of reference referred to herein as "the Department"). Appellant contends the trial court erred in interpreting Welfare and Institutions Code section 14105.98 ¹ as precluding judicial relief to correct an error by the Department in determining appellant's share of supplemental Medi-Cal payments under the "disproportionate share hospital" (DSH) program which provides supplemental payments to hospitals serving a disproportionate number of low income patients. We shall affirm the trial court's denial of the writ petition.

THE STATUTORY FRAMEWORK

"The Medi-Cal program (§ 14000 et seq.) represents California's implementation of the federal Medicaid program (42 U.S.C. §§ 1396-1396v) 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. Belshe ["Kennedy Medical Center "] (1996) 13 Cal.4th 748, 751, 55 Cal.Rptr.2d 107, 919 P.2d 721 [addressing disputes concerning payment for services rendered].)

Federal law originally required states to reimburse health care providers for the "reasonable cost" of services rendered, i.e., the cost of services actually incurred by the provider and otherwise allowable by Medicaid. (Kennedy Medical Center, supra, 13 Cal.4th at p. 751, 55 Cal.Rptr.2d 107, 919 P.2d 721.) In 1980 and 1981, "in an effort to contain spiraling Medicaid costs for hospital services," the federal law was changed to allow states to develop alternate methodologies to limit reimbursement based upon costs that would have been reasonably incurred by an "efficient and economically operated facility," even if a provider's actual costs were greater. (Id. at pp. 751-752, 55 Cal.Rptr.2d 107, 919 P.2d 721, citing 42 U.S.C. § 1396a(a)(13)(A).)

In calculating Medi-Cal reimbursement in this state, the provider is given full credit for certain costs, such as rent and taxes, but not for other costs, such as costs of services that have increased significantly over those incurred in prior years. (Kennedy Medical Center, supra, 13 Cal.4th at p. 752, 55 Cal.Rptr.2d 107, 919 P.2d 721, citing Cal.Code Regs., tit. 22, § 50000 et seq.)

Thus, Medi-Cal reimbursement may not fully cover a hospital's costs.

In addition to reimbursement under the foregoing provisions, hospitals which provide care for a disproportionate share of low-income patients may be eligible to receive a supplemental payment under the state's "disproportionate share hospitals" (DSH) program, enacted to take advantage of a federal program making matching federal funds available to the states. (§ 14105.98; Stats.1991, ch. 279, pp. 1762-1779; Stats.1991, ch. 1046, pp. 4824-4845.) Under this program, governmental entities that operate hospitals (i.e., counties, hospital districts, and the University of California) transfer funds to the state. After deduction of an administrative fee for the state, these funds draw matching federal funds, and the combined monies are then distributed among public and private hospitals which qualify as DSHs based on their provision of services to a disproportionate number of Medi-Cal or other low-income patients. (§ 14105.98, subd. (a)(1); see Sen. Rules Com., 3d Reading Analysis of Assem. Bill No. 2804 (1996 Reg. Sess.) June 20, 1996 [giving background on DSH program].)

An uncodified section of the 1991 enactment of the DSH program stated in part: "Several federal medicaid statutory amendments over the past decade have encouraged and directed states to provide, as part of their state medicaid programs, special recognition and higher payment amounts to hospitals that provide services to a disproportionate number of medicaid and other low-income patients. These statutory provisions ... were intended by Congress to assist those 'safety net' hospitals, particularly public hospitals and teaching hospitals, that face significant financial distress due to changing economic circumstances in the health care industry. The concept of higher medicaid payments to disproportionate share hospitals is intended to assist economically endangered facilities in meeting their rising costs of uncompensated care relating to uninsured and underinsured patients...." (Stats.1991, ch. 279, § 1, subd. (f), p. 1763.) The state enactment continues: "It is the intent of the Legislature to provide for additional Medi-Cal payment adjustments for inpatient services rendered by disproportionate share hospitals, particularly those hospitals that have proportionately higher 'low-income utilization rate' percentages, since many of these facilities are confronted by substantial economic distress. It is also the intent of the Legislature to utilize a portion of the local financial participation to fund other critical Medi-Cal health care expenditures. It is the further intent of the Legislature to obtain the full extent of federal financial participation permitted under federal law for expenditures under the Medi-Cal program." (Stats.1991, ch. 279, § 1, subd. (i), p. 1764.)

The statutory scheme provides: "For each fiscal year commencing with 1991-92, there shall be Medi-Cal payment adjustment amounts paid to hospitals pursuant to this section. The amount of payments made and the eligible hospitals for each payment adjustment year shall be determined in accordance with the provisions of this section. The payments are intended to support health care services rendered by disproportionate share hospitals." (§ 14105.98, subd. (b).)

"For each fiscal year commencing with 1991-92, the department shall issue a disproportionate share list. The list shall be developed in accordance with subdivisions (e) and (f), and shall serve as a basis for payments under this section for the particular payment adjustment year." (§ 14105.98, subd. (c).)

Section 14105.98, subdivision (f)(1), ² provides for issuance of the disproportionate share list by the Department.

Section 14105.98, subdivision (f)(5), ³ prescribes finality of the list upon issuance and prohibits modification of the list after issuance, except for mathematical or typographical errors made in preparation of the list.

Section 14105.98, subdivision (s), ⁴ limits review of the list and provides there shall be no appeal from calculations which are final pursuant to subdivision (f)(5).

As will appear, the dispute in this case focuses on the question whether errors in a DSH list may be corrected. This implicates section 14105.98.

FACTUAL AND PROCEDURAL BACKGROUND

On November 16, 1995, appellant filed in the trial court a petition for writ of mandate (Code Civ. Proc., § 1085) seeking judicial review of the Department's refusal to correct an admitted inaccuracy in its DSH list for fiscal year 1994-1995, from which appellant's DSH payments for 1994-1995 were determined. The error assertedly resulted in reduced DSH payments to appellant.

Exhibits attached to the petition in the trial court included letters between the parties, recounting the following:

On December 16, 1994, the Department issued its DSH list for 1994-1995. As noted, once issued the list is final and cannot be modified, except for typographical or mathematical errors made in preparation of the list. (§ 14105.98, subd. (f)(5), fn. 3, ante; § 14105.98, subd. (s), fn. 4, ante.)

Sometime in December 1994, after the December 16th issuance of the list, appellant (a private hospital) contacted the Department by telephone and said the Department had made an error in counting appellant's 1993 patient days by failing to double the obstetric (OB) codes to take into account the newborns. ⁵

In a letter dated April 21, 1995, the Department responded to a February 7, 1995, letter from appellant (the February 7th letter is not part of the record) concerning this claim of error. The Department's letter stated it made a "cursory review" of appellant's claim and determined it was unfounded. The cursory nature of the review was because staff efforts were directed to issues which could be corrected, i.e., mathematical and typographical errors in preparation of the list. Such errors (unrelated to appellant) were found, and a modified list was issued January 31, 1995. Thereafter, upon receipt of appellant's February 7th letter, the Department researched the discrepancy between its determination of appellant's "cap days" and appellant's determination. The Department found appellant had changed from a "contracting OB rate-per-discharge hospital" to a "contracting all-inclusive rate-per-discharge hospital" during 1993. This change, not the count of newborn days, accounted for the discrepancy. The Department stated it had been unaware of the change. The Department indicated it would adjust the DSH program for future years but not for the 1994-1995 year.

By letter dated May 4, 1995, appellant asserted it had no obligation to notify the Department of changes in appellant's Medi-Cal contract so as to assist the Department in its mandated responsibilities.

In further correspondence, the Department acknowledged "we inadvertently failed to include certain general acute...