Children's Hospital and Health Center, a Washington Corporation v. S. Kimberly Belshe, Director, California Department of Health Services

188 F.3d 1090, 99 Daily Journal DAR 8409, 99 Cal. Daily Op. Serv. 6569, 1999 U.S. App. LEXIS 18881, 1999 WL 615145
CourtCourt of Appeals for the Ninth Circuit
DecidedAugust 16, 1999
Docket98-15559
StatusPublished
Cited by87 cases

This text of 188 F.3d 1090 (Children's Hospital and Health Center, a Washington Corporation v. S. Kimberly Belshe, Director, California Department of Health Services) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Children's Hospital and Health Center, a Washington Corporation v. S. Kimberly Belshe, Director, California Department of Health Services, 188 F.3d 1090, 99 Daily Journal DAR 8409, 99 Cal. Daily Op. Serv. 6569, 1999 U.S. App. LEXIS 18881, 1999 WL 615145 (9th Cir. 1999).

Opinions

Opinion by Judge DAVID R. THOMPSON; Dissent by Judge SNEED.

DAVID R. THOMPSON, Circuit Judge:

OVERVIEW

Eighteen hospitals located outside of California (“the plaintiffs”) brought suit against S. Kimberly Belshe (“Belshe”), Director of the California Department of Health Services (“CDHS”). The plaintiffs alleged that CDHS’s method for reimbursing out-of-state hospitals that treat California’s Medicaid (“Medi-Cal”) patients violates the portion of the Social Security Act known as the Boren Amendment, 42 U.S.C.A. § 1396a(a)(13)(A) (West 1992). Belshe moved for summary judgment.

In its first summary judgment order, the district court held the Boren Amendment applies to out-of-state hospitals. Thereafter, in a second order, the district court held the CDHS was failing to meet the Boren Amendment’s requirements in setting reimbursement rates for out-of-state hospitals that treat Medi-Cal patients. The court also held the CDHS is obligated to make additional payments to out-of-state hospitals treating Medi-Cal patients that serve a disproportionate share of low-income individuals (“DSH payments”). The district court then certified its summary judgment orders for immediate appeal pursuant to 28 U.S.C. § 1292(b), and this appeal followed.

[1093]*1093In this appeal, Belshe argues the plaintiffs’ lawsuit is mo.ot because the Boren Amendment was repealed during the pen-dency of the action, and in any event, the lawsuit is barred by the Eleventh Amendment. Alternatively, Belshe contends that the district court erred in holding that the Boren Amendment applies to out-of-state hospitals. We have jurisdiction under 28 U.S.C. § 1292(b), and we affirm.

BACKGROUND

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. (“the Medicaid Act”), authorizes the payment of federal funds to states to defray expenses incurred in providing medical assistance to low-income individuals. See 42 U.S.C. § 1396; Wilder v. Virginia Hosp. Ass’n, 496 U.S. 498, 502, 110 S.Ct. 2510, 110 L.Ed.2d 455 (1990). Unlike Medicare, which is administered nationally, the Medicaid Act is administered by the individual states that choose to participate in the program. If a state participates in the program, the state must comply with the requirements of the Medicaid Act and its implementing regulations. See 42 U.S.C. § 1396a; 42 C.F.R. §§ 430 et seq.; Wilder, 496 U.S. at 502, 110 S.Ct. 2510. All fifty states have chosen to participate.

States wishing to receive Medicaid funds must submit a state medical assistance plan to the Secretary of Health and Human Services (“Secretary”). This plan must detail the state’s coverage and include the methodology it will use to reimburse institutional health care providers for the services they render to Medicaid recipients. See 42 U.S.C. § 1396a(a); 42 C.F.R. §§ 430.10 — 430.18; Wilder, 496 U.S. at 502,110 S.Ct. 2510. The plan must be approved by the Health Care Financing Administration (“HCFA”), the federal agency responsible for administering the Medicaid program. See 42 C.F.R. §§ 430.10, 430.12.

Prior to 1980, states were required to reimburse hospitals the “reasonable cost” of providing inpatient services, generally in the form of retrospective payments based on a hospital’s actual costs for given services. See 42 U.S.C. § 1396a(a)(13) (1976); Folden v. Washington State Dep’t of Social and Health Serv., 981 F.2d 1054, 1056 (9th Cir.1992). Hoping to contain escalating medical costs, Congress enacted a new standard for hospital reimbursement as part of the 1981- Omnibus Reconciliation Act, Pub.L. No. 97-35 § 2173. This new standard, known as the Boren Amendment, required a state plan to

provide ... for payment ... of the hospital services ... provided under the plan through the use of rates (determined in accordance with methods and standards developed by the State ... and which, in the case of hospitals, take into account the situation of hospitals which'serve a disproportionate number of low income patients with special needs ... ) which the State finds, and makes assurances satisfactory to the Secretary, are reasonable and adequate to meet the costs which must be incurred by efficiently and economically operated facilities in order to provide care and services in conformity with applicable State and federal laws, regulations, and quality and safety standards and to assure that individuals eligible for medical assistance have reasonable access (taking into account geographic location and reasonable travel time) to inpatient hospital services of adequate quality; and such State makes further assurances, satisfactory to the Secretary, for the filing of uniform cost reports by each hospital ... and periodic audits by the State of such reports....

42 U.S.C.A. § 1396a(a)(13)(A) (West 1992).

The purpose of the Boren Amendment was “to give states greater flexibility in calculating reasonable costs and in containing the continuing escalation of those costs.” Folden, 981 F.2d at 1056. The Third Circuit in West Virginia University Hospitals, Inc. v. Casey, 885 F.2d 11 (3d Cir.1989), aff'd on other grounds, 499 U.S. 83, 111 S.Ct. 1138, 113 L.Ed.2d 68 (1991), concluded that the Boren Amendment “authorizes states to develop their own medicaid reimbursement standards and method[1094]*1094ologies for payment of hospital services, but subjects those standards and methodologies to three general federal requirements.” Id. at 22. First, states must take into account hospitals serving a disproportionate share of low-income patients. Id. at 22-23. Second, states must make findings that the rates are “reasonable and adequate” to meet the necessary costs of an efficiently operated hospital. Id. And third, states must assure Medicaid patients reasonable access to inpatient hospital care. Id. As the Third Circuit noted in West Virginia University Hospitals, these requirements are set forth in 42 C.F.R. §§ 447.250-447.280. Id.

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188 F.3d 1090, 99 Daily Journal DAR 8409, 99 Cal. Daily Op. Serv. 6569, 1999 U.S. App. LEXIS 18881, 1999 WL 615145, Counsel Stack Legal Research, https://law.counselstack.com/opinion/childrens-hospital-and-health-center-a-washington-corporation-v-s-ca9-1999.