Nursing Home Industry Sues State

The state’s nursing home industry has filed a lawsuit claiming the California Department of Health Services underpaid long-term care facilities by at least $54 million for their care of Medi-Cal beneficiaries in 2001-2002.

The California Assn. of Health Facilities, which represents 1,400 long-term care homes, says the state did not pay nursing homes and facilities for the developmentally disabled enough money to cover higher costs associated with energy, workers’ compensation and liability insurance.

The lawsuit contends that the state health department knew about those increased costs but acted “arbitrarily and capriciously” in not paying nursing homes for them. The trade group is asking a Superior Court judge in San Francisco to order the state to repay facilities at least $2.16 per patient per day to offset the cost increases for care provided between Aug. 1, 2001, and July 31, 2002, totaling $54.6 million.

“Basically, we’ve seen total operating costs that have escalated at rates of 20% over the past two years, and we’ve received a little under 3% from the state,” said Darryl Nixon, director of reimbursement and fiscal programs for the health facilities association.

Similar suits against the state have been successful in arguing that the state owes Medi-Cal providers enough money to guarantee eligible patients access to care. Three lawsuits since 1987 have led to increased payments or prevented cutbacks in payments to doctors, hospitals and dentists.

Lea Brooks, a spokeswoman for the state Department of Health Services, would not comment on the nursing-home suit, saying that her agency has not reviewed it.

The suit, which was filed Dec. 6 and amended Jan. 17, comes as nursing homes and other medical providers try to fend off additional fee cuts proposed by Gov. Gray Davis to bridge a massive state budget shortfall.

The governor has proposed cutting Medi-Cal reimbursements to doctors, nursing homes, pharmacies and most other health professionals by 15%. That would save $1.5 billion in next year’s budget, half of which would revert to the general fund. So far, legislators have rejected fee cuts.