Justices Deal Costly Setback to Hospitals

In a costly decision for hospitals, the California Supreme Court ruled Monday that they can no longer recover the full cost of treating Medi-Cal accident victims by claiming money the patients later receive in lawsuits as compensation for their injuries.

The unanimous decision is expected to cost California hospitals millions of dollars a year. Since 1992, California law has permitted hospitals to recoup the cost of treating Medi-Cal patients by placing liens against monetary damages the patients may later win in personal injury lawsuits. Medi-Cal, the state’s medical coverage program for the poor, reimburses medical providers only a fraction of their costs.

“A health-care provider may, at most, recover a ‘nominal’ amount” of damages won by a Medi-Cal patient in a lawsuit, Justice Janice Rogers Brown wrote for the court.

The state law allowing for full reimbursement is preempted by federal Medicaid law, the court ruled. Part of Medi-Cal is paid for by the federal government, which prohibits a hospital from charging a recipient more than the cost of the government reimbursement.

The decision was not a complete loss for the state’s hospital industry, however. The court said hospitals will not have to repay Medi-Cal patients whose monetary damages hospitals have taken in the past.

The case was brought by Cimmaron Olszewski, a Medi-Cal patient who received emergency care from Scripps Health, which owns five hospitals in the San Diego area. Olszewski later sued the driver of the vehicle who caused the accident and collected about $400,000. Scripps sought about half of that to pay for the full cost of her medical care.

Because the court declared invalid the state law that allows for such reimbursement, Olszewski will keep the full amount.

Deborah Giles, who represented Scripps in the case, said the decision “is going to have a significant financial impact statewide on hospitals, doctors and ancillary health-care providers -- everyone who provides treatment to people who have been injured through the negligence of another party.”

Kim E. Card, a lawyer for Olszewski, said that many lawsuits are settled for the amount of private liability insurance a defendant carries. When that was a small amount, hospitals seeking reimbursement for their full costs above Medi-Cal could take the entire recovery, leaving nothing for the injured.

In Monday’s ruling, Brown said the court reached the decision reluctantly.

She said the ruling gives the person who caused the injury “a windfall at the expense of the innocent health-care provider.”

“As a result,” she wrote in Olszewski v. Scripps Health, the person responsible for the injury “escapes liability for the full amount of the medical expenses he or she wrongfully caused.” Brown said this “harms society as a whole.”

But in a reprieve for hospitals, the court said they may not be sued for money they have already collected from Medi-Cal accident victims because the hospitals were relying on a state law.