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Providence Service Corporation Comments on U.S. Court of Appeals' Decision to Uphold Federal Injunction Blocking California's 10% Cut in Medi-Cal Payments

TUCSON, Ariz., July 15 /PRNewswire-FirstCall/ -- The Providence Service Corporation (Nasdaq: PRSC) today commented on the recent ruling by the U.S. Court of Appeals for the Ninth Circuit upholding the August 2008 federal injunction prohibiting the 10% cut in California's Medi-Cal payments to various health care providers that was initially passed by the California Legislature in February 2008. In the ruling, Judge Milan Smith Jr. wrote, "A budget crisis does not excuse ongoing violations of federal law."

"We are pleased that despite the appeal by the California Department of Health Care Service, the Ninth Circuit has intervened on behalf of Medicaid beneficiaries, upholding the injunction that barred the Medi-Cal cuts," said Fletcher McCusker, Chairman and CEO.

In the Ninth Circuit decision, a three judge panel not only upheld the injunction, but also determined that it should reach back to July 1, 2008 when the rate cuts took effect, rather than the August 18, 2008 date of the issuance of the injunction.

In the ruling, Judge Smith stated that the balance of hardships "tips sharply" in the plaintiffs' favor, "as the 10% reduction threatens access to much-needed medical care." The court added, "There is a robust public interest in safeguarding access to health care for those eligible for Medicaid, whom Congress has recognized as the most needy in the country."

The attempted 10% cut to reimbursement rates under California's Medicaid program, Medi-Cal, was initially passed by California state legislators in February 2008. The rate reductions took effect on July 1, 2008. A group of Medi-Cal beneficiaries and providers sued the California Department of Health Care Service, claiming the cuts violated federal laws requiring state payments to be "consistent with efficiency, economy and quality of care." An injunction was granted on August 18, 2008 blocking the 10% cuts for all but managed-care plans and acute-care hospitals not under contract with the state. After arguments by the state's health-care department, the injunction was modified to apply only to payments for services provided on or after August 18, the day the judge issued the order. This prompted appeals from both sides, with the director of California's health-care department appealing the underlying injunction, while the plaintiffs challenged the modification order and asked the court to block the rate reduction retroactively. The federal injunction was reaffirmed in December 2008 and the final decision upholding the injunction and making it retroactive was issued by the Ninth Circuit on July 10, 2009.

About Providence

The Providence Service Corporation, through its owned and managed entities, provides home and community based social services and non-emergency transportation services management to government sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections. Providence does not own or operate beds, treatment facilities, hospitals or group homes, preferring to provide services in the client's own home or other community setting. The Company provides a range of services through its direct and managed entities to over 81,000 clients through 1,019 contracts at March 31, 2009, with an estimated 6.7 million individuals eligible to receive the Company's non-emergency transportation services related to its LogistiCare operations. Combined, the Company has a nearly $1 billion book of business including managed entities.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "demonstrate," "expect," "estimate," "anticipate," "should" and "likely" and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement was made. Such forward-looking statements are based on current expectations that involve a number of known and unknown risks, uncertainties and other factors which may cause actual events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but are not limited to the global credit crisis, capital market conditions, and other risks detailed in Providence's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Providence is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events or otherwise.

SOURCE The Providence Service Corporation
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