Business Law

Family Health Centers of San Diego v. State Department of Health Care (July 6, 2021, C089555) __Cal.App.5th.__ [2021 WL 3240274]

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Family Health Centers of San Diego v. State Department of Health Care (July 6, 2021, C089555) __Cal.App.5th.__ [2021 WL 3240274] [ordered published July 30, 2021]

A federally qualified health center’s community outreach expenses to increase utilization are not reimbursable under Medi-Cal.

Family Health Centers of San Diego operates a federally qualified health center (FQHC) that provides various medical services to its patients, including Medi-Cal beneficiaries. An FQHC can receive grants under the Public Health Service Act (42 U.S.C. § 201 et seq.) and can seek reimbursement under Medi-Cal for certain expenses, including reasonable costs directly or indirectly related to patient care. Family Health sought reimbursement from Medi-Cal for nearly $80,000 of salary and benefit expenses incurred for required community outreach efforts aimed at increasing patient utilization of available services. The State Department of Health Care Services (DHCS) disallowed reimbursement after determining that the expenses were not tied closely enough to patient care to be reimbursable. Family Health’s administrative appeals were rejected by a hearing officer, an ALJ, and the Chief ALJ. Family Health then filed a petition for writ of mandate, which the trial court denied. It appealed.

The Court of Appeal affirmed, holding that DHCS and the administrative law judges did not abuse their discretion in finding that Family Health’s outreach costs were not reimbursable. The court acknowledged that the outreach activities were required as part of Family Health’s role as a FQHC grant recipient. But the court explained that the mere fact Family Health was required to perform these services did not make their costs eligible for reimbursement, even if the services provided a benefit. Reimbursement eligibility is governed by the CMS’s Provider Reimbursement Manual, which clearly states that advertising costs seeking to increase patient utilization of a provider’s services are not reimbursable.

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, 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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