Court Opinion

ID: 9848941
Source: CourtListenerOpinion
Date Created: 2023-09-24 04:30:35.862703+00
Date Added: 2024-06-11T09:18:54.880456
License: Public Domain

*761MOSK, J.
I dissent. The majority conclude that the Legislature intended to burden providers of health care under the California Medical Assistance Program (Medi-Cal) with potentially open-ended financial liability to the State Department of Health Services (department). Certainly that cannot be. The Court of Appeal reached the correct result, and its judgment should be affirmed. Because the majority hold to the contrary, however, it will take a legislative act to remove the onerous financial uncertainty to which today’s decision subjects these health care enterprises.
Subdivision (a) of Welfare and Institutions Code section 14170—unla-beled statutory references are to this code—provides:
“(1) Amounts paid for services provided to Medi-Cal beneficiaries shall be audited by the department in the manner and form prescribed by the department. The department shall maintain adequate controls to ensure responsibility and accountability for the expenditure of federal and state funds. Cost reports and other data submitted by providers to a state agency for the purpose of determining reasonable costs for services or establishing rates of payment shall be considered true and correct unless audited or reviewed by the department within 18 months after July 1,1969, the close of the period covered by the report, or after the date of submission of the original or amended report by the provider, whichever is later. Moreover the cost reports and other data for cost reporting periods beginning on January 1, 1972, and thereafter shall be considered true and correct unless audited or reviewed within three years after the close of the period covered by the report, or after the date of submission of the original or amended report by the provider, whichever is later.
“(2) Nothing in this section shall be construed to limit the correction of cost reports or rates of payment when inaccuracies are determined to be the result of intent to defraud, or when a delay in the completion of an audit is the result of willful acts by the provider or inability to reach agreement on the terms of final settlement.”
The statute is not a model of clarity. Cost reports are submitted to the department, however, “for the purpose of determining reasonable costs for services or establishing rates of payment . . . .” (§ 14170, subd. (a)(1).) This implies that the audit should determine the amount of money due, not just the accuracy of the provider’s figures. Subdivision (a)(2) of section 14170 supports this conclusion by providing that “rates of payment” may be corrected “when a delay in the completion of an audit is the result of . . . inability to reach agreement on the terms of final settlement.” Indeed, *762although “audit” is not defined for purposes of the statute in question (see, however, § 11227), standard definitions thereof include a “final statement of account” (Webster’s New Intenat. Dict. (3d ed. 1961) p. 143) and a “rendering and settling of accounts” (ibid.).
Naturally, as the last step in the audit process, a final settlement cannot be reached until the audit findings have been made. (See Cal. Code Regs., tit. 22, § 51536, subd. (b)(10).) The question is whether the whole process must be completed in three years. Section 14170 implies that it must. Contrary to the majority’s observations, nothing in section 14171 undermines such a conclusion. Subdivisions (a) and (b) thereof merely establish that a Medi-Cal provider may challenge either the audit findings or the resulting settlement.
The majority impose a double standard regarding the parties’ obligations. The state as reimburser is to be indulged, while the hapless Medi-Cal provider is to tolerate whatever delays or other burdens the former may impose. The Court of Appeal reasonably questioned whether the Legislature intended a process whereby a hospital would be dunned for payments made years earlier. “In its multiyear inpatient reimbursement settlement dated July 1990,” the appellate court explained, “the Department sought to recoup more than $400,000 for services rendered by Kennedy to Medi-Cal patients seven years earlier, in 1982; more than $800,000 for services rendered six years earlier, in 1983; and more than $200,000 for services four years earlier, in 1985. Few businesses could operate successfully if [their] financial position were to remain so long unknown and imperiled.” (Italics deleted.) By contrast, the majority appear to believe that the Legislature meant for providers to sustain the burden of open-ended delays in calculating final reimbursement. This is a strange view of commercial reality.
Even as the majority conclude that the Legislature intended to subject Medi-Cal providers to a harsh regime, they themselves manifest an avuncularly tolerant view of the department’s obligations toward those enterprises. They appear to believe that the agency cannot reasonably be expected to settle a provider’s account in three years. To be sure, the calculations required for final settlement appear to be complex. But at least some data are regularly and periodically obtainable. For example, the department must consider changes in consumer and producer price indices in calculating the sums due the provider. (Cal. Code Regs., tit. 22, § 51536, subds. (b)(6), (f), & (g).) The Bureau of Labor Statistics of the United States Department of Labor (see 29 U.S.C. §§ 1, 2) calculates consumer and producer price indices monthly or annually. (Statistical Abstract of the United States (115th ed. 1995) pp. 492-495, 500-503.) Surely the Legislature could have decided that three years after the Medi-Cal provider submitted all relevant information was adequate time to settle an account.
*763The majority’s indulgent view of the department’s obligations dovetails all too comfortably with the department’s own attitude. In its July 12, 1990, letter to plaintiff demanding that it repay $1,564,109.37 for periods ending as much as seven and a half years before, the department insisted that “[i]f you did not own the hospital during this fiscal period and are not responsible for Medi-Cal liabilities for this fiscal period, you should immediately forward this notice to the former owners.” (The department does not casually invoke the term “immediately,” for in contrast to the limitless time it believes it enjoys to settle an account, it gave the provider in this case 67 days to prepare and send a request for administrative adjustment, and there is no indication in the letter that any prior provider would receive an extension.) Certainly the department maintains records of prior providers and could easily submit notice to them, but evidently it prefers to assign this task to the current provider, thus jeopardizing the financial position of all past as well as present providers subject to the final settlement in question.
Finally, to put a quicker end to this litigation and allow the Legislature to address any resulting difficulties for health care enterprises, I would decide the question whether the three-year statute of limitations contained in Code of Civil Procedure section 338, subdivision (a), applies. There is no reason not to do so. The majority’s remand to the Court of Appeal unnecessarily expends the resources of both that court and these litigants.
In a suggestion that probably is meant to be palliative, the majority propose that a provider may present a defense of laches. But plaintiff may be understood already to have said, as it were, “Thanks but no thanks.” The record contains its observation that the “suggestion . . . that the doctrine of laches may provide a remedy for a provider when its final settlement is delayed must be rejected as impracticable and unrealistic. Under [that] reasoning, in order to close its books each fiscal year, a hospital would have to retain an attorney to speculate whether sufficient time has expired since the submission of the cost report and other data such that a court would find prejudice if the Department were to issue a new liability after three years.”
The statutory scheme is, as stated, less than clear. But it is most unlikely that the Legislature intended to give the department years, perhaps decades, to settle an account. I would affirm the judgment of the Court of Appeal.