Cuts to Medi-Cal reimbursement rates may close rural hospitals

The Sacramento Bee reported yesterday on the possibility--even probability--that several rural hospitals and skilled nursing facilities in northern California are facing impending closure, largely due to cuts in Medi-Cal reimbursement rates. These cuts, reflected in AB 97 passed in 2011 and designed to save California $330 million each year, trimmed 10 percent from the state's Medi-Cal budget. They affect 88 California hospitals.

Here's an excerpt from Jane Braxton Little's story, dateline Portola (population 2,104), and headlined "Portola Hospital could face closure over Medi-Cal reimbursement reductions."

Within the next few weeks – even days – the hospital that has been saving lives in this rural Plumas County community since 1910 may itself face mortality. 

Eastern Plumas Health Care is confronting a combination of reductions in its Medi-Cal reimbursements that amount to as much as 25 percent of the total, said Tom Hayes, administrator of the 75-bed hospital. 

In addition to a $1.3 million annual cut to the federal Medicaid program, called Medi-Cal in California, the state Department of Health Care Services is demanding a $2.4 million repayment of funds already issued retroactive to 2011.

Hayes explained that the cuts would reimburse skilled nursing facilities at rates 20% to 40% below below the facilities' actual cost to provide the services.  He went on to comment:  

If the California Department of Health Care Services requires us to pay this amount, it will be the demise of not only our skilled nursing facility but the entire organization.

A number of rural hospitals, as well as the California Hospital Association, sought an injunction to stay the cuts.  That injunction was upheld by a federal district court in Los Angeles, who ruled in February 2012 that "California's fiscal crisis does not outweigh the irreparable injury the plaintiffs would suffer." In December, 2012, that decision was reversed by a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit.  Thus the cuts can be levied in March or April.  Meanwhile, the plaintiffs are seeking to have their case heard en banc by the Ninth Circuit.  

The Bee notes that Assemblyman Luis Alejo, D-Watsonville, has introduced AB 900 to stop the proposed budget cuts to Medi-Cal reimbursements.

Meanwhile, hospitals like the one in Portola seem to be living on borrowed time.