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From Health Law Daily, September 8, 2015

No appeal means unpaid holiday schedule injunction remains partially intact

By Mary Damitio, J.D.

California’s state Medicaid agency remains enjoined from enforcing the state’s existing uniform unpaid holiday schedule policy that denies reimbursement for services provided to disabled individuals on certain days, despite the fact that the U.S. Supreme Court has subsequently ruled that courts have no jurisdiction to hear such actions. The injunction order became final after the state failed to file an appeal and a change in law alone was insufficient to warrant a modification of the order. However, the injunction could not remain in effect as to future changes in the state’s Medicaid reimbursement policies (The ARC of California v. Douglas, August 31, 2015, England, M.).

Background. The ARC of California (ARC) and the Cerebral Palsy Association of San Diego (CPA) filed suit against the California Department of Health Care Services and the California Department of Developmental Services (collectively the State) challenging California’s payment policies for services provided to disabled individuals under Medicaid. The suit alleged that the State violated the Medicaid Act (42 U.S.C. § 1396(a)(30)(A)) by reducing payments to providers of services to disabled individuals. Specifically, the suit sought to enjoin California from enforcing mandatory, unpaid holidays for providers under a “uniform holiday schedule,” and sought to enjoin California from implementing its “half day” billing rule, under which payments to providers were cut if a client elected to leave early (See Holiday schedule preventing reimbursement for certain days found invalid, February 17, 2015).

Procedural history. ARC and CPA filed a motion for partial summary judgment, which was granted and the State was permanently enjoined from continuing to enforce the reimbursement practices. The State did not appeal the decision. Fifteen days after the court granted partial summary judgment, the U.S. Supreme Court held that the Supremacy Clause of the U.S. Constitution did not confer a private right of action on parties to compel compliance with Section 30(A) of the Medicaid Act (See High court reverses 9th Cir.; won’t allow providers to bring private action to challenge Medicaid reimbursement, March 31, 2015). Subsequently, the State filed a Motion to Vacate seeking to vacate the permanent injunction and the partial summary judgment order based on the U.S. Supreme Court’s ruling.

Res judicata. The order of summary judgment was a final order and judgment and was thus final and binding on the parties under the doctrines of res judicata and collateral estoppel. The State was well aware of the pending U.S. Supreme Court case and failed to file a timely appeal of the court’s summary judgment order. A subsequent change in law does not necessarily present extraordinary circumstances so as to warrant a modification of a final order under Rule 60(b)(6) of the Federal Rules of Civil Procedure. The court had the authority and jurisdiction at the time it issued its injunction order.

Future practices. While the court refused to vacate its summary judgment order, it found that it could not enjoin future similar reimbursement practices because orders that have explicit prospective application can be altered due to subsequent changes in law. In its previous injunction order, the court enjoined the state from making any future changes to provider reimbursements that did not comply with Section 30(A) of the Medicaid Act. As a result of the U.S. Supreme Court decision, the court did not have the jurisdiction to enjoin those future practices.

The case is No. 2:11-cv-02545-MCE-CKD.

Attorneys: William Thomas McLaughlin, II (Lang, Richert & Patch) for ARC of California and United Cerebral Palsy Association of San Diego. Niromi W. Pfeiffer, Office of the Attorney General, for Toby Douglas, California Department of Health Care Services, Terri Delgadillo, and California Department of Developmental Services.

Companies: The ARC of California; United Cerebral Palsy Association of San Diego; California Department of Health Care Services; California Department of Developmental Services

MainStory: TopStory HomeNews MedicaidPaymentNews CaliforniaNews

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