Lawsuits Against California Predicted

As a result of the U.S. Supreme Court decision Thursday allowing hospitals to sue states over Medicaid funding, Southern California hospitals will take the state to court, officials predicted.

“The hospitals will sue, the physicians’ groups will sue, the counties will sue,” said David Langness of the Hospital Council of Southern California. He contended that the state’s Medicaid reimbursement policies have “bankrupted the health-care industry.”

“It’s been murder,” Langness said. “. . . It has been the death knell for emergency rooms, trauma centers, burn programs, obstetrics programs . . . . Frankly, it has been the chief ingredient in 53% of hospitals losing money in California.”

Langness and others were buoyed by the court’s decision, which permits hospitals to sue states in federal court for “reasonable reimbursement.” In California, hospital officials say, the state reimburses hospitals at an average rate of 61 cents for every dollar spent.

That rate has dropped steadily, they say, from 67 cents last year and 70 cents the year before. The Medicaid reimbursement rate in California has dropped from 26th in the nation in the early 1980s to 47th today, Langness said.

“What they might do is get together a consortium of interests and file a suit on behalf of a large group of hospitals,” predicted Ron Dahlgren, president and chief executive officer of Queen of Angels-Hollywood Presbyterian Medical Center and a veteran hospital administrator.

Officials at the state Department of Health Services, which administers the state’s program of health insurance for the poor, known as MediCal, refused Thursday to comment on the Supreme Court’s decision, saying that they had not had time to review it.

MediCal reimbursement rates--the rates at which the state pays health care facilities for caring for MediCal patients--have long been a sore point between hospitals and the state. Many hospitals say that they have lost increasing amounts of money on the program.

The rates have been blamed in part for the closing of 52 hospitals in California over the last decade. In Southern California, many hospitals have stopped contracting with the MediCal program and no longer accept MediCal patients.

The problem has become more acute as private insurers have begun negotiating their own stringent contracts with hospitals, making it difficult for hospitals to use the profits they make from private-pay patients to cover losses on MediCal patients.

“It’s patently obvious that the state has been breaking its own laws,” said Langness, who believes the hospitals could win in court. “. . . We have another case of the government shafting the very people it’s supposed to represent.”

But Gary Wells, a deputy director of the Los Angeles County Department of Health Services, which is reimbursed for outpatient services at what Wells said is a rate of 35% of charges, said the county would be cautious in contemplating suing the state.

“Allowing us to sue and the prospects of winning are potentially two different things,” he said. “What they’re doing is giving us an avenue to litigate the issue, not necessarily indicating that we would be successful.

“Sometimes, when you squeeze one area, it ends up popping out at another area,” he added. “ . . . We are trying to maintain a cooperative mode and have them see us as a partner in providing local indigent health care.”