FAMILY HEALTH CENTERS OF SAN DIEGO, Plaintiff and Appellant, v. STATE DEPARTMENT OF HEALTH CARE SERVICES, Defendant and Respondent.
C089555 (Super. Ct. No. 34-2018-80002953-CU-WM-GDS)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)
Filed 7/6/21
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes
Plaintiff Family Health Centers of San Diego operates a federally qualified health center (FQHC) that provides various medical services to its patients, some of whom are Medi-Cal beneficiaries. Under section 330 of the Public Health Service Act (
Section 330 of the Public Health Service Act authorizes grants to be made to FQHC‘s. (
BACKGROUND
1. Statutory background
The federal government provides financial assistance to states in order to provide medical care to low-income individuals through the Medicaid program. (
“Pursuant to Medi-Cal, participating health care providers, such as hospitals, receive reimbursement directly from the [DHCS] for providing medical care to Medi-Cal beneficiaries.” (Simi Valley Adventist Hospital v. Bontá (2000) 81 Cal.App.4th 346, 348.) Providers are reimbursed for their allowable costs, as determined under Medicare/Medicaid standards and principles of reimbursement set forth in the Code of Federal Regulations and the PRM. (Oroville Hospital v. Department of Health Services (2006) 146 Cal.App.4th 468, 472; see also
In general, to be reimbursable, claimed costs “must be based on the reasonable cost of [covered] services” and “related to the care of beneficiaries.” (
Under the federal regulations, “[r]easonable cost includes all necessary and proper expenses incurred in furnishing services, such as administrative costs, maintenance costs, and premium payments for employee health and pension plans. It includes both direct and indirect costs and normal
Advertising costs are allowable if they are “incurred in connection with the provider‘s public relations activities [and are] primarily concerned with the presentation of a good public image and directly or indirectly related to patient care. Examples are: visiting hours information, conduct of management-employee relations, etc.” (PRM § 2136.1 (rev. 267, 09-82).) However, “[c]osts of advertising to the general public which seeks to increase patient utilization of the provider‘s facilities are not allowable. . . . While it is the policy of the [relevant federal agencies] to promote the growth and expansion of needed provider facilities, general advertising to promote an increase in the patient utilization of services is not properly related to the care of patients.” (PRM § 2136.2 (rev. 267, 09-82).)
“The method by which the [DHCS] reimburses [Medi-Cal providers] is explained in detail in [Kennedy, supra, 13 Cal.4th 748]. Briefly stated, [Medi-Cal providers] receive interim estimated payments of Medi-Cal reimbursement during each fiscal year, with retroactive adjustments occurring at the end of each fiscal year when actual costs are known. (
“Consistent with [the] statutory authority [set forth in Welfare and Institutions Code section 14171], the regulations establish detailed appeal procedures applicable to the audit process, including an appeal from a final audit report. (
2. Factual background
a. December 2016 audit and appeal
In December 2016, the DHCS audited plaintiff‘s 2013 cost report and reclassified as nonreimbursable $78,032 in salary and benefit expenses that were for community outreach. The audit report noted (1) there was insufficient documentation demonstrating that the expenses were related to services and supplies incident to an FQHC visit, and (2) the expenses were not a covered benefit under
Plaintiff appealed the DHCS‘s determination in January 2017. After holding an informal hearing in March 2017, the hearing auditor upheld the adjustment in May 2017. The hearing auditor reasoned that
b. October 2017 hearing
During the October 2017 hearing, Jeff Cates, a health program auditor for the DHCS, testified first. At the time, Cates had worked for over 17 years at the DHCS and had conducted approximately 200 audits. He agreed with the report‘s conclusion and testified to the accuracy of the basis for reclassification of plaintiff‘s outreach costs as nonreimbursable. Cates had reviewed plaintiff‘s salary detail, job descriptions for those providing outreach services, and state plan amendments and regulations. In Cates‘s opinion, plaintiff‘s outreach costs were not allowable under the applicable regulations.
Plaintiff‘s chief executive officer, Fran Butler-Cohen, testified next. She explained that plaintiff served low-income and diverse populations that often
Butler-Cohen testified that, in her opinion, FQHC‘s are mandated by the federal government and the state to perform outreach services, and therefore such costs were allowable. She cited several documents in support of her opinion. For example, the DHCS‘s grant application form for FQHC‘s lists “outreach” in the “required services provided” section. As reflected in the application, plaintiff provided outreach services directly. As part of its nonclinical outreach, plaintiff also provided counseling regarding eligibility for services, counseling regarding HIV-related issues, and counseling to teens regarding sexual education and health. In addition, plaintiff provided outreach “for the specific purpose of developing awareness of each clinic‘s presence, resources, cultural competence, and desire to serve among members of [plaintiff‘s] target populations.” Plaintiff performed these tasks “in the street, in schools, in agen[cies], business venues [such as LGBTQ bars and clubs, etc.], [and] other public venues such as beaches and parks.” Butler-Cohen testified that the purpose of the company‘s efforts was to “get the word out, so to speak, for the various services we provide.”
Butler-Cohen also cited a document published by the Health Resources and Services Administration (which regulates plaintiff) titled “Program Requirements,” which lists outreach as a required service to be provided by a FQHC like plaintiff. The document explains that “[o]utreach services are a broad range of culturally and linguistically appropriate activities focused on recruiting and retaining patients from the target population/service area. [¶] At a minimum, these services must promote awareness of the health center‘s services and support entry into care. [¶] These services do not involve direct patient care where a provider is generating a face-to-face visit with a patient, documenting the care in a patient medical record, or exercising clinical judgment in the provision of services to a patient.” The document references
Butler-Cohen also cited legislation and regulations that she believed supported her opinion regarding reimbursement for outreach costs. She testified that
Butler-Cohen testified regarding the former “Expanded Access to Primary Care” (EAPC) program, a state program designed to expand access to and improve the quality of outpatient health care for medically indigent persons. The program information defined reimbursable versus allowable services. For example, outpatient visits were allowable and reimbursed under certain circumstances, while “information sessions for prospective recipients [and] health presentations to community groups” were not reimbursable.
Similarly, the May 2010 Affordable Care Act (ACA) encouraged assistance to low-income individuals to access and appropriately use health services, enroll in health coverage programs, obtain a regular primary care provider or a medical home, provide case management and care management, perform health outreach using neighborhood health workers (which plaintiff had), provide transportation, expand capacity, and provide direct patient care services.
Butler-Cohen also testified regarding a Medi-Cal timeline produced by the DHCS. The document indicates that when the ACA was adopted in 2010, California received $10 billion to implement health coverage for low-income and uninsured individuals, and to improve care for vulnerable populations. To get matching federal funds under the ACA, California “funneled” vulnerable individuals from the “Healthy Families Program” into Medi-Cal. Outreach was necessary to ensure that these individuals were moved to Medi-Cal.
Butler-Cohen also testified about a 2012 letter from then-director of the DHCS, Toby Douglas. The letter discussed an initial plan to implement the ACA in California, including transitioning the “Low Income Health Program”
c. Decision by administrative law judge
In May 2018, the administrative law judge (ALJ) issued a proposed decision finding that the ” ‘community outreach services’ ” did not involve patient care and instead were efforts to attract new patients and increase patient utilization of plaintiff‘s services. The ALJ noted that members of plaintiff‘s outreach staff were “tasked to ‘promote awareness of the health center‘s services and support entry into care’ of the new patients contacted.” These tasks included “attempting to make new patients ‘comfortable enough to seek care,’ such as through repeated ‘passes’ of contact.” The ALJ concluded that the evidence established that the disallowed amounts were spent for patient recruitment efforts not reimbursable with Medi-Cal funds.
In making its decision, the ALJ relied on part 413 of title 42 of the Code of Federal Regulations for the proposition that, to be reimbursable, costs must be reasonable and related to the care of beneficiaries. (
The ALJ reviewed the authorities submitted by plaintiff, but found them unconvincing. According to plaintiff, section 220.3 of the Medicare Benefit Policy Manual identified outreach as ” ‘non-reimbursable [but] nevertheless allowable.’ ” The ALJ noted that the cited section applied only to ” ‘preventative health services’ provided ‘by or under the direct supervision of a
The ALJ also rejected the idea that plaintiff should be reimbursed because it is required to provide outreach services in order to receive certain grants. The ALJ reasoned that the availability of these grants was not in question, nor did the grants necessarily require Medi-Cal to also reimburse plaintiff.
The ALJ further concluded that outreach activities are not reimbursable as case management under the 1994 letter to the state Medicaid director. The ALJ reasoned that the letter identified ” ‘Medicaid outreach’ as one of the ‘administrative costs necessary for the proper and efficient administration of the State plan,’ it does not contemplate subcontracting this to FQHC clinics through cost basis reimbursement but merely cites to the Center for Medicare/Medicaid Services’ . . . Medicaid Manual authorizing the State to spend Federal money on case management services. The Medicaid Manual in its current form still authorizes such use of Federal Medicaid funds by the State, but does not discuss using FQHC clinics as outreach contractors or incorporating case management payments into FQHC per-visit rates.”
With respect to the PRM, the ALJ rejected plaintiff‘s argument that outreach services were reimbursable because there was no provision that restricts it, such that general cost principles should be applied. The ALJ reasoned that outreach work is “performed specifically to bring new patients into the facilities.” Although such activities are not prohibited, costs for patient recruitment are excluded under section 2136.2 of the PRM.
Given his conclusions, the ALJ declined to reach the DHCS‘s argument that the outreach costs were nonallowable due to insufficient documentation.
d. Motion for reconsideration and petition for writ of mandate
Plaintiff filed a petition for reconsideration. In July 2018, the Chief ALJ affirmed the ALJ‘s decision, finding that the outreach costs were really patient recruitment costs and therefore nonreimbursable.
In August 2018, plaintiff filed a petition for writ of mandate in the trial court. The trial court denied the petition in April 2019. Noting that outreach costs are not discussed in the PRM, the trial court agreed with the ALJ and the Chief ALJ and found that plaintiff‘s outreach services are similar to advertising intended to increase patient use of plaintiff‘s services. Given that the cost of advertising to increase utilization of the provider‘s facilities is not allowable under the PRM, the trial court held that the costs were not reimbursable.
1. Standard of review
Pursuant to
Like the trial court, an appellate court‘s task is to “determine whether the [DHCS‘s] decision is supported by substantial evidence. [Citation.] [¶] ‘As to questions of law, appellate courts perform essentially the same function as trial courts in an administrative mandate proceeding, and the trial court‘s conclusions of law are reviewed de novo.’ ” (Hi-Desert Medical Center v. Douglas (2015) 239 Cal.App.4th 717, 730.) With respect to questions of law, we apply the same rules governing interpretation of statutes to the interpretation of administrative regulations, with the fundamental goal of ascertaining the agency‘s intent and effectuating the purpose of the law. (Pang v. Beverly Hospital, Inc. (2000) 79 Cal.App.4th 986, 994-995.) We seek to “give the regulatory language its plain, commonsense meaning . . . , and we must read regulations as a whole so that all of the parts are given effect.” (County of Kern v. State Dept. of Health Care Services, supra, 180 Cal.App.4th at p. 1512.) As this court recently explained, although state agencies such as the DHCS “may be entitled to deference in interpreting its own regulations and policies” (Oak Valley Hospital District v. State Dept. of Health Care Services (2020) 53 Cal.App.5th 212, 224), we do not extend such deference when it comes to the DHCS‘s interpretation of regulations and policies such as the PRM that are issued by federal agencies like the Centers for Medicare and Medicaid Services. (Id. at pp. 224-225.)
2. Plaintiff‘s claims on appeal
Plaintiff contends the trial court erred in concluding that outreach costs are not allowable under
Plaintiff also argues its outreach costs were “reasonable” (and allowable under
Finally, plaintiff argues the trial court erred in concluding that outreach was akin to advertising to the general public to increase patient utilization of its facilities and therefore unallowable per PRM section 2136.2. Plaintiff argues the PRM was created before the advent of FQHC‘s and was not intended to address their outreach activities. According to plaintiff, courts have defined advertising as ” ‘widespread promotional activities usually directed at the public at large,’ ” which is much different than plaintiff‘s targeted activity of sending trained individuals into the community to help at-risk individuals obtain health care. Plaintiff argues it is bad public policy to disallow outreach costs given its value to society and the communities plaintiff serves. We find no merit in plaintiff‘s arguments.
3. Analysis
We agree with the ALJ, the Chief ALJ, and the trial court that the DHCS did not abuse its discretion in finding that plaintiff‘s outreach costs were nonreimbursable. Plaintiff‘s outreach efforts involve going into public spaces such as on the street, at schools, business venues, beaches, and parks to attract new patients, provide counseling regarding eligibility for services, and make medical appointments for services. Such services may benefit the recipient by increasing awareness of care available through plaintiff and making the recipient feel more comfortable seeking care. And, such activities are required as part of plaintiff‘s role as a FQHC grant recipient. (
The regulations exclude costs that the program defines as not allowable, and the PRM makes clear that advertising costs “seek[ing] to increase patient utilization of the provider‘s facilities are not
We disagree with plaintiff that we must disregard the PRM‘s clear guidance about advertising costs merely because the manual was drafted before the current FQHC program was implemented. Had the relevant agencies wished to change the manual to make FQHC outreach costs reimbursable, they would have done so. (See City of Long Beach v. Workers’ Comp. Appeals Bd. (2005) 126 Cal.App.4th 298, 311 [“[i]f the language of the statute is unambiguous, we presume the Legislature meant what it said“].)
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to defendant. (
KRAUSE , J.
We concur:
ROBIE , Acting P. J.
HOCH , J.