Business Law

Crestwood Behavioral Health, Inc. v. Baass (May 1, 2023, C094882) __ Cal.App.5th __ [2023 WL 3166593]

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DHCS has no mandatory duty to “deem audited” any unaudited cost reports and data after three years.

Some skilled nursing facilities serving Medi-Cal beneficiaries may provide special treatment program (STP) services to patients with chronic psychiatric impairments, for which they receive reimbursement from the Department of Health Care Services based on days of care and type of services provided. Under the Quality and Accountability Supplemental Payment System (QASP), the Department may authorize supplemental payments to facilities meeting certain performance standards, using audited bed days to calculate payment amounts. However, because the Department does not audit STP days, they are not included in QASP calculations. Crestwood Behavioral Health and other facilities providing STP services petitioned for administrative writ relief mandating the Department to include STP days in QASP calculations, which they alleged would result in recovering millions of dollars in QASP payments. The trial court denied writ relief, and the facilities appealed.

The Court of Appeal affirmed, holding that appellants failed to identify an appropriate basis for writ relief. The court explained that Welfare and Institutions Code, section 14170, subdivision (a)(1), which requires the Department to implement an auditing system, does not impose a mandatory or ministerial duty on the Department to “deem audited” the unaudited cost reports and data after three years. Rather, the section vests the Department with discretion to decide which cost reports and data to audit and limits its discretion by providing that reports and data shall be considered true and correct unless audited or reviewed within three years. The Department was not required to take any particular action with respect to the cost reports and data, so writ relief could not be granted to compel the performance of a mandatory, ministerial act. The facilities also failed to demonstrate any abuse of discretion by the Department, because it could reasonably exercise discretion to decline to audit STP days due to its limited resources, and could not exercise discretion to include unaudited STP days in the QASP calculations without violating the State Plan.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson, Peder K. Batalden, and Lacey Estudillo at the appellate firm Horvitz & Levy LLP, and is republished with permission.

For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or

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