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California Society of Pathologists
One Capitol Mall Suite 320
Sacramento, CA 95814 
Tel : 916-446-6001
Fax :  916-444-7462

Important Decision on Liability of Lab Director for Medi-Cal Payments
A Sacramento Superior Court Judge has issued a tentative ruling on a petition filed by a pathologist to overturn a determination by an Administrative Law Judge that found the pathologist laboratory director responsible for repayment to Medi-Cal payment of over $6 million dollars.
The pathologist had been the director of two independent labs that were audited by the Medi-Cal program in 2002 for clinical lab services billed and reimbursed in the prior three year period. At the time of the audit the labs had been closed and the owners of the labs could not be found. Since there were no records for the services that had been reimbursed DHCS sought restitution of those payments. In the absence of the owners DHCS then attempted to find the pathologist liable to repayment as the lab director. The pathologist was not an owner of the labs and had not billed in his name or been paid any of those funds, but for a nominal payment as lab director. He was listed as the director of the lab on both the state licenses and CLIA certificates.
The pathologist appealed the auditor's determination beginning in 2003 through a hearing before an Administrative Law Judge and discussions with DHCS but to no avail. The ALJ decision did find the pathologist responsible for $6 million dollars in payments and sought restitution. The ruling was based on the provisions in the Business and Professions Code that state that the laboratory director is jointly and severally responsible for the overall operation and administration of the laboratory. The ALJ decision was ultimately ratified by the Director of DHCS. Last year the pathologist sought a Writ of Mandate in Sacramento Superior Court to overturn the ALJ decision. The Writ argued that the pathologist was not the "provider" under state law, had received none of the disputed payments, had no oversight or responsibility for the billings to Medi-Cal, and under the law of restitution the action can only be against a party that had received the disputed funds.
There was a hearing requested by the Attorney General that occurred last Friday wherein they requested that the Judge reverse the tentative ruling. The judge took the arguments under submission and has not yet issued the final ruling. We expect that shortly and will advise at a later date.
Bill Moves to Eliminate Medi-Cal Check Holds to Providers
Pathologists who own or operate independent clinical laboratories are painfully aware of the budget cash flow tool of holding/delaying payments to "institutional providers" under Medi-Cal. It happened in both 2008 and in March of 2009. The classification of "institutional" simply referred to any provider licensed by DHCS/CDPH which includes among others hospitals, adult day health care, and clinical labs.
CSP supports AB 367 (Galgiani) would eliminate that practice by requiring the Controller to transfer enough funds from the General Fund to pay all providers and eliminates the current one month payment hold that is contained in statute. AB 397 passed the Assembly Health Committee on Tuesday but now must pass the Assembly Appropriations Committee. That will be a difficult task in light of the current budget issues and with a cost that could be several billion dollars. We will keep you informed on the progress of the bill.