Tulare Pediatric Health Care Center v. State Department of Health Care Services (2019) 41 Cal.App.5th 163

Under Medicaid, California must pay federally qualified heath centers the full amount of contracting providers’ charges.

States participating in the federal Medicaid program must pay federally qualified heath centers for the services they provide to Medicaid beneficiaries. California participates through Medi-Cal. Under Medicaid, California must pay such health centers 100 percent of their costs of furnishing required services. Tulare Pediatric Health Care Center (the Clinic) is a federally qualified health center. The Clinic hired Dr. Prem Kamboj, who charged $106 per patient visit. Adding this figure to Clinic operating costs, the Clinic charged the California Department of Health Care Service $167.85 per patient visit. DHCS audited the Clinic and found that, on some occasions, Kamboj’s costs of providing services were less than $106 per visit. DHCS reduced its payments to the Clinic accordingly, contending the amount it owed the Clinic should be based on Kamboj’s actual costs. The Clinic petitioned to require DHCS to pay the full $106. The trial court ruled for the Clinic.

The Court of Appeal affirmed. In its view, both 42 U.S.C. § 1396a(bb) and its state-law counterpart required DHCS to pay 100 percent of the Clinic’s reasonable costs. Those costs included the full amount of charges by contracting providers like Dr. Kamboj. In other words, the amount of the Clinic’s costs control, reflecting Congress’s “mandate that states must fully reimburse health centers for the cost of Medicaid beneficiaries.” The court rejected DHCS’s reliance on and interpretation of Medicare regulations allowing for consideration of providers’ “actual costs,” though the court left open the possibility that DHCS’s position might properly be applied in disputes with hospitals. See Oroville Hospital v. Dept. of Health Services (2006) 146 Cal.App.4th 468.

The bulletin describing the Court of Appeal’s 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 htwatson@horvitzlevy.com.