Calif. Medicaid provider pay cut blocked again

A 10% Medicaid provider pay cut sought by California Gov. Jerry Brown has been blocked again, this time through a petition for review (PDF) with the 9th U.S. Circuit Court of Appeals.

The pay cut was approved by the CMS in October 2011 and is included in Brown's proposed 2013-14 budget, but it had been blocked by a U.S. District Court judge's injunction. A three-judge panel from the 9th Circuit ruled Dec. 13 that the injunction should be lifted.

Now the California medical and hospital associations, along with six other organizations, have filed a petition for the case to be reviewed en banc, which usually means by the entire court.

But the 9th Circuit is the nation's largest, with 28 active appellate judges. If a case is reviewed en banc, it is heard before an 11-judge panel consisting of the chief judge and 10 other judges chosen at random.

“The state is in much better fiscal shape now than when these cuts were initially proposed in 2011,” Dr. Paul Phinney, California Medical Association president, said in news release. He added that, with millions of new patients entering the system under the Patient Protection and Affordable Care Act's Medicaid expansion, “We simply cannot continue to cut resources and expect successful implementation of health reform in California.”

For hospitals, the cuts to Medi-Cal, California's Medicaid program, affect rural and safety net institutions with skilled-nursing units.

According to the American Hospital Association, 66 of the 75 staffed beds at the namesake hospital of the Eastern Plumas Health Care District in rural Portola, Calif., are in the nursing unit. In the news release, Eastern Plumas CEO Tom Hayes says the hospital's average net income over the fast five years has been under $440,000 and it is now facing cuts totaling $2.4 million. He said the cuts would not only force the closure of the skilled-nursing unit, but “it would cause the demise of our entire organization.”

In the petition for review, the plaintiffs argue that the Dec. 13 decision “upends 16 years of 9th Circuit precedent,” under which the state could not set Medicaid rates “without documented consideration of providers' costs.”

“The panel's decision, if not reconsidered, will threaten our government's critical separation of powers by eviscerating meaningful judicial review of agency action,” the petition stated. “The judiciary has 'final authority' over statutory interpretation questions.”

In writing the December opinion, appellate Judge Stephen Trott was unsympathetic to the plaintiffs' arguments about costs.

“The term 'cost' may also include items such as contract prices to suppliers and service providers, which may themselves be negotiated and reduced if reimbursement rates are reduced,” Trott wrote. “Nowhere in this record have we been able to find a description by the plaintiffs of a useful definition of costs; and that term is anything but a talisman solving all problems or providing answers to complicated questions.”

An e-mail from the California Department of Health Care Services said that, assuming “positive resolution in March,” the Medi-Cal cuts will result in savings of $431 million for the state.

The other organizations in the lawsuit are the California Dental Association, California Pharmacists Association, National Association of Chain Drug Stores, California Association of Medical Product Suppliers, AIDS Healthcare Foundation and American Medical Response, which is an emergency transport company serving 2,100 communities nationwide.