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April 2, 2012 

Medi-Cal Provider Rate Reduction Status


In February, the U.S. Supreme Court in a 5-4 decision remanded the decision that had enjoined the 2008-09 10% rate reductions for many providers. That injunction has been appealed by DHCS and we had been awaiting a decision on the principal issue of whether providers had standing to bring such an action to challenge the reductions. The decision sent the case back to the 9th Circuit Court of Appeals with no decision on the issue based upon the complexity of the case and the fact that since that injunction was issued there has now been another 10% reduction enacted and actually approved by CMS. The Court determined that this issue needed to be fully argued and briefed and may bring in issues related to compliance with the Administrative Procedures Act. This is a victory for the provider community and we are hopeful that the 9th Circuit Court of Appeals will continue to support enjoining these provider rate reductions.


The 10% rate cut that was approved as part of the 2011-12 State Budget was intended to take effect on June 1, 2011 but required CMA approval via State Plan Amendment. CMS did approve the change in late September last year and DHCS announced their intent to make the change retroactive to June 1, 2011. An injunction was sought and obtained in Federal Court on 1/30/12 that stopped the implementation of the cut to most providers. For pathology the injunction prohibited any reduction to physician payments but did not block a 10% reduction for services billed by clinical laboratories. We have yet to see any reductions but the risk is certainly there along with the possibility of recoupment of over-payments going back to June 1, 2011.


The injunction order has been appealed by DHCS and CMS to the Ninth Circuit Court of Appeals. A request for emergency stay of the order by DHCS was denied by the Court last week meaning that the injunction will stay in place until a ruling on the appeal is issued. That ruling is expected this Summer.



New Bill on Billing by Out-of-Network Providers  


SB 1373 ( Lieu) addresses situations where an insured receives services in a hospital or other facility that is part of the insurer or plan network but other physicians in the hospital or other facility are non-contracted providers. The author is concerned that insured patients should not bear the brunt of out-of-network charges when they tried to obtain services at a facility that was part of the plan network. It is similar to prior bills dealing with non-contracted hospital based physicians but this bill actually applies to a broader category of facilities, including clinics, clinical labs, imaging centers etc. The bill would require the following when the provider is not contracted or part of the network;


  • Non-contracted provider must provide notice to the patient that they are out of network and provide an estimate of charges.
  • If the required notice is not provided then the non-contracted provider can only charge the approved out of network rate paid by the plan or insurer.
  • A health facility or group cannot hold itself out as part of the network, unless all physicians at the facility are part of the network.


The CSP has met with the author and explained the problems with this approach. The ability of a hospital based pathologist to provide such notice to a hospital in or outpatient prior to service would be impossible. We did indicate that it would be rare for some members of a pathology group to be contracted when others were not. Also, the failure to contract is more likely related to inadequate reimbursement by the plan or insurer rather than a desire to be out of network. The discussion was positive and we hope SB 1373 will be amended to employ a different strategy to address the problem. It will be heard in the Senate Health Committee in April.




CSP Annual Convention

November 27 - December 1, 2012

Hyatt Regency Embarcadero

San Francisco, CA


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