25 Cal. App. 5th 811
Cal. Ct. App. 5th2018Background
- California enacted temporary 10% reductions to Medi‑Cal inpatient hospital reimbursement for noncontract hospitals (AB 5; AB 1183) effective July 2008–April 2011; the department submitted state plan amendments (SPAs) to CMS and, after supplemental materials, CMS approved the SPAs in October 2011.
- Plaintiffs (noncontract hospitals) sued the California Department of Health Care Services seeking a writ of mandate to void the reduced rates and recover nearly $100 million, alleging violations of 42 U.S.C. § 1396a(a)(13)(A) (procedural notice) and § 1396a(a)(30)(A) (substantive standards: efficiency, economy, quality, and access).
- The trial court denied the writ petitions on the merits; plaintiffs appealed. The court of appeal affirmed but adopted a different primary ground than the trial court on one key issue.
- The court held that substantive challenges under § 30(A) to CMS‑approved rates cannot be enforced by a state writ of mandate against state officials; the exclusive remedy is administrative challenge to CMS with APA review and possible federal court review.
- The court also held that plaintiffs failed to demonstrate a § 13(A) notice violation: federal rules require notice before the effective date (not necessarily before enactment) and CMS reviewed and approved the notice as adequate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 30(A) (substantive rate standards) can be enforced by writ of mandate against the state after CMS approval | Hospitals: § 30(A) creates enforceable right; state writ available to invalidate improper rates | Dept/CMS: § 30(A) enforcement is exclusively administrative (petition to CMS then APA review); equitable relief precluded | Held: Writ unavailable; Armstrong bars private/state equitable enforcement of § 30(A); challenge must go to CMS and then court under APA |
| Whether § 13(A) (public notice/process) was violated in adoption/implementation of rate reductions | Hospitals: Legislature and department gave effectively no notice during legislative process; violated § 13(A) notice/comment requirements | Dept: Federal law/regulation requires notice before effective date; notice here occurred before effective date and CMS approved the SPA | Held: No § 13(A) violation; notice before effective date satisfied requirements and CMS accepted the process |
| Whether state PIRL regulations or other California rules convert § 30(A) into a ministerial, enforceable duty | Hospitals: Prior PIRL regs operationalize § 30(A), making it judicially enforceable by writ | Dept: Statute superseded PIRL; state regs cannot redefine federal § 30(A) or create a private remedy where federal law limits it | Held: PIRL was superseded and cannot make § 30(A) judicially enforceable; broad § 30(A) standards remain nonministerial and for CMS to administer |
Key Cases Cited
- Armstrong v. Exceptional Child Center, Inc., 135 S. Ct. 1378 (U.S. 2015) (Medicaid Act precludes private/equitable enforcement of § 30(A); agency remedy is exclusive and § 30(A) is judicially unadministrable)
- Douglas v. Independent Living Center of Southern Cal., 565 U.S. 606 (U.S. 2012) (Medicaid providers may challenge CMS approval of state plans under the APA)
- Hoag Memorial Hospital Presbyterian v. Price, 866 F.3d 1072 (9th Cir. 2017) (Ninth Circuit found CMS approval arbitrary and capricious where access impact was not considered)
- Mission Hospital Regional Medical Center v. Shewry, 168 Cal.App.4th 460 (Cal. Ct. App. 2008) (§ 13(A) notice requirement creates a ministerial duty enforceable by writ when notice does not occur before rates become effective)
- Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (U.S. 1984) (agency interpretations of statutes it administers warrant deference)