Santa Ana Hospital Medical Center v. Belshé (56 Cal. App. 4th 819, 1997)

Opinion

SIMS, J.

Appellant Santa Ana Hospital Medical Center appeals from the trial court’s denial of its petition for a writ of mandate (Code Civ. Proc. § 1085) against S. Kimberly Belshé, as Director of the California Department of Health Services (for ease of reference referred to herein as the Department). Appellant contends the trial court erred in interpreting Welfare and Institutions Code section 14105.98 as precluding judicial relief to correct an error by the Department in determining appellant’s share of supplemental Medi-Cal payments under the “disproportionate share hospital” (DSH) program which provides supplemental payments to hospitals serving a disproportionate number of low-income patients. We shall affirm the trial court’s denial of the writ petition.

The Statutory Framework

“The Medi-Cal program (§ 14000 et seq.) represents California’s implementation of the federal Medicaid program (42 U.S.C. §§ 1396-1396v), through which the federal government provides financial assistance to states so that they may furnish medical care to qualified indigent persons. [Citation.] The Department is the single state agency designated to administer the Medi-Cal program. (§ 14203.)” (Robert F. Kennedy Medical Center v. Belshé (1996) 13 Cal.4th 748, 751 [55 Cal.Rptr.2d 107, 919 P.2d 721] (Kennedy Medical Center) [addressing disputes concerning payment for services rendered].)

Federal law originally required states to reimburse health care providers for the “reasonable cost” of services rendered, i.e., the cost of services actually incurred by the provider and otherwise allowable by Medicaid. (Kennedy Medical Center, supra, 13 Cal.4th at p. 751.) In 1980 and 1981, “in an effort to contain spiraling Medicaid costs for hospital services,” the federal law was changed to allow states to develop alternate methodologies to limit reimbursement based upon costs that would have been reasonably incurred by an “efficient and economically operated facility,” even if a provider’s actual costs were greater. (Id. at pp. 751-752, citing 42 U.S.C. § 1396a(13)(A).)

In calculating Medi-Cal reimbursement in this state, the provider is given full credit for certain costs, such as rent and taxes, but not for other costs, such as costs of services that have increased significantly over those incurred in prior years. (Kennedy Medical Center, supra, 13 Cal.4th at p. 752, citing Cal. Code Regs., tit. 22, § 50000 et seq.)

Thus, Medi-Cal reimbursement may not fully cover a hospital’s costs.

In addition to reimbursement under the foregoing provisions, hospitals which provide care for a disproportionate share of low-income patients may be eligible to receive a supplemental payment under the state’s DSH program, enacted to take advantage of a federal program making matching federal funds available to the states. (§ 14105.98; Stats. 1991, ch. 279, pp. 1762-1779; Stats. 1991, ch. 1046, pp. 4824-4845.) Under this program, governmental entities that operate hospitals (i.e., counties, hospital districts, and the University of California) transfer funds to the state. After deduction of an administrative fee for the state, these funds draw matching federal funds, and the combined moneys are then distributed among public and private hospitals which qualify as DSH’s based on their provision of services to a disproportionate number of Medi-Cal or other low-income patients. (§ 14105.98, subd. (a)(1); see Sen. Rules Com., 3d reading analysis of Assem. Bill No. 2804 (1996 Reg. Sess.) June 20, 1996 [giving background on DSH program].)

An uncodified section of the 1991 enactment of the DSH program stated in part: “Several federal medicaid statutory amendments over the past decade have encouraged and directed states to provide, as part of their state medicaid programs, special recognition and higher payment amounts to hospitals that provide services to a disproportionate number of medicaid and other low-income patients. These statutory provisions . . . were intended by Congress to assist those ‘safety net’ hospitals, particularly public hospitals and teaching hospitals, that face significant financial distress due to changing economic circumstances in the health care industry. The concept of higher medicaid payments to disproportionate share hospitals is intended to assist economically endangered facilities in meeting their rising costs of uncompensated care relating to uninsured and underinsured patients. . . .” (Stats. 1991, ch. 279, § 1 (f), p. 1763.) The state enactment continues: “It is the intent of the Legislature to provide for additional Medi-Cal payment adjustments for inpatient services rendered by disproportionate share hospitals, particularly those hospitals that have proportionately higher ‘low-income utilization rate’ percentages, since many of these facilities are confronted by substantial economic distress. It is also the intent of the Legislature to utilize a portion of the local financial participation to fund other critical Medi-Cal health care expenditures. It is the further intent of the Legislature to obtain the full extent of federal financial participation permitted under federal law for expenditures under the Medi-Cal program.” (Stats. 1991, ch. 279, § l(i), p. 1764.)

The statutory scheme provides: “For each fiscal year commencing with 1991-92, there shall be Medi-Cal payment adjustment amounts paid to hospitals pursuant to this section. The amount of payments made and the eligible hospitals for each payment adjustment year shall be determined in accordance with the provisions of this section. The payments are intended to support health care services rendered by disproportionate share hospitals.” (§ 14105.98, subd. (b).)

“For each fiscal year commencing with 1991-92, the department shall issue a disproportionate share list. The list shall be developed in accordance with subdivisions (e) and (f), and shall serve as a basis for payments under this section for the particular payment adjustment year.” (§ 14105.98, subd. (c).)

Section 14105.98, subdivision (f)(1), provides for issuance of the disproportionate share list by the Department.

Section 14105.98, subdivision (f)(5), prescribes finality of the list upon issuance and prohibits modification of the list after issuance, except for mathematical or typographical errors made in preparation of the list.

Section 14105.98, subdivision (s), limits review of the list and provides there shall be no appeal from calculations which are final pursuant to subdivision (f)(5).

As will appear, the dispute in this case focuses on the question whether errors in a DSH list may be corrected. This implicates section 14105.98.

Factual and Procedural Background

On November 16,1995, appellant filed in the trial court a petition for writ of mandate (Code Civ. Proc., § 1085) seeking judicial review of the Department’s refusal to correct an admitted inaccuracy in its DSH list for fiscal year 1994-1995, from which appellant’s DSH payments for 1994-1995 were determined. The error assertedly resulted in reduced DSH payments to appellant.

Exhibits attached to the petition in the trial court included letters between the parties, recounting the following:

On December 16,1994, the Department issued its DSH list for 1994-1995. As noted, once issued the list is final and cannot be modified, except for typographical or mathematical errors made in preparation of the list. (§ 14105.98, subd. (f)(5), fn. 3, ante; 14105.98, subd. (s), fn. 4, ante.)

Sometime in December 1994, after the December 16th issuance of the list, appellant (a private hospital) contacted the Department by telephone and said the Department had made an error in counting appellant’s 1993 patient days by failing to double the obstetric (OB) codes to take into account the newborns.

In a letter dated April 21, 1995, the Department responded to a February 7, 1995, letter from appellant (the February 7th letter is not part of the record) concerning this claim of error. The Department’s letter stated it made a “cursory review” of appellant’s claim and determined it was unfounded. The cursory nature of the review was because staff efforts were directed to issues which could be corrected, i.e., mathematical and typographical errors in preparation of the list. Such errors (unrelated to appellant) were found, and a modified list was issued January 31, 1995. Thereafter, upon receipt of appellant’s February 7th letter, the Department researched the discrepancy between its determination of appellant’s “cap days” and appellant’s determination. The Department found appellant had changed from a “contracting OB rate-per-discharge hospital” to a “contracting all-inclusive rate-per-discharge hospital” during 1993. This change, not the count of newborn days, accounted for the discrepancy. The Department stated it had been unaware of the change. The Department indicated it would adjust the DSH program for future years but not for the 1994-1995 year.

By letter dated May 4, 1995, appellant asserted it had no obligation to notify the Department of changes in appellant’s Medi-Cal contract so as to assist the Department in its mandated responsibilities.

In further correspondence, the Department acknowledged “we inadvertently failed to include certain general acute care accommodation codes specific to a change in the contract. This failure caused us to set the allowable day cap at 11,282 rather than 13,582.” The Department stated the statute precluded it from making a correction, since this was not a mathematical or typographical error made in preparation of the DSH list. The Department further stated corrections are discretionary, and it must evaluate their potential impact on all DSH hospitals; therefore, even if the statute permitted change, it did not require change.

In opposing the writ petition in the trial court, the Department submitted a declaration from Carolynn Michaels, the Department’s chief of the disproportionate share unit. She attested in part as follows:

“. . . The DSH Supplemental Payment Adjustment Program is a federally mandated program. The program is designed to recognize those hospitals which serve a disproportionate number of Medicaid (Medi-Cal in California) and low income/charity patients and to compensate these providers for their unrecovered costs of caring for Medicaid and other indigent patients. In California, this program is administered by [the Department] on a state fiscal year basis. The total program dollars available for each federal fiscal year is capped at $2.19 billion. These funds represent 50% federal dollars and 50% intergovernmental transfers (from counties, hospital districts and the University of California Regents). The DSH program has no state funding.

“. . . Each year, the Department determines which California hospitals are eligible to participate in the DSH program for that particular year. Hospitals do not apply for the DSH program. The Department calculates eligibility for the program from historical data. These calculations are based on the federal requirements for eligibility as set forth in subdivision (d) of section 1396r-4 of title 42 of the United States Code, and the California Medicaid State Plan. Eligibility to participate in the DSH program hinges on two factors: the hospital’s ‘Medicaid utilization rate’ and/or its Tow income utilization rate.’

“. . . Each year, after the eligibility determination is completed, the Department issues the DSH list. The ‘disproportionate share list,’ defined in . . . section 14105.98(a)(1), ‘means an annual list of disproportionate share hospitals that provide acute inpatient services issued by the department for purpose[s] of this section.’ Components of the DSH list are identified in. . . section 14105.98(f)(2), . . .’ (A) The name and license number of the hospital. (B) Expressed as a percentage, the hospital’s . . . Medi-Cal utilization rate and low-income utilization rate. . . . (C) Based on the hospital’s low-income utilization rate, the hospital’s low income number.’ These components are the only defined elements on the DSH list as published each year by the Department.”

Michaels attested the DSH list for the 1994-1995 year was issued on December 16, 1994. An error capable of correction (not the error of which appellant complains) was corrected, and a modified list was issued on January 31, 1995. The error of which appellant complained could not be corrected because it was an alleged error in the “cap” on DSH payments, and the “cap” is not an element of the DSH list and therefore is not subject to correction under section 14105.98.

Michaels further attested: “Once the eligibility list is issued, the Department compiles additional data on the eligible hospitals and performs several specific calculations to determine each hospital’s ‘projected total payment adjustment.’ This process is in section 14105.98 and in the California Medicaid State Plan (Attachment 4.19-A).[] When these calculations are completed, the projected total payment adjustment amount is communicated via letter to each hospital.

“. . . The methodology the Department utilizes in determining each transferor entity’s intergovernmental transfer amount is identified in . . . section 14163. Although the methodology is fairly complex, simply put, transferring entities (counties, U.C. Regents and hospital districts) are those which have an associated hospital participating in the DSH program for the specific year. For example, Sacramento County does not participate in the fiinding of this program because there is no County hospital. On the other hand, U.C. Davis is a DSH eligible hospital and their ‘public entity’ (the U.C. Regents) do[es] participate in making intergovernmental transfers. The actual amount each transferring entity is assessed is proportional to the amount of dollars their hospital(s) is (are) projected to receive in the DSH program year. In total, all transferring entities must pay into the state’s Medi-Cal Inpatient Payment Adjustment (MIPA) fund an amount equal to fifty percent of the total projected hospital payments to be made to all participating hospitals (public and private), which constitutes the non-federal share of the total payments.

. . Each year, after the issuance of the DSH list and the projected payment amounts for each of the eligible hospitals, the Department receives inquiries from hospitals which seek clarification on how the calculations were computed. The Department works closely with these hospitals, explaining the sources of the data and the specific formulas used in performing the calculations, emphasizing the finality of the process. The most important point made to these hospitals is that, once all of the calculations are performed and the transfer[] or entities are billed for the specific intergovernmental transfer, there is no reconsideration of data. A case-by-case review of all inquiries made at the beginning of each payment adjustment year, would have a devastating impact on the entire process of calculating eligibility, projected payment amounts, and beginning with the 1995/96 payment adjustment year, the OBRA [Omnibus Budget Reconciliation Act] ’93 limits, as well as the transfer[]or entity intergovernmental payment amounts. All calculations and resulting individual hospital payment amounts are interrelated and impact each future step. Individual hospital challenges to various aspects of each of the calculations would cause indefinite delays in payments, pending resolution of all problems. All final payment and transfer amounts are dependent on each other, so as to have a domino effect, and the ultimate start of the dollars flowing to hospitals depends upon the finality of all calculations. Thus, the petitioner’s request to change their data for the 1994-95 year would require the recalculation and redistribution of all intergovernmental transfers and hospital payments.[]

“. . . The alleged ‘error’ that the petitioner alludes to is contained in a portion of the data utilized by the Department to determine the projected total payment adjustment amount as described in paragraph #11, above. However, as noted in paragraph #13, once all of the interrelated calculations are completed and the corresponding payment amounts and transfer amounts are communicated, calculations are final.”

The Michaels declaration further explained: “. . . During the time period between the issuance of the original DSH list and the issuance of the modified DSH list, the Department only corrected the error which specifically dealt with eligibility determination of hospitals for inclusion on the DSH list as authorized by section 14105.98(f)(5). A mathematical error was made in the calculation of the Medicaid Utilization Rate (MUR). When calculating the denominator, an incorrect variable was inadvertently accessed from the data base. The number used for ‘total days’ in the denominator inaccurately included sub-acute days, long term days, intermediate care days, residential days, and long term psychiatric days. A less significant error was also made. The nursery days were added twice when computing the denominator of the fraction for hospitals reporting on the ‘old’ OSHPD [Office of Statewide Health Planning and Development] reporting form. This part of the calculation was performed correctly for hospitals reporting on the ‘new’ OSHPD form. These mathematical errors resulted in a lower MUR for many hospitals and a lower MUR eligibility threshold number (one standard deviation above the mean). In sum, these calculations affected only the MUR eligibility determination as to which hospitals would be on the DSH list, as opposed to affecting the calculation of individual hospital payment amounts, which occurs at a later time.”

Appellant replied with a declaration of a health care consultant, James Foley, who stated in part that the Department could have easily corrected the error with respect to appellant at the same time the Department withdrew the DSH list for correction of the mathematical error unrelated to appellant. Foley further declared, with respect to the “domino effect” of making corrections, “based upon my review of hundreds of DSH calculations, the error at issue in this case is unusual, perhaps even unique. I am aware of only a handful of other DSH challenges, and none of them involve the specific problem at issue here, and indeed two of them do not relate to determination of the ‘cap’ at all, but rather to the petitioner-hospitals’ basic eligibility for DSH payments.”

Following a hearing, the trial court on July 11,1996, filed its “Order and Judgment,” stating in part as follows:

“1. [Appellant’s] requests that the Court issue a peremptory writ of mandate requiring Health Services to increase [appellant’s] payments under the disproportionate share hospital (DSH) program for the 1994-95 fiscal year, and for any other relief, are denied.

“2. It is found that Health Services made a mistake in calculating the payments to petitioner in that the computer followed an incorrect code. Such a mistake was not made in preparation of the list and is not correctable as a mathematical or typographical error or an omission on the part of Health Services or the Office of Statewide Health Planning and Development. The mistake was not arbitrary and capricious and did not constitute an abuse of discretion.

“3. The Legislature has determined that errors made in the administration of the DSH program are not appealable, with certain non-applicable exceptions. Administration of the DSH program is so interrelated and complicated the program would come to a halt if independent hospitals were able to appeal determinations once the list has been issued. The lack of the ability to appeal in light of the interdependence of the program is not an untoward infringement, and does not rise to a constitutional challenge. Some harm is permitted in aid of the greater cause. Relief available under the DSH program is prospective. The Court specifically determines that retrospective relief is not available and that there will be no redeterminations of hospitals eligible to be on the DSH list or of allocation of funds for any previous periods.”

The hospital appeals.

Discussion

I. Standard of Review

“In reviewing the trial court’s ruling on a writ of mandate [under Code of Civil Procedure section 1085], the appellate court is ordinarily confined to an inquiry as to whether the findings and judgment of the trial court are supported by substantial, credible and competent evidence. This limitation, however, does not apply to resolution of questions of law where the facts are undisputed. In such cases, as in other instances involving matters of law, the appellate court is not bound by the trial court’s decision, but may make its own determination. [Citation.]” (Rodriguez v. Solis (1991) 1 Cal.App.4th 495, 502 [2 Cal.Rptr.2d 50].) This appeal presents questions of law subject to de novo review.

II. Appellant’s Contentions

A. Citation to Trial Court Opinion in Unrelated Case

We first reject appellant’s reliance on a trial court opinion in an unrelated case.

In its opening brief on appeal, appellant attached as an appendix to its brief a copy of a trial court’s “Ruling on Submitted Matter” in an unrelated case (CHCM, Inc. v. Belshé (Super. Ct. Sacramento County, No. 96CS01023) ruling of Sept. 3, 1996) (CHCM) which assertedly raised similar issues concerning correctability of errors in DSH payment adjustments. Appellant requested that we take judicial notice of this unpublished ruling. Appellant’s counsel later withdrew the request for judicial notice in a letter to this court dated February 3, 1997, in which counsel stated the request was being withdrawn because it was assertedly inappropriate to make such a request in a brief. Counsel stated he merely intended to ask this court to consider the CHCM ruling as “relevant authority concerning the same general subject matter raised in the present case.” Appellant’s reply brief repeats the request that we consider the CHCM ruling.

We decline to consider the CHCM ruling. Even assuming for the sake of argument that the CHCM case involves the same issue as the case before us (a point disputed by the Department), a written trial court ruling has no precedential value. (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 763, pp. 730-731.)

Asserting that California Rules of Court, rule 977, precludes only citation of unreported appellate opinions, appellant leaps to the illogical conclusion that unreported trial court opinions are citable authority. Appellant cites Witkin for the proposition that trial court decisions may be considered instructive and persuasive, particularly where there is no binding higher authority. (9 Witkin, Cal. Procedure, supra, § 763, pp. 730-731.) However, what the cited treatise says is “The doctrine [of stare decisis] applies only to decisions of appellate courts. Trial courts make no binding precedents. . . . [H But such decisions [trial court decisions and administrative tribunal decisions] are by no means ignored; when collected and readily available for study, they may be cited for their persuasive value, and are occasionally followed in the absence of controlling higher authority. Examples are: [