Thirty California hospitals sued the state Department of Health Services in federal court in Sacramento to halt what they called "devastating" Medicaid payment cuts. About 40 other hospitals were expected to join the suit, said the plaintiffs' law firm, Hooper, Lundy & Bookman, Los Angeles. At issue is a mandate in California's fiscal 2004-05 budget that froze Medicaid reimbursement at 2003 levels for so-called "noncontract" hospitals. Roughly 20% of the 430 California hospitals that treat Medicaid patients don't have contracts with pre-negotiated rates with California and instead receive fee-for-service payments based on historical costs.
In a news release, Byron Gross, a partner with the plaintiffs' law firm, said California "illegally failed to consider the cost of the services involved, whether costs had increased and whether the rate reduction would have an impact on the ability of hospitals to continue to provide quality care and sufficient access" to beneficiaries of the state Medicaid program, Medi-Cal. In a similar case filed on behalf of the California Medical Association and other provider groups, a federal judge last year enjoined the state from enacting a proposed 5% Medi-Cal rate cut. -- by Laura B. Benko