News Release

California Hospitals Seek Court Ruling to Prevent Medi-Cal Payment Cuts From Taking Effect
Preliminary Injunction Request to be Considered at December 19 Court Hearing

SACRAMENTO (November 22, 2011) –   In a follow-up step to a recent lawsuit filed against state and federal Medicaid officials, the California Hospital Association (CHA) has petitioned a federal judge to prevent the California Department of Health Care Services (DHCS) from implementing Medi-Cal rate cuts slated for distinct-part skilled nursing facilities (DP/NF) within acute care hospitals.

In its motion for a preliminary injunction, CASE NO. cv-11-09078 CAS (MANx), CHA said preventing the rate cuts from taking effect is necessary in order “to stop California from slashing the rates hospitals are paid for skilled nursing care by an unprecedented 20-plus percent.”  The petition goes on to call the decision by the Centers for Medicare and Medicaid Services (CMS) approving the rate reductions “arbitrary and capricious” and states that the cuts “will have disastrous consequences for California hospitals, Medi-Cal beneficiaries and many California communities.”

“During months of conversations with state and federal officials, hospitals across California provided compelling evidence about the impact these cuts will have on access to care for our most vulnerable patients,” said CHA President/CEO C. Duane Dauner.  “We believe that the cuts are in violation of federal Medicaid law and without regard for the welfare of thousands of patients with complex medical needs.”

The rate cuts, which are retroactive to June 1, 2011, were approved by CMS in late October.   While the cuts have been portrayed as a 10 percent payment reduction, in fact the cuts are significantly higher because they are based on the payment rates in effect during FY 2008-2009.  In most cases, the payment cuts will exceed 20 percent.        

Patients who receive care in hospital-based skilled nursing units often have complex medical needs or require specialized services not available in freestanding nursing homes. 

In a recent survey of CHA member hospitals, 50 percent of responding facilities indicated that they will close their DP/NF units if these cuts take effect, while 35 percent indicated that they would reduce the number of beds or discontinue services to Medi-Cal patients.

Included with the petition for a preliminary injunction are declarations submitted by 19 California hospitals with DP/NF units.  These declarations describe the enormous harm that the payment reductions will have on access to care.  Among the letters submitted is one from Mayers Memorial Hospital, a small rural hospital in a mountainous area of Northern California.  The nearest hospital to Mayers is more than 75 miles away, over a winding road.  According to hospital officials, the payment cuts will force Mayers to eliminate obstetrical services and reduce the availability of skilled nursing care.

Patients who receive care from the Eastern Plumas Health Care District in Northern California’s Plumas County also will be severely impacted by the rate cuts.  According to the hospital’s declaration filed with the court, the rate cut “will most certainly result in the closure” of skilled nursing units at Eastern Plumas’ two rural locations. The declaration also states that the “hospital has zero days of cash on hand” and that it most likely “would not survive the catastrophic impact these cuts represent.”

A hearing on CHA’s petition for a preliminary injunction has been scheduled for 10 am on December 19, 2011 in federal district court in Los Angeles.

CHA members can find more information in a December 5 memorandum at