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California Association For Health Services At Home et al v. State Department of Health Care Services et al

March 26, 2012

CALIFORNIA ASSOCIATION FOR HEALTH SERVICES AT HOME ET AL., PLAINTIFFS AND RESPONDENTS,
v.
STATE DEPARTMENT OF HEALTH CARE SERVICES ET AL., DEFENDANTS AND APPELLANTS.



(Super. Ct. No. 04CS00543) APPEAL from a judgment of the Superior Court of Sacramento County, Michael P. Kenny, Judge. Affirmed in part and reversed in part.

The opinion of the court was delivered by: Blease , Acting P. J.

CERTIFIED FOR PUBLICATION

In this appeal from a judgment granting a petition for a supplemental writ of mandate, we must decide whether the State Department of Health Care Services (the Department)*fn1 was required to consider provider costs or otherwise comply with the Ninth Circuit's decision in Orthopaedic Hospital v. Belshe (9th Cir. 1997) 103 F.3d 1491 (Orthopaedic) in conducting an annual review of Medi-Cal reimbursement rates paid to providers of home health agency services for the years 2001 through 2005.

The trial court found the Department had "not performed a proper rate review" and issued a writ of mandate commanding the Department to perform a further rate review consistent with Orthopaedic. The Department appeals, arguing (1) mandamus is not available because plaintiffs seek to control its discretion, (2) Orthopaedic is not controlling and the Department was not required to conduct the rate review in accordance with that decision, and (3) the Department's review otherwise satisfied the requirements prescribed in California's state plan.

We shall conclude that mandamus does lie where, as here, plaintiffs seek to correct what they perceive to be an abuse of discretion. We shall further conclude that the Department did not abuse its discretion in failing to consider provider costs or otherwise conduct its review in accordance with Orthopaedic, but that it nevertheless acted arbitrarily and capriciously by relying on out of date and irrelevant data in concluding that its rates were sufficient to ensure that Medi-Cal recipients had the same access to care in the geographical area as members of the general public from 2001 through 2005.

FACTUAL AND PROCEDURAL BACKGROUND

"The Medicaid Act (42 U.S.C. §§ 1396a-1396v) authorizes federal grants to states for medical assistance to certain low income persons. [Citation.] The program is funded by both the federal and state governments, and administered by the states. [Citations.] To receive matching federal funding, states must agree to comply with the applicable Medicaid law. [Citation.] The state program in California is called Medi-Cal. "Within broad federal rules, the states determine the payment levels for services, and make payment for services directly to the individuals or entities furnishing the services. [Citation.] The Medicaid Act requires each participating state to adopt a state plan describing the policy and methods to be used to set payment rates. [Citations.]" (California Association for Health Services at Home v. State Department of Health Services (2007) 148 Cal.App.4th 696, 700-701 (CAHSAH I).) Pursuant to United States Code section 1396a(a)30(A) of the Medicaid Act (hereafter referred to as section 30(A)), each state plan must, "provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area . . . ." (Italics added.) "DHS is the agency that administers California's state plan. [Citations.] California's state plan provides that the methodology for establishing payment rates is to develop an evidentiary base or rate study resulting in the determination of a proposed rate, to present the proposed rate at a public hearing to gather public input, to determine the payment rate based on both the evidentiary base and the public input, and to establish the payment rate through the adoption of regulations." (CAHSAH I, supra, 148 Cal.App.4th at p. 701, fn. omitted.) With regard to home health agency services, the services at issue here, the state plan contained the following language as of the date this action was filed: "'The State Agency shall perform an annual review of the Medi-Cal reimbursement rates paid to providers of home health agency services. The purpose of such review is to ensure that the rates comply with [section] (30)(A), which requires payments to be:

'1) consistent with efficiency, economy, and quality of care; and

'2) sufficient to enlist enough providers so that care and services are available at least to the extent that such care and services are available to the general population in the geographic area.'" (Id. at p. 702, fn. omitted.)*fn2

Despite this plan provision, the Department had not performed a review of the applicable reimbursement rates since 2000 (CAHSAH I, supra, 148 Cal.App.4th at p. 702), and reimbursement rates for home health providers have remained unchanged since that time (Cal. Code Regs., tit. 22, § 51523, History).

In 2005, plaintiffs filed a complaint and petition for mandamus relief (Code Civ. Proc., § 1085), alleging the Department violated state and federal law by refusing since 2000 to raise or review Medi-Cal reimbursement rates paid to providers of home health agency services. (CAHSAH I, supra, 148 Cal.App.4th at pp. 700, 702.) The trial court agreed in part and issued a writ of mandate requiring the Department to perform a review of reimbursement rates for the then current year (2005). (Id. at p. 700.) The court denied plaintiffs' request for a writ to compel the Department to raise reimbursement rates for prior years. (Ibid.) Both parties appealed. (Ibid.)

In CAHSAH I, we held that "DHS was required to review reimbursement rates annually, but that plaintiffs . . . failed to show DHS was obligated to set new rates." (148 Cal.App.4th at p. 700.) We further concluded that the trial court erred in not extending its mandate to prior years. (Ibid.) Accordingly, we directed the trial court to issue a writ of mandate compelling the Department to conduct an annual review of the Medi-Cal reimbursement rates paid to the providers of home health agency services for the years 2001 through 2005. (Id. at p. 710.) On April 24, 2008, the trial court issued a writ of mandate consistent with our decision.

The Department completed the rate review in March 2009 and concluded that the rates paid to providers of home health agency services for the years 2001 through 2005 were consistent with efficiency, economy, and quality of care, and sufficient to enlist enough providers so that care and services are available at least to the extent such care and services are available to the general population in the geographic area as required under the state plan and section 30(A). The Department did not consider provider costs in any of its analyses or determine whether its rates were reasonably related thereto.

In February 2009, plaintiffs sought a supplemental writ of mandate, claiming the rate review was flawed. More particularly, plaintiffs asserted that "instead of performing a valid study, [the Department] . . . failed to consider . . . whether the rates are sufficiently high to cover an efficient, economical provider's costs" as required under Orthopaedic or "meaningfully address quality of care and access to services . . . ." Plaintiffs requested, among other things, that the trial court issue a supplemental writ of mandate requiring the Department to perform a proper rate review based on responsible cost studies for each of the years 2001 through 2005 and "address the following for each year in its rate review: (1) whether the rates were sufficiently high to cover the costs of an efficient and economically operated home health provider; (2) whether the rates were sufficiently high to be consistent with the provision of quality care; and (3) whether the rates were sufficiently high to ensure that Medi-Cal recipients had the same access to care in their geographical area as members of the general public."

The trial court determined that the Department had "not performed a proper rate review for the years 2001 through 2005" and issued a supplemental writ of mandate directing the Department to "perform a further rate review which is consistent with Orthopaedic . . . and the Court's September 25, 2009 Minute Order" and "address whether the rates were sufficient to address the costs of an efficient and economically operated home health [care] provider, whether the rates [were] sufficient to be consistent with the provision of quality care, and whether the rates ...


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