Case 2:0'1 9-cv-08642-CAS-MAN Document 1
II I

Filed 11/24/09

1 LLOYD A, BOOKMAN (State Bar No. 89251)
E-Mail: lbookman@health-Iaw.com 2 JORDAN B. KEVJJ:tE (State Bar No. 217868)
E-Mail: jkeville@healtli-Iaw.com 3 HOOPER, LlJN1)Y & BOOKMft...N, INC.
1875 Century Park East, Suite 1600 4 Los AngeleS~ California 90067-2517
Telephone: 310) 551-8103 5 Facsnnile: ( 10) 551-8181
6 Attorneys for CALIFORNIA HOSPITAL ASSOCIATION
7

Page 1 of 26 Page ID #:1

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UNITED STATES DISTRICT COURT

9

. CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

10

CV09 08642

11 CALIFORNIA HOSPITAL ASSOCIATION,
12 Plaintiff,
13

CASE NO.
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

14 DAVID MAXWELL-JOLLY,
15 DIRECTOR OF THE STATE DEPARTMENT OF HEALTH CARE
16 SERVICES, STATE OF CALIFORNIA,
17 Defendant.
18

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20

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1070114.3

COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 2 of 26 Page ID #:2

1

JURISDICTION AND VENUE

2

1. Plaintiff California Hospital Association ("CHA") brings this

3 complaint pursuant to 28 United States Code ("U.S.C.") § 1331, the Supremacy

4 Clause and 42 U.S.C. § 1983. Shaw v. Delta Air Lines, Inc., 463 U.S. 85,96 n. 14

5 (1983). This court further may compel Defendant David Maxwell-Jolly, Director of

6 the California Department ofHealth Care Services (the "Director") to comply with

7 the mandatory provisions of the federal Medicaid law pursuant to 28 U.S.C. § 1361.

8

2. Venue lies in this judicial district under 28 U.S.C. § 1391, in that the

9 Director has offices within this judicial district and is thus deemed to reside within

10 this judicial district.

11

12

INTRODUCTION

13

3. The State of California continues to disregard the mandates of federal

14 law when making decisions that impact the rates of reimbursement afforded to

15 health care providers under California's Medicaid program, Medi-Cal. On two

16 separate occasions in 2008, as part of the enactment of the State budget, the

17 California Legislature passed statutes that called for flat percentage reductions in the

18 payment rates for various classes of services covered under Medi-Cal. The majority

19 of these payment rate reductions were enjoined by federal courts because they were

20 not enacted or implemented in a manner consistent with the federal Medicaid Act,

21 which requires that states consider certain factors and take certain procedural steps

22 before altering the rates paid to health care providers. Indeed, these rate reductions

23 resulted in two, published decisions from the Ninth Circuit Court of Appeals

24 establishing dearly that, to the extent it undertakes the task of setting Medi-Cal

25 payment rates, the Legislature must comply with the mandates of federal law and, if

26 it does not, the offending State statutes will be preempted.

27

28

1070114.3

COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 3 of 26 Page ID #:3

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4. The Legislature's effort to balance California's budget for the 2009-

2 2010 fiscal year has resulted in legislation that once again reduces Medi-Cal

3 payment rates solely in the name of financial savings and without adherence to the

4 requirements of the Medicaid Act. Although the form of the most recent rate

5 reductions may differ slightly from the flat percentage reductions that were enjoined

6 previously, the process through which the latest limitations were enacted was

7 viliually identical to the process that led to the now enjoined cuts. The State should

8 not be permitted to continue to ignore federal law when setting Medi-Cal payment

9 rates.

10

5. By this action, an organization representing the interests of California

11 hospitals seeks an injunction to invalidate and stop the implementation of these

12 latest Medi-Cal rate limitations, which went into effect either on July 1 or August 1,

13 2009, as they apply to payment rates for multiple categories of hospital services.

14 These new payment limitations will improperly deprive Medi-Cal participating

15 hospitals, including some small and rural facilities, of reimbursement to which they

16 otherwise are lawfully entitled. Moreover, these payment reductions, combined

17 with those that have become before them, are threatening the ability of many

18 hospitals to continue to provide certain services and thereby potentially creating

19 gaps in access to such services for Medi-Cal beneficiaries.

20

6. The newly enacted payment limitations are illegal because, as it has

21 multiple times before, California failed to fulfill its legal mandate to consider

22 whether the resulting reimbursement rates are consistent with efficiency, economy

23 and quality of care, reasonably related to provider costs, and sufficient to enlist

24 enough providers so that Medi-Cal beneficiaries have access to the impacted

25 services to the extent such services are available to the general public. The State

26 further violated federal law, like it has done before, by enacting the reimbursement

27 limitations without the proper public process required for payment rate adjustments.

28

1070114.3

2
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 4 of 26 Page ID #:4

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7. For these and other reasons, these latest Medi-Cal rate limitations for

2 hospitals violate federal law. The imposition ofthese rate limitations has caused,

3 and will continue to cause, irreparable harm to California hospitals in the form of

4 improperly reduced payments that cannot be recovered in federal court through an

5 action at law. Accordingly, Plaintiff seeks declaratory and injunctive reliefto

6 prevent the rate limitations from taking effect and, to the extent the limitations

7 already are in operation, to stop them from being applied any further.

8

9

FEDERAL MEDICAID LAW

10

8. Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq., the

11 Medicaid Act, authorizes federal financial support to states for medical assistance to

12 low-income persons who are aged, blind, disabled, or members of families with

13 dependent children. The program is jointly financed by the federal and state

14 governments and administered by the states. The states, in accordance with federal

15 law, decide eligible beneficiary groups, types and ranges of services, payment level

16 for services, and administrative and operative procedures. Payment for services is

17 made directly by states to the individuals or entities that furnish the services. 42

18 Code of Federal Regulations ("C.P.R.") § 430.0.

19

9. In order to receive matching federal financial participation, states must

20 agree to comply with the applicable federal Medicaid law and regulations, 42 U.S.C.

21 §§ 1396 et seq. Once a state has decided to participate in the Medicaid program,

22 compliance with the federal Medicaid law and regulations is mandatory.

23

10. At the state level, the Medicaid program is administered by a single

24 state agency, which is charged with the responsibility of establishing and complying

25 with a state Medicaid plan (the "State Plan") that, in turn, must comply with the

26 provisions of applicable federal Medicaid law. 42 U.S.c. § 1396a(a)(5) and 42

27 C.F.R. §§ 430.10 and 431.1 O. The State Plan must be submitted to the Secretary of

28 the United States Department of Health and Human Services (the "Secretary") for

10701]4.3

3
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 5 of 26 Page ID #:5

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1 approval and must describe the policies and methods to be used to set payment rates

2 for each type of service included in the state Medicaid plan. 42 C.F.R. §§ 430.10

3 and 447.201 (b). Changes to the State Plan may not be implemented by the state

4 prior to being approved by the Secretary.

5

11. For hospitals and certain other institutional providers, states must

6 establish rates through a public process that includes: (a) publication of proposed

7 rates, the methodologies underlying the establishment of such rates, and

8 justifications for the rates; (b) a reasonable opportunity for comment on the

9 proposed rates, methodologies and justifications by providers, beneficiaries and

10 their representatives, and other concerned State residents; and (c) publication of the

11 final rates, the methodologies underlying the establishment of such rates, and

12 justifications for such final rates. See 42 U.S.C. § 1396a(a)(13)(A) (hereinafter

13 "Section 13(A)"); 42 C.F.R. § 447.205.

14

12. Each state's Medicaid plan must "provide such methods and

15 procedures ... relating to the utilization of, and the payment for, care and services

16 available under the plan which may be necessary ... to assure that payments are

17 consistent with efficiency, economy, and quality ofcare and are sufficient to enlist

18 enough providers so that care and services are available under the plan at least to

19 the extent that such care and services are available to the general public in the

20 geographic area . ... If 42 U.S.C. § 1396a(a)(30)(A) (hereinafter "Section 30(A)")

21 (emphasis added); 42 C.F.R. § 447.204. Section 30(A) has been interpreted by the

22 Ninth Circuit Court of Appeals to require state Medicaid agencies to consider

23 provider costs, based on "reasonable cost" studies, when setting Medi-Cal payment

24 rates and to preclude states from basing Medicaid rate setting decisions solely on

25 budgetary factors.

26

27

28

1070114.3

4
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 6 of 26 Page ID #:6

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1

CALIFORNIA'S MEDI-CAL PROGRAM

2

l3. The State of California has elected to participate in the Medicaid

3 program. California has named its program "Medi-Cal." See Cal. Welf. & Inst.

4 Code §§ 14000 et seq.; 22 Cal. Code of Regs. §§ 50000 et seq.

5

14. Medi-Cal healthcare payments are disbursed in two ways. The first is a

6 "fee for service" process whereby the Department of Health Care Services (the

7 "Department") determines whether the healthcare services were covered and

8 furnished to an eligible beneficiary, and, if so, pays the service providers directly.

9 Alternatively, the Department administers Medi-Cal through various managed care

10 models operated by public and private entities under contract.

11

15. In 1982, the California Legislature authorized the Department to enter

12 into contracts with selected hospitals to furnish inpatient services in accordance with

13 the terms set forth in those contracts. The system is known as the selective provider

14 contracting program ("SPCP"). See Cal. Welf. and Inst. Code § 14081 et seq. The

15 hospitals contracting pursuant to the SPCP are often referred to as "contract

16 hospitals" and generally are paid based on negotiated per diem rates for inpatient

17 services furnished by the hospital. Hospitals that do not have SPCP contracts are

18 referred to herein as "noncontract hospitals" and are paid directly by the Department

19 for inpatient services using the payment formula discussed below.

20

21

MEDI-CAL PAYMENTS TO HOSPITALS

22

16. Payments from the Medi-Cal fee for service program to hospitals for

23 various categories of services are governed by various statutes, regulations, the State

24 Plan, and in some instances, informal handbooks, manuals or bulletins.

25

17. Payments for inpatient hospital services to noncontract hospitals are

26 governed by 22 California Code of Regulations ("C.C.R.") §§ 51545-51556 and

27 Attachment 4.l9-A to the State Plan. Hospitals are reimbursed the lowest of (1)

28 their reasonable costs determined using Medicare reasonable cost principles, (2) an

10701143

5
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 7 of 26 Page ID #:7

1 all-inclusive rate per discharge based on cumulative annual adjustments to a base 2 rate, (3) the 60th percentile rate per discharge of hospitals in the same peer group, or

3 (4) customary charges. Hospitals receive interim payments throughout each year

4 which are an estimate ofthe final reimbursement due the hospital. Final

5 reimbursement is determined based on a cost report submitted by the hospital after

6 the close of its fiscal year.

7

18. Payments for outpatient hospital services are addressed at 22 C.C.R.

8 § 51509. In general, specific rates are established for the use of hospital facilities

9 and hospitals are paid for other services, such as laboratory or radiology services, at

10 the rates that are payable to non-hospital providers. Payments provided in certain

11 hospital outpatient departments are governed by Welfare and Institutions Code §

12 14105.24.

13

19. Payments for services provided by nursing facilities that are part of

14 hospitals (Distinct Part/Nursing Facilities, or IDPlNFs") are governed by 22 C.C.R.

15 § 51511 and Attachment 4.19-D to the State Plan. Reimbursement is the lower of

16 (1) a per diem rate based on a particular hospital's projected costs of providing

17 DPINF services or (2) a statewide per diem rate computed by the Department.

18 Payments for subacute and pediatric subacute services are governed by 22 C.C.R. §§

19 51511.5 and 51511.6, as well as Attachment 4.19-D to the State Plan. In general,

20 such payments are the lower of (1) a per diem rate based on a particular hospital's

21 projected costs of providing subacute services or (2) a statewide per diem rate

22 computed by the Department. Under the State Plan, the Department is required to

23 re-evaluate Medi-Cal payment rates for both DPINF and subacute services on a

24 yearly basis. The Department generally is required to make updates to payment

25 rates each year to account for certain economic conditions in the industry, which

26 reflect an assumption that provider costs will generally increase every year due to, at

27 minimum, inflation.

28

1070114.3

6
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 8 of 26 Page ID #:8

1

THE All 5 RATE REDUCTIONS OF 2008

2

20. On February 16,2008, the California Legislature enacted Assembly

3 Bill X3 5 ("2008 AB 5") in special session. Section 14 of said bill added Section

4 14105.19 to the Welfare and Institutions Code. Pursuant to paragraph (b)(1) of

5 Welfare and Institutions Code § 14105.19, payments under the Medi-Cal fee for

6 service program for various classes services were reduced by ten percent beginning

7 with services provided on or after July 1,2008.

8

21. The Legislature also enacted Welfare and Institutions Code §

9 14166.245, which reduced payments to noncontract hospitals for inpatient services

10 furnished on or after July 1,2008, by ten percent. This is accomplished by reducing

11 interim payments for inpatient hospital services furnished by noncontract hospitals

12 on or after July 1,2008, by ten percent, and by limiting the final reimbursement for

13 each patient day of inpatient hospital services furnished on or after July 1, 2008, to

14 90 percent of the hospital's audited allowable cost per day.

15

22. The rate and payment reductions set forth in Welfare and Institutions

16 Code §§ 14105.19(b)(I) and 14166.245 as enacted by 2008 AB 5 are referred to

17 herein as "the 2008 AB 5 Rate Reductions."

18

23. On April 22, 2008, Independent Living Center of Southern California

19 ("ILCSC") and other plaintiffs filed a lawsuit in Los Angeles Superior Court against

20 the Director to challenge the 2008 AB 5 Rate Reductions. The essence of the

21 complaint was that the 2008 AB 5 Rate Reductions violated Section 30(A) of the

22 federal Medicaid Act. The State removed this action to federal court.

23

24. On June 25, 2008, Judge Christina A. Snyder of the United States

24 District Court for the Central District of California denied ILCSC a preliminary

25 injunction on the grounds that it had not established a likelihood of success on its

26 legal claims. ILCSC immediately appealed the denial of the preliminary injunction

27 to the Ninth Circuit Court of Appeals.

28

1070114.3

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COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 9 of 26 Page ID #:9

1

25. By order dated July 16,2008, the Ninth Circuit reversed the district

2 court's denial ofthe injunction, holding that the Supremacy Clause provides a

3 vehicle for prospective enforcement of federal laws such as Section 30(A). On

4 September 17,2008, the Ninth Circuit issued its Opinion on its July 16,2008 Order.

5 Indep. Living Ctr. Of S. Cal. v. Shewry, 543 F.3d 1050 (9th Cir. 2008) [hereinafter

6 "ILC 1'].

7

26. Upon remand, the district court on August 18, 2008, issued a

8 preliminary injunction ordering the State to refrain from implementing the 2008 AB

9 5 Rate Reductions for certain services. Indep. Living Ctr. ofS. Cal. v. Shewry 2008

10 WL 3891211 (C.D.Cal. 2008). The district court found that ILCSC established a

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11 likelihood of success on the merits because the Department did not offer sufficient

12 evidence that it "made the [inquiries required by Section 30(A)] in deciding to enact

13 the ten percent reduction." The district further determined that the 2008 AB 5 Rate

14 Reductions as applied to pharmacies, physicians, dentists and ADHCs had a

15 likelihood of irreparably harming Medi-Cal beneficiaries by limiting access to the

16 healthcare services provided by these classes of providers.

17

27. Both ILCSC and the Director appealed aspects of the district court's

18 preliminary injunction order to the Ninth Circuit. A hearing was held with respect

19 to these appeals on February 18, 2009.

20

28. On July 9, 2009, the Ninth Circuit issued a published decision

21 regarding the appeals of the district court's injunction ofthe 2008 AB 5 Rate

22 Reductions. See Indep. Living Ctr. OfS. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644 23 (9th Cir. 2009) [hereinafter "ILC 11']. The Ninth Circuit affirmed the district court's

24 determination that ILCSC was likely to prevail on its claim that 2008 AB 5 was not

25 enacted in accordance with, and therefore is preempted by, Section 30(A). The

26 Ninth Circuit also concluded that the district court did not abuse its discretion in

27 determining that ILCSC adequately demonstrated the likelihood that irreparable

28 hatm would result if the 2008 AB 5 Rate Reductions were not enjoined.

1070114.3

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COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 10 of 26 Page ID #:10

1

THE All 1183 RATE REDUCTIONS OF 2008

2

29. On September 18,2008, after a protracted budget stalemate, Governor

3 Schwarzenegger signed Assembly Bill 1183 ("AB 1183"), the budget trailer bill for

4 fiscal year 2008-09. AB 1183 amended Welfare and Institutions Code § 14105.19,

5 making most aspects of the 2008 AB 5 Rate Reductions effective only through

6 February 29,2009, including rate cuts for hospital outpatient, subacute and DP/NF

7 services. AB 1183 made the 2008 AB 5 Rate Reductions of Welfare and

8 Institutions Code § 14105.19 applicable to small and rural hospitals until October

9 31,2008. That meant, beginning on November 1, 2008, "small and rural" hospitals,

10 as defined in the California Health and Safety Code, were exempt from the ten

11 percent rate reduction.

12

30. AB 1183 also enacted the following modified rate reductions, subject to

13 certain exemptions, effective March 1,2009, by implementing Welfare and

14 Institutions Code § 14105.191:

15

(a) A five percent rate reduction for Medi-Cal fee-for-services

16 benefits paid to, among other facilities, DP/NFs, rural swing-bed facilities, subacute

17 care units that are, or are parts of, distinct parts of general acute care hospitals, and

18 pediatric subacute care units that are, or are parts of, distinct parts of general acute

19 care hospitals; and

20

(b) A one percent rate reduction for all other Medi-Cal fee-for-

21 service benefits, including hospital outpatient services.

22

31. AB 1183 also imposed additional reductions on reimbursement from

23 the Medi-Cal program to noncontract hospitals for inpatient hospital services by

24 amending Welfare and Institutions Code § 14166.245 to result in the following

25 payment rates, effective March 1,2009:

26

(a) For most noncontract hospitals, interim payments for inpatient

27 hospital services are the lesser of90% of the interim rate or 95% of an "average

28 regional per diem contract rate." Final reimbursement is limited to the lesser of

I0701l4.3

9
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 11 of 26 Page ID #:11

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1 90% of the hospital's audited allowable cost per day or 95% of an "average regional

2 per diem contract rate."

3

(b) "Small and rural hospitals" are exempted from these limitations.

4

(c) Certain hospitals in open health facility planning areas are

5 subject only to the 10% rate reductions and not the "average regional per diem

6 contract rate" limitations.

7

32. The reductions set forth in Welfare and Institutions Code §§ 14105.191

8 and 14166.245, as enacted by AB 1183, are hereinafter referred to as the "AB 1183

9 Rate Reductions."

10

33. On January 29,2009, a coalition ofMedi-Cal providers and provider

11 organizations, including CRA, filed a complaint in district court against the Director

12 challenging the AB 1183 Rate Reductions as to pharmacy, adult day health care

13 center ("ADHC") and hospital services on the grounds that AB 1183 was not

14 enacted in accordance with the requirements ofthe Medicaid Act, including those

15 set forth in Section 30(A). On February 11, 2009, CRA and other individual

16 hospital plaintiffs filed a motion in the district court seeking preliminary injunction

17 of the AB 1183 rate cuts for hospital services. The other, non-hospital plaintiffs

18 filed a separate motion to enjoin the rate reductions as to pharmacy and ADHC

19 services.

20

34.. On March 9, 2009 the district court issued orders on both preliminary

21 injunction motions conceming the AB 1183 Rate Reductions. The district court

22 concluded, with respect to both motions, that the plaintiffs demonstrated a

23 substantial likelihood of prevailing on their claims that the AB 1183 Rate

24 Reductions conflicted with, and therefore are preempted by, Section 30(A).

25 Notwithstanding this finding, the district court declined to enjoin the AB 1183 Rate

26 Reductions for hospital services on the grounds that the hospital plaintiffs had not

27 demonstrated that they would be irreparably harmed by the reduced payment rates

28 because they did not show that beneficiary access to hospital services would be

1070114.3

10
COMPLAINT

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1 reduced as a result of the rate reductions. In reaching this decision, the district court

2 rejected an.argument by CRA and the other hospital plaintiffs that hospitals

3 necessarily were irreparably harmed by the AB 1183 rate reductions because they

4 are precluded by the Eleventh Amendment from obtaining retroactive compensation

5 from the State in federal court for any under-reimbursement.

6

35. CRA and the other hospital plaintiffs appealed the district court's order

7 on March 11, 2009. The next day, they filed an emergency motion with the Ninth

8 Circuit seeking a temporary stay of the AB 1183 Rate Reductions for hospitals on

9 the grounds that the district court committed legal error by not finding that hospitals

10 were faced with irreparable harm by virtue of reduced Medi-Cal payment rates.

11

36. The emergency motion was granted in a published decision from the

12 Ninth Circuit. See California Pharmacists Ass'n v. Maxwell-Jolly, 563 F.3d 847 (9th

13 Cir. 2009). In Cal. Pharm., the Ninth Circuit concluded that the plaintiffs showed

14 that AB 1183 likely was preempted by Section 30(A) because the statute, and the

IS Medi-Cal rate cuts called for thereby, were enacted without consideration of

16 efficiency, economy, quality of care and impact on beneficiary access to services.

17 Id. at 851. Cal. Pharm. also establishes that, for preliminary injunction purposes,

18 unlawfully reduced Medi-Cal reimbursement constitutes an injury to the providers

19 subject to the decreased rates and that such an injury is irreparable when, due to

20 sovereign immunity, the reimbursement differential cannot be recovered in federal

21 court through a suit for money damages. Id. at 851 - 853.

22

37. Based on the aforementioned findings, the Cal. Pharm. court stayed the

23 AB 1183 Rate Reductions impacting hospitals. However, the Ninth Circuit's stay

24 order did not extend to the ten percent reduction for rates paid to non-contract

25 hospitals for inpatient services because that cut was originally enacted by AB 5 and

26 not by AB 1183.

27

28

1070114.3

1 1
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 13 of 26 Page ID #:13

1

THE An 5 RATE REDUCTIONS OF 2009

2

38. On July 28, 2009, after four extra legislative sessions, Governor

3 Schwarzenegger signed into law Assembly Bill X4 5 ("2009 AB 5"), the budget

4 trailer bill for California fiscal year 2009 - 2010. Although, unlike the last two

5 California budget trailer bills, 2009 AB 5 did not make any flat percentage

6 reductions to Medi-Cal payment rates, the bill enacted or amended multiple statutes

7 in order to limit Medi-Cal reimbursement for several classes of hospital services.

8

39. 2009 AB 5 amended Welfare and Institutions Code § 14105.191, which

9 was originally enacted by AB 1183, to effectively "freeze" the Medi-Cal payment

10 rates for, among other things, DPINF, subacute and pediatric subacute services at

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11 2008 - 2009 levels. Specifically, the statute now provides that, for the designated

12 services, "reimbursement rates ... for services rendered during the 2009 - 10 rate

13 year and each rate year thereafter, shall not exceed the reimbursement rates that

14 were applicable to those classes of providers in the 2008-09 rate year." In effect, the

15 amended version of the statute indefinitely suspends the a=ual payment updates for

16 these classes of services that are otherwise required by the State Plan.

17

40. 2009 AB 5 also amended Welfare and Institutions Code § 14166.245,

18 which is the statute that governs reimbursement for hospital inpatient services

19 provided by noncontract hospitals. Through the amendment, the Legislature

20 eliminated the exemption for small and rural hospitals from the ten percent

21 reduction originally enacted by 2008 AB 5. Effective July 1,2009, small and rural

22 hospitals again became subject to the 10 percent reimbursement reduction, but

23 remain exempted from application of the "regional average" limitation enacted

24 throughAB 1183.

25

41. The reimbursement limitations described in paragraphs 39 and 40

26 above and established by the amendments to Welfare and Institutions Code §

27 14105.191 and 14166.245, as enacted by 2009 AB 5, are hereinafter referred to as

28 the "2009 AB 5 Reimbursement Limitations."

1070114.3

12
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 14 of 26 Page ID #:14

1

42. Plaintiff is infonned and believes and thereon alleges that 2009 AB 5,

2 which included the 2009 AB 5 Reimbursement Limitations, did not go through the

3 public process that is nonnally characteristic oflegislation and was instead the

4 product of mostly behind-closed-doors budget negotiations. 2009 AB 5 was first

5 introduced as a spot budget trailer bill on July 2, 2009, had no substantive content at

6 the time, and was intended to provide a vehicle to enact budget related items that

7 were under negotiation. The substantive provisions ofthe bill, including the 2009

8 AB 5 Reimbursement Limitations, were added to the bill on July 23,2009. It was

9 passed by both the Senate and Assembly that same day and then forwarded on to the

10 Governor for signature the next day, July 24,2009. The bill was signed into law by

11 the Governor on July 28,2009. The bill was enacted as urgency legislation to

12 become effective immediately. In enacting 2009 AB 5, both the Senate and

13 Assembly suspended rules that otherwise limit how quickly a bill can be passed

14 after amendment.

15

43. Plaintiff is infonned and believes and thereon alleges that, prior to

16 enacting 2009 AB 5, neither the Legislature nor the Director engaged in any type of

17 public notice and comment process related to the payment rates that would result

18 from the 2009 AB 5 Reimbursement Limitations.

19

44. Plaintiff is further infonned and believes and thereon alleges that, like

20 the State's failures that prompted the injunctions at issue in ILC II and Cal. Pharm.,

21 prior to enacting or implementing 2009 AB 5, no studies or other analyses were

22 conducted by the Legislature or by the Director to determine whether the Medi-Cal

23 payment rates resulting from the 2009 AB 5 Reimbursement Limitations would be

24 consistent with efficiency, economy and quality of care or reasonably related to the

25 costs of providing the services affected by the rate reduction.

26

45. Plaintiff is infonned and believes and thereon alleges that prior to

27 enacting or implementing 2009 AB 5, no studies or other analyses were conducted

28 by the Legislature or by the Director to determine the impact the 2009 AB 5

1070114.3

13
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 15 of 26 Page ID #:15

1 Reimbursement Limitations would have on the ability of Medi-Cal beneficiaries to

2 have access to the impacted hospital services to the same extent as the general

3 public.

4

5

THE ILLEGALITY OF 2009 AB 5

6

46. Defendant has violated, and continues to violate federal Medicaid

7 statutes, federal Medicaid regulations and the State Plan by failing to analyze Medi-

8 Cal reimbursement rates for the services affected by the 2009 AB 5 Reimbursement

9 Limitations in order to ensure that those rates are consistent with efficiency,

10 economy and quality of care, reasonably related to provider costs, and sufficient to

11 ensure that beneficiaries of the Medi-Cal program have access to services to the

12 same extent as the general public.

13

47. Violation of Federal Statute: The 2009 AB 5 Reimbursement

14 Limitations are invalid and may not lawfully be implemented because they violate

15 federal Medicaid law, and are therefore preempted by the Supremacy Clause,

16 because:

17

(a) The 2009 AB 5 Reimbursement Limitations violate Section

18 30(A) because:

19

(i) Neither the Director nor the Legislature considered the

20 factors of efficiency, economy, quality of care, and access to services prior to

21 enacting the 2009 AB 5 Reimbursement Limitations;

22

(ii) Neither the Director nor the Legislature demonstrated a

23 reasonable connection between the 2009 AB 5 Reimbursement Limitations and the

24 efficient and economical provision of quality care, or ensuring access to services,

25 prior to enacting the 2009 AB 5 Reimbursement Limitations;

26

27

28

1070114.3

14
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 16 of 26 Page ID #:16

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(iii) Neither the Legislature nor the Director considered the

2 costs of providing quality care or demonstrated a reasonable connection between

3 Medi-Cal rates as affected by the 2009 AB 5 Reimbursement Limitations and

4 provider costs;

5

(iv) Plaintiff is informed and believes and thereon alleges that

6 the rates resulting from the 2009 AB 5 Reimbursement Limitations are not

7 consistent with efficiency, economy, and quality of care, reasonably related to

8 provider costs, or sufficient to ensure that Medi-Cal beneficiaries have access to the

9 impacted hospital services to the same extent as the general population.

10

(b) The 2009 AB 5 Reimbursement Limitations violate Section

11 l3(A) as to the impacted hospital services (including subacute and DP/NF services)

12 because they were not adopted through the public process required by this provision.

13 In addition to a claim of preemption under the Supremacy Clause, the State's failure

14 to comply with Section l3(A) gives rise to a private right of action under 42 U.S.C.

15 § 1983, as violation of the civil rights ofCHA's members.

16

48. Violation of Federal Regulations: The 2009 AB 5 Reimbursement

17 Limitations are invalid and may not lawfully be implemented because they violate

18 federal Medicaid regulations, and are therefore preempted by the Supremacy Clause,

19 in that public notice of the reimbursement limitations as to the impacted hospital

20 services (including subacute and DP/NF services) was not given in accordance with

21 the terms of 42 C.F.R. § 447.205.

22

49. Violation ofthe State Plan: As mentioned above, the Director must

23 follow the State Plan as a Federal requirement for participation in the Medicaid

24 program. The 2009 AB 5 Reimbursement Limitations are invalid and may not

25 lawfully be implemented as they violate the State Plan, and accordingly, Federal

26 law, and are therefore preempted by the Supremacy Clause, because they

27 indefinitely suspend the annual payment update for DP/NF, subacute and pediatric

28 subacute services otherwise required by the State Plan.

1070114.3

15
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 17 of 26 Page ID #:17

1

50. No State Plan Amendment: The 2009 AB 5 Reimbursement

2 Limitations are invalid and may not lawfully be implemented because they are

3 inconsistent with and violate the State Plan, including, but not limited to,

4 Attachment 4.l9-A ofthe State Plan as to hospital inpatient services and Attachment

5 4.19-D as to DP/NF services. The 2009 AB 5 Reimbursement Limitations are

6 therefore preempted by the Supremacy Clause. The Director may not lawfully

7 implement the 2009 AB 5 Reimbursement Limitations unless and until he obtains

8 federal approval of the necessary amendments to the State Plan from the federal

9 government. Plaintiff is informed and believes, and thereon alleges, that the

10 Director has not obtained federal approval for the 2009 AB 5 Reimbursement

11 Limitations.

12

13

THE PARTIES

14

51. Defendant DAVID MAXWELL-JOLLY is the Director of the

15 Department of Health Care Services and, as such, has the responsibility to

16 administer the Medi-Cal program consistent with the Medicaid Act. The Director is

17 sued in his official capacity. The Department is the single state agency charged with

18 the administration of California's Medicaid program, known as Medi-Cal. See

19 California Welf. & Inst. Code §§ 14000 et seq. The Director has an office in the

20 County of Los Angeles.

21

52. Plaintiff CRA is a trade association representing the interests of

22 hospitals in the State of California. CRA is incorporated in the State of California

23 with its principal office in Sacramento, California. CRA's member hospitals

24 provide both inpatient and outpatient hospital services. With respect to inpatient

25 services, some of CRA's members have contracts with the Department, while other

26 members do not. In addition, many ofCRA's members operate special units, such

27 as emergency departments, DP/NFs that provide skilled nursing care, or subacute

28 and pediatric subacute units. CRA represents nearly 450 hospitals and health

1070114.3

16
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 18 of 26 Page ID #:18

1 systems throughout California, including general acute care hospitals both small and

2 large, children's hospitals, rural hospitals, psychiatric hospitals, academic medical

3 centers, county hospitals, investor-owned hospitals, and multi-hospital health

4 systems. These hospitals furnish vital health care services to millions of our states'

5 citizens CRA also represents more than 150 Executive, Associate and Personal

6 members. CRA brings this action on its own behalf and in its representative

7 capacity on behalf of its members, many of which are providers under California's

8 Medi-Cal program and will be directly and adversely affected by the challenged rate

9 limitations, and on behalf of its members' patients.

10

11

CHA'S STANDING AS AN ASSOCIATION

12

53. Many ofCRA's members are Medi-Cal providers. These Medi-Cal

13 providers will suffer a concrete economic injury in the form of reduced payments

14 for services by the unlawful implementation ofthe 2009 AB 5 Reimbursement

15 Limitations.

16

54. CRA, as an association representing the interests of California hospitals

17 that participate in the Medi-Cal program and as party seeking to compel the Director

18 to comply with his public duties as defined by federal law, has a right and an

19 enforceable interest to maintain this action to: (1) enjoin Defendant's continuing

20 violation of federal Medicaid law; and (2) compel Defendant to comply with the

21 provisions of the applicable federal laws.

22

55. Moreover, CRA has a right and an enforceable interest to maintain this

23 action against the Director under the Supremacy Clause of the United States

24 Constitution and under the Civil Rights Act, 42 U.S.C. § 1983, to enjoin the

25 Director's continuing violation of the federal Medicaid law and to compel the

26 Director to comply with the provisions of the applicable federal Medicaid law.

27

28

1070114.3

17
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 19 of 26 Page ID #:19

1

56. Under 28 U.S.C. § 2201, CRA is entitled to a declaration of its rights,

2 its members' rights, and/or its members' patients' rights under federal Medicaid

3 law.

4

5

FIRST CAUSE OF ACTION

6 (VIOLATION OF 42 U.S.C. § 1396a(a)(30)(A)/SUPREMACY CLAUSE)

7

57. Plaintiff hereby incorporates by reference paragraphs 1 through 56,

8 inclusive, as though fully set forth herein.

9

58. The 2009 AB 5 Reimbursement Limitations violate Section 30(A) of

10 the Medicaid Act because:

11

(a) Neither the Director nor the Legislature considered the factors of

12 efficiency, economy, quality of care, and access to services prior to enacting the

13 2009 AB 5 Reimbursement Limitations;

14

(b) Neither the Director nor the Legislature demonstrated a

15 reasonable connection between the payment rates resulting from 2009 AB 5

16 Reimbursement Limitations and the provision of quality care in an efficient and

17 economic manner, or ensuring access to services, prior to enacting the 2009 AB 5

18 Reimbursement Limitations;

19

(c) Neither the Legislature nor the Director considered the costs of

20 providing quality care or demonstrated that the Medi-Cal payment rates resulting

21 from the 2009 AB 5 Reimbursement Limitations are reasonably related to provider

22 costs; and

23

(d) Plaintiff is informed and believes and thereon alleges that the

24 rates resulting from the 2009 AB 5 Reimbursement Limitations are not consistent

25 with efficiency, economy, and quality of care, nor are they reasonably related to

26 provider costs, and also are not sufficient to enlist enough providers so that Medi-

27 Cal beneficiaries have access to the impacted hospital services at least to the extent

28 that such services are available to the general population.

1070114.3

18
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 20 of 26 Page ID #:20

1

SECOND CAUSE OF ACTION

2 (VIOLATION OF 42 U.S.C. § 1396a(a)(13)(A)/SUPREMACY CLAUSE/42

3

U.S.C. § 1983)

4

59. Plaintiff hereby incorporates by reference paragraphs 1 through 56,

5 inclusive, as though fully set forth herein.

6

60. The 2009 AB 5 Reimbursement Limitations violate Section 13(A) as to

7 the impacted hospital services (including DPINF and subacute services) because

8 they were not adopted through a public process as required by this provision.

9

61. The 2009 AB 5 Reimbursement Limitations are thus preempted by the

10 Supremacy Clause of the United States Constitution, art. IV. and violate the civil

11 rights ofCHA's members, which are enforceable through 42 U.S.C. § 1983.

12

13

THIRD CAUSE OF ACTION

14

(VIOLATION OF 42 C.F.R. § 447.205/SUPREMACY CLAUSE)

15

62. Plaintiff hereby incorporates by reference paragraphs 1 through 56,

16 inclusive, as though fully set forth herein.

17

63. The 2009 AB 5 Reimbursement Limitations are invalid and may not

18 lawfully be implemented because they violate 42 C.F.R. § 447.205 as to the

19 impacted hospital services (including subacute and DPINF services), and are

20 therefore preempted by the Supremacy Clause, in that public notice of the

21 reimbursement limitations was not given in accordance with the terms of 42 C.F.R.

22 § 447.205.

23

24

FOURTH CAUSE OF ACTION

25

(VIOLATION OF STATE PLANIFAILURE TO AMEND STATE

26

PLAN/SUPREMACY CLAUSE)

27

64. Plaintiff hereby incorporates by reference paragraphs 1 through 56,

28 inclusive, as though fully set forth herein.

1070114.3

19
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 21 of 26 Page ID #:21

1

65. The 2009 AB 5 Reimbursement Limitations are invalid and may not

2 lawfully be implemented as they violate the State Plan, including but not limited to,

3 Attachment 4.19-D as to DPINF and subacute services, and accordingly, federal

4 law, and are therefore preempted by the Supremacy Clause, because they

5 indefinitely suspend the annual updates to Medi-Cal payment rates for DPINF,

6 subacute and pediatric subacute services otherwise required by the State Plan.

7

66. The Director may not lawfully implement the 2009 AB 5

8 Reimbursement Limitations unless and until it obtains federal approval of the

9 necessary amendments to the State Plan from the federal government.

10

11

FIFTH CAUSE OF ACTION

12

(DECLARATORY RELIEF)

13

67. Plaintiff hereby incorporates by reference paragraphs 1 through 56,

14 inclusive, as though fully set forth herein.

15

68. An actual and justiciable controversy exists between Plaintiff and

16 Director regarding the validity of the 2009 AB 5 Reimbursement Limitations.

17 Plaintiff, on behalf of its members, contends that the reimbursement limitations are

18 invalid and unlawful in violation of federal statute, federal regulations, and the State

19 Plan, while the Director contends that the reimbursement limitations are valid in all

20 respects.

21

69. Accordingly, pursuant to 28 U.S.C. § 2201, Plaintiff requests this Court

22 to declare that the 2009 AB 5 Reimbursement Limitations are invalid, unlawful and

23 preempted by federal Medicaid law.

24

70. No administrative appeal process or other administrative remedy is

25 available to Plaintiff or its members to challenge the 2009 AB 5 Reimbursement

26 Limitations.

27

28

1070114.3

20
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 22 of 26 Page ID #:22

1

71. All ofthe said injuries are great, immediate, and irreparable, for which

2 damages at law are inadequate, and for which Plaintiff, or its members, have no

3 plain, adequate or speedy relief at law or otherwise.

4

5

WHEREFORE, Plaintiff prays for judgment as follows:

6

l. For an Order declaring that the 2009 AB 5 Reimbursement Limitations

7 violate 42 U.S.C. §§ 1396a(a)(30)(A) and 1396a(a)(13), 42 C.F.R. § 447.205, and

8 theCalifornia State Plan and are thus invalid and preempted by the Supremacy

9 Clause of the United States Constitution, art. IV;

10

2. For an Order declaring that the 2009 AB 5 Reimbursement Limitations

11 represent a de facto amendment to the State Plan and therefore said rate reductions

12 cannot be imposed without federal approval;

13

3. For an Order preliminarily and permanently enjoining the Director

14 from effectuating the 2009 AB 5 Reimbursement Limitations or reducing to any

15 degree the Medi-Cal rates for services rendered by hospitals that are affected by

16 Welfare and Institutions Code §§ 14105.191 and 14166.245, as amended by 2009

17 AB 5; and

18

4. For the costs of suit, including reasonable attorneys' fees incurred by

19 Plaintiffs, as permitted under 42 U.S.C. § 1988 or otherwise, and

20

5. Such other and further relief as may be just and proper.

21

22 DATED: November 23, 2009 HOOPER, LUNDY BOOKMAN, INC.

23

24

By:--+tt~~!;;~::=-:=-::::::-:=-=---­ JORD N B. KEVILLE

25

Attorneys for CALIFORNIA HOSPITAL ASSOCIATION

26

27

28

1070114.3

21
COMPLAINT

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 23 of 26 Page ID #:23
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE .runGE FOR DISCOVERY
This case has been assigned to District Judge Consuelo B. Marshall and the assigned discovery Magistrate Judge is Margaret A. Nagle. The case number on all documents filed with the Court should read as follows:
CV09- 8642 CBM (MANx)
Pursuant to General Order 05-07 of the United States District Court for the Central District of California, the Magistrate Judge has been designated to hear discovery related motions.
All discovery related motions should be noticed on the calendar of the Magistrate Judge

NOTICE TO COUNSEL

A copy of this notice must be served with the summons and complaint on all defendants (if a removal action is fifed, a copy of this notice must be served on all plaintiffs).

Subsequent documents must be filed at the following location:

[Xl Western Division
312 N. Spring St., Rm. G-B Los Angeles, CA 90012

Ll Southern Division

U Eastern Division

411 West Fourth St., Rm. 1-053

3470 Twelfth St., Rm. 134

Santa Ana, CA 92701-4516

Riverside, CA 92501

Failure to file at the proper location will result in your documents being returned to you.

CV-18 (03106)

NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 24 of 26 Page ID #:24

AO 440 (Rev. 02/09) Summons in It Civil Action
UNITED STATES DISTRICT COURT
for the CENTRAL DISTRICT OF CALIFORNIA, WESTERN DNISION

CALIFORNIA HOSPITAL ASSOCIATION, Plaintiff v.
DAVID MAXWELL-JOLLY, DIRECTOR OF THE STATE DEPARTMENT OF HEALTH CARE SERVICES, STATE OF CALIFORNIA,
Defendant

) ) ) Civil Actioll No.
iCV09 08642

SUMMONS IN A CIVIL ACTION

To: (Defendantls name and address)

David Maxwell-Jolly, Director Departmellt of Health Care Services State of Califomia 1501 Capitol Avenue Suite 600 I . Sacramento, CA 95814

A lawsuit has been filed against you.
With:in 20 da.ys after service of this Sl1rnrnons on you (not connting the day you receiven it) - or 60 days if yon are the United States or a United States agency, or an officer or employee of the United States described in Fed. R. Civ. P. 12 (0)(2) or (3) - you must scrve on the plaintiff an answer to the attached complaint or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer or motion must be served on the plaintiff or plaintiff's attomey, whose name and address are: Lloyd A. Bookman, Esq.
Jordan n. Keville, Esq.
HOOPER, LUNDY & BOOKMAN, INC. 1875 Century Park East Suite 1600 Los Angeles, CA 90067 Tel: (310) 551-8103 Fax: (310) 551-8181 Ibookman@health-law.com jkcville@health-law.com
If you fail to respond, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the court.

Date: ---------c---

CLERK OF COURT

]070649.1

American LegalNel, Inc. W'WW.FormsWorktlow.com

Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 25 of 26 Page ID #:25

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
CIVIL COVER SHEET

I (a) PLAINTIFFS (Check box ifyou are representingyollrselfO) CALIFORNIA HOSPITAl: ASSOCIATION

DEFENDANTS DAVID MAXWELL.JOLLY. DIRECTOR OF THE DEPARTMENT OF
HEALTH CARE SERVICES, STATE OF-CALIFORNIA

(b) Attorneys (Finn Name, Address and Telephone Number. Ifyou are representing yonn;:elf, provide ,slime.)
LI()yd A. Bookman, Jornltn B. Keville, Hooper, Lundy & Bookman, Inc., 1875 Century Park Easl, Suite 1600. Los Angeles, CA,90067; (310) SSl~8181

Attorneys (IfKnowo)

11. BASIS OF JURISDICTION (Place an X in one bOKonly.)

o I U.S. Govemment Plaintiff

"3 ;edernl Question (U.S. Govemment Not II Party)

IlL CfTIZENSIIIP OF PRINCIPAL PARTIES - For Diversity CFt5es Only
(Place an X in on~ box for plaintiff and on~foT defendant)

Citizen ofThis State

PTF DEF 01 01 Incorporated or Principal Place
of Business in this S1ate

PTF DEF 04 04

o 2 U.S. Government Defendant 0 4 Diversity (rndicate Citizenship Citizen of Another State of Panies in Hem nI)

02 02 Incorporated Qlld Principal PllLce 05 05 of Business in Another Slate

Citizen or Subject of aForeign Country D 3 D 3 Foreign NUlion

06 06

IV. ORIGIN (Place an X in one box only.)

til Origin,'ll

02 Removed from 03 Remanded from

Proceeding

Slate Court

AppeJJare Court

04 Reinstated or Reopened

05 Transferred from 1l1l0lherdistricI (specify):

r6 V. REQUESTED IN COMPLAINT: JURY DEMAND: 0 Yes No (Che<:k 'Yes' only if demanded in complaint.)

06 Multi- 07 Appeal to District

Dis((ict

Judge from

Litigation

Magistrate Judge

CLASS ACTION ulll1er F.R.C.P. 23: 0 Yes Ii'No

0 MONEY DEMANDED IN COMPLAINT: $

VI, CAUSE OF ACTION {CiLe the U.S. Civil Shttute under which you are filing and write a briefslatement of t:!luse. Do nol cite jurisdictional statutes unless diversity.) Claim under Suprell1acy Clallse (hat Sm.testatutes limiting Medkaid payments violate the federtll Medicaid Act, inc!. 42 U.S.C. sec. I39611{a)(I3)(A). and are preempted

VII, NATURE OF SUIT (Plnce ltn X in one box Duly)

J. . ; '.4I.Jm!t§1'~T~1l.'4 i!c.• ,

,CRN:titACJ:

[] 400 State Reapportionment 0110 Insurance

.' ,

''IJi~TS

PERSONAtlNJURY

, .TORTS..:
PERSONAL

PRISONER. .".,.·-psTiT10NS

iAaQ~
. 0710 Fair Labor Standards

0410 AnLitrust

0120 Marine

01]0 AirphtIle

PROPERTY

0510 Motions to

Aot

0430 Banks and Blinking 0130 Miller Act

0315 Airplane Product 0370 Otller Fraud

Vacate Sentence 0720 Labm1Mgmt.

0450 Commerce/ICC

0140 Negotiablelnstrument

Lillbility

0371 Truth in Lending

Habeas Corpus

Relations

Ratcsletc.

D 150 Recovery of

0460 Deportalion

Overpayment &

0470 'Racketeer Influenced

Enforccment of

and Comlpt

Judgment

Organizations

0151 Medicare Act

0480 Consumer Credit

0152 Recovery ofDefaulwd

0490 Cnble/Sat TV

Student Lotm (Excl.

0810 Selective Service

Veterans)

0850 Securities/Commodilies! 0153 Recovery of

Exchange

Overpayment of

0875 CusLomer Challenge 12

Veteran's BeneuLs

USC3410

0160 Siockholders' Suits

0890 Othet Statutory Actiom: 0190 Other Contract

0320 Assault. Libel & Slander
0330 Fed. Employers' Liability
0340 Marine 0345 Marine Product
LilLbility 0350 Motor Vehicle
0355 Molar Vehicle Product Liability
0360 Other Personal Injllry
0362 Personal Injury~cd Malpractice

0380 Other Personal 0530 General

0730 Labor/Mgmt.

Property Damage 0535 Death Penally

ReporLing&

0385 Property Damnge 0540 Mandamusl

Disclosure Act

ProducL Liability

Other

~1i.ilM,.Qi!tg;Y'/i 0550 Civil Rights

0740 Railway Labor Act 0790 Other I.abor

0422 AppeaL 28 USC 0555 Prison Condition

Litigation

{~:~~:~~::=~t:fN1 158
0423 Withdrawal 28

0791 Emp!. Ret. Inc. Security Act

. USC 157
. CTVrL·.R1GTITS

o 6] 0 Agriculture .. ·}i{OPER'l'Y.R:LOtlTS o 620 Other Food & 0820 Copyrights

[]441 Voting 0442 Employment 0443 HousingfAcco-

Drug 0625 Drug Related
Seirore of

0830 Patent
o 840 Tmdcmnrk
:c'l ~6.C("k ~i\QUirJ'Y . ,

0891 Agricllitural Act

0195 Contract Product

0365 Personal Injury-

mmodatioos

l'rupclty21 USC 0861 HlA (139511)

0892 Economic StilbilizaLiun

Liability

Product Liability 0444 Welfare

881

0862 Blilck Lllng (923)

Act 0893 Environmental Matters 0894 Energy Allocution Act 0895 Freedom of Info. Act

0196 Pmnchisc
l\llAI.il\ofERTV ..
02)0 Land Condemna.tion 0220 Foreclosure

OJ6& AsbllStos PeTsonal 0445 American with

:

Injury Product

Disabilities ~

L!abiJ}ly
··... J!vIWOMT1ON

. Employment
' 0446 American witli

0630 Liquor Laws
o 640 RR. & Truck
0650 Airl ine Regs
0660 Oecupatiornd

0863 DlWC/DIWW (405(g))
o H64 SSJD Title XVI o 865 RBI (405(g)) .

0900 Appeal of Fee Dctcrmi~ 0230 Rent Leuse & Ejectment 0462 Nllluralizalion

DislLbilitjes -

Safely !Health :-'. FIID,FMJ.· TA~.SYITS.

nation Under Equal Access [0 Justice ,(950 COIlStitutionality of Slale Slailltcs

0240 Torts (0 Land
0245 Tort ProdUl:t Liability 0290 All Othor Real Property

0463 0465

Application Habcas Corpus~ Alien Detainee OIlier Immigmtion Actions

Olber 0440 OlherCivil
Rights

0690 Other

0870 Tuxes (U.S. Plainliff or Defendant)
0871 lRS-Third Party 26 USC 7609

c."NllbV a9 08 6 42 FOROFFICEUSEONLY; AFTER COMPLl:TINGTHE FRONTSlJ)E aFFORM CY·7l, COMPLETE THE TNFORMATfONREQUF,STED BELOW.

CV-71 (05/08)

CIVIL COVER SHEET

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Case 2:09-cv-08642-CAS-MAN Document 1 Filed 11/24/09 Page 26 of 26 Page ID #:26

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
CIVIL COVER SHEET

VIII(n). IDENTICAL CASES: Has Illis actiol} been previously filed in this court and dismissed, remanded orclosed1 MNo 0 Yes Iryes,listcasenlJmber(~): _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
VJII(b), RELATED CASES: Have any cases been previously filed in this <;ourt tbataTe related 10 lhe present elise? 0 No r/yes
Ifyes, list case number(s); 2:08·cv-03315: 2:09-cv-0382: 2:09-ev-00722j 3:08-cv-5173

Civil cnses nr€ deemed.- relnted If a previously flied case and the present CRse:
(Check all bo>:es thnt apply) d A. Arise from the SRme of closely related transllctions, happenings, or events; or
riB. Call for dete~innlion of the same or ~ubstantilllly related or similar qllestions of law and fact; or
DC, For other reasons would entail substllotial duplication of labor ifheard by differentj\ldges; or
o D. Involve the same patent, trademark or copyrigh~ alld one of the factors identified above in II, b or c also is present.

IX. VENUE: (When completing the follOwing infomation, lise an additionl\15heet if necessary.)

(n) List the County in this District; California COllnty outside of this District; State ifother than California; or Foreign COllntlY, in which EACH named plaintiff resides. 0 Check here if the v;ovemment its ogencies oremp!ovoos is II named plaintiff. If this box is checked, go to item (b).

County in this District:·

Califomill County outside oflhi5 District; State, if olher than California; or Foreign Countl)'

CALIFORNIA HOSPITAL ASSOClATION ~ Socramento County

(b) List the County in this District; California County olltside of (his District; State ifother ttlim California; or Foreign CountIy, in which EACH named defendant resides. 0 Check here jflhe government its ap;encie.'i or employees is a named defendant. If this box is checked, gO to item (c).

COllnty in this District'"

California County outside of this District; S{ale, if other than California; or Foreign Country

DAVID MAXWELL.JOLLY, DIRECTOR OF THE STATE DEPARTMENT OF HEALTH CARE SERVICES, STATE OF CALIFORNIA

Offices in Sacramento and Los Angeles Counties

(c) LlsLlllC County in this District; California County outside of this District; State if othcr than California; or Foreign COllDtry, in which EACH claim arose,

" N{l ct:]n 18nd condemnation cases,u (hlliocation ofthc tract oflolld involved

Comlly in this Distric(:'"

Califomia County outside of this Dislriot; SCate, if ot~er than Calirornia; or Foreigll Country

Each of the claims in the complaint arose, jn among other places, Sacramento

County

i< Los Angdes, OJ'Hoge, San Bernanllno, Riversid~. VlmtUrII, Santa DarbRfR, an Luis Obispo COllntie.s

.Note: In land condemnfltion cases lise the location of-the (r.act orland involved

\.u4v1 \)).1 l)--" }) \-z.."?>lO~ x. SIGNATURE OF ATTORNEY (OR PRO PER):

TheCV~71 CovcrSh~c~and Noliee 10 Coullscllfar(ie.s;

(JS-44) 6,il

Date n
the i formation contained hereillneitherrepJacenorsupplemcnt the filing and service o~pleadillgs

or other papers RS required by l!lw. ThiS form, approvcd by (he Judlaml Conference afthe Uillted States mSeptember 1974. is required pursuant to LOCHI Rule 3-\ ls_notfilcd

but is"used by the Clerk ofthe Court for the purpose of~t!lti~tics. venue and initiating the civil docket sheet. (For more deuliled insmlctions, see separate instructions sheet)

Key to Statistical codes relating to Social Security Cases: Nature ofSuJt Code Abbreviation Substnntlvc Statement ofClluse of Action

861

I-lIA

AU claims for health insurance benefits (Medicare) under Title 18, Part A, of the Social Securi~y Act, liS amended

Also, include claims by hospitals, skilled nursing facilities, etc., for certification as providers ofservices under the

progmm. (4211,g,C. t935FF(b»)

862

Bl.

All claims for "Black Lung" benefits under Title 4, Part B, oflile Federal COllI Mine HCI11(h and Safety Act of 1969.

(3{) U.S.C. 923)

863

DIWC

All claims fileil by insured workers for disability insurance benefits under Title 20fthe Social Security Act, as

amended; plus all claims filed for child's insurance benefits bWied on disability. (42 V.S.C. 405(g})

863

mww

All clll,ims filed for widows aT widowers insurance benefits bosed on disability under Title 2 orlhc Social Seclirity

Act. a:l nmendcd. (42 U.S.C. 405(g))

'64

ssm

All claims rOf supplcmcnLal securiLY income payments based upon disabiLity filed nndcr Title J6 of the Social Security

Act, as amcndcd,

'65

RS,

All claims for retirement (old age) Ilnd surviyors bene-tits under Title 2 of the 80cilll Security Act, as I1mended. {42

u.s.c. (g»

CV-71 (05fOH)

CIVIL COVER SHEET

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 Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 1 of 8 Page ID #:1563

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

Present: The Honorable CHRISTINA A. SNYDER

PAUL PIERSON

LAURA ELIAS

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Lloyd A. Bookman Jordan B. Keville

Brenda Ann Ray Lisa Tillman

Proceedings:

DEFENDANT'S MOTION FOR MORE DEFINITE STATEMENT OR, IN THE ALTERNATIVE, MOTION TO DISMISS (filed 1/15/10)

I. INTRODUCTION & BACKGROUND

On November 24, 2009, plaintiff California Hospital Association (“CHA”) filed the instant action against defendant David Maxwell-Jolly, Director of the California Department of Health Care Services (the “Director”). The California Department of Health Care Services (the “Department”) is a California agency charged with the administration of California’s Medicaid program, Medi-Cal. Plaintiff is a trade association representing certain California hospitals that “participate in the Medi-Cal program.” Compl. ¶ 54.

On July 28, 2009, California Governor Arnold Schwarzenegger signed into law Assembly Bill X4 5 (“AB 5"). AB 5 amends Cal. Welf. & Inst. Code § 14105.191, in part, and effectively “freezes” the Medi-Cal reimbursement rates for certain designated services “rendered during the 2009-2010 rate year and each rate year thereafter” at 20082009 levels. Cal. Welf. & Inst. Code § 14105.191(f); Compl. ¶ 39. Among the designated services, are multiple categories of hospital services, including services provided by nursing facilities that are part of hospitals (distinct part/nursing facilities, or “DP/NFs”), and subacute and pediatric subacute care units that are part of hospitals. Cal. Welf. & Inst. Code § 14105.191(f) (referencing classes of providers identified in subdivision (b)(2)). AB 5 also amends Cal. Welf. & Inst. Code § 14166.245, which

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 2 of 8 Page ID #:1564
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

governs payments to acute care hospitals not under contract with the Department for inpatient services. AB 5 eliminates the exemption for small and rural hospitals from the ten percent reduction on payments for inpatient services, originally enacted by Assembly Bill X3 5 in February 2008. Id. § 14166.245(g)(1); Compl. ¶ 40.

Plaintiff alleges that these two reimbursement rate provisions of AB 5 violate Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the “Medicaid Act”), and that therefore, they are invalid under the Supremacy Clause of the United States Constitution. U.S. CONST. art. VI, cl. 2. Specifically, plaintiff alleges that AB 5 is preempted by § 30(A) of the Medicaid Act, 42 U.S.C. § 1396a(a)(30)(A) (“§ 30(A)”), because neither the Director nor the California legislature considered the “quality of care” and “equal access” provisions of § 30(A), and thus whether reimbursement rates are reasonably related to provider costs, before its implementation. Compl. ¶ 58. Plaintiff further alleges that the Director failed to comply with additional requirements of the Medicaid Act, federal regulations, and the state plan. Specifically, plaintiffs alleges that the two rate provisions of AB 5 were implemented in violation of (1) the public process provisions of 42 U.S.C. § 1396a(a)(13)(A);1 (2) the public notice provisions of 42 C.F.R. § 447.205; (3) the State Plan requirements. Compl. ¶¶ 59-66. Plaintiffs seek declaratory relief and injunctive relief to restrain the implementation and enforcement of the two rate provisions of AB 5 at issue.

Medicaid is a cooperative federal program: the federal government provides federal funding to the states so that states may provide medical care to their needy citizens. State participation is voluntary; however, once a state chooses to participate by accepting federal funds, it must comply with requirements imposed by the Medicaid Act. Because California has elected to participate in the Medicaid program, it must administer its state Medicaid program, Medi-Cal, in compliance with a state plan that has been preapproved by the Secretary of the U.S. Department of Health and Human Services (the “Secretary”), and which complies with the requirements set forth in 42 U.S.C. §

1 In addition to bringing the instant action under the Supremacy Clause, plaintiff

alleges that it has standing to enforce § 13(A) through a civil rights action under 42

U.S.C. § 1983. Compl. ¶ 61.

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 3 of 8 Page ID #:1565
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

1396a(a)(1)-(70). In accordance with these requirements, California must provide “methods and procedures” for the payment of care and services that (1) are “consistent with efficiency, economy, and quality of care,” and (2) ensure their availability to the Medicaid population to the same “extent as they are available to the general population in the geographic area.” 42 U.S.C. § 1396a(a)(30)(A). These requirements are known, respectively, as the “quality of care” and “equal access” provisions of § 30(A) of the Medicaid Act. In addition, for certain provider services, including hospital services, California must allow a public process for determination of payment rates, with publication of the proposed rates and their underlying methodologies, such that providers are “given a reasonable opportunity for review and comment.” 42 U.S.C. § 1396a(a)(13)(A) (“§ 13(A)”). Further, the state must administer Medi-Cal in accordance with Medicaid regulations; applicable state law, as specified in sections 14000 to 14124 of the Welf. & Inst. Code; and Medi-Cal regulations.

On January 15, 2010, the Director filed the instant motions for more definite statement or, in the alternative, motion to dismiss. Plaintiff filed its opposition on February 1, 2010. A reply was filed on February 8, 2010. A hearing was held on February 22, 2010. After carefully considering the arguments set forth by both parties, the Court finds and concludes as follows.

II. LEGAL STANDARD

A. Motion for a More Definite Statement under Fed. R. Civ. P. 12(e)

Federal Rule of Civil Procedure 8(a)(2) requires a “short and plain statement of the claim showing that the pleader is entitled to relief.” Federal Rule of Civil Procedure 12(e) provides that “[a] party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response.” Furthermore, a motion filed pursuant to Rule 12(e) “must point out the defects complained of and the details desired.” Fed. R. Civ. P. 12(e).

B. Motion to Dismiss under Fed. R. Civ. P. 12(b)(1) for Lack of Standing

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 4 of 8 Page ID #:1566
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

In order to establish standing to assert a claim, a plaintiff must do the following: (1) demonstrate an injury in fact, which is concrete, distinct and palpable, and actual or imminent; (2) establish a causal connection between the injury and the conduct complained of; and (3) show a substantial likelihood that the requested relief will remedy the alleged injury in fact. See McConnell v. Federal Election Comm’n, 540 U.S. 93, 22526 (2003).

Because standing relates to a federal court’s subject matter jurisdiction under Article III, it is properly raised in a motion to dismiss under Fed. R. Civ. P. 12(b)(1), not Rule 12(b)(6). White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). The Ninth Circuit has noted a distinction between facial and factual jurisdictional attacks under Rule 12(b)(1). White, 227 F.3d at 1242 (“Rule 12(b)(1) jurisdictional attacks can be either facial or factual.”). “Where the motion presents a facial jurisdictional attack — that is, where the motion is based solely on the allegations in the complaint — the court must accept these allegations as true. Where, however, the challenge is factual — where it is based on extrinsic evidence, apart from the pleadings — the court may resolve factual disputes in order to determine whether it has jurisdiction.” Nat’l Licensing Ass’n, LLC v. Inland Joseph Fruit Co., 361 F. Supp. 2d 1244, 1247 (E.D. Wash. 2004) (citing Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987)). The court, however, may not resolve these disputes “‘if issues of jurisdiction and substance are intertwined,’ that is, if the jurisdictional question is dependent on the resolution of factual issues going to the merits.” Id. (quoting Roberts, 812 F.2d at 1177).

“It is the responsibility of the complainant clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute and the exercise of the court’s remedial powers.” Warth v. Seldin, 422 U.S. 490, 518 (1975). “For the purposes of ruling on a motion to dismiss for want of standing, both the trial and the reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Id. at 501; Takhar v. Kessler, 76 F.3d 995, 1000 (9th Cir. 1996). “At the same time, it is within the trial court’s power to allow or to require the plaintiff to supply, by amendment to the complaint or by affidavits, further particularized allegations of fact deemed supportive of plaintiff’s standing. If, after this opportunity, the plaintiff’s standing does not adequately appear from all materials of record, the complaint must be dismissed.” Warth, 422 U.S. at 501-02.

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 5 of 8 Page ID #:1567

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

III. DISCUSSION
The Director contends that although plaintiff CHA asserts representational standing, it fails to support this assertion with a plain statement identifying those members with standing to bring the instant action.2 Mot. at 3. Accordingly, the Director moves for a more definite statement of CHA’s membership, or in the alternative, moves to dismiss the instant action for lack of subject matter jurisdiction and failure to state a claim for relief. Id. Specifically, the Director asserts that plaintiff simply alleges that it represents “nearly 450 hospitals and health systems throughout California” and that it brings this suit on behalf of its members, “many of which are providers under California’s Medi-Cal program.” Id. at 8 (citing Compl. ¶ 52). He argues, however, that plaintiff must allege which of these CHA members, on their own, have standing to challenge these statutory enactments. Id. According to the Director, while there are some 66 rural hospitals within the state of California, certain rural hospitals that were formed as public hospital districts, pursuant to Cal. Health & Safety Code §§ 32000 et seq., are political subdivisions of the state, and thus lack standing to challenge any state statute in federal court.3 Id. (citing Heath v. Redbud Hosp. Dist., 436 F. Supp. 766, 768

2 According to the Director, an organization asserting representational standing must demonstrate: (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to vindicate are germane to the organization’s purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Mot. at 7 (citing Hunt v. Washington Apple Advertising Comm’n, 432 U.S. 333, 343 (1977)).

3 The Director requests that the Court take judicial notice of four filings with the

Court: (1) Governor Arnold Schwarzenegger’s Emergency Proclamation of July 1, 2009;

(2) the complaint in CHA v. Health Net of Cal., Los Angeles County Superior Ct. Case

No. BC414389; (3) map prepared by the California Office of Statewide Health Planning

and Development (“OSHPD”) locating all of the rural hospitals within California; and (4)

excerpts from the websites of Hazel Hawkins Memorial Hospital, Hi-Desert Medical

Center, and Seneca Healthcare District stating that these facilities are “political

subdivisions of the state.” Under Fed. R. Evid. 201, a court may take judicial notice of

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 6 of 8 Page ID #:1568
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

(N.D. Cal. 1977), for the proposition that hospital districts organized under state statutes were subdivisions of the state for purposes of § 1983 claims; and Palomar Pomerado Health Sys. v. Belshe, 180 F.3d 1104 (9th Cir. 1999)). Thus, he argues that to the extent CHA represents the interests of rural hospitals impacted by the challenged rate reduction statute, plaintiff must allege its membership includes rural hospitals that have standing to sue; and further, that plaintiff must distinguish between those members with standing to sue from those without standing to sue, such that these members do not “participate in discovery and enjoy any awarded injunctive relief.” Id. at 8-9.

Plaintiff responds that the Director’s motion under Rule 12(e) fails because this rule is reserved for complaints that are so unintelligible that the defendant literally cannot produce a responsive pleading. Opp’n at 1. Plaintiff contends that the Director’s succinct discussion of the complaint in the instant motion “amply demonstrates” that the Director understands the issues raised by the complaint and the grounds upon which plaintiff challenges the two Medi-Cal rate provisions of AB 5. Id. at 6. Plaintiff further contends that the complaint sufficiently alleges facts to show that CHA has associational standing to bring this action. Id. at 7. In support of this argument, plaintiff argues that the complaint alleges that CHA’s members include small and/or rural hospitals, Compl. ¶ 52, and that for purposes of a motion to dismiss, these allegations must be accepted as true. Id. at 8. Further, it argues that associational standing may exist when even just one member would have standing. Id. Plaintiff contends that the Director provides no legal basis for his contention that plaintiff must identify in its complaint which of its members would have standing in their own right to challenge the Medi-Cal rate provisions at issue. Id. at 10 (citing Nat’l Ass’n for the Advancement of Colored People v. Ameriquest Mortgage Co., 635 F. Supp. 2d 1096, 1102 (C.D. Cal. 2009), for the contrary proposition that an organization does not have to identify individual association members with

“matters of public record.” Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th

Cir.1986). As such, judicial notice is proper insofar as judicial notice is taken that these

four court filings were made. The Court GRANTS the Director’s request for judicial

notice to the extent they request that the Court take judicial notice that the four

documents were filed with the Court. However, the Court does not take judicial notice of

the truth of the matters asserted therein.

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 7 of 8 Page ID #:1569
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

standing in its pleadings in order to satisfy the first prong of the Hunt test). Finally, plaintiff argues that the fact that some of CHA’s members may lack standing is immaterial for purposes of the instant motion. Id. at 11. Accordingly, plaintiff contends that the holding of Palomar, 180 F.3d at 1108, that Medi-Cal providers that are operated by political subdivisions of the state do not have standing in federal court to bring an action against the Director on federal constitutional grounds, would, at most, only apply to a small subset of CHA’s members.4 Id. at 12. Further, it contends that the Director’s concerns are unwarranted given that this case involves a broad based challenge to two statutes under the Supremacy Clause, that if plaintiff prevails on its claims, then it will necessarily impact all Medi-Cal participating hospitals, regardless of individual provider standing or participation. Id. at 14-15.

The Director replies that a particularized statement of standing is necessary to ensure that any awarded injunction is narrowly tailored and within this Court’s jurisdictional scope. Reply at 3. The Director contends that to the extent this Court awards any injunctive relief in this case, that relief must be tailored to address only those persons with standing to sue in this Court. Id. at 4. Accordingly, the Director reiterates his request that this Court grant the instant motions, or in the alternative, requests that the Court rule that any CHA members with the status of political subdivisions of the state are exempt from any awarded relief in this matter. Id. at 5.

It appears to the Court that the primary issue raised by the Director is not whether some members of CHA have standing, but whether CHA may assert associational standing when some of its members would otherwise not have standing to sue in their own right. However, “[a]ssociational standing may exist even when just one of the association’s members would have standing.” Retail Industry Leaders Ass’n v. Fielder, 475 F.3d 180, 186 (4th Cir. 2007) (citing Warth v. Seldin, 422 U.S. 490, 511 (1975) (explaining that an “association must allege that its members, or any one of them, are

4 Plaintiff further argues that the Director’s concerns arising from Palomar do not

extend to all of the claims because the holding in Palomar is limited to claims asserted

under the United States Constitution, and plaintiff’s second claim is brought under the

Supremacy Clause and 42 U.S.C. § 1983. Opp’n at 12-13, n.4.

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Case 2:09-cv-08642-CAS-MAN Document 35 Filed 02/22/10 Page 8 of 8 Page ID #:1570
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

suffering immediate or threatened injury”). Thus, given that plaintiff alleges that some of its members, including small and rural hospitals, “will suffer a concrete economic injury in the form of reduced payments for services” as a result of the two rate provisions of AB 5 at issue, the Court finds that plaintiff CHA has sufficiently alleged associational standing to bring the instant action, for declaratory and injunctive relief, on behalf of its members.5 See, e.g., Indep. Living Ctr. of S. Cal. v. Shewry, 543 F.3d 1050, 1065-66 (9th Cir. 2008) (holding that Medi-Cal providers have standing to bring suit, under the Supremacy Clause, to challenge state legislation that directly reduces reimbursement payments to such providers). Accordingly, the Court denies the Director’s instant motions.

IV. CONCLUSION

Based on the foregoing, the Court DENIES the Director’s motion for a more definite statement, and in the alternative, motion to dismiss the complaint.

IT IS SO ORDERED.

Initials of Preparer

-- : 02 PDP

5 Moreover, at oral argument, plaintiff represented to the Court that at least five of

its members qualify as “small and rural hospitals” under the statute, which are not public

hospital districts — specifically, Coalinga Regional Medical Center, Barton Memorial

Hospital, George L. Mee Memorial Hospital, Marshall Medical Center SNF, and Sutter

Amador. See Suppl. Blaisdell Decl. In Support of Mot. For Preliminary Injunction, Ex.

A; Def.’s Req. For Judicial Not. In Support of Opp’n to Mot. For Preliminary Inunction,

Ex. 17.

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 Case 2:09-cv-08642-CAS-MAN Document 36 Filed 02/22/10 Page 1 of 5 Page ID #:1571

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

Present: The Honorable CHRISTINA A. SNYDER, U.S. DISTRICT JUDGE

PAUL PIERSON

LAURA ELIAS

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Lloyd Bookman Jordan B. Keville

Brenda Ann Ray Lisa Tillman

Proceedings: DEFENDANT’S MOTION TO STAY (filed 1/20/10)

I. INTRODUCTION

On November 24, 2009, plaintiff California Hospital Association (“CHA”) filed the instant action against defendant David Maxwell-Jolly, Director of the California Department of Health Care Services (the “Director”). The California Department of Health Care Services (the “Department”) is a California agency charged with the administration of California’s Medicaid program, Medi-Cal. Plaintiff is a trade association representing certain California hospitals that “participate in the Medi-Cal program.” Compl. ¶ 54.

On July 28, 2009, California Governor Arnold Schwarzenegger signed into law Assembly Bill X4 5 (“AB 5"). AB 5 amends Cal. Welf. & Inst. Code § 14105.191, in part, and effectively “freezes” the Medi-Cal reimbursement rates for certain designated services “rendered during the 2009-2010 rate year and each rate year thereafter” at 20082009 levels. Cal. Welf. & Inst. Code § 14105.191(f); Compl. ¶ 39. Among the designated services, are multiple categories of hospital services, including services provided by nursing facilities that are part of hospitals (distinct part/nursing facilities, or “DP/NFs”), and subacute and pediatric subacute care units that are part of hospitals. Cal. Welf. & Inst. Code § 14105.191(f) (referencing classes of providers identified in subdivision (b)(2)). AB 5 also amends Cal. Welf. & Inst. Code § 14166.245, which governs payments to acute care hospitals not under contract with the Department for inpatient services. AB 5 eliminates the exemption for small and rural hospitals from the

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Case 2:09-cv-08642-CAS-MAN Document 36 Filed 02/22/10 Page 2 of 5 Page ID #:1572
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

ten percent reduction on payments for inpatient services, originally enacted by Assembly Bill X3 5 in February 2008. Id. § 14166.245(g)(1); Compl. ¶ 40.

Plaintiff alleges that these two reimbursement rate provisions of AB 5 violate Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the “Medicaid Act”), and that therefore, they are invalid under the Supremacy Clause of the United States Constitution. U.S. CONST. art. VI, cl. 2. Specifically, plaintiff alleges that AB 5 is preempted by § 30(A) of the Medicaid Act, 42 U.S.C. § 1396a(a)(30)(A) (“§ 30(A)”), because neither the Director nor the California legislature considered the “quality of care” and “equal access” provisions of § 30(A), and thus whether reimbursement rates are reasonably related to provider costs, before its implementation. Compl. ¶ 58. Plaintiff further alleges that the Director failed to comply with additional requirements of the Medicaid Act, federal regulations, and the state plan. Specifically, plaintiffs alleges that the two rate provisions of AB 5 were implemented in violation of (1) the public process provisions of 42 U.S.C. § 1396a(a)(13)(A);1 (2) the public notice provisions of 42 C.F.R. § 447.205; (3) the State Plan requirements. Compl. ¶¶ 59-66. Plaintiffs seek declaratory relief and injunctive relief to restrain the implementation and enforcement of the two rate provisions of AB 5 at issue.

On January 11, 2010, plaintiff filed a motion for preliminary injunction, which is scheduled for hearing on February 22, 2010. On January 20, 2010, the Director filed the instant motion to stay plaintiff’s motion for preliminary injunction, or in the alternative, the instant action. On February 1, 2010, plaintiff filed its opposition. A reply was filed on February 8, 2010. A hearing was held on February 22, 2010. After carefully considering the arguments set forth by both parties, the Court finds and concludes as follows.

II. LEGAL STANDARD

1 In addition to bringing the instant action under the Supremacy Clause, plaintiff

alleges that it has standing to enforce § 13(A) through a civil rights action under 42

U.S.C. § 1983. Compl. ¶ 61.

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Case 2:09-cv-08642-CAS-MAN Document 36 Filed 02/22/10 Page 3 of 5 Page ID #:1573
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

A district court has discretionary power to stay proceedings in its own court. See Landis v. North American Co., 299 U.S. 248, 254 (1936). Accordingly, the court “may, with propriety, find it is efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings which bear upon the case.” Leyva v. Certified Grocers of Cal. Ltd., 593 F.2d 857, 863 (9th Cir. 1979). However, case management concerns alone are not necessarily a sufficient ground to stay proceedings. See Dependable Highway Express v. Navigators Ins. Co., 498 F.3d 1059, 1066 (9th Cir. 2007). “‘[I]f there is even a fair possibility that the stay . . . will work damage to some one else,’ the stay may be inappropriate absent a showing by the moving party of ‘hardship or inequity.’” Id. (quoting Landis, 299 U.S. at 255). Further, “being required to defend a suit, without more, does not constitute a ‘clear case of hardship or inequity’ within the meaning of Landis.” Lockyer v. Mirant Corp., 398 F.3d 1098, 1112 (9th Cir. 2005).

III. DISCUSSION

The Director contends that plaintiff’s motion for preliminary injunction, or alternatively, the instant action, should be stayed pending “the same and similar legal issues” in three pending cases before the Ninth Circuit Court of Appeals: (1) Managed Pharmacy Care v. Maxwell-Jolly, U.S. Ct. of Appeals Dkt. No. 09-55692, C.D. Cal. Case No. 09-0382 CAS (MANx); (2) Nat’l Assoc. of Chain Drug Stores v. Schwarzenegger, U.S. Ct. of Appeals Dkt. No. 09-57051, C.D. Cal. Case No. 09-7097 CAS (MANx) (“NACDS”); and (3) Cal. Pharmacists Ass’n v. Maxwell-Jolly, U.S. Ct. of Appeals Dkt. No. 09-5532, C.D. Cal. Case No. 09-0722 CAS (MANx).2 Mot. at 2, 6. The Director argues that the pending appeals will address “salient legal issues in this case [which include] clarification of the scope and nature of an appropriate cost study pursuant to the

2 Defendant requests that the Court take judicial notice of six filings with the

Court: copies of the court docket in the three pending cases before the Ninth Circuit;

copies of the opening briefs in two of the cases; and this Court’s order in Nat’l Assoc. of

Chain Drug Stores. Under Fed. R. Evid. 201, a court may take judicial notice of "matters

of public record." Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir.

1986). The Court GRANTS defendant’s request for judicial notice.

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Case 2:09-cv-08642-CAS-MAN Document 36 Filed 02/22/10 Page 4 of 5 Page ID #:1574
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

federal law, and the meaning of the term ‘bears a reasonable relationship,’ as used in the Ninth Circuit’s Orthopedic decision.” Mot. at 8. Specifically, he contends that in Managed Pharmacy Care and California Pharmacists, the Ninth Circuit is being asked to find that the Department’s rate analysis, conducted after legislative enactment of a MediCal rate reduction, but before the Department implemented the reductions at issue, comported with § 30(A). Id. at 6. In other words, according to the Director, the Ninth Circuit will interpret whether the California legislature itself is bound by § 30(A). Id. The Director contends that because the pending appeals will be determined shortly, a stay will serve judicial order and economy by maintaining uniform treatment of like suits.3 Id. at 7-8. Further, the Director argues that without this stay, he will be forced to expend scarce resources defending the instant action, and that plaintiff cannot demonstrate that its members will significantly suffer from a stay. Id. at 8-9.

Plaintiff responds that a stay is inappropriate because the pending appeals will not be resolved in a way that impacts the resolution of the instant case. Opp’n at 5. It contends that the legal issue in two of the pending appeals, identified by the Director, was already addressed by the Ninth Circuit in two published decisions: Cal. Pharmacists Ass’n . Maxwell-Jolly, 563 F.3d 847 (9th Cir. 2009), and Independent Livin Ctr. of Southern Cal. v. Maxwell-Jolly, 572 F.3d 644 (9th Cir. 2009) (“IILC”). Opp’n at 1, 6-7. Specifically, plaintiff asserts that with these two opinions, the Ninth Circuit made it clear that the requirements of § 30(A) apply to Medi-Cal rate changes mandated by the legislature. Id. at 6. In addition, plaintiff argues that the appeal in NACDS is clearly distinguishable from the instant case because it does not involve a statutorily mandated change or limitation to Medi-Cal payment rates, but rather the way the Director applies an already existing reimbursement formula. Id. at 3. Moreover, plaintiff contends that a stay will cause further damage to CHA’s members because the rate provisions at issue are already in effect. Id. at 7-8. In support of this argument, plaintiff asserts that the Ninth Circuit, in California Pharmacists, 563 F.3d at 851-53, already concluded that the same type of harm plaintiff is claiming in this case, warranted an emergency stay. Id. Further,

3 The Ninth Circuit heard oral argument on January 19, 2010 in Managed

Pharmacy Care v. Maxwell-Jolly and California Pharmacists; and granted an expedited

hearing in Nat’l Assoc. of Chain Drug Stores.

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Case 2:09-cv-08642-CAS-MAN Document 36 Filed 02/22/10 Page 5 of 5 Page ID #:1575
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date February 22, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

plaintiff argues that the Director has not demonstrated a legitimate hardship or inequity absent a stay. Id. at 9-10. Finally, plaintiff contends that the Director has not shown that the appeal proceedings will be concluded within a reasonable time because stays that depend on the conclusion of a pending appeal are indefinite and potentially very lengthy. Id. at 10-12 (citing Yong v. Internal Revenue Service, 209 F.3d 1116, 1119 (9th Cir. 2000)).

The Director replies that a stay serves the public interest in uniform legal rulings and avoiding unnecessary judicial interference in state statutes. Reply at 2. Further, he reiterates that plaintiff cannot show tangible harm from a stay. Id. at 3.

The Court finds that the Director has failed to demonstrate that a stay pending resolution of the cases before the Ninth Circuit Court of Appeals is appropriate. Given that the Ninth Circuit has previously had the opportunity to interpret the scope of § 30(A) in Medi-Cal cases similar to the instant case, see e.g., Cal. Pharmacists Ass’n . MaxwellJolly, 563 F.3d 847 (9th Cir. 2009), the Court finds that any benefit gained by awaiting further guidance from the Ninth Circuit is outweighed by the potential harm to plaintiff if an indefinite stay is granted.

IV. CONCLUSION

Based on the foregoing, the Court DENIES the Director’s motion to stay.

IT IS SO ORDERED.

Initials of Preparer

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 Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 1 of 15 Page ID #:1576

1

2

3

4

5

6

7

8

UNITED STATES DISTRICT COURT

9

CENTRAL DISTRICT OF CALIFORNIA

10

WESTERN DIVISION

11 CALIFORNIA HOSPITAL

)

ASSOCIATION,

)

12

)

Plaintiff,

)

13

)

vs.

)

14

)

)

15 DAVID MAXWELL-JOLLY, Director )

of the State Department of Health Care )

16 Services, State of California,

)

)

17

)

Defendant.

)

18 _______________________________

Case No. CV 09-8642 CAS (MANx) ORDER GRANTING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION

19 I. INTRODUCTION & BACKGROUND
20 On November 24, 2009, plaintiff California Hospital Association (“CHA”) filed
21 the instant action against defendant David Maxwell-Jolly, Director of the California
22 Department of Health Care Services (the “Director”). The California Department of
23 Health Care Services (the “Department”) is a California agency charged with the
24 administration of California’s Medicaid program, Medi-Cal. Plaintiff is a trade
25 association representing certain California hospitals that “participate in the Medi-Cal
26 program.” Compl. ¶ 54.
27 On July 28, 2009, California Governor Arnold Schwarzenegger signed into law
28 Assembly Bill X4 5 (“AB 5"), the budget trailer bill for California fiscal year 2009-

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 2 of 15 Page ID #:1577

1 2010. AB 5 amends Cal. Welf. & Inst. Code § 14105.191, in part, and effectively

2 “freezes” the Medi-Cal reimbursement rates for certain designated services “rendered

3 during the 2009-2010 rate year and each rate year thereafter” at 2008-2009 levels. Cal.

4 Welf. & Inst. Code § 14105.191(f); Compl. ¶ 39. Among the designated services, are

5 multiple classes of hospital services, including services provided by nursing facilities

6 that are part of hospitals (distinct part/nursing facilities, or “DP/NFs”), and by subacute

7 and pediatric subacute care units that are part of hospitals. Cal. Welf. & Inst. Code §

8 14105.191(f) (referencing classes of providers identified in subdivision (b)(2)). AB 5

9 also amends Cal. Welf. & Inst. Code § 14166.245, which governs payments to acute care

10 hospitals not under contract with the Department for inpatient services. AB 5 eliminates,

11 effective July 1, 2009, the exemption for small and rural hospitals from the ten percent

12 reduction on payments for inpatient services, originally enacted by Assembly Bill X3 5

13 in February 2008 (“2008 AB 5").1 Id. § 14166.245(g)(1); Compl. ¶ 40.

14

Plaintiff alleges that these two reimbursement rate provisions in AB 5 violate Title

15 XIX of the Social Security Act, 42 U.S.C. § 1396 et seq. (the “Medicaid Act”), and

16 therefore are invalid under the Supremacy Clause of the United States Constitution.

17 U.S. CONST. art. VI, cl. 2. Specifically, plaintiff alleges that AB 5 is preempted by §

18 30(A) of the Medicaid Act, 42 U.S.C. § 1396a(a)(30)(A) (“§ 30(A)”), because neither

19 the Director nor the California legislature considered the “quality of care” and “equal

20 access” provisions of § 30(A), or whether reimbursement rates are reasonably related to

21 provider costs, before its implementation. Compl. ¶ 58. Plaintiff further alleges that the

22 Director failed to comply with additional requirements of the Medicaid Act, federal

23 regulations, and the state plan. Specifically, plaintiffs alleges that the two rate

24 provisions of AB 5 were implemented in violation of (1) the public process provisions of

25

26

27

1 Assembly Bill 1183 (“2008 AB 1183"), enacted on September 16, 2008, amended

Cal. Welf. & Inst. Code § 14166.245 such thatfefective November 1, 2008, small and rural

28 hospitals were exempt from the ten percent reduction.

2

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 3 of 15 Page ID #:1578

1 42 U.S.C. § 1396a(a)(13)(A) (“§ 13(A)”);2 (2) the public notice provisions of 42 C.F.R.

2 § 447.205; (3) the State Plan requirements. Compl. ¶¶ 59-66. Plaintiffs seek declaratory

3 relief and injunctive relief to restrain the implementation and enforcement of the two rate

4 provisions of AB 5 at issue.

5

Medicaid is a cooperative federal program: the federal government provides

6 federal funding to the states so that states may provide medical care to their needy

7 citizens. State participation is voluntary; however, once a state chooses to participate by

8 accepting federal funds, it must comply with requirements imposed by the Medicaid Act.

9 Because California has elected to participate in the Medicaid program, it must administer

10 its state Medicaid program, Medi-Cal, in compliance with a State Medicaid Plan (“State

11 Plan”) that has been pre-approved by the Secretary of the U.S. Department of Health and

12 Human Services (the “Secretary”), and which complies with federal Medicaid law,

13 including the requirements set forth in 42 U.S.C. § 1396a(a)(1)-(70). In accordance with

14 these requirements, California must provide “methods and procedures” for the payment

15 of care and services that (1) are “consistent with efficiency, economy, and quality of

16 care,” and (2) ensure their availability to the Medicaid population to the same “extent as

17 they are available to the general population in the geographic area.” 42 U.S.C. §

18 1396a(a)(30)(A). These requirements are known, respectively, as the “quality of care”

19 and “equal access” provisions of § 30(A) of the Medicaid Act. In Orthopedic Hospital v.

20 Belshe, 103 F.3d 1491, 1496 (9th Cir. 1997), the Ninth Circuit interpreted § 30(A) to

21 require the Director to set reimbursement rates that “bear a reasonable relationship to

22 efficient and economical hospitals' costs of providing quality services, unless the

23 Department shows some justification for rates that substantially deviate from such

24 costs.” See also Indep. Living Ctr. of S. Cal. V. Maxwell-Jolly, 572 F.3 644, 651-52

25 (9th Cir. 2009) (“ILC II”) (affirming the standards established in Orthopedic Hospital).

26

27

2 In addition to bringing the instant action under the Supremacy Clause, plaintiff

alleges that it has standing to enforce § 13A( ) through a civil rights action under 42 U.S.C.

28 § 1983. Compl. ¶ 61.

3

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 4 of 15 Page ID #:1579

1 To meet this statutory requirement, the Ninth Circuit held that the Director “must rely on

2 responsible cost studies, its own or others', that provide reliable data as a basis for its rate

3 setting.” Orthopedic Hospital, 103 F.3d at 1496. In addition, for certain providers,

4 including hospital service providers, California must establish rates through a public

5 process that includes publication of the proposed rates and their underlying

6 methodologies, such that providers are “given a reasonable opportunity for review and

7 comment.” 42 U.S.C. § 1396a(a)(13)(A) (“§ 13(A)”). Further, the state must administer

8 Medi-Cal in accordance with Medicaid regulations; applicable state law, as specified in

9 sections 14000 to 14124 of the Welf. & Inst. Code; and Medi-Cal regulations.

10

On January 11, 2010, plaintiff filed the instant motion for preliminary injunction.

11 On February 5, 2010, the Director filed an amended opposition.3 Plaintiff filed its reply

12 on February 10, 2010. A hearing was held on February 22, 2010. After carefully

13 considering the arguments set forth by both parties, the Court finds and concludes as

14 follows.

15 II. LEGAL STANDARD

16

“A preliminary injunction is not a preliminary adjudication on the merits: it is an

17 equitable device for preserving the status quo and preventing the irreparable loss of

18 rights before judgment.” Textile Unlimited v. A..BMH & Co., 240 F.3d 781, 786 (9th

19 Cir. 2001). The Ninth Circuit summarized the Supreme Court’s recent clarification of

20 the standard for granting preliminary injunctions in Winter v. Natural Res. Def. Council,

21 129 S. Ct. 365, 374 (2008), as follows: “[a] plaintiff seeking a preliminary injunction

22 must establish that he is likely to succeed on the merits, that he is likely to suffer

23 irreparable harm in the absence of preliminary relief, that the balance of equities tips in

24 his favor, and that an injunction is in the public interest.” Am. Trucking Ass’n, Inc. v.

25 City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009).

26

27

3 The Director’s opposition, filed Februa ry 1, 2010, was stricken by the Court

because it exceed the page limit of Local Rule 116-. The Court directed the Director to file

28 an opposition that complies with the Local Rules of Court on or before February 10, 2010.

4

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 5 of 15 Page ID #:1580

1 III. DISCUSSION

2

A. LIKELIHOOD OF SUCCESS ON THE MERITS

3

As a threshold matter, the Director contends that the instant motion should be

4 denied because plaintiff fails to properly allege standing.4 Opp’n at 3-4. For the reasons

5 discussed in this Court’s February 22, 2010 order denying the Director’s motion to

6 dismiss, the Court finds that CHA has properly alleged associational standing to bring

7 the instant action.5

8

Plaintiff seeks an order that preliminarily enjoins the Director from implementing

9 the reimbursement rate provisions of AB 5 codified at Cal. Welf. & Inst. Code §

10 14105.191(f) and § 14166.245(g)(1), on the basis that plaintiff is likely to succeed on the

11

12

4 The Director contends that to the extent CHA’s membership consists of publicly-

13

owned providers of Medi-Cal services, C HA lacks representational standing to seek injunctive relief on behalf of such political subdivisions of the State that would not have

14 standing to bring this action on their own behalf. Opp’n at 3-4 (citing Palomar Pomerado

15

Health Sys. v. Belshe, 280 F.3d 1104 (9th Cir. 1999)). TheDirector requests that the Court deny plaintiff’s motion or, in the alternative,stay the motion pending discovery of CHA’s

16 membership. Id. At oral argument, plaintiff represented to the Court that at least five of

17

its members qualify as “small and rural hospitals” under the statute, which are not public hospital districts — specifically, Coalinga Regional Medical Center, Barton M emorial

18 Hospital, George L. Mee Memorial Hospital, Marshall Medical Center SNF, and Sutter

19 Amador. See Suppl. Declaration of Patricia Blaisdell In Support of Mot. For Preliminary Injunction, Ex. A; Def.’s Req. For Judi cial Not. In Support of O pp’n to Mot. For
20 Preliminary Inunction, Ex. 17.

21

5 At oral argument, the Director request ed that to the extent this Court awards

22 plaintiff any injunctive relief, the relief be tailored to address only those CHA m embers

23

that would have standing in their own right to bring suit and to exempt hospitals that are political subdivisions of the State. As the Court noted in its February 22, 2010 order, CHA

24 may assert associational st anding to bring the instant action for injunctive relief.

25 Moreover, the holding of Palomar, 180 F.3d at 1108 (holding that a political subdivision of the State lacks standing to bring an action against the State in federal court, at least to
26 the extent that its action challenges the va lidity of state reg ulations on constitutional

27 grounds), does not suggest that even though th ey lack standing, political subdivisions remain subject to state laws that are otherwise declared to be invalid under the Supremacy
28 Clause.

5

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 6 of 15 Page ID #:1581

1 merits of each of its four claims against the Director.

2

As noted above, plaintiff brings its first claim for relief under the Supremacy

3 Clause based on the allegation that AB 5 is preempted by § 30(A). The Ninth Circuit

4 has held that plaintiff may bring suit under the Supremacy Clause to enjoin

5 implementation of state legislation preempted by the Medicaid Act. See, e.g., Indep.

6 Living Ctr. of S. Cal. v. Shewry, 543 F.3d 1050, 1065-66 (9th Cir. 2008) (“ILC I”).

7 Under general principles of federal conflict preemption, state law is preempted only to

8 the extent that it actually conflicts with state law. Pacific Gas & Elec. Co. v. State

9 Energy Res. Conservation & Dev. Comm'n, 461 U.S. 190, 204 (1983). Such a conflict

10 may arise either where “compliance with both federal and state regulations is a physical

11 impossibility, or where state law stands as an obstacle to the accomplishment and

12 execution of the full purposes and objectives of Congress.” Id. at 203-04. In so far as

13 the California Legislature and the Department fail to consider the factors required by §

14 30(A) before setting Medi-Cal reimbursement rates, the Court may find that such state

15 legislation frustrates the purpose underlying § 30(A), and is thus preempted. See ILC II,

16 572 F.3d at 653. Section 30(A) creates duties on behalf of the Department, i.e., the duty

17 to consider efficiency, economy, and quality of care when establishing reimbursement

18 rates. See Orthopedic Hospital, 103 F.3d at 1496-97. Thus, when the State of California

19 seeks to modify reimbursement rates for health care services provided under the Medi-

20 Cal program, it must consider efficiency, economy, quality of care, and equality of

21 access, as well as the effect of providers’ costs on those relevant factors. See ILC II, 572

22 F.3d at 651-53. As the Ninth Circuit held in Orthopedic Hospital, 103 F.3d at 1496, §

23 30(A) requires that the Director set reimbursement rates that “bear a reasonable

24 relationship to efficient and economical hospitals' costs of providing quality services,

25 unless the Department shows some justification for rates that substantially deviate from

26 such costs.” To meet this statutory requirement, the Director “must rely on responsible

27 cost studies, its own or others', that provide reliable data as a basis for its rate setting.”

28 103 F.3d at 1496.

6

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 7 of 15 Page ID #:1582

1

Plaintiff contends that the California legislature failed to consider the § 30(A)

2 factors before enacting AB 5 as a budget trailer bill. Mot. at 13. According to plaintiff,

3 there is nothing in the legislative history that indicates that the state considered the §

4 30(A) factors, including hospital costs, prior to enacting AB 5; nor is there evidence that

5 it reviewed or relied on cost studies, and thus considered whether the new payments

6 rates to hospitals, including DP/NF and subacute units, would be reasonably related to

7 hospital costs. Id. at 14-16; Declaration of Jay Raymond. Instead, plaintiff contends

8 that given the haste with which AB 5 was enacted, there was little opportunity for the

9 legislature to consider the § 30(A) factors.6 Id. at 15-16. Similar to the Medi-Cal

10 reimbursement rates enacted by 2008 AB 5 and AB 1183, which were found likely

11 preempted by § 30(A) in ILC II and Cal. Pharm. Ass’n v. Maxwell-Jolly, 563 F.3d 847

12 (9th Cir. 2009), plaintiff asserts that the reimbursement rate provisions of AB 5 were

13 enacted for purely budgetary reasons in violation of § 30 (A). Id. at 16.

14

The Director responds that because the California legislature limited

15 reimbursement to 90 percent of hospitals’ allowable audited costs, that it expressly

16 considered non-contract hospital costs in enacting the ten percent rate reduction, codified

17 at § 14166.245(b). Opp’n at 4. Because ninety percent is within the 85 to 95 percent

18 “range of reasonableness” set by the Boren Amendment, previously codified at §

19 1396a(a)(13(A), the Director argues that the state has satisfied the more flexible

20 requirements of § 30(A). Id. at 5, 7. However, the Ninth Circuit has already rejected

21 this argument in the related matter of ILC II, 572 F.3d at 655 n.11, where it found that

22 the substantive requirements under the Boren Amendment do not apply to the court’s

23 interpretation of § 30(A). In addition, the Court notes that the Director has not proffered

24 any evidence that the legislature considered § 30(A) factors and hospital costs when

25

26

6 AB 5 was originally introduced on July 2, 2009 without any substantive content.

27 The Senate amended AB 5 on July 23, 2009, to add virtually all of the budget trailer language, included the rate provisions at issue, and the Senate and Assembly passed AB
28 5 that same day. The Governor signed the bill on July 28, 2009.

7

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 8 of 15 Page ID #:1583

1 enacting the freeze on DP/NFs and subacute rates. Accordingly, the Court concludes

2 that there is no evidence that the legislature complied with the procedural requirements

3 under § 30(A) when enacting the challenged rate provisions of AB 5. Rather, it appears

4 that the only reason for imposing the cuts was California’s current fiscal emergency.

5

In the alternative, the Director contends that to the extent that § 30(A) imposes a

6 duty on the State, this duty rests solely with the Department and cannot apply to the

7 conduct of the State legislature. Opp’n at 8. He argues further that under the challenged

8 statutes, the Department retains discretion not to implement the rate freeze and to

9 reinstate the ten percent reduction for small and rural hospitals, if it determines that the

10 enacted rates would not comply with federal Medicaid requirements. Id. at 5-6, 8. In

11 support of this argument, the Director cites to § 14105.191(i).7 Id. at 6. This code

12 section provides that:

13

The department shall promptly seek any necessary federal approvals for

14

the implementation of this section. To the extent that federal financial

15

participation is not available with respect to any payment that is reduced

16

or limited pursuant to this section, the director may elect not to

17

implement that reduction or limitation.

18 14105.191(i). Finally, the Director contends that the Department made the necessary

19 “bona fide fact-findings” under § 30(A), based on reliable cost studies involving the

20 criteria of efficiency, economy, quality of care, and access to cares, before exercising its

21 discretion to implement the two challenged rate provisions of AB 5. Opp’n at 7. The

22 Director submits declarations of three Department employees and one independent

23 contractor. See Declarations of Sandra Yien; Jalynne Callori; Timothy Matsumoto; and

24

25

7 Further, the Director contends that theDepartment retains broad authority to “limit

the rates of payments for h ealth care services.” Cal. Welf. & Inst. Code § 14105(a).

26 Plaintiff replies that to the extent that the Driector asserts authority to adjust payment rates,

27 pursuant to § 14105(a), that this contenti on is defeated by the express term s of § 14105.191(a) which provide that “[n]otwithstanding any other provision of law . . the
28 director shall reduce provide payments, as specified in this section.” Reply at 12, n. 7.

8

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 9 of 15 Page ID #:1584

1 Susan Flores.

2

While the Director maintains that the Department has discretion under §

3 14105.191(i) not to enforce rate provisions enacted by AB 5, the Court notes this section

4 expressly does not apply to payments to hospitals not under contract with the State for

5 inpatient services, and thus would not apply to the challenged provision, enacted at §

6 14166.245. See Cal. Welf. & Int. Code § 14105.191(c) (providing that payments to non-

7 contract hospitals shall be governed by 14166.245). Further, plaintiff contends that by

8 the plain language of §14105.191, the Director has limited discretion to “react to the

9 non-availability of federal funding,” and that nothing in the section suggests that the

10 Director can decline to implement certain payment limitations.8 Reply at 12. As this

11 Court has previously noted, studies that constitute post-hoc rationalization for a

12 legislative decision that has already been made are insufficient to demonstrate

13 compliance with § 30(A). See Cal. Pharm., No. 09-722, slip. op. at 9-11 (C.D. Cal. Mar.

14 9, 2009), aff’d by 563 F.3d 847, 850 (9th Cir. 2009). Thus, despite the Director’s

15 assertion that AB 5 gives him some discretion to alter the rate cuts based on the

16 Department’s own analysis, which it does not appear to do, the Court finds that the

17 declarations submitted by the Director do not demonstrate compliance with § 30(A).9

18

19

8 Moreover, plaintiff contends that all public notice of the rate limitations issued by

the Department indicate that those limits were legislatively mandated, and thus it argues

20 that the Director has never “behaved as if he had any choice but to implement” the rate

21 limitations enacted by AB 5. Reply at 12-13(citing, e.g., the Department’s announcement of the reimbursement lim itation in the July 31, 2009 California Regulatory Notice
22 Register).

23

9 Specifically, based on the declarations submitted by the Director, it appears the

24 Department has conducted cost-based rate analysis to determine how past rate reductions,

25 namely the ten percent and five percent rate reductions enacted by 2008 AB 5 and AB 1183, affected Medi-Cal reim bursement. See, e.g. , Matsumoto Decl. ¶¶ 7-9, Ex. 28.
26 Further, the Department submits a copy of its analysis of how the rate freeze will affect

27 reimbursement of 2009-2010 projected costs. See Yien Decl. ¶¶ 8, 13, Exs. 21, 22.

Finally, the Department asked Medi-Cal fiscalintermediary, HP EnterpriseServices, which

28

(continued...)

9

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 10 of 15 Page ID #:1585

1

2

Because the Court finds that plaintiff has demonstrated a likelihood of success on

3 the merits of its § 30(A) claim, the Court need not address the merits of plaintiff’s

4 remaining claims for purposes of the present motion.

5

B. IRREPARABLE HARM

6

Plaintiff contends that its members, who participate in the Medi-Cal program, are

7 being irreparably harmed by the reimbursement rate provisions of AB 5 codified at Cal.

8 Welf. & Inst. Code § 14105.191(f) and § 14166.245(g)(1). Mot. at 21. Plaintiff argues

9 that its members will suffer pecuniary harm as a result of the rate provisions, given that

10 they will receive less reimbursement than they would otherwise receive absent the

11 limitations enacted by AB 5. Id. at 21-22. Further, it argues that the Ninth Circuit has

12 held that, notwithstanding the general rule that monetary harm does not constitute

13 irreparable harm, pecuniary harm may constitute irreparable injury if the plaintiff cannot

14 recover damages from the defendant because such retroactive monetary claims would be

15 barred by the Eleventh Amendment. Id. (citing Cal. Pharm., 563 F.3d at 851-52). Given

16 that CHA’s member hospitals are barred by the Eleventh Amendment from obtaining

17 retroactive relief in federal court from the AB 5 rate provisions, specifically with respect

18 to services provided for non-contract inpatient services by small and rural hospitals on or

19

20

9(...continued)

21

administers Medi-Cal claims, to evaluate paid claims information for a period when there was a reimbursement rate reduction, July1, 2008 through February 28, 2009, as compared

22 to a period when no reduction was in effectJ, uly 1, 2007 through February 28, 2008. Yien

23

Decl. ¶ 21. The purpose of this January 2010 study was to determ ine how past rate reductions impacted beneficiary access. Id. ; see Flores Decl. (sum marizing results of

24 study); Exs. 14, 15. While the Director contneds that these studies indicate that the current

25 rate reductions will not impairbeneficiary access and that current reimbursement rates fall within the “range of reasonableness,” th e Court finds that this evidence does not
26 demonstrate that the specific challenged ra te provisions, codified at § 14105.191 and §

27 14166.245, were enacted and implemented “based on” the Legislature and Department’s consideration of responsible cost studies and a finding that AB 5 was consistent with
28 efficiency, economy, quality of care, and access.

10

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 11 of 15 Page ID #:1586

1 after July 1, 2009, and for DP/NFs and subacute services on or after August 1, 2009,

2 plaintiff contends that they will suffer irreparable harm if the requested injunction is not

3 granted.10

4

The Director responds that plaintiff does not meet its burden of showing harm

5 because it does not proffer specific evidence of the alleged pecuniary harm caused by

6 AB 5. Opp’n at 20. Plaintiff replies that no such showing is required because it is self-

7 evident from the terms of the two rate provisions that AB 5 reduces payments to

8 providers. Reply at 20.

9

First, § 14105.191, as amended by AB 5, effectively “freezes” the Medi-Cal

10 reimbursement rates for certain designated services, including services provided by

11 DP/NFs and subacute care units, “rendered during the 2009-2010 rate year and each rate

12 year thereafter” at 2008-2009 levels. Cal. Welf. & Inst. Code § 14105.191(f). Because

13 the reimbursement methodology for determining DP/NFs and subacute payment rates is

14 based on historical cost data, the Department is required to make annual updates to such

15 payment rates.11 See State Plan Attachment 4.19-D at 1; Cal. Code Regs. tit. 22, § 51511

16 (explaining that DP/NFs receive prospectively determined per diem reimbursement rates

17 based on the lesser of an individual facility’s projected costs or a prospectively

18 determined median per diem rate); id. §§ 51511.5l; 51511.6 (outlining a similar

19 reimbursement scheme for facilities providing adult and pediatric subacute services).

20

21

10 Plaintiff contends that in the Medicaid context, the issue of whether relief is

prospective or retrospective depends on the date of service and not the date of paym ent.

22 Mot. at 23 (citing e.g., ILC II, 572 F.3d at 661, n. 19). The express terms of the amended

23 versions of § 14105.191 and § 14166.245 state that the lim it on reim bursement rates became effective for services rendered sinceAugust 1, 2009 and July 1, 2009, respectively.
24 Cal. Welf. & Inst. Code § 14105.191(f); § 14166. 245(g)(1). Accordingly, plaintiff

25 contends that the Director cannot dispute that the rate limitations of AB 5 are already in 26 effect, even if the Director has not yet implemented them. Mot. at 23.

27

11 According to plaintiff, the Dep artment uses cost report data subm itted by

participating hospitals, from two years p rior, when setting rates for the upcom ing year.

28 Mot. at 5.

11

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 12 of 15 Page ID #:1587

1 Thus, plaintiff argues that AB 5 indefinitely suspends the annual payment for these 2 services, regardless of how drastically provider costs may increase in subsequent years. 3 Mot. at 11. The Director responds that plaintiff’s claim of harm is illusory because 4 while the Department does conduct annual cost studies, there is no Medicaid 5 requirement that California provide annual payment increases.12 Opp’n at 21. Based on 6 the historical rate data and the Department’s own data regarding “unfrozen” DP/NFs and 7 subacute rates for the 2009-2010 year, plaintiff replies that it is clear that DP/NFs and 8 subacute rates would have increased were it not for the challenged rate limitation.13 Mot. 9 at 22; Reply at 22-23. Further, plaintiff provides, by way of example, that CHA member 10 Community Medical Center is currently being paid for DP/NF services at a “frozen” rate 11 of $343.63, while the Department has calculated an “unfrozen” rate for the facility of

12

13

14

12 In addition, the Director asserts that given that the Departm ent was paying 10

15

percent and then 5 percent reduced rates during the 2008-2009 year, the unreduced 20082009 rates now being paid to DP/NFs and subacute care providers, are actually higher than

16 the rates being paid a year ago. Opp’n at 20-21. However,a comparison to reduced rates,

17

already found likely preem pted by federal la w, is not the appropriate fram ework for analyzing harm. See, e.g., ILC I, 543 F.3d at 1065 (finding that “loss of gross incom e”

18 resulting from the specific Medical rate cha nge is cognizable injury for purposes of

19 standing).

20

13 According to plaintiff, the med ian rate for DP/NF services increased by an

21

average of 14.37 percent each year between 2004 and 2008. Mot. at 22, n.9; Blaisdell Decl. ¶ 5. Further, it argues that the medianrate for adult subacute services went up by an

22 average of 8.96 percent, and the median rate for pediatric subacute services increased by

23

an average of 4.85 percent. Id. Further, plaintiff argues that the fact that the rate freeze provision is projected to result in budgeta ry savings of approxim ately $75 m illion

24 demonstrates that hospitals would be paid more for services but for AB 5. Mot. at 17, 22;

25 Raymond Decl. ¶ 9; Ex. B at 153. As for the Departm ent’s own data, plaintiff subm its spreadsheets prepared by the Department withcalculations of the “unfrozen” DP/NFs and
26 subacute rates for the 2009-2010 year. Suppl. Blaisdell Decl. ¶¶ 6-7; Exs. B. When

27 compared with the frozen payment rates, plaintiff asserts that numerous facilities are being paid less in 2009-2010 than they would othe rwise have been absent the challenged
28 provision in AB 5. Id.; Ex. C.

12

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 13 of 15 Page ID #:1588

1 $381.37 for 2009-2010.14 Reply at 23; Supp. Blaisdell Decl. ¶ 7; Ex. C. Finally, the

2 Director responds that certain DP/NFs may incur no real harm from the rate freeze

3 because many DP/NFs receive supplemental reimbursement over and above the usual

4 Medi-Cal rate reimbursement. Opp’n at 21; Declaration of Larry Brown ¶¶ 5-6. Plaintiff

5 responds that the Director overstates the availability of these supplements payments, and

6 asserts that only a small number of facilities impacted by the rate freeze will qualify for

7 such payments. Reply at 22, n.13; Declaration of Henry Zaretsky ¶¶ 18, 22.

8

As to the second challenged rate provision, § 14166.245, as amended by AB 5,

9 reduces the Medi-Cal reimbursement rate of inpatient services provided by small and

10 rural hospitals, not under contract with the State, by ten percent.15 Cal. Welf. & Inst.

11 Code § 14166.245(g)(1). In Santa Rosa Memorial Hospital v. Maxwell-Jolly, No. 08-

12 5173 SC, 2009 WL 3925498, at *5 (N.D. Cal. Nov. 18, 2009), the court found that the

13 plaintiff hospitals were harmed by the ten percent rate reduction enacted by 2008 AB 5.

14 Plaintiff contends that AB 5 is effectively the same rate reduction as 2008 AB 5, given

15 that AB 5 “simply resurrects the same rate reduction for small and rural facilities, after

16 [2008] AB 1183 temporarily exempted this category of facilities.” Mot. at 21-22.

17 Accordingly, it argues that just as the 2008 AB 5 harmed plaintiff in Santa Rosa, AB 5 is

18

19

14 Plaintiff asserts that an nualized for the entire year, this differential in the

reimbursement rates will resultin total annualized losses tothe facility of $414,001.66 for

20 2009-2010. Reply at 23; Suppl. Blaisdell Decl. ¶ 7E;x. C. Further, plaintiff provides other

21 examples of member hospitals that provide DP/NFs and subacute services, which will be receive less gross income as a result of the payment freeze enacted in § 14105.191(f). Id.
22

23

15 The relevant code section states that“[o]n and after July 1,2009, small and rural hospitals . . . shall be subject to the reductionsset forth in paragraph (1) of subdivision (b)

24 and subparagraph (A) of paragraph (3) of subdivision (c) . . . . .” Cal. Welf. & Inst. Code

25 § 14166.245(g)(1). Subdivision (b)(1) states, in pertinent part, that for non-contract hospitals “amounts paid as interim payments for inpatient hospital services . . .shall be
26 reduced by 10 percent.” Id. § 14166.245(b)(1). Subdivision (c)(3)(A) provides that

27 “[w]hen calculating a hospital's cost report settlement for a hospital's fiscal period . . ., the settlement . . . shall be limited to . . . [n]inety percent of the hospital's audited allowable
28 cost per day for those services . . . .” Id. § 14166.245(c)(3)(A).

13

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 14 of 15 Page ID #:1589

1 harming CHA’s small and rural hospitals. Id. The Director responds that no real harm

2 may occur as a result of § 14166.245 because several small and rural hospitals are

3 expected to be paid disproportionate share hospital (“DSH”) reimbursement for acute

4 care hospital inpatient services rendered during 2009-2010, and thus these DSH

5 payments will push total reimbursement for these hospitals to above 90 percent, and in

6 some instances above 100 percent, of allowable costs. Opp’n at 21; Declaration of

7 Jalynne Callori ¶ 7.

8

The Court finds that plaintiff has sufficiently demonstrated that there is a

9 likelihood certain CHA member hospitals will suffer monetary losses as a result of the

10 rate freeze and ten percent payment reduction implemented by AB 5. Moreover, the

11 Court concludes that plaintiffs have shown irreparable harm if an injunction is not

12 granted, given that the relevant rate provisions became effective July 1, 2009 and August

13 1, 2009, and plaintiff’s members would be barred by the Eleventh Amendment from

14 obtaining retroactive relief in federal court. See Cal. Pharm., 563 F.3d at 851-52.

15

C. BALANCE OF HARDSHIPS & PUBLIC INTEREST

16

While the Court is mindful of the difficulty facing the State of California in light

17 of its fiscal crisis, the Ninth Circuit has held that “[s]tate budgetary considerations do not

18 . . . in social welfare cases, constitute a critical public interest that would be injured by

19 the grant of preliminary relief. In contrast, there is a robust public interest in

20 safeguarding access to health care for those eligible for Medicaid.” ILC II, 572 F.3d at

21 659. Further, the Ninth Circuit has determined that “it would not be equitable or in the

22 public’s interest to allow the state to continue to violate the requirements of federal law.”

23 Cal. Pharm., 563 F.3d at 852-53. Given that the State may decide to implement a rate

24 change upon making a properly reasoned and supported analysis, the Court finds that the

25 balance of equities and the public interest weigh in favor of granting the injunction.

26 IV. CONCLUSION

27

In accordance with the foregoing, the Court GRANTS plaintiff’s motion for

28 preliminary injunction. The Court hereby orders respondent Director, his agents,

14

Case 2:09-cv-08642-CAS-MAN Document 37 Filed 02/24/10 Page 15 of 15 Page ID #:1590

1 servants, employees, attorneys, successors, and all those working in concert with him to 2 refrain from enforcing Cal. Welf. & Inst. Code § 14105.191(f), including refraining from 3 effectively freezing the Medi-Cal reimbursement rates for services provided by nursing 4 facilities that are part of hospitals, and by subacute and pediatric subacute care units that 5 are part of hospitals, “rendered during the 2009-2010 rate year and each rate year 6 thereafter” at 2008-2009 levels. Further, the Court orders the Director, et al., to refrain 7 from enforcing that portion of Cal. Welf. & Inst. Code 14166.245(g)(1) which reduces 8 by ten percent payments to small and rural hospitals, not under contract with the 9 Department, for inpatient services provided on or after July 1, 2009.

10

11

IT IS SO ORDERED

12 Dated: February 24, 2010

13

14

________________________________ CHRISTINA A. SNYDER
UNITED STATES DISTRICT JUDGE

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

 
 Case 2:09-cv-08642-CAS-MAN Document 49 Filed 04/05/10 Page 1 of 4 Page ID #:1686

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date April 5, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

Present: The Honorable CHRISTINA A. SNYDER

CATHERINE JEANG

NOT PRESENT

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

(In Chambers:) DEFENDANT’S MOTION TO MODIFY RULING ON MOTION FOR PRELIMINARY INJUNCTION (filed 03/08/10 & 3/11/10)

The Court finds this motion appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing date of April 12, 2010, is hereby vacated, and the matter is hereby taken under submission.

I. INTRODUCTION
The facts and procedural history of the instant motion are known to the parties and summarized in this Court’s February 24, 2010 order granting plaintiff’s motion for preliminary injunction. Specifically, the Court ordered

[R]espondent Director, his agents, servants, employees, attorneys, successors, and all those working in concert with him to refrain from enforcing Cal. Welf. & Inst. Code § 14105.191(f), including refraining from effectively freezing the Medi-Cal reimbursement rates for services provided by nursing facilities that are part of hospitals, and by subacute and pediatric subacute care units that are part of hospitals, “rendered during the 2009-2010 rate year and each rate year thereafter” at 2008-2009 levels. Further, the Court orders the Director, et al., to refrain from enforcing that portion of Cal. Welf. & Inst. Code 14166.245(g)(1) which reduces by ten percent payments to small and rural hospitals, not under contract with the Department, for inpatient services provided on or after July 1, 2009.

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Case 2:09-cv-08642-CAS-MAN Document 49 Filed 04/05/10 Page 2 of 4 Page ID #:1687
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date April 5, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

Feb. 24, 2010 Order at 15.

On March 8, 2010, defendant filed the instant motion to modify the February 24, 2010 order, pursuant to Fed. R. Civ. P. 59(e). On March 17, 2010, plaintiff filed a statement of non-opposition to the motion. After carefully considering the arguments set forth by both parties, the Court finds and concludes as follows.

II. LEGAL STANDARD

The Court may grant reconsideration of a final judgment under Federal Rules of Civil Procedure 59(e) and 60. Generally, a motion for reconsideration of a final judgment is appropriately brought under Federal Rule of Civil Procedure 59(e). See Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985) (discussing reconsideration of summary judgment). The motion must be filed no later than twenty-eight days after entry of the judgment. See Fed. R. Civ. P. 59(e). “Reconsideration [pursuant to Rule 59(e)] is appropriate if the district court (1) is presented with newly discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is an intervening change in controlling law.” School Dist. No. 1J, Multnomah County, Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993); see also Kern-Tulare Water Dist. v. City of Bakersfield, 634 F. Supp. 656, 665 (E.D. Cal.1986), rev'd in part on other grounds, 828 F.2d 514 (9th Cir. 1987).

Under Rule 60(a), the Court may grant reconsideration of final judgments based on clerical mistakes. Relief under this rule can be granted on the court's own motion and at any time. See Fed. R. Civ. P. 60(a). However, once an appeal has been filed and docketed, leave of the appellate court is required to correct clerical mistakes while the appeal is pending. See id. Under Rule 60(b), the court may grant reconsideration of a final judgment and any order based on: “(1) mistake, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud; (4) a void judgment; (5) a satisfied or discharged judgment; or (6) extraordinary circumstances which would justify relief.” ACandS, Inc., 5 F.3d at 1263. A motion for reconsideration on any of these ground must be brought within a reasonable time and no later than one year of entry of judgment or the order being challenged. See Fed. R. Civ. P. 60(c)(1).

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Case 2:09-cv-08642-CAS-MAN Document 49 Filed 04/05/10 Page 3 of 4 Page ID #:1688
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date April 5, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

III. DISCUSSION

Defendant contends that the Court’s February 24, 2010 order granting plaintiff’s motion for preliminary injunction is overbroad and should be amended to fall within the specific scope of relief sought by plaintiff. Mot. at 5. Namely, he argues that the portion of the order granting injunctive relief as to Cal. Welf. & Inst. Code § 14105.191(f) should indicate that the injunction is limited to defendant’s implementation of the freeze in rates applicable to skilled nursing facilities that are a distinct part of general acute care hospitals and to pediatric and adult subacute units that are part of hospitals. Id. Plaintiff does not object to the Court modifying its order in this way.

Thus, the Court hereby modifies the first paragraph, set forth at page 15 of its February 24, 2010 order, as follows: “The Court hereby orders respondent Director, his agents, servants, employees, attorneys, successors, and all those working in concert with him to refrain from enforcing the freeze in reimbursement rates set forth in Cal. Welf. & Inst. Code § 14105.191(f) only as it applies to services provided by skilled nursing facilities that are a distinct part of general acute care hospitals, by adult subacute care units, and by pediatric subacute care units that are part of hospitals, ‘rendered during the 2009-2010 rate year and each rate year thereafter.’ Further, the Court orders the Director, et al., to refrain from enforcing that portion of Cal. Welf. & Inst. Code 14166.245(g)(1) which reduces by ten percent payments to small and rural hospitals, not under contract with the Department, for inpatient services provided on or after July 1, 2009.”

IV. CONCLUSION

In accordance with the foregoing, the Court GRANTS defendant’s motion to modify.

IT IS SO ORDERED.

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00 : 00
Page 3 of 4

Case 2:09-cv-08642-CAS-MAN Document 49 Filed 04/05/10 Page 4 of 4 Page ID #:1689

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-8642 CAS (MANx)

Date April 5, 2010

CALIFORNIA HOSPITAL ASSOCIATION v. DAVID MAXWELL-JOLLY, Director of the State of Department of Health Care Services, State of California

Initials of Preparer

CMJ

CV-90 (06/04)

CIVIL MINUTES - GENERAL

Page 4 of 4

 
 Case 2:09-cv-08642-CAS-MAN Document 67-1 Filed 08/19/14 Page 1 of 10 Page ID #:1766

1160845.8

1 LYNN S. CARMAN (State Bar No. 28860)

MEDICAID DEFENSE FUND 2 404 San Anselmo Ave.

3

San Anselmo, CA 94960 Telephone: (415) 927-4023

4 Facsimile: (415) 256-9632

5

STANLEY L. FRIEDMAN (State Bar No. 120551) 445 S. Figueroa Street, 27th Floor

6 Los Angeles, CA 90071-1631

Telephone: (213) 629-1500 7 Facsimile: (213) 232-4071

8 E-Mail: friedman@friedmanlaw.org

9 LLOYD A. BOOKMAN (State Bar No. 89251) CRAIG J. CANNIZZO (State Bar No. 70379)
10 JORDAN B. KEVILLE (State Bar No. 217868)

11

E-Mail: ccannizzo@health-law.com HOOPER, LUNDY & BOOKMAN, P.C.

12 1875 Century Park East, Suite 1600 Los Angeles, CA 90067-2517

13 Telephone: (310) 551-8103

Facsimile: (310) 551-8181 14
Attorneys for Plaintiffs and Intervenors

15

16

UNITED STATES DISTRICT COURT

17

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

18 INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,
19 a nonprofit corporation, et al.,

20

Petitioners,

SACRAMENTO FAMILY MEDICAL 21 CLINICS, INC.; et al.,

22 v.

Intervenors,

23

TOBY DOUGLAS, Director of the

24 Department of Health Care Services,

State of California

25

Defendants.

26

27

28

Case No. CV 08-3315 CAS (MANx)
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT
[Notice of Motion and Joint Motion; Declaration of Craig J. Cannizzo in Support of Joint Motion for Approval of Settlement Agreement; and [Proposed] Order filed concurrently herewith]
Date: September 22, 2014 Time: 10:00 a.m. Crtrm.: 5, Floor 2 Hon. Christina A. Snyder Action Filed: April 22, 2008

CV 08-3315 CAS (MANx) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-08642-CAS-MAN Document 67-1 Filed 08/19/14 Page 2 of 10 Page ID #:1767

1160845.8

1 CALIFORNIA PHARMACISTS

ASSOCIATION, et al.,

2

Plaintiffs,

3

v.

TOBY DOUGLAS, Director of the

4 California Department of Health Care

Services

5

Defendant.

6

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,

7 et al.,

8 v.

Plaintiffs,

9 TOBY DOUGLAS, Director of the

10

Department of Health Care Services, State of California

11

Defendant.

12

CALIFORNIA HOSPITAL ASSOCIATION

13

Plaintiff,

14 v.

15

TOBY DOUGLAS, Director of the Department of Health Care Services,

16

State of California Defendant.

17

Case No. CV 09-722 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 29, 2009
Case No. CV 09-382 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 16, 2009
Case No. CV 09-8642 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: November 24, 2009

18

19

20

21

22

23

24

25

26

27

28
CV 08-3315 CAS (MANx) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-08642-CAS-MAN Document 67-1 Filed 08/19/14 Page 3 of 10 Page ID #:1768

1160845.8

1

MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION

3

Plaintiffs and Intervenors (collectively, “Plaintiffs”), on the one hand, and the

4 Department of Health Care Services (“DHCS” ) and the Director of DHCS,

5 (collectively, “the Department”), on the other, jointly move the Court to approve the

6 Settlement Agreement reached in the above-referenced cases. The Settlement

7 Agreement was reached after six years of complex and exhaustive litigation,

8 including multiple preliminary injunctions entered by this Court, numerous opinions

9 by the Ninth Circuit Court of Appeals, complex regulatory proceedings, and

10 ultimately, a United States Supreme Court decision that vacated most of the Ninth

11 Circuit decisions and remanded the matter for further proceeding. After the

12 Supreme Court’s opinion was issued in February 2012, the parties engaged in

13 continuous negotiations under the supervision of the chief Ninth Circuit mediator.

14 As a result of these efforts, the parties ultimately negotiated a settlement which was

15 executed in April 2014, and which the parties now present to the Court for approval.

16

The settlement was intensively negotiated by all parties and represents a fair

17 and adequate resolution of these cases. Under the terms of the settlement, the

18 parties have already dismissed their appeals from the preliminary injunctions issued

19 in the cases, (§§ III.A.1, and § 1.16); and Plaintiffs agree, when this Agreement

20 becomes effective, to dismiss the within actions with prejudice, (§ III.A.3), subject

21 however to the Court retaining continuing jurisdiction to determine (1) motions for

22 attorneys’ fees by counsel for Plaintiffs, and (2) motions or proceedings by Plaintiffs

23 to enforce the Agreement, up to and including January 1, 2016 (§ III.D.17). In

24 return, under the settlement, the Department has agreed – either by release (§ III.B.2

25 (page 14), or by agreement § III.A.8 (page 13) – to forgo recoupment of any

26 amounts paid out by the Department to Medi-Cal providers, pursuant to the

27 preliminary injunctions previously issued by this Court, except with respect to “opt-

28 out providers.” In other words, when the settlement becomes effective, Plaintiffs

1

CV 08-3315 CAS (MANx)

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT

Case 2:09-cv-08642-CAS-MAN Document 67-1 Filed 08/19/14 Page 4 of 10 Page ID #:1769

1160845.8

1 will give up their right to seek any further relief, and the state will give up its right

2 to seek recoupment of funds that have already been paid pursuant to the preliminary

3 injunctions, except with respect to “Claimed Excess Payments” for providers that

4 “opt out” of the settlement. This preserves the status quo, and by any measure is

5 fundamentally fair and equitable given the risk, expense, complexity and likely

6 duration of further litigation if the settlement is not approved.

7 II. BACKGROUND

8

A. Original Medi-Cal Rate-Cut Legislation

9

The Court is familiar with the complex procedural and factual history of these

10 actions, and the legislative enactments which they challenge, Assembly Bill X3 5

11 (“2008 AB 5”), Assembly Bill 1183 (“AB 1183”), and Assembly Bill X4 5 (“2009

12 AB 5”).

13

B. Subsequent Legislation Impacting The Rate Cuts

14

The effective dates of certain of the payment reductions in these cases have

15 been impacted or superseded by subsequent legislation.

16

First, the 10% outpatient payment reduction of 2008 AB 5 was superseded on

17 March 1, 2009 by AB 1183, which imposed smaller payment reductions.

18

Second, Senate Bill 90 (“SB 90”), which was enacted effective April 13, 2011

19 eliminated the AB 1183 Reductions as to hospital inpatient services provided by

20 Non-Contracting hospitals, for services rendered on or after April 13, 2011.

21

Another legislative enactment impacting the effective date of the challenged

22 payment reductions is Section 93.5 of Assembly Bill 97 of 2011 (“AB 97”), which

23 authorized the Department to reduce payments for various outpatient services and

24 DP/NF services by ten percent, effective June 1, 2011 (the “AB 97 Reductions”).

25 The instant settlement does not involve actions challenging the AB 97 Reductions.

26

C. The Supreme Court’s February 2012 Ruling And Subsequent

27

Ninth Circuit Mediation Efforts

28

On January 18, 2011, the Supreme Court granted certiorari with respect to the

2

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1 various payment reduction lawsuits. Earlier, on November 18, 2010, the Centers for

2 Medicare & Medicaid Services (“CMS”) had disapproved various State Plan

3 Amendments (“SPAs”) related to the payment reductions, and the Department had

4 requested reconsideration. Oral argument in the Supreme Court was conducted on

5 October 3, 2011. However, following oral argument, CMS approved some of the

6 pending SPAs, and the Department withdrew its request for reconsideration of some

7 of its other SPAs. The parties subsequently submitted letter briefs to the Supreme

8 Court regarding the effect on the applicable cases, if any, of these administrative

9 developments.

10

The Supreme Court issued its decision on February 22, 2012. Douglas v.

11 Indep. Living Ctr. of S. Cal., Inc., 132 S.Ct. 1204 (2012). The Supreme Court held

12 that the SPA decisions of CMS changed the procedural posture of the cases. Id. at

13 1209-10. The Supreme Court further held that, given the complexity of these cases,

14 it would remand the cases back to the Ninth Circuit for further consideration of

15 whether providers could maintain an action under the Supremacy Clause with

16 respect to the payment reductions at issue. Id. at 1211. Thus, the Court vacated the

17 Ninth Circuit decisions that had affirmed the various preliminary injunctions, and

18 remanded the matter to the Ninth Circuit.

19

Following the Supreme Court’s decision, the Plaintiffs in the various cases

20 and the Department then engaged in lengthy settlement negotiations overseen by the

21 chief Ninth Circuit mediator, Claudia Bernard. These mediation efforts were

22 successful, ultimately resulting in execution of the instant proposed settlement on 23 April 28, 2014.1

24

25

26 1 The Settlement Agreement is attached as Exhibit A to the Declaration of Craig J.

27

Cannizzo in Support of Joint Motion for Approval of Settlement Agreement, filed concurrently herewith.

28

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1 III. THE PROPOSED SETTLEMENT

2

A. General Provisions

3

First, pursuant to the Settlement Agreement, the parties have dismissed their

4 various appeals in these actions. Then, after both this Court and CMS approves the

5 Settlement, Plaintiffs will dismiss their actions with prejudice, subject to the Court

6 retaining jurisdiction (1) to determine Plaintiffs’ attorneys’ fees motions and (2) to

7 determine any motions by Plaintiffs to enforce the Agreement, up to and including

8 January 1, 2016. In exchange, the Department will agree to forgo recoupment

9 claims against Medi-Cal providers arising out of the preliminary injunctions in these

10 cases, except with respect to “Claimed Excess Payments” for the following: (1) any

11 current or prior hospital member of California Hospital Association (“CHA”), that,

12 after notice sent after the Effective Date of the Settlement, nevertheless elects to opt

13 out of the benefits of the Settlement (as specified in ¶¶ III.A.4 and 5); and (2) any

14 provider that institutes a new suit or fails to dismiss a pending suit or administrative

15 action against the State or Federal government, or officials in respect to the 2008

16 AB 5, 2009 AB 5, or AB 1183 Reductions, and (3) the plaintiff hospitals in the

17 Santa Rosa or North Bay litigation (¶¶ II.19 and III.A.7). Each side is to bear its

18 own costs, except for any Plaintiffs’ attorneys’ fees which may be awarded, if any.

19

Among other things, the agreement provides that the Settling Plaintiffs –

20 which include not only individual providers but also associational plaintiffs who are

21 acting as virtual representatives of the associations’ members – will release state and

22 federal entities “from any and all liability, derivative or otherwise,” for all claims

23 concerning or relating to the payment reductions, “excluding any claims that any

24 individual Medi-Cal provider may have relating exclusively to the accuracy of the

25 computation by DHCS of the reimbursement due to that provider under applicable

26 law.” (§ III.B.1.)

27

In turn, pursuant to § III.B.2, the Department will release the Settling

28 Plaintiffs from liability relating to “DHCS’s Claimed Excess Payments,” meaning

4

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1 payments made while challenged payment reductions were enjoined, but where

2 DHCS ultimately obtained federal approval from CMS for those payment reductions 3 (§ III.A.8).2 In addition, pursuant to the Settlement Agreement, the Department has

4 agreed to forgo recoupment of amounts paid as a result of various preliminary

5 injunctions where the Department subsequently withdrew its request for SPA

6 approvals. This covers various pharmacy and other outpatient provider payments

7 during the period from July 1, 2008 through February 28, 2011, as well as certain

8 hospital payments through December 31, 2010, or February 28, 2011, depending on

9 the provider category. (See fn. 1, supra.)

10

The settlement will not be effective until fully approved by CMS, or, if only

11 partially approved by CMS, the Department decides to nevertheless proceed and not

12 recover monies from providers for the payment reductions for time periods

13 discussed above. The date on which the settlement is effective is known as the

14 “Settlement Effective Date.” (§ II.24.)

15

B. Special Hospital Notice Provisions

16

Under the Settlement Agreement, the hospitals are required to forgo pursuing

17 any further legal relief from the Medi-Cal payment reductions that were challenged

18 in the applicable cases. In contrast with the other portions of these cases involving

19 the outpatient payment reductions, this includes several hospital payment reductions

20 that were enjoined only after they had been implemented for a period of time or

21

22 2This includes, with some exceptions, all payments made as a result of injunctions

23

of the AB 1183 Reductions for services rendered from March 1, 2011 through May 31, 2011, after which the successor legislation, AB 97, became effective. However,

24 for hospital outpatient services and Non-Contract hospital inpatient services, the

25

relevant dates of service are January 1, 2011 through April 12, 2011. Claimed Excess Payments also include payments made to small and rural Non-Contract

26 hospitals for inpatient services while the 2009 AB 5 Reductions were enjoined, for

27

dates of service of January 1, 2011 through April 12, 2011 and for DP/NFs for the period March 1, 2011 through May 31, 2011.

28

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1160845.8

1 were never enjoined by this Court, some of which were statutorily eliminated

2 several years later by SB 90 in 2011. Additionally, the association members of

3 CHA are relatively few in number (approximately 450) and are readily identifiable.

4 Because of these unique circumstances that are only applicable to hospital providers,

5 the settlement is structured to provide special notice to hospitals, such that

6 individual hospitals, that are not already an “opt-out provider”, may choose not to

7 accept the benefits of this settlement, and instead opt out and pursue claims on their

8 own if they determine the settlement is not in their best interests.

9

Specifically, within 30 days of the Settlement Effective Date, the CHA is

10 required to send a notice to all current members – and any hospital that was a

11 member during any period on or after July 1, 2008 – advising them of the terms of

12 the settlement (the “CHA Notice”). (§ III.A.4.) Within 45 days of when the CHA

13 Notice is mailed, hospitals may opt out of the settlement by filing their own lawsuit

14 challenging any or all of the payment reductions for any or all hospital services,

15 and/or the federal government’s approval of those reductions. If a hospital opts out,

16 it is not required to release the State from any potential claims, and could seek

17 retroactive relief with respect to the payment reductions. However, any such opt-out

18 hospital would not get the benefit of the settlement, meaning that DHCS will have

19 the right to seek recoupment of any Claimed Excess Payment from the hospital.

20

The CHA Notice must advise the hospitals of (a) the terms of the Settlement;

21 (b) that they may “opt out” by timely filing a lawsuit in their own name; and (c) if a

22 hospital does file such an individual action, then it will lose the benefits of the

23 Settlement, and the Department will have the right to seek recoupment of any

24 payment to that provider that constitutes or constituted a DHCS’ Claimed Excess

25 Payment. (§ III.A.4.) If CHA and DHCS cannot reach agreement on wording of the

26 CHA Notice, any such dispute will be submitted to the Court for resolution. (Id.)

27

C. Retention of Jurisdiction, and Attorneys’ Fees

28

Finally, the settlement also provides (§ III.D.17) that the Court shall retain

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1160845.8

1 jurisdiction, after the agreed dismissal of the within actions, with respect to motions

2 or proceedings by any named Plaintiff to enforce the Settlement Agreement; and

3 with respect to any motion for attorneys’ fees by any of the Plaintiffs or Plaintiffs’

4 attorneys. Then, § III.C. provides that attorneys for Plaintiffs may seek an award of

5 fees from the Department and/or the benefitted parties, including hospitals. Any

6 such application must be filed no earlier than the Settlement Effective Date, and no

7 later than 30 days after the Settlement Effective date.

8 IV. THE SETTLEMENT SHOULD BE APPROVED BECAUSE IT IS

9

FUNDAMENTALLY FAIR, ADEQUATE AND REASONABLE

10

In deciding whether to approve a settlement agreement under which the court

11 retains continuing enforcement jurisdiction, the criteria applied is whether it is “fair,

12 adequate, and reasonable, as well as consistent with the public interest.” United

13 States v. Lexington-Fayette Urban County Gov’t, 591 F.3d 484, 489 (6th Cir. 2010).

14 As the Ninth Circuit has noted, “[s]ettlement is the offspring of compromise; the

15 question . . . is not whether the final product could be prettier, smarter or snazzier,

16 but whether it is fair, adequate and free from collusion.” Hanlon v. Chrysler Corp.,

17 150 F.3d 1011, 1027 (9th Cir. 1998); see also Officers for Justice v. Civil Service

18 Comm’n, 688 F.2d 615, 625 (9th Cir. 1982) (“The proposed settlement is not to be

19 judged against hypothetical or speculative measure of what might have been

20 achieved by the negotiators.”).

21

The proposed settlement is the result of years of negotiation between counsel

22 for the Plaintiffs and counsel for the Department. There is no question that the

23 positions of the Plaintiffs and the Department were adverse, and that the settlement

24 is the fruit of arm’s-length negotiations. This is particularly true in light of the fact

25 that the Department is a governmental entity which has defended these actions

26 zealously, and which has dedicated substantial resources to advocating for its

27 position in multiple state and federal fora, up to and including the United States

28 Supreme Court. See Hanlon, 150 F.3d at 1026 (participation of governmental entity

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1160845.8

1 weights in favor of approving settlement agreement).

2

The proposed settlement is fundamentally fair, adequate, and reasonable. By

3 this settlement, providers will have secured gains they achieved in the litigation and

4 will avoid the risk that would ensue if these actions were further litigated.

5 V. CONCLUSION

6

For all the above reasons, the parties jointly request that this Court approve

7 the Settlement Agreement, subject to the retention of jurisdiction for the limited

8 purposes described in the [Proposed] Order.

9 DATED: August 19, 2014 10

Respectfully submitted, LYNN S. CARMAN

11

12

By: /s/ LYNN S. CARMAN

13

Attorneys for Petitioners/Plaintiffs

14 DATED: August 19, 2014 15

Respectfully submitted, STANLEY L. FRIEDMAN

16

17 18 19 20 DATED: August 19, 2014 21

By: /s/ STANLEY L. FRIEDMAN
Attorneys for Petitioners/Plaintiffs
Respectfully submitted, HOOPER, LUNDY & BOOKMAN, P.C.

22 23 24 25 DATED: August 19, 2014 26

By: /s/ CRAIG J. CANNIZZO
Attorneys for Plaintiffs/Intervenors Respectfully submitted, OFFICE OF THE ATTORNEY GENERAL

27

By: /s/

SUSAN M. CARSON

28

Supervising Deputy Attorney General

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1168460.1

1 LYNN S. CARMAN (State Bar No. 28860)

MEDICAID DEFENSE FUND 2 404 San Anselmo Ave.

3

San Anselmo, CA 94960 Telephone: (415) 927-4023

4 Facsimile: (415) 256-9632

5

STANLEY L. FRIEDMAN (State Bar No. 120551) 445 S. Figueroa Street, 27th Floor

6 Los Angeles, CA 90071-1631

Telephone: (213) 629-1500 7 Facsimile: (213) 232-4071

8 E-Mail: friedman@friedmanlaw.org

9 LLOYD A. BOOKMAN (State Bar No. 89251)

CRAIG J. CANNIZZO (State Bar No. 70379)

10 JORDAN B. KEVILLE (State Bar No. 217868)

11

E-Mail: ccannizzo@health-law.com HOOPER, LUNDY & BOOKMAN, P.C.

12 1875 Century Park East, Suite 1600 Los Angeles, CA 90067-2517

13 Telephone: (310) 551-8103

Facsimile: (310) 551-8181 14

15 Attorneys for Plaintiffs and Intervenors

16

UNITED STATES DISTRICT COURT

17

CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION

18 INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,
19 a nonprofit corporation, et al.,

20

Petitioners,

21

SACRAMENTO FAMILY MEDICAL CLINICS, INC.; et al.,

22

Intervenors,

v.

23

TOBY DOUGLAS, Director of the

24 Department of Health Care Services,

State of California

25

Defendants.

26

27

Case No. CV 08-3315 CAS (MANx)
DECLARATION OF CRAIG J. CANNIZZO IN SUPPORT OF JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT
[Notice of Motion and Joint Motion, Memorandum of Points and Authorities and Proposed Order filed concurrently herewith]
Date: September 22, 2014 Time: 10:00 a.m. Crtrm.:5, Floor 2 Hon. Christina A. Snyder Action Filed: April 22, 2008

28
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1168460.1

1 CALIFORNIA PHARMACISTS

ASSOCIATION, et al.,

2

Plaintiffs,

3

v.

TOBY DOUGLAS, Director of the

4 California Department of Health Care

Services

5

Defendant.

6

INDEPENDENT LIVING CENTER OF SOUTHERN CALIFORNIA, INC.,

7 et al.,

8 v.

Plaintiffs,

9 TOBY DOUGLAS, Director of the

10

Department of Health Care Services, State of California

11

Defendant.

12

CALIFORNIA HOSPITAL ASSOCIATION

13

Plaintiff,

14 v.

15

TOBY DOUGLAS, Director of the Department of Health Care Services,

16

State of California Defendant.

17

Case No. CV 09-722 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 29, 2009
Case No. CV 09-382 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: January 16, 2009
Case No. CV 09-8642 CAS (MANx)
Hon. Christina A. Snyder, Judge Presiding Action Filed: November 24, 2009

18

19

20

21

22

23

24

25

26

27

28
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1168460.1

1

DECLARATION OF CRAIG J. CANNIZZO

2

I, CRAIG J. CANNIZZO, declare as follows:

3

1. I am an attorney duly licensed to practice law in the State of California.

4 I am an attorney with the law firm of Hooper, Lundy & Bookman, P.C., counsel of

5 record for certain Plaintiffs and Intervenors herein. The facts stated herein are

6 personally known to me, and if called as a witness I could and would competently

7 testify to them.

8

2. Attached hereto as Exhibit A is a true and correct copy of the

9 Settlement Agreement reached in the above-referenced cases.

10

I declare under penalty of perjury that the foregoing is true and correct.

11

Executed on August 19, 2014, at San Francisco, California.

12

13

/s/

CRAIG J. CANNIZZO

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

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EXHIBIT A

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SETTLEMENT AGREEMENT

This Settlement Agreement is made by and among Toby Douglas, in his official capacity as the Director of the California Department of Health Care Services, and the Department of Health Care Services (collectively, DHCS), on the one hand, and each of the named plaintiffs and intervenors in the Applicable Cases as defined below; Lynn Carman and Stanley L. Friedman with respect to Paragraphs III.C.1.a and III.C.1.c only; and Hooper, Lundy & Bookman, P.C. with respect to Paragraphs III.C.1.b and III.C.1.c only, on the other hand.
I. RECITALS WHEREAS, the State of California implemented various reductions and limitations on Medi-Cal reimbursement effective on and after July 1, 2008; WHEREAS, certain of the Medi-Cal reimbursement reductions and limitations are being challenged in the Applicable Cases; WHEREAS, certain of the plaintiffs in the Applicable Cases and their counsel believe that they have viable legal claims against DHCS for additional Medi-Cal reimbursement arising from the application of the challenged Medi-Cal reimbursement reductions and limitations; WHEREAS, DHCS denies the validity of any such claims; WHEREAS, DHCS believes that it has valid claims for recovery of Medi-Cal reimbursement as to certain providers for various time periods during which various reductions and limitations on Medi-Cal reimbursement were enjoined by a district court, but where the federal government, through its Centers for Medicare and Medicaid Services (CMS), ultimately approved the reductions and limitations; WHEREAS, the Settling Plaintiffs deny the validity of any such claims;

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WHEREAS, the California Legislature enacted legislation in 2011 (SB 90) that ended effective April 13, 2011 the reductions and limitations challenged in some of the Applicable Cases for non-contract hospital inpatient services, as codified at Welfare and Institutions Code section 14166.245;
WHEREAS, as a result of the enactment of the 2011 legislation (SB 90), certain of the Settling Plaintiffs agreed not to pursue further certain legal claims against DHCS relating to the 2008 AB 5 Reductions, 2009 AB 5 Reductions, and AB 1183 Reductions (as defined below) as to certain hospitals services;
WHEREAS, the settlement provided for herein is not, and shall not in any way be construed as, deemed to be evidence of, or be admissible in any action or proceeding of any kind whatsoever (including, without limitation, litigation, arbitration, and administrative proceedings) as an admission or concession of any fault, liability, or fact by any individual or entity;
WHEREAS, the Parties recognize the inherent uncertainty in litigation, and the time and resources necessary to litigate the issues raised in the Applicable Cases;
WHEREAS, the Parties desire to fully and finally resolve and settle the Applicable Cases; and
WHEREAS, the Parties have engaged in extensive settlement negotiations supervised by a Ninth Circuit mediator; including in-person meetings, conference calls, and electronic communications prior to reaching the terms contained in this Settlement Agreement.
II. DEFINITIONS The following definitions shall apply for purposes of this Settlement Agreement: 1. “2008 AB 5,” means Assembly Bill X3 5, enacted February 16, 2008, and enrolled at Chapter 3, Statutes of 2007-2008, Third Extraordinary Session.

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2. “2008 AB 5 Reductions,” means the 10% reduction to Medi-Cal payments for various health care services enacted pursuant to 2008 AB 5, and previously codified at California Welfare & Institutions Code §§ 14105.19(b) and 14166.245.
3. “2009 AB 5,” means Assembly Bill X4 5, enacted on July 28, 2009, and enrolled at Chapter 5, Statues of 2009-2010, Fourth Extraordinary Session.
4. “2009 AB 5 Reductions,” means the Medi-Cal reductions and limits enacted pursuant to 2009 AB X4 5 and codified at California Welfare & Institutions Code §§ 14105.191(f)(1) and 14166.245(g).
5. “AB 1183,” means Assembly Bill 1183, enacted on September 30, 2008, and enrolled at Chapter 758, Statutes of 2008.
6. “AB 1183 Reductions,” means the Medi-Cal 1% and 5% payment reductions, and “applicable average regional per diem contract rate reduced by 5%” reimbursement limit for some non-contract hospitals, enacted pursuant to AB 1183, and previously codified at California Welfare & Institutions Code § 14105.191(b) and § 14166.245(b)(2)(A) and (c)(3)(B).
7. “Agreement” or “Settlement Agreement” or “Settlement” means this Settlement Agreement.
8. “Applicable Cases” means the following: a. California Association for Health Services at Home v. Shewry, United
States District Court for the Central District of California, Case No. CV08-07045 CAS-MAN; b. California Hospital Association v. Maxwell-Jolly, United States District
Court for the Central District of California, Case No. 2:09-CV-08642 CAS; c. California Hospital Association v. Maxwell-Jolly, Sacramento County
Superior Court, Case No. 34-2010-80000673;

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d. California Hospital Association v. Douglas, San Francisco Superior Court, Case No. CPF-11-511413;
e. California Medical Association v. Shewry, Los Angeles County Superior Court, Case No. BC390126;
f. California Medical Transportation Association, Inc. v. Shewry, United States District Court for the Central District of California, Case No. CV08-07046 CAS-MAN;
g. California Pharmacists Association v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. CV 09-722 CAS(Ex);
h. Independent Living Center of Southern California v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. 2:08-cv-03315 CAS (MANx); and
i. Independent Living Center of Southern California v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. 2:09-CV-00382-CAS (MANx).
9. “CHA” means the California Hospital Association. 10. “CHA Notice” means the notice described in paragraph III.A.4. 11. “DHCS” means and includes each of the California Department of Health Care Services and the Director of the California Department of Health Care Services. 12. “DHCS’s Claimed Excess Payments” means payments that DHCS has made to Medi-Cal providers, or may make to Medi-Cal providers in the future, in excess of the amounts authorized by state law, specifically as to periods in which (1) the 2008 AB 5 Reductions, 2009 AB 5 Reductions, and/or AB 1183 Reductions were enjoined by a court, and (2) DHCS ultimately obtained federal approval from CMS to implement the reductions, and where, in

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addition, (3) such payments were in excess of the Medicaid reimbursement ultimately approved by CMS through amendments to the California State Medicaid Plan.
13. “DHCS’s Released Claims” means any and all rights, claims, and causes of action that DHCS and/or the State had, has, or may have in the future against Medi-Cal providers for recoupment of DHCS’s Claimed Excess Payments, if CMS approves DHCS’s request not to recoup those payments in accordance with Paragraph III.A.2, supra. However, “DHCS’s Released Claims” shall not include any claims for recoupment of DHCS’s Claimed Excess Payments as to any Opt Out Provider.
14. “DP/NF,” means distinct part nursing facility, which is a unit of a hospital that furnishes skilled nursing services.
15. “Federal Released Entities” means any federal agency, federal agency subdivision, or person employed by the federal government, including but not limited to the United States Department of Health and Human Services (HHS); the Secretary of HHS; CMS; any subdivisions of HHS and CMS; and the officers, employees and agents of HHS and CMS, and persons working with them.
16. “Interlocutory Ninth Circuit Appeals and Cross-Appeals” means: a. California Hospital Association v. Maxwell-Jolly, 9th Cir. No. 10-55462; b. California Pharmacists Association v. Maxwell-Jolly, 9th Cir. No. 09-
55365; c. California Pharmacists Association v. Maxwell-Jolly, 9th Cir. No. 09-
55532; d. Independent Living Center of Southern California, Inc. v. Shewry, 9th Cir.
No. 08-56422;

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e. Independent Living Center of Southern California, Inc. v. Shewry, 9th Cir. No. 08-56554;
f. Independent Living Center of Southern California, Inc. v. Shewry, 9th Cir. No. 08-57016; and
g. Independent Living Center of Southern California, Inc. v. Maxwell-Jolly, 9th Cir. No. 09-55692.
17. “Non-Contract Hospital” means a hospital that has not entered into a Selective Provider Contracting Program (SPCP) contract with DHCS, as set forth in Article 2.6 of Chapter 7, Part 3, Division 9 of the California Welfare and Institutions Code.
18. “North Bay HealthGroup Plaintiff” means any plaintiff in NorthBay Healthcare Group v. Douglas, San Francisco Superior Court, Case No. CGC-11-512059.
19. “Opt Out Provider” means any and all of the following: (1) any individual or entity that maintains and fails to dismiss within thirty (30) days of the Settlement Effective Date any lawsuit or administrative action (e.g., administrative audit appeal) against any entity or official of the State or Federal governments with respect to any or all of the 2008 AB 5 Reductions, the 2009 AB 5 Reductions, or the AB 1183 Reductions as applied to any service(s), excluding any such action limited exclusively to the accuracy of the computation of any of the challenged statutory reductions to a specific Medi-Cal provider; (2) any individual or entity that, at any time on or after the Settlement Effective Date, initiates a new lawsuit or administrative action against any entity or official of the State or Federal governments with respect to any one or all of the 2008 AB 5 Reductions, the 2009 AB 5 Reductions, or the AB 1183 Reductions, excluding any such action limited exclusively to the accuracy of the computation of any of the

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challenged statutory reductions to a specific Medi-Cal provider; and (3) any Santa Rosa Plaintiff or North Bay HealthGroup Plaintiff.
Lawsuits or administrative actions that will be the basis for treating a provider as an “Opt Out Provider” under this Paragraph shall include, but shall not be limited, to any lawsuit that a hospital may timely file in accordance with the CHA Notice and the procedures set forth in Paragraph III.A.4, infra, and any following lawsuits that are not dismissed with prejudice within thirty (30) days after the Settlement Effective Date:
a. California Association of Health Facilities v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. CV10-03259;
b. California Hospital Association v. Maxwell-Jolly, United States District Court for the Central District of California, No. 2:09-CV-03694;
c. Care Centers, Inc. v. Maxwell-Jolly, Sacramento County Superior Court, Case No. 34-2010-80000700;
d. Developmental Services Network v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. CV10-03284;
e. Hospital of Barstow, Inc., v. California Department of Health Care Services, Sacramento County Superior Court, Case No. 34-2010-80000522;
f. Hospital of Barstow, Inc. v. Sebelius, United States District Court for the Central District of California, Case No. CV11-10638 CAS (MANx);
g. NorthBay Healthcare Group v. Douglas, San Francisco Superior Court, Case No. CGC-11-512059, subject to the additional terms described in this Paragraph;

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h. Santa Rosa Memorial Hospital v. Maxwell-Jolly, United States District

Court for the Northern District of California, Case No. 08-CV-5173-SC, subject to the additional

terms described in this Paragraph; and

i.

Santa Rosa Memorial Hospital v. Douglas, San Francisco Superior Court,

Case No. CPF-09-509658, subject to the additional terms described in this Paragraph.

20. “Parties” means the named plaintiffs and intervenors in the Applicable Cases and

DHCS.

21. “Plaintiff Released Claims” means:

a. Any and all rights, claims, and causes of action, whether federal, state, or

otherwise, and whether past, present, or future, asserted in the Applicable Cases, and the

Interlocutory Ninth Circuit Appeals and Cross-Appeals, and any and all rights, claims, and

causes of action, whether federal, state, or otherwise, and whether past, present, or future,

concerning or relating to the 2008 AB5 Reductions, 2009 AB5 Reductions, or AB 1183

Reductions, that could have been asserted in respect to those Reductions in those cases based on

the facts alleged therein, including but not limited to any claim for Medicaid reimbursement for

services subject to those Reductions rendered on or after July 1, 2008 but before June 1, 2011

that would exceed reimbursement that complies with California’s federally-approved Medicaid

State Plan as amended, including but not limited to State Plan Amendments (SPAs) approved by

CMS as SPA 08-009A, SPA 08-009B1, and SPA 08-009D on or about October 27, 2011,

excluding any such claim by an Opt Out Provider; and

b. Any and all rights, claims, and causes of action, under the federal

Administrative Procedures Act (APA) or any other federal or state law, whether past, present, or

future, arising from HHS’s approval for various periods of implementation the 2008 AB 5

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Reductions, 2009 AB 5 Reductions, AB 1183 Reductions, excluding any such rights, claims, and causes of action by an Opt Out Provider.
22. “Santa Rosa Plaintiff” means any plaintiff in the following matters: Santa Rosa Memorial Hospital v. Maxwell-Jolly, United States District Court for the Northern District of California, Case No. 08-CV-5173-SC; Santa Rosa Memorial Hospital v. Douglas, San Francisco Superior Court, Case No. CPF-09-509658.
23. “Settlement Execution Date” means the date that this Settlement Agreement is fully executed.
24. “Settlement Effective Date” means either (1) the date on which CMS grants complete and total approval of DHCS’s request to forgo seeking recoupment of DHCS’s Claimed Excess Payments, as provided in Paragraph III.A.2 infra, or (2) if CMS only partially approves DHCS’s request, the date (if any) upon which DHCS notifies plaintiffs’ counsel that it is not exercising its option to terminate the Settlement as set forth in Paragraph III.D.4, infra.
25. “Settling Plaintiffs” means all of the named plaintiffs and intervenors in the Applicable Cases; their successors and assigns, agents, heirs, executors, administrators, and personal representatives (as to plaintiffs who are individual persons); their successors and assigns, parent corporations, affiliates, subsidiaries, divisions, current members, former members who were members during any period of time in which the 2008 AB 5 Reductions, the 2009 AB 5 Reductions, and the AB 1183 Reductions were in effect or would have been in effect if not enjoined by the courts, officers, directors, agents and employees (as to plaintiffs and intervenors who are not individual persons); and any person or entity in privity with the named plaintiffs and intervenors, or who otherwise can claim through or be bound by them. Notwithstanding the foregoing, Settling Plaintiffs shall not include any Opt Out Provider.

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26. “State Released Entities” means the State of California; the Governor of the State

of California; the State Legislature and all of its members; any elected state officer; any state

agency, board, and commission, and their officers, employees, agents, and persons working with

them, including but not limited to DHCS and the Director of DHCS; and any subdivision of the

State.

III. TERMS In view of the foregoing, the Parties agree as follows.

Each of the foregoing recitals and definitions is incorporated by reference herein and

made a part hereof.

A. General Terms

1. Within fifteen (15) days of the Settlement Execution Date, the parties shall jointly

request that the United States Court of Appeals for the Ninth Circuit dismiss the Interlocutory

Ninth Circuit Appeals and Cross Appeals, with each side to bear their own costs including but

not limited to costs previously awarded by any appellate court in these cases. Within fifteen (15)

days of the date that the Ninth Circuit dismisses the appeals in this matter, the parties shall

jointly submit this Settlement to the United States District Court for the Central District of

California and request that the Court approve it.

2. Within thirty (30) days of receiving notice of the district court’s approval of this

Settlement as described in Paragraph III.A.1, DHCS shall send a written request to CMS for

approval to forgo seeking recoupment of DHCS’s Claimed Excess Payments to Medicaid

providers without jeopardizing any federal financial participation (FFP). However, DHCS may

request to retain the right to apply the 2008 AB 5 Reductions, 2009 AB 5 Reductions, and AB

1183 Reductions, to the extent that implementation of such reductions was previously approved

by CMS, with respect to any Opt Out Provider. Within 5 business days of its receipt of CMS’s

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decision to approve or reject, in whole or in part, its request, DHCS shall notify all plaintiffs’ counsel in writing by email to their known email addresses of that occurrence and provide a copy of CMS’s response.
3. Within thirty (30) days of the Settlement Effective Date, all plaintiffs in the Applicable Cases shall file a dismissal of all actions in the Applicable Cases, with prejudice, each party to bear their own costs, including any costs that may have been previously awarded or by any court in these proceedings. The parties stipulate that any order of dismissal shall state that the district court retains jurisdiction to entertain any application for attorneys’ fees as described in Part III.C and for purposes of enforcement of this Agreement and for such period as described in Part III.D.17.
4. Within thirty (30) days of the Settlement Effective Date, CHA shall send a notice to all current hospital members, and any hospital that was a prior member of CHA during any period on or after July 1, 2008, by registered or certified mail, return-receipt requested, to their last known address, that advises them: (a) of the terms of this Settlement; (b) that they may “opt out” of the settlement by filing their own lawsuit(s), in their own name(s), challenging any one or all of the 2008 AB 5 Reductions, 2009 AB 5 Reductions, or AB 1183 Reductions for any or all hospital services, including without limitation Non-Contract hospital inpatient services, DP/NF services, or hospital outpatient services, and/or the federal government’s approval of these reductions, provided that they file any such individual action within forty-five (45) days of when the notice was mailed to them; and (c) that, if a hospital does file such an individual action challenging one or more of these payment reductions, then it will lose the benefits of this Settlement, and DHCS will have the right under this Agreement to seek recoupment of any payment to that provider that constitutes or constituted a DHCS’s Claimed Excess Payment.

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Counsel for CHA shall meet and confer with DHCS’s counsel regarding the wording of the notice; in the event that the parties are unable to reach agreement on such wording, the matter shall be submitted to the United States District Court for the Central District of California for resolution. Within fourteen (14) days of sending the notice provided in this paragraph, CHA shall file a proof of service regarding that notice with the United States District Court for the Central District of California, and attach thereto true and accurate copies of all executed return receipts. If any notices are returned to CHA as nondeliverable, CHA shall also include photocopies of such returned notices as attachments to its proof of service.
5. With respect to any individual lawsuit filed by a hospital as described in Paragraph III.A.4 that complies with the 45-day time period set forth therein: (1) DHCS shall waive, and not assert, any collateral estoppel or res judicata defense, based on the dismissals, the Settlement, or the Settlement Agreement; and (2) any such lawsuit shall be treated as if it was filed on May 5, 2008 with respect to the 2008 AB 5 Reductions, September 30, 2010 with respect to the AB 1183 Reductions, and June 30, 2011 with respect to the 2009 AB 5 Reductions, for statute-of-limitations and laches purposes. Except as provided in this paragraph, DHCS shall retain any and all defenses that may be available to it in such cases and to such claims. Nothing in this Settlement Agreement shall extend the time for the filing of any administrative action by an Opt Out Provider. Nothing in the Settlement, the Settlement Agreement, or any dismissal in this matter, shall have any collateral estoppel or res judicata effect on CHA v. Shewry, No. CPF03-503772 (S.F. Super. Ct.); CHA v. Shewry, No. CPF-08-508578 (S.F. Super. Ct.); CHA v. Douglas, CPF-12-512379 (S.F. Super. Ct.) (collectively, the “CHA Cases”), and no Party shall assert otherwise. The CHA Cases shall not be included in Plaintiff Released Claims.

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6. Other than hospitals as provided in Paragraphs III.A.4, no Settling Plaintiff shall seek to continue to litigate their claims in the Applicable Cases, institute any new lawsuit or claim challenging the 2008 AB 5 Reductions, 2009 AB 5 Reductions, or AB 1183 reductions in any forum, or otherwise seek to opt out of this Settlement.
7. DHCS shall retain the right to seek recoupment of any payments that constitutes or constituted DHCS’s Claimed Excess Payments from any Opt Out Provider.
8. DHCS hereby confirms that it has never had, and does not currently have, any intention to seek recoupment from providers for services rendered during any period in which 2008 AB 5, 2009 AB5, or AB1183 were enjoined, and for which DHCS chose to withdraw its request for SPA approvals for reductions during those periods, including but not limited to the additional money that DHCS was required to pay to physicians, clinics, optometrists, pharmacies, optometrists, and adult day health care centers for services rendered July 1, 2008August 17, 2008 pursuant to the amended preliminary injunction issued by Judge Snyder, dated January 22, 2010. DHCS hereby confirms, represents, warrants, and agrees that DHCS will not seek recoupment with respect to the reductions described above for time periods in which it withdrew its request for, and did not receive, SPA approval, nor will it otherwise seek to enforce the reductions described above for those periods. No Settling Plaintiff may quote, cite, reference, or otherwise rely upon this Paragraph, or any portion of it, in connection with any motion for attorney’s fees.
B. Releases 1. Effective on the Settlement Effective Date, all Settling Plaintiffs shall release the State Released Entities and the Federal Released Entities from any and all liability, derivative or otherwise, for all of the Plaintiff Released Claims, excluding any claims that any individual

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Medi-Cal provider may have relating exclusively to the accuracy of the computation by DHCS

of the reimbursement due to that provider under applicable law.

2. Effective on the Settlement Effective Date, DHCS shall release the Settling

Plaintiffs from any and all liability for DHCS’s Released Claims for Payments, and shall not

seek to recoup DHCS’s Claimed Excess Payments, except that DHCS shall not release its claims

to recoup DHCS’s Claimed Excess Payments from any Opt Out Provider.

C. Attorneys’ Fees and Costs 1. The Parties shall each pay their own fees and costs, including but not limited to

any costs incurred and/or awarded in any appellate proceeding, except as expressly set forth

herein.

a. No earlier than the Settlement Effective Date, and no later than thirty (30)

days after the Settlement Effective Date, plaintiffs and their attorneys Lynn Carman and Stanley

Friedman may file (an) application(s), together or separately, for attorneys’ fees for services

performed in litigating Independent Living Center of Southern California v. Maxwell-Jolly,

United States District Court for the Central District of California, Case No. 2:08-cv-03315 CAS

(MANx), and Independent Living Center of Southern California v. Maxwell-Jolly, United States

District Court for the Central District of California, Case No. 2:09-CV-00382-CAS (MANx),

including any proceeding in these cases before the Judicial Council on Multidistrict Litigation,

the Ninth Circuit Court of Appeals, or the Supreme Court. DHCS may oppose any such request

and retains any and all arguments and defenses that it may have to an award of attorneys’ fees

and to the amount of such award that may be claimed.

b. No earlier than the Settlement Effective Date, and no later than thirty (30)

days after the Settlement Effective Date, intervenors and the law firm of Hooper, Lundy &

Bookman, P.C., may file an application for attorneys’ fees for services performed in litigating

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Independent Living Center of Southern California v. Maxwell-Jolly, United States District Court for the Central District of California, Case No. 2:08-cv-03315 CAS (MANx), including any appellate proceedings in this case. DHCS may oppose any such request and retains any and all arguments and defenses that it may have to an award of attorneys fees and to the amount of such award that may be claimed.
c. No earlier than the Settlement Effective Date, and no later than thirty (30) days after the Settlement Effective Date, any plaintiffs’ attorney who has appeared in one or more of the Applicable Cases may file an application for attorneys fees under the “common benefit” theory (as described in Mills v. Electric Auto-Lite Co., 396 U.S. 375, 392-96 (1970)) or any other theory for services performed in litigating the relevant case(s), provided that such application shall seek payment exclusively and directly from any Medicaid providers that purportedly obtained a benefit from counsel’s work, and not from DHCS or any of the State Released Entities. In connection with any such application, plaintiffs counsel shall not assert any argument that would require DHCS or any other state agency to utilize its resources or modify its internal practices to assist plaintiffs’ counsel in collecting any fee award that the court may grant. Further, any plaintiffs’ counsel who makes such an application shall fully indemnify the State Released Parties and hold them harmless as to any claims asserted by any provider who may be ordered by the court to pay fees to counsel in connection with work done on the Applicable Cases, provided such indemnification obligation shall not exceed the actual attorneys fee recovery of such counsel pursuant to an award of fees as described in this Paragraph.
2. Except as provided in Paragraph III.C.1 supra, the Settling Plaintiffs and their counsel release DHCS for any attorneys’ fees incurred in connection with the Applicable Cases.

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D. Other Terms 1. In the event that this Settlement Agreement is not finally approved by the United

Stated District Court for the Central District of California, as provided in Paragraph III.A.1,

supra, the Parties shall be restored to their respective positions as of the date when this

Settlement Agreement is signed, except that the dismissed Interlocutory Ninth Circuit Appeals

and Cross-Appeals shall remain dismissed. In this event, the terms and provisions of this

Settlement Agreement shall have no further force and effect with respect to the Parties and shall

not be used in any action or in any other proceeding for any purpose, and any judgment or order

entered by the United Stated District Court for the Central District of California in accordance

with the terms of this Settlement Agreement shall be treated as vacated, nunc pro tunc.

2. If CMS does not act upon DHCS’s request to forgo recoupment of DHCS’s

Claimed Excess Payments to Medicaid providers, as provided in Paragraph III.A.2, supra within

180 days from when DHCS submits its request, then any of the Parties, individually or

collectively, may elect to terminate the Settlement by providing written notice to all the other

Parties in the manner set forth in Paragraph III.D.18, infra. If any Party or Parties exercise their

right to terminate the Settlement pursuant to this Paragraph, then the Parties shall be restored to

their respective positions as of the date when this Settlement Agreement is signed, except that the

dismissed Interlocutory Ninth Circuit Appeals and Cross-Appeals shall remain dismissed.

Subject only to this exception (i.e., continued dismissal of the Interlocutory Ninth Circuit

Appeals and Cross-Appeals), the terms and provisions of this Settlement Agreement shall have

no further force and effect with respect to the Parties and shall not be used in any action or in any

other proceeding for any purpose, and any judgment or order entered by the United Stated

District Court for the Central District of California in accordance with the terms of this

Settlement Agreement shall be treated as vacated, nunc pro tunc.

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3. In the event that CMS completely rejects DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments to Medicaid providers, as provided in Paragraph III.A.2, supra, the Parties shall be restored to their respective positions as of the date when this Settlement Agreement is signed, except that the dismissed Interlocutory Ninth Circuit Appeals and Cross-Appeals shall remain dismissed. Subject only to this exception (i.e., continued dismissal of the Interlocutory Ninth Circuit Appeals and Cross-Appeals), the terms and provisions of this Settlement Agreement shall have no further force and effect with respect to the Parties and shall not be used in any action or in any other proceeding for any purpose, and any judgment or order entered by the United Stated District Court for the Central District of California in accordance with the terms of this Settlement Agreement shall be treated as vacated, nunc pro tunc.
4. In the event that CMS partially, but not fully, approves DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments to Medicaid providers, as provided in Paragraph III.A.2, supra, DHCS shall have the option of terminating this Settlement, as follows:
a. Within thirty (30) days of receiving notice of CMS’s decision to only partially approve its request, DHCS shall notify plaintiffs’ counsel, as provided in Paragraph III.D.18, infra, of whether it is continuing with, or terminating, the Settlement.
b. If DHCS exercises its option to terminate the Settlement, the Parties shall be restored to their respective positions as of the date when this Settlement Agreement is signed, except that the dismissed Interlocutory Ninth Circuit Appeals and Cross-Appeals shall remain dismissed. Subject only to this exception (i.e., continued dismissal of the Interlocutory Ninth Circuit Appeals and Cross-Appeals), the terms and provisions of this Settlement Agreement shall have no further force and effect with respect to the Parties and shall not be used in any action or

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in any other proceeding for any purpose, and any order entered by the United States District Court for the Central District of California in accordance with the terms of this Settlement Agreement shall be treated as vacated, nunc pro tunc.
5. If this Settlement Agreement is approved by the court as provided in Paragraph III.A.1.a, supra, and if CMS fully approves DHCS’s request to forgo recoupment as provided in Paragraph III.A.2, supra, or, if CMS partially, but not fully, approves DHCS’s request but DHCS nevertheless does not exercise its option to terminate this Agreement (as provided in Paragraph III.D.4, supra), then DHCS also shall agree not to implement the 2009 AB 5 Reductions and AB 1183 Reductions as to DP/NF services provided and/or prescription drugs dispensed by Medicaid providers on or after June 1, 2011, in the event that superseding statutory reductions as to such services are or remain under court injunction. See Order Granting Preliminary Injunction, California Hospital Association v. Douglas, No. 11-9078 CAS (MANx) (C.D. Cal. Dec. 28, 2011).
6. No order of a court pertaining to an application for attorneys’ fees as set forth in Paragraph C, supra, or modification or reversal on appeal of any court order concerning any application for attorneys’ fees awarded to any of plaintiff’s counsel, shall constitute grounds for cancellation, modification or termination of this Agreement, and neither the Parties nor plaintiff’s counsel shall request or suggest any such relief.
7. Notwithstanding any failure to obtain final court or federal approval as contemplated by this Agreement, and notwithstanding any other termination of this Agreement, any agreements made and orders entered during the course of the settlement negotiations relating to the confidentiality of information shall survive.

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8. This Settlement Agreement is executed without reliance upon any representation by any of the named plaintiffs and intervenors in the Applicable Cases, and their agents, on the one hand, and DHCS or its agents on the other hand, concerning the nature or extent of any damages or legal liability, and all Parties have read the contents hereof, have been fully advised by counsel as to the consequences thereof, and have signed the same as a free act.
9. Each Party executing this Agreement received independent legal advice from its counsel regarding the meaning and legal effect of this Settlement Agreement, the advisability of making the agreements provided for herein, and the execution of this Settlement Agreement, and fully understand the same. Each Party executing this Settlement Agreement has the full right and authority to enter into this Agreement on behalf of itself, or any person or entity on behalf of whom it enters into this Agreement in a representative capacity, and to bind fully such person or entity to the terms and obligations of this Settlement Agreement. The Parties executing this Agreement have full power to enter into this Settlement Agreement and have not heretofore assigned, transferred, or encumbered, or purported to assign, transfer, or encumber, voluntarily or involuntarily, to any person or entity, all or any portion of the obligations or rights which are the subject of this Settlement Agreement.
10. None of the Parties shall be considered to be the drafter of this Settlement Agreement or any provision hereof for the purpose of any statute, case law, or rule of interpretation or construction that would or might cause any provision to be construed against the drafter hereof. This Settlement Agreement was drafted with substantial input by all Parties and their counsel, and no reliance was placed on any representations other than those contained herein.

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11. The terms set forth in this Agreement constitute the entire Agreement and are not

subject to modification except by a writing signed by all of the Parties through their respective

counsel.

12. The Parties agree to execute all documents that may be necessary to effectuate the

purpose of this Agreement.

13. This Agreement shall be used solely for the following purposes, and for no other

purpose: (1) settlement; (2) enforcement of the terms of this Agreement; and (3) in an action for

breach of this Agreement.

14. This Agreement may be executed through the use of two or more counterparts,

each of which will be deemed an original, and together shall constitute one written instrument.

Photographic or facsimile copies of signed counterparts may be used in lieu of the originals for

any purpose and shall have the same force and effect as an original ink signature.

15. The Settling Parties acknowledge that this Agreement (and any order that may

incorporate its terms) is based on a compromise of disputed claims and does not constitute an

admission by any of the Settling Parties as to any of the Settling Parties’ claims or defenses in

any of the Applicable Cases referenced in this Agreement.

16. This entire Settlement Agreement, and all of its obligations, shall fully terminate

upon the first of the following:

a.

Termination of this Settlement Agreement for lack of court approval as

set forth in Paragraph III.D.1, supra;

b. Termination of the Settlement on a Party’s (Parties’) election because

CMS failed to act upon DHCS’s request to forgo recoupment of DHCS’s Claimed Excess

Payments as set forth in Paragraph III.D.2, supra.

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c. Termination of this Settlement Agreement because CMS disapproves

entirely DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments made to

Medicaid Providers, as set forth in Paragraph III.D.3, supra; and

d. Termination of this Settlement Agreement because CMS only partially

disapproves DHCS’s request to forgo recoupment of DHCS’s Claimed Excess Payments made to

Medicaid Providers, and DHCS exercises its option to terminate the Settlement, as set forth in

Paragraph III.D.4, supra.

In addition, the district court’s continuing jurisdiction, as set forth in Part III.D.17,

shall terminate on the earlier of the following.

a. Completion of all of the parties’ respective obligations under this

Settlement Agreement; or

b.

The arrival of January 1, 2016.

The Parties further agree that, upon the occurrence of any event set forth above in this

Paragraph, no court will retain any jurisdiction over this Settlement Agreement, and the parties

will not seek to either extend or enforce any court’s jurisdiction over this Settlement Agreement

beyond the time at which any of the events set forth in this Paragraph have occurred.

Notwithstanding the foregoing, following a termination of this Settlement Agreement as

described in this Paragraph, the jurisdiction of United States District Court for the Central

District of California shall remain in full force and effect for any actions, disputes, claims or

controversies regarding the validity, enforcement, interpretation or breach of this Settlement

Agreement to the extent they relate to any period of time in which this Settlement Agreement

was in effect.

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17. The Parties agree to submit to the continuing jurisdiction of the United States
District Court for the Central District of California, (1) with respect to any motion for attorney’s
fees as contemplated by Part III.C., and (2) in any motion or proceeding brought or filed by any
named plaintiff in any of the Applicable Cases to enforce this Settlement Agreement, up to and
including January 1, 2016. The Parties agree to the court’s continuing jurisdiction solely as a
means for expediting the resolution of any disputes that may arise, and do not intend for their
agreement to submit to the court’s jurisdiction as described in this Paragraph to be a factor for
the district court to consider in assessing any application for attorneys’ fees as described in Part
III.C., supra, and no Party shall argue otherwise.
18. All notices to the Parties that this Agreement may require or permit shall be made
in writing and shall be sufficiently served if personally delivered or sent by certified or registered
mail, return receipt requested, postage prepaid, addressed to the parties as set forth below:
a. The Plaintiffs and Intervenors:
Lloyd A. Bookman Hooper, Lundy & Bookman, P.C. 1875 Century Park East Suite 1600 Los Angeles, California 90067 lbookman@health-law.com
Craig Cannizzo Hooper, Lundy & Bookman, P.C. 575 Market Street, Suite 2300 San Francisco, California 94105 ccannizzo@health-law.com
Lynn S. Carman Medicaid Defense Fund 404 San Anselmo Ave. San Anselmo, California 94960 lynnscarman@hotmail.com

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Stanley L. Friedman 445 S. Figueroa Street, 27th Floor Los Angeles, California 90071 friedman@friedmanlaw.org
b. DHCS:
Susan Carson Greg Brown Office of the Attorney General 455 Golden Gate Ave., Suite 11000 San Francisco, California 94102 Susan.Carson@doj.ca.gov Gregory.Brown@doj.ca.gov
Douglas Press Chief Counsel Department of Health Care Services Office of Legal Services MS 0011 PO Box 997413 Sacramento, California 95899-7413
Notice shall be deemed given on the date of personal delivery or, if served by mail, upon
the date stamped by the postal service on the return receipt. Any Party may change its address
for notice by notifying all of the other parties of the change of address in writing in accordance
with the provisions of this subparagraph.
19. This Settlement Agreement may be signed in counterparts. This Settlement
Agreement shall be signed by each named plaintiff in the Applicable Cases, who agree to be
bound thereby. However, an attorney may sign on behalf of a named plaintiff if authorized to do
so by that named plaintiff, and any attorney who so signs warrants and represents that he/she has
full authority to bind the named plaintiff on whose behalf he/she signs.
20. This Agreement, along with any exhibits, appendices, addendums, schedules, and
amendments hereto, encompasses the entire agreement of the Parties, and supersedes all previous
understandings and agreements between the Parties, whether oral or written. No prior versions

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of this Agreement, or written proposals of any party, are admissible in any court for any purpose, including but not limited to use to interpret the meaning of this Agreement. This Agreement is the product of drafting by all the Settling Parties and, in construing this Agreement, no Party shall have any term or provision hereof construed against it solely by reason of such party having drafted this Agreement or any portion of it.

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Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 30 of 52 Page ID #:1805

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 31 of 52 Page ID #:1806

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 32 of 52 Page ID #:1807

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 33 of 52 Page ID #:1808

For: California Association of Public Hospitals and HeaJ.th Systems

By: (411/
Name: 1?-Cr
Title: ZSbEA%ST
Date:

Cf 0

For: California Dental Association
By: Name: Title: Date:

For: California Hospital Association
By: Name: Title: Date:

For: California Medical Association
By: Name: Title: Date:

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Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 35 of 52 Page ID #:1810

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 36 of 52 Page ID #:1811

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 37 of 52 Page ID #:1812
*
* Farmacia Remedios, Inc. no longer exists, and the corporate form of the original plaintiff is no longer recognized by the State of California or the state of incorporation (Delaware).

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 38 of 52 Page ID #:1813

Case 2:09-cv-08642-CAS-MAN Document 67-2 Filed 08/19/14 Page 39 of 52 Page ID #:1814
For: California Pharmacists Association By: Name: Title: Date:
For: Farmacia Remedios, Inc. By: Name: Title:_____ Date:
For: Charles Gallagher By: Name: Title: Date:
For: Fe Garcia
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Approved as to form: HOOPER, LUNDY & BOOKMAN, P.C.
OFFICE OF THE ATTORNEY GENERAL
Gregory D. Brown Deputy Attorney General

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 Case: 2:09-cv-8642 As of: 11/26/2018 12:27 PM PST 1 of 9
(MANx),CLOSED,DISCOVERY,RELATED−G
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA (Western Division − Los Angeles)
CIVIL DOCKET FOR CASE #: 2:09−cv−08642−CAS−MAN

California Hospital Association v. David Maxwell−Jolly Assigned to: Judge Christina A. Snyder Referred to: Magistrate Judge Margaret A. Nagle Related Case: 2:08−cv−03315−CAS−MAN
Case in other court: 9th CCA, 10−55462 Cause: 28:2201 Constitutionality of State Statute(s)
Plaintiff

Date Filed: 11/24/2009 Date Terminated: 06/01/2011 Jury Demand: None Nature of Suit: 950 Constitutional − State Statute Jurisdiction: Federal Question

California Hospital Association

represented by Jordan Brian Keville Hooper Lundy & Bookman PC Watt Plaza 1875 Century Park East Suite 1600 Los Angeles, CA 90067−2799 310−551−8111 Fax: 310−551−8181 Email: jkeville@health−law.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Lloyd Alan Bookman Hooper Lundy and Bookman PC 1875 Century Park East Suite 1600 Los Angeles, CA 90067 310−551−8111 Fax: 310−551−8181 Email: lbookman@health−law.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Craig J Cannizzo Hooper Lundy and Bookman PC 575 Market Street Suite 2300 San Francisco, CA 94105 415−875−8500 Fax: 415−875−8519 Email: ccannizzo@health−law.com ATTORNEY TO BE NOTICED

V.
Defendant
David Maxwell−Jolly Director of the State of Department of Health Care Services, State of California

represented by Susan Marie Carson CAAG − Office of the Attorney General California Department of Justice 455 Golden Gate Avenue Suite 11000 San Francisco, CA 94102 415−703−5580 Fax: 415−703−5480 Email: Susan.Carson@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
Brenda Ann Ray CAAG − Office of the Attorney General 1300 I Street Suite 1101 Sacramento, CA 95814 916−324−5208

Case: 2:09-cv-8642 As of: 11/26/2018 12:27 PM PST 2 of 9
Fax: 916−324−5567 Email: brenda.ray@doj.ca.gov ATTORNEY TO BE NOTICED
Lisa Anne Tillman CAAG − Attorney General Office 1300 I Street Suite 125 Sacramento, CA 94244−2550 916−327−7872 Fax: 916−324−5567 Email: lisa.tillman@doj.ca.gov ATTORNEY TO BE NOTICED

Date Filed 11/24/2009 11/24/2009 11/24/2009 11/24/2009 12/07/2009
12/09/2009
12/09/2009
12/17/2009 12/18/2009 01/11/2010

# Docket Text
1 COMPLAINT against Defendants David Maxwell−Jolly, State of California. (Filing fee $ 350 PAID.), filed by Plaintiff California Hospital Association. (et) (ds). (Entered: 11/30/2009)
20 DAY Summons Issued re Complaint − (Discovery) 1 as to Defendant David Maxwell−Jolly. (et) (Entered: 11/30/2009)
2 CERTIFICATE AND NOTICE of Interested Parties filed by Plaintiff California Hospital Association. (et) (ds). (Entered: 11/30/2009)
3 NOTICE of Related Case(s) filed by Plaintiff California Hospital Association. Related Case(s): CV 08−03315 CAS (MANx); CV 09−0382 CAS (MANx) and CV 09−0722 CAS (Ex). (et) (ds). (Entered: 11/30/2009)
4 PROOF OF SERVICE Executed by Plaintiff California Hospital Association, upon David Maxwell−Jolly served on 11/25/2009, answer due 12/15/2009. The Summons and Complaint were served by Personal service, by FRCP Rule 4 statute, upon Vince Blackburn, Staff Counsel authorized to accept service. Due Dilligence declaration no attachment. Original Summons not returned. (Keville, Jordan) (Entered: 12/07/2009)
5 ORDER RETURNING CASE FOR REASSIGNMENT by Judge Consuelo B. Marshall. ORDER case returned to the Clerk for random reassignment pursuant to General Order 08−05. Case randomly reassigned from Judge Consuelo B. Marshall to Judge J. Spencer Letts for all further proceedings. The case number will now reflect the initials of the transferee Judge CV 09−08642 JSL (MANx). (rn) (Entered: 12/09/2009)
6 ORDER RE TRANSFER PURSUANT TO GENERAL ORDER 08−05 −Related Case− filed. Related Case No: CV 08−03315 CAS(MANx). Case transferred from Judge J. Spencer Letts to Judge Christina A. Snyder for all further proceedings. The case number will now reflect the initials of the transferee Judge CV 09−08642 CAS(MANx).Signed by Judge Christina A. Snyder (rn) (Entered: 12/09/2009)
8 ORDER ON STIPULATION TO EXTENSION OF TIME TO RESPOND TO COMPLAINT by Judge Christina A. Snyder 7 . Court orders that Defendant's response to complaint is due on or before 1/15/2009. (kpa) (Entered: 12/21/2009)
7 STIPULATION for Extension of Time to File Response to Complaint as to Complaint − (Discovery) 1 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Proposed Order on Stipulation for Extension of Time to Respond to Complaint)(Ray, Brenda) (Entered: 12/18/2009)
9 NOTICE OF MOTION AND MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals filed by Plaintiff California Hospital Association. Motion set for hearing on 2/8/2010 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Memorandum of Points and Authorities in Support, # 2 Declaration of Duane C. Dauner, # 3 Declaration of Jan S. Raymond in Support, # 4 Exhibit A to Declaration of Jan S. Raymond, # 5 Exhibit B−1 to Declaration of Jan S. Raymond, # 6 Exhibit B−2 to Declaration of Jan S. Raymond, # 7 Exhibit C to Declaration of Jan S. Raymond, # 8 Declaration of Patricia Blaisdell in Support, # 9 Declaration of Jordan B. Keville in

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01/11/2010 01/13/2010 01/14/2010 01/14/2010 01/14/2010
01/14/2010 01/15/2010 01/15/2010 01/15/2010
01/19/2010

Support, # 10 Proposed Order, # 11 Request for Judicial Notice)(Keville, Jordan) (Entered: 01/11/2010)
10 DECLARATION of Jordan B. Keville in Support of MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals 9 filed by Plaintiff California Hospital Association. (Keville, Jordan) (Entered: 01/11/2010)
11 NOTICE TO COUNSEL by Judge Christina A. Snyder: This case has been assigned to the calendar of Judge Christina A. Snyder. This Notice to Counsel shall be to all parties appearing in propria persona, and for purposes of this notice, the term "counsel" shall include any person appearing in pro per. See document for further details. (jre) (Entered: 01/14/2010)
12 EX PARTE APPLICATION to Continue Hearing on Plaintiff's Motion for Preliminary Injunction from February 8, 2010 to February 22, 2010 Re: MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals 9 filed by Defendant David Maxwell−Jolly.(Tillman, Lisa) (Entered: 01/14/2010)
13 MEMORANDUM of Points and Authorities in Support filed by Defendant David Maxwell−Jolly. Re: EX PARTE APPLICATION to Continue Hearing on Plaintiff's Motion for Preliminary Injunction from February 8, 2010 to February 22, 2010 Re: MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal 12 (Tillman, Lisa) (Entered: 01/14/2010)
14 DECLARATION of Lisa Tillman re Memorandum of Points and Authorities in Support (non−motion), Memorandum of Points and Authorities in Support (non−motion) 13 , EX PARTE APPLICATION to Continue Hearing on Plaintiff's Motion for Preliminary Injunction from February 8, 2010 to February 22, 2010 Re: MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal 12 filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 01/14/2010)
15 EX PARTE APPLICATION for Order for [Proposed] Order for Continuance of Hearing filed by Defendant David Maxwell−Jolly.(Tillman, Lisa) (Entered: 01/14/2010)
16 NOTICE OF MOTION AND MOTION for More Definite Statement filed by Defendant David Maxwell−Jolly. Motion set for hearing on 2/22/2010 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Declaration of Lisa Tillman in Support, # 2 Request for Judicial Notice, # 3 Proposed Order)(Tillman, Lisa) (Entered: 01/15/2010)
17 Plaintiffs' Opposition re: EX PARTE APPLICATION to Continue Hearing on Plaintiff's Motion for Preliminary Injunction from February 8, 2010 to February 22, 2010 Re: MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal 12 filed by Plaintiff California Hospital Association. (Keville, Jordan) (Entered: 01/15/2010)
18 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: Filer used the Ex Parte Application for Order event in docketing this filing, creating a pending matter for the judge. This document tendered for the judge's approval should have been submitted as a separate PDF attachment to the ex parte application, document #12, or a Notice of Lodging. Clerk has terminated the proposed order, only, from the judge's pending report RE: Proposed Order filed 1/14/2010 15 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 01/15/2010)
19 ORDER by Judge Christina A. Snyder: Defendant's Application for a Continuance of the hearing on Plaintiff's Motion for a Preliminary Injunction 12 is hereby granted. Plaintiff's Motion for a Preliminary Injunction 9 will be heard on 2/22/2010 at 10:00 AM. In accord with Local Rule 7−11, Defendant's opposition, if any, to the Preliminary Injunction Motion is now due on 2/1/2010. (gk) (Entered: 01/19/2010)

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01/20/2010 01/21/2010 02/01/2010 02/01/2010 02/01/2010
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02/04/2010

20 NOTICE OF MOTION AND MOTION to Stay Case pending Issuance of 9th Circuit Court of Appeals Decisions filed by Defendant David Maxwell−Jolly. Motion set for hearing on 2/22/2010 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Declaration of Lisa Tillman in Support of Defendant's Motion for Stay, # 2 Defendant's Request for Judicial Notice in Support of Motion for Stay, # 3 Proposed Order)(Tillman, Lisa) (Entered: 01/20/2010)
21 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: No Certification of Interested Parties, Local Rule 7.1−1 RE: Defendant's Notice of Motion and Motion to Stay filed 1/20/2010 20 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 01/22/2010)
22 Opposition re: MOTION to Stay Case pending Issuance of 9th Circuit Court of Appeals Decisions 20 filed by Plaintiff California Hospital Association. (Keville, Jordan) (Entered: 02/01/2010)
23 OPPOSITION re: MOTION for More Definite Statement 16 filed by Plaintiff California Hospital Association. (Keville, Jordan) (Entered: 02/01/2010)
24 MEMORANDUM in Opposition to MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals 9 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Declaration of Lisa Tillman in Support of Def. Opp. to Mtn for Preliminary Injunction, # 2 Declaration of Larry Brown in Support of Def. Opp. to Mtn for Preliminary Injunction, # 3 Declaration of J. Callori in Support of Def. Opp. to Mtn for Preliminary Injunction, # 4 Declaration of Susan Flores in Support of Def. Opp. to Mtn for Preliminary Injunction, # 5 Declaration of A. Harjala in Support of Def. Opp. to Mtn for Preliminary Injunction, # 6 Declaration of Ong in Support of Def. Opp. to Mtn for Preliminary Injunction, # 7 Declaration of S. Yien in Support of Def. Opp. to Mtn for Preliminary Injunction, # 8 Declaration of Matsumoto in Support of Def. Opp. to Mtn for Preliminary Injunction, # 9 Proposed Order On Plaintiff's Mtn for Prelim. Injunc.)(Tillman, Lisa) ** DOCUMENT STRICKEN PURSUANT TO CIVIL MINUTES OF 2/4/2010 30 ** Modified on 2/5/2010 (gk). (Entered: 02/01/2010)
25 REQUEST FOR JUDICIAL NOTICE re MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals 9 filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Exhibit 1 to RJN, # 2 Exhibit 2 to RJN, # 3 Declaration 3−12 to RJN, # 4 Declaration 13−A to RJN, # 5 Exhibit 13−B to RJN, # 6 Exhibit 14−20 to RJN, # 7 Declaration 21−28 to RJN)(Tillman, Lisa) (Entered: 02/01/2010)
26 NOTICE Notice of Interested Parties filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 02/01/2010)
27 EX PARTE APPLICATION to Exceed Page Limitation Defendant's Oppo. to Mtn. for Prelim. Injunction filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Declaration of L. Tillman in Support of Ex Parte App. to Exceed Page Limit, # 2 Proposed Order Granting Def. Ex Parte App. to Exceed Page Limit)(Tillman, Lisa) (Entered: 02/01/2010)
28 ORDER by Judge Christina A. Snyder denying 27 Ex Parte Application to Exceed Page Limite for Briefing on Motion for Preliminary Injunction. (bm) (Entered: 02/03/2010)
29 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: Incorrect event selected. Correct event to be used is Certificate/Notice of Interested Parties. Notice (other) event utilized in docketing this filing RE: Notice of Interested Parties filed 2/1/2010 26 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 02/04/2010)
30 MINUTES (In Chambers) Order Striking Defendant's Opposition to Plaintiff's Motion for Preliminary Injunction Filed 2/1/2010 by Judge Christina A. Snyder: The Court hereby strikes defendant's 36 page Opposition to Plaintiff's Motion for Preliminary Injunction filed on 2/1/2010 24 . The Court orders defendant to file an opposition that

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complies with the Local Rules of Court, on or before 2/5/2010. Plaintiffs shall file their reply no later than 2/10/2010. Court Reporter: Not Reported. (gk) (Entered: 02/05/2010)
31 AMENDED OPPOSITION re: MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals 9 filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 02/05/2010)
32 REPLY to Opposition to MOTION for More Definite Statement 16 or, in the Alternative, Motion to Dismiss filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 02/08/2010)
33 REPLY to Opposition to MOTION to Stay Case pending Issuance of 9th Circuit Court of Appeals Decisions 20 filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 02/08/2010)
34 RESPONSE IN SUPPORT of MOTION for Preliminary Injunction re: to enjoin Defendant from implementing/applying limitations to Medi−Cal Reimbursement to Hospitals 9 filed by Plaintiff California Hospital Association. (Attachments: # 1 Declaration (Supplemental) of Patricia Blaisdell, # 2 Declaration (Supplemental) of Jan S. Raymond, # 3 Declaration of Henry W. Zaretsky; Exhibits)(Keville, Jordan) (Entered: 02/10/2010)
35 MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court DENIES defendant David Maxwell−Jolly, Director of the California Department of Health Care Services's Motion for More Definite Statement, and in the Alternative, Motion to Dismiss the Complaint 16 . Court Reporter: Laura Elias. (gk) (Entered: 02/24/2010)
36 MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court DENIES defendant David Maxwell−Jolly, Director of the California Department of Health Care Services's Motion to Stay 20 . Court Reporter: Laura Elias. (gk) (Entered: 02/24/2010)
37 ORDER Granting Plaintiff's Motion for Preliminary Injunction 9 by Judge Christina A. Snyder. The Court GRANTS plaintiff's motion for preliminary injunction. The Court HEREBY ORDERS respondent Director, his agents, servants, employees, attorneys, successors, and all those working in concert with him to refrain from enforcing Cal. Welf. & Inst. Code § 14105.191(f), including refraining from effectively freezing the Medi−Cal reimbursement rates for services provided by nursing facilities that are part of hospitals, and by subacute and pediatric subacute care units that are part of hospitals, "rendered during the 2009−2010 rate year and each rate year thereafter" at 2008−2009 levels. Further, the Court ORDERS the Director, et al., to refrain from enforcing that portion of Cal. Welf. & Inst. Code 14166.245(g)(1) which reduces by 10% payments to small and rural hospitals, not under contract with the Department, for inpatient services provided on or after 7/1/2009. (csi) (Entered: 02/25/2010)
38 NOTICE OF MOTION AND MOTION to Alter Judgment re Order on Motion for Preliminary Injunction,,,, 37 . filed by Defendant David Maxwell−Jolly. Motion set for hearing on 4/12/2010 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Proposed Order)(Tillman, Lisa) (Entered: 03/08/2010)
39 EX PARTE APPLICATION for Consideration of Filing a Corrected Declaration filed by Defendant David Maxwell−Jolly. (Attachments: # 1 Declaration of Lisa Tillman in Support of Ex Parte Application, # 2 Declaration of Susan Flores in Support of Ex Parte Application, # 3 Corrected Declaration of Susan Flores in Support of Motion for Preliminary Injunction, # 4 Proposed Order)(Tillman, Lisa) (Entered: 03/09/2010)
40 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents RE: NOTICE OF MOTION AND MOTION to Modify Ruling on Motion for Preliminary Injunction 38 . The following error(s) was found: Other error(s) with document(s) are specified below: Lacking statement re conference of counsel, pursuant to Local Rule 7−3. Proposed order not submitted pursuant to Local Rule 52−4.1. In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. You need

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03/11/2010
03/11/2010 03/15/2010
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04/05/2010

not take any action in response to this notice unless and until the court directs you to do so. (jp) (Entered: 03/11/2010)
41 CORRECTED NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents 40 RE: Defendant's Notice of and Motion to Modify Ruling on Motion for Preliminary Injunction filed 3/8/2010 38 . The following error(s) was found: Lacking statement re conference of counsel, pursuant to Local Rule 7−3. In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. You need not take any action in response to this notice unless and until the court directs you to do so. (gk) (Entered: 03/11/2010)
42 NOTICE OF MOTION AND Amended MOTION to Alter Judgment re Order on Motion for Preliminary Injunction,,,, 37 . filed by Defendant David Maxwell−Jolly. Motion set for hearing on 4/12/2010 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Declaration, # 2 Proposed Order)(Tillman, Lisa) (Entered: 03/11/2010)
43 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents RE: Defendant's Amended Notice of and Motion to Modify Ruling on Motion for Preliminary Injunction filed 3/11/2010 42 . The following error(s) was found: Incorrect event selected. The correct event is: Amendment (Motion related). Filer used the Motion to Alter Judgment event in docketing this filing, and set this Amended Notice for hearing on 4/12/2010. As the motion appears on the judge's calendar (see document number 38), the clerk has terminated this entry, only, from the calendar. In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. You need not take any action in response to this notice unless and until the court directs you to do so. (gk) (Entered: 03/16/2010)
44 NOTICE OF NON−OPPOSITION to Amended MOTION to Alter Judgment re Order on Motion for Preliminary Injunction,,,, 37 .Amended MOTION to Alter Judgment re Order on Motion for Preliminary Injunction,,,, 37 . 42 filed by Plaintiff California Hospital Association. (Keville, Jordan) (Entered: 03/17/2010)
45 ORDER by Judge Christina A. Snyder: Upon good cause appearing, Defendants Ex Parte Application to permit the filing of a corrected declaration of Susan Flores 39 is GRANTED. (jp) (Entered: 03/18/2010)
46 NOTICE OF APPEAL to the 9th CCA filed by Defendant David Maxwell−Jolly. (Filing Fee NOT PAID.) (Attachments: # 1 Civil Appeals Docketing Statement)(Tillman, Lisa) (Entered: 03/26/2010)
47 NOTIFICATION by Circuit Court of Appellate Docket Number 10−55462, 9th CCA regarding Notice of Appeal to 9th Circuit Court of Appeals 46 as to Defendant David Maxwell−Jolly. (cbr) (Entered: 03/29/2010)
48 APPEAL FEE PAID: re Notice of Appeal to 9th Circuit Court of Appeals 46 as to Defendant David Maxwell−Jolly; Receipt Number: 134845 in the amount of $455. (dmap) (Entered: 03/30/2010)
51 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals 46 filed by David Maxwell−Jolly, CCA # 10−55462. The appeal filed March 26, 2010, is a preliminary injunction appeal. Accordingly, Ninth Circuit Rule 3−3 shall apply. If they have not already done so, within 7 calendar days after the filing date of this order, the parties shall make arrangement to obtain from the court reporter an official transcript of proceedings in the district court that will be included in the record on appeal. The briefing schedule shall proceed as follows: the opening brief and excerpts of record are due not later than April 23, 2010; the answering brief is due May 21, 2010 or 28 days after service of the opening brief, whichever is earlier; and the optional reply brief is due within 14 days after service of the answering brief. See 9th Cir. R. 3−3(b). If appellant fails to file timely the opening brief, this appeal will be dismissed automatically by the Clerk for failure to prosecute. See 9th Cir. R. 42−1. Order received in this district on 9/27/2010. (lr) (Entered: 09/28/2010)
49 MINUTE ORDER (IN CHAMBERS) by Judge Christina A. Snyder granting 38 Motion to Modify Ruling on Motion for Preliminary Injunction (filed 3/8/10 &

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04/15/2010 04/26/2010
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06/30/2011 09/29/2011 12/22/2011 03/21/2012 03/30/2012
09/19/2012 01/18/2013 06/24/2013 11/05/2013

3/11/10). (pp) (Entered: 04/07/2010)
50 TRANSCRIPT DESIGNATION AND ORDERING FORM For Dates: February 22, 2010; Court Reporter: Laura M. Elias; Court of Appeals Case Number: 10−55462; Re: 46 (Tillman, Lisa) (Entered: 04/15/2010)
52 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals 46 filed by David Maxwell−Jolly, CCA # 10−55462. Appellant's unopposed amended motion for a stay of appellate proceedings is granted in light of the pending petitions for certiorari in Independent Living Center of Southern California, Inc. v. Shewry, U.S.S.C. Case No. 09−958, and Maxwell−Jolly v. California Pharmacists Ass'n, U.S.S.C. Case No. 09−115. Within 90 days from the date of this order, or upon resolution of the petitions for certiorari, whichever is sooner, appellant shall file a status report or a motion for appropriate relief. Briefing is stayed until further order of this court. Order received in this district on 9/27/2010. (lr) (Entered: 09/28/2010)
53 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals 46 filed by David Maxwell−Jolly, CCA # 10−55462. Appellant's motion for a continued stay of appellate proceedings is granted in light of the pending petitions for certiorari in Independent Living Center of Southern California, Inc. v. Shewy, U.S. Sup. Ct. Case No. 09−958, and Maxwell−Jolly v. California Pharmacists Ass'n, U.S. Sup. Ct. Case No. 09−115. Within 90 days from the date of this order, or upon resolution of the petitions for certiorari, whichever is sooner, appellant shall file a status report or a motion for appropriate relief. Briefing is stayed until further order of this court. Order received in this district on 9/27/2010. (lr) (Entered: 09/28/2010)
54 MINUTE ORDER IN CHAMBERS by Judge Christina A. Snyder: This action is hereby removed from this Courts active caseload until further application by the parties or order of this Court. Counsel shall file a joint report detailing thestatus of the case within 30 days and every quarter thereafter until the action has been reactivated on this Courts active caseload or a stipulation for dismissal is filed. SEE ORDER. (Made JS−6. Case Terminated.) (im) (Entered: 06/03/2011)
55 STATUS REPORT Joint filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 06/30/2011)
56 STATUS REPORT Joint Status Report filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 09/29/2011)
57 STATUS REPORT Joint Status Report filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 12/22/2011)
58 STATUS REPORT Joint Status Report filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 03/21/2012)
59 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals 46 filed by David Maxwell−Jolly CCA # 10−55462. Appellant's motion for a 60−day stay of proceedings in this preliminary injunction appeal is granted in part. Within 60 days after the date of this order, appellant shall file the opening brief or a motion for appropriate relief. If appellant files the opening brief, the answering brief is due 28 days after service of the opening brief, and the optional reply brief is due within 14 days after service of the answering brief. Order received in this district on 3/30/2012. (dmap) (Entered: 04/03/2012)
60 STATUS REPORT Joint Status Report filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 09/19/2012)
61 STATUS REPORT Joint Status Report filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 01/18/2013)
62 STATUS REPORT Joint filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 06/24/2013)
63 MINUTES (IN CHAMBERS) STAY OF PROCEEDINGS by Judge Christina A. Snyder: By order dated 7/8/2013, the Court directed the parties in these matters to submit a joint status report. Dkt. #242, in case no. 2:11−CV−09688−CAS(MANx). The joint status report was filed on 7/23/2013. Dkt. #243, in case no. 2:11−CV−09688−CAS(MANx). The Court has reviewed the parties' positions set forth

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12/19/2013 05/12/2014 05/28/2014
08/19/2014
08/28/2014
09/22/2014
09/22/2014 03/31/2015 04/13/2015 04/20/2015 04/21/2015 04/22/2015
04/23/2015

therein, as well as the issues presented by the petition for writ of certiorari now pending in the United States Supreme Court, see Supreme Court Docket No. 13−253. Based on the foregoing, the Court finds that there is good cause to stay the proceedings or, if applicable, to continue the existing stay of the proceedings in the above−entitled cases, pending notification from this Court. The parties are directed to file a joint status report with this Court within 14 days after the Supreme Court has taken any action with respect to the above−referenced petition for writ of certiorari. Court Reporter: Not Present. (gk) (Entered: 11/06/2013)
64 STATUS REPORT JOINT STATUS REPORT filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 12/19/2013)
65 STATUS REPORT (Joint) filed by Defendant David Maxwell−Jolly. (Tillman, Lisa) (Entered: 05/12/2014)
66 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals 46 filed by David Maxwell−Jolly, CCA # 10−55462. Pursuant to the parties' joint request for dismissal, these appeals are voluntarily dismissed. Fed. R. App. P. 42(b). The parties shall bear their own costs and fees on appeal. A copy of this order shall serve as and for the mandate of this court. Order received in this district on 5/28/14. (mat) (Entered: 05/30/2014)
67 NOTICE OF MOTION AND Joint MOTION for Settlement Approval of AGREEMENT filed by Petitioner California Hospital Association. Motion set for hearing on 9/22/2014 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Memorandum, # 2 Declaration, # 3 Proposed Order)(Keville, Jordan) (Entered: 08/19/2014)
68 Notice of Appearance or Withdrawal of Counsel: for attorney Susan Marie Carson counsel for Defendant David Maxwell−Jolly. Adding Susan M. Carson as attorney as counsel of record for Toby Douglas, Director DHCS for the reason indicated in the G−123 Notice. Filed by Defendant Toby Douglas, Director of the Department of Health Care Services, State of California. (Attorney Susan Marie Carson added to party David Maxwell−Jolly(pty:dft))(Carson, Susan) (Entered: 08/28/2014)
69 MINUTES OF MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT 67 hearing held before Judge Christina A. Snyder. The Court confers with counsel. The Court grants the above−referenced motion. The Court will issue the Proposed Order Granting Joint Motion for Approval of Settlement Agreement forthwith. Court Reporter: Laura Elias. (lom) (Entered: 09/25/2014)
70 ORDER GRANTING JOINT MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT 67 by Judge Christina A. Snyder. (lom) (Entered: 09/25/2014)
71 NOTICE filed by Plaintiff California Hospital Association. re Settlement Effective Date (Cannizzo, Craig) (Entered: 03/31/2015)
72 NOTICE OF VOLUNTARY DISMISSAL PURSUANT TO FED.R.CIV. PRO. 41(a)(1) (Keville, Jordan) (Entered: 04/13/2015)
73 NOTICE OF ERRATA AND WITHDRAWAL OF VOLUNTARY DISMISSAL filed by Plaintiff California Hospital Association. (Keville, Jordan) (Entered: 04/20/2015)
74 STIPULATION for Hearing re Motions for Attorneys' Fees filed by Plaintiff California Hospital Association. (Attachments: # 1 Proposed Order Re Briefing Schedule for Motions for Attorneys' Fees)(Keville, Jordan) (Entered: 04/21/2015)
75 NOTICE OF MOTION AND Joint MOTION to Dismiss Case filed by Plaintiff California Hospital Association. (Attachments: # 1 Memorandum of Points and Authorities iso Application for Voluntary Dismissal, # 2 Declaration of Craig J. Cannizzo iso Application for Voluntary Dismissal, # 3 Proposed Order Dismissing Action)(Attorney Craig J Cannizzo added to party California Hospital Association(pty:pla))(Cannizzo, Craig) (Entered: 04/22/2015)
76 ORDER ON PLAINTIFFS' EX PARTE APPLICATION FOR DISMISSAL OF ACTION by Judge Christina A. Snyder: Upon Plaintiff's Ex Parte Application 75 , IT IS HEREBY ORDERED that, pursuant to Federal Rule of Civil Procedure 41(a)(2), Case No. CV 09−8642 is hereby dismissed with prejudice, each party to bear its own

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costs in accordance with Part III.A.3 of the Settlement Agreement of the parties on file herein, with the Court retaining jurisdiction, pursuant to Parts III.A.3 and III.D.17 of the Settlement Agreement, to entertain any application for attorneys' fees as described in Part III.C. of the Settlement Agreement, and for purposes of enforcement of the Settlement Agreement by any parties in the within action, up to and including 1/1/2016. (gk) (Entered: 04/24/2015)