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Media Alerts - Hoag Memorial Hospital v. Price
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October 26, 2017
  Hoag Memorial Hospital v. Price
Headline: Ninth Circuit holds that the Secretary of the U.S. Department of Health and Human Services violated 42 U.S.C. §1396(a)(30)(A) and acted in an arbitrary and capricious way in approving a retroactive 10% reduction in payments for outpatient services provided to California's Medi-Cal program beneficiaries.

Areas of Law: Medicaid; Administrative Law; Social Security

Issue Presented: Whether the Secretary's approval of an amendment to California's Medi-Cal program was arbitrary and capricious where there was no evidence comparing the availability of health care providers to Medi-Cal beneficiaries and the general population as required by 42 U.S.C. §1396(a)(30)(A).

Brief Summary: The Ninth Circuit reversed and remanded the district court's grant of summary judgment in favor of the Secretary that approved the Secretary's decision to implement a retroactive 10% reduction for outpatient services for Medi-Cal beneficiaries. The panel found the Secretary's decision was not entitled to Chevron deference and that he acted arbitrarily capriciously by failing to consider whether §30(A)'s express requirement of equal access to medical services would be satisfied.

Extended Summary: California requested the Secretary to approve a state plan amendment (SPA) to its Medi-Cal program that would authorize a retroactive 10% reduction for outpatient services for Medi-Cal beneficiaries. The Secretary initially declined approving the SPA because California did not provide information concerning the impact of the proposed reductions on beneficiary access to services. The state resubmitted the SPA and provided information on provider participation in Medi-Cal and beneficiary use of hospital outpatient services over a three-year period. The Secretary later approved the resubmitted SPA and found the State was in compliance with § 30(A).

A group of 57 hospitals that provide outpatient services to Medi-Cal beneficiaries filed a suit challenging the Secretary's approval of the SPA on a number of grounds, including that the record lacked evidence regarding the comparative level of access available to Medi-Cal beneficiaries and the general population. The district court granted summary judgment for the Secretary. The court held that the Ninth Circuit decision in Managed Pharmacy Care v. Sebelius, 716 F.3rd 1235 (9th Cir. 2013), controlled, and the court was required to defer to the Secretary's approval of the SPA. It went on to find that § 30(A) does not specify any particular procedures required for obtaining an approval of an amendment. This appeal followed.

The Ninth Circuit reversed and remanded the case to the district court. The panel discussed whether the Secretary's decision was entitled to Chevron deference. It held that where Congress had unambiguously expressed its intent in a statute, a conflicting administrative agency decision is not entitled to such deference. Because § (30)(A) specifically requires that a SPA must be structured so care and services are available to beneficiaries to at least the same extent as they are available to the general public, the Secretary acted arbitrarily and capriciously by approving the SPA without evidence addressing the equal access requirement. The panel found the Secretary could not have determined the equal access requirement where the evidence did not include any information regarding what services were available to the general population.

The panel also distinguished this case from Managed Pharmacy Care, one that also involved §30(A). In Managed Care, the specific question was whether the Secretary must take provider costs into consideration before approving a rate-reducing SPA. The Ninth Circuit held in Managed Care that where a statute does not describe the specific steps a state must take to meet a standard, the agency is not required to follow a fixed methodology and its decision is entitled to Chevron deference. The instant case is different because the express language of § 30(A) requires a comparison of the availability of provider care to Medi-Cal beneficiaries with that of the general population.

The panel remanded the case to the district court.

To read the full opinion, please visit:

Panel: Milan D. Smith, Jr. and N.R. Smith, Circuit Judges, and Gary Feinerman, District Judge.

Argument Date: April 5, 2017

Date of Issued Opinion: August 7, 2017

Docket Number: 15-56547

Decided: Reversed and Remanded

Case Alert Author: Samantha K. Pruett

Counsel: Robert C. Leventhal (argued) and A. Joel Richlin, Foley & Lardner LLP, Los Angeles, California, for Plaintiffs-Appellants.

Jeffrey Eric Sandberg (argued), Lindsey Powell, and Mark B. Stern, Attorneys, Appellate Staff; Eileen M. Decker, United States Attorney; Civil Division, United States Department of Justice, Washington, D.C.; for Defendant-Appellee.

Author of Opinion: Judge Milan D. Smith, Jr.

Circuit: Ninth Circuit

Case Alert Supervisor: Philip L. Merkel

    Posted By: Glenn Koppel @ 10/26/2017 11:58 AM     9th Circuit  

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