Court upholds ruling in favor of Department of Health Care in private ambulance compensation case

By Tomas Kassahun | Mar 24, 2018

SAN FRANCISCO – The U.S. Court of Appeals for the 9th Circuit has upheld a district court’s ruling in favor of the director of the California Department of Health Care Services in a lawsuit brought by private ambulance companies over compensation.

A decision in Sierra Medical Services Alliance, Care Flight, et al. vs. Jennifer Kent was argued and submitted last November and filed March 6. Ronald Lee Gilman, U.S. Circuit Judge for the U.S. Court of Appeals for the 6th Circuit, wrote the opinion. The case had been appealed from the U.S. District Court for the Central District of California.

The plaintiffs had alleged violation of the Fifth Amendment’s takings clause, the 14th Amendment’s due process clause, the commerce clause, and the contract clause of the United States Constitution. 

“The ambulance companies alleged that their constitutional rights were violated because they received only 20 cents in reimbursement for every dollar that they spent to transport Medi-Cal patients,” the opinion said.

The reimbursement rate is set by DHCS according to regulations approved by the Centers for Medicare and Medicaid Services, the appeals court said.

According to the court, California law requires ambulance companies to give emergency services to patients despite the patient's inability to pay.

“To at least partially offset the cost of providing such transportation, California has an established reimbursement rate for those companies voluntarily enrolled as providers with the state’s Medicaid program (Medi-Cal) when they transport Medi-Cal patients,” the opinion said.

The plaintiffs alleged that they have suffered $60 million in annual losses due to only being paid 20 percent of the total cost.

The appeals court said California makes supplemental reimbursement available to public emergency transportation services such as fire departments, but not for private providers such as the plaintiffs.

The plaintiffs said the reimbursement program is a violation of the equal protection clause of the 14th Amendment because public emergency transportation services are entitled to reimbursement unlike private emergency services.

“Payments to public providers count toward the state’s share of Medicaid dollars, whereas payments to private providers do not,” the opinion said. “Steering more Medi-Cal spending toward public providers is therefore in the state’s fiscal interest. Accordingly, the supplemental-reimbursement program survives rational-basis review.” 

The plaintiffs also argued that DHCS failed to make sure that Medi-Cal reimbursement rates have kept pace with the plaintiffs’ costs.

“The plaintiffs voluntarily participate in Medi-Cal and therefore have no constitutionally protected interest in any particular Medi-Cal reimbursement rate,” the opinion said.

The appeals court added that the plaintiffs were given plenty of time to come up with strong evidence, but didn’t do so.

“If, as the court found and as DHCS argues on appeal, the record lacks evidence upon which the plaintiffs can sustain their claims, then the court properly entered judgment for DHCS,” the opinion said. 

The plaintiffs argued against the documents DHCS submitted in regards to its motion for summary judgment.

The appeals court said the documents do not matter because the court didn’t make its opinion based on those documents.

The court added that the plaintiffs made claims that were not included in their amended complaint, so the district court didn’t make a judgment on those claims.

The taking clause claim was the most valid claim made by the plaintiffs, the appeals court said.

The taking clause claim, according to the opinion, prohibits the taking of “private property . . . for public use, without just compensation.” 

“A takings clause claim requires proof that the plaintiff 'possesses a ‘property interest’ that is constitutionally protected,'” the court said.

The district court had ruled that the plaintiffs don’t have a constitutionally protected property interest, saying “[b]ecause participation in Medicaid is voluntary, . . . providers do not have a property interest in a particular reimbursement rate.” 

The plaintiffs said their ambulances, equipment, wages, supplies, insurance, goodwill and ambulatory service as well as employment contracts are property rights at issue. 

“The MediCal program does not compel the plaintiffs to furnish those resources for public use,” the opinion said. “The program provides compensation at predetermined rates only to those providers that voluntarily choose to participate.”

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