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Health Care Providers Sue State of California Over Cuts in Medi-Cal Payments
Date:5/5/2008

per Medicaid beneficiary.

Patients in rural areas of California may be particularly affected by the planned Medi-Cal payment cuts, where there may be only one pharmacy and the local hospital also serves as a skilled nursing facility.

"It is almost impossible to grasp the real impact of these cuts on small rural health care providers," said Charles R. Guenther, CEO of Eastern Plumas Health Care District, which operates two small hospitals in Portola and Loyalton in Plumas County, located in northeastern California. "Our organization has already been through bankruptcy once -- we can't go through it again. We have no operating cash on hand and we owe $1.5 million in accounts payable. We are the only health care provider for about 1,500 square miles. We are having great difficulty in getting essential supplies and keeping qualified staff even at the current level of Medi-Cal reimbursement. If the state pulls the rug out from us by implementing these cuts, we will have no choice but to reduce services and close facilities."

Reductions Violate Medicaid Regulations

The lawsuit also contends that under federal Medicaid law, the Secretary of the U.S. Department of Health and Human Services (HHS) must approve the policies and methods used for setting payment rates and that such changes may not be implemented by the state prior to HHS' approval. According to the complaint, California has yet to submit what is known as a State Plan Amendment (SPA) to the federal government, requesting approval of the reduced Medi-Cal rates.

Additionally, federal regulations require the state to establish Medicaid payment rates for hospitals and other institutional providers through a public process that includes publishing the proposed rates and the methodologies and justifications used to establish those rates. No such process took place before the 10 percent rate reduction was approved, according to the lawsuit. Rather, the rate reductions were bas
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SOURCE California Hospital Association
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