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October 1999

Court Places Burden for Medi-Cal Liabilities Delay on DHS

On September 29, 1999 the California Court of Appeal issued a published decision inFountain Valley Regional Hospital and Medical Center v. Director of the Department of Health Services (No. B124368), holding that the Department of Health Services (DHS), as the California State Medicaid agency, had the burden of proving at an administrative hearing why it delayed so long in issuing revised final Medicaid settlements to a hospital.

In September 1994, DHS issued “revised” Medi-Cal liabilities to Fountain Valley Regional Hospital and Medical Center for its 1981, 1982 and 1983 fiscal years. DHS had previously issued “final” settlements for these fiscal years as early as 1985. Fountain Valley argued that the revised liabilities were untimely issued and should therefore be deemed void.

Because the California courts had previously ruled that DHS’ administrative procedures for assessing and recouping Medi-Cal liabilities were not subject to the statute of limitations, Fountain Valley argued at an administrative hearing that the assessment of the liabilities was nevertheless time-barred because of the equitable doctrine of laches, which means that DHS’ neglect to assert its right in a timely manner caused prejudice to the hospital. In addition, the hospital argued that the burden of justifying the delay and the lack of prejudice to the hospital at the hearing should be placed on DHS because of the length of time delay in the case.

An administrative law judge and a state trial court rejected Fountain Valley’s position and concluded instead that Fountain Valley had the burden of proving the unreasonableness of the delay and any resulting prejudice to Fountain Valley caused by the delay.

However, the appellate court agreed with Fountain Valley’s arguments and reversed the trial court and DHS. The appellate court concluded that Fountain Valley could rely on a limitations period “borrowed” from analogous statutes of limitations to establish a presumption that the delay in the issuance of the liabilities was unreasonable and that the hospital had been prejudiced.

The appellate court remanded the case to DHS, which now has the burden of rebutting that presumption at a resumed administrative hearing. If DHS does not meet the burden of proof, it cannot recover its “refund claim,” according to the appellate court. The court also concluded that there must be some finality to DHS’ “final” reimbursement settlements.

The appellate court’s decision in this case provides important precedent for hospitals and other Medi-Cal providers for challenging DHS’ attempts to revise previously finalized Medi-Cal settlements long after the original final settlements are issued.

Because of the importance of this case, it is anticipated that DHS will ask the California Supreme Court to review the appellate court decision.

Hooper, Lundy & Bookman represented Fountain Valley in this case. For more information, please contact Patric Hooper or Lloyd Bookman at (310) 551-8111.

Integrative Medicine Emerging as a 21st Century Paradigm

The consumer-driven movement to integrate complementary and alternative medicine (CAM) therapies with those of conventional or “Western” medicine is fast becoming a health care paradigm for the new millennium, according to Hooper, Lundy & Bookman Principal, Angela Mickelson.

Ms. Mickelson, who specializes in assisting health care and managed care organizations establish both allopathic and integrative medicine programs and practices, recently assembled a panel of experts for a seminar to provide health care executives with an understanding of the emerging trends in integrative medicine as well as the opportunities and challenges that hospitals, health systems and managed care organizations face in integrating CAM therapies into their established allopathic practices.

“Today, we are witnessing dissatisfaction and frustration with the typical medical model where the doctor supposedly knows all and prescribes the treatment, and where the patient accepts the prescription without asking questions,” she told seminar attendees. “Given the information that is available today, particularly over the Internet and through the media and advertising, consumers are becoming participants in their health care. They want to be advised of all their health care options and for their health care practitioners to be familiar with the full spectrum of these options, including CAM therapies,” she said.

Ms. Mickelson noted that CAM is a multibillion dollar industry. Because of its size, she said, health care organizations should begin to examine the integration of CAM therapies in order to serve consumers and capture the growing revenue stream for these services.

HLB Attorney Robert Valencia, who also participated in the seminar, agreed. “Many of our existing hospital and medical group clients are considering establishing CAM clinics because it makes good business sense, and because patients are demanding these services.”

Mr. Valencia, who specializes in assisting hospitals and other providers in addressing the legal and business issues related to establishing medical clinics, noted that integrated medical centers (IMCs) face many of the same issues that other clinics do, but with a twist. “Part of that twist is that practitioners at IMCs are not all licensed or regulated,” he said, adding that another twist is the issue of whether CAM providers will be integrated into a hospital medical staff.

For more information on establishing an IMC, contact Ms. Mickelson at (310) 551-8170 or Mr. Valencia at (310) 551-8167.

A full report of the seminar appears in the October 11, issue of California Health Law Monitor. For issue or subscription information, please call (800) 274-6774.

Davis Signs Landmark Legislation

Governor Gray Davis recently signed a 21-bill legislative package that has the potential to affect the operations of health care businesses in all segments of the state’s industry.

The umbrella bill of the package, AB 78 (Gallegos), creates a new Department of Managed Care within the Business Transportation and Housing Agency.

Another bill, SB 21 (Figueroa), provides patients with the right to sue their health plan for malpractice.

SB 260 (Speier) establishes the Financial Solvency Standards Board within the Department of Managed Care and places a two-year moratorium on limited Knox-Keene licenses.

AB 55 (Migden) requires the Department of Managed Care to establish an independent medical review system.

Other bills in the package expand consumer protections and mandate health care benefits for specific conditions.

Essentially all health care provider organizations in the state will be affected by the mandates of this package of bills, which HLB attorneys have analyzed. For more information, contact Bob Lundy at (310) 551-8180 or Angela Mickelson at (310) 551-8170.


Q: How long should our medical practice retain patient medical records?

A: There are three circumstances when a doctor’s retention of medical records is governed by California statutes. First, physicians must retain the records of Medi-Cal patients for three years after the last date services were provided. Second, physicians must retain the records of patients for whom reimbursement was received from the Emergency Medical Services Fund for three years after the last date for which services were rendered and reimbursement received under the program. Third, each physician who “issues a prescription, or dispenses or administers” a Schedule II narcotic must keep a record of the transaction for three years.

In addition to statutory requirements, there are other factors physicians should consider. For example, an adult’s cause of action against a health care provider must be brought within three years after the date of injury or one year after the plaintiff discovers or reasonably should have discovered the injury, whichever occurs first. The statute of limitations may be tolled upon a showing of fraud, intentional concealment, or the presence of a foreign body in plaintiff’s person which has no therapeutic or diagnostic purpose or effect.

A minor must also bring action against a health care provider within three years from the date of injury, except that minors under the age of six have at least until their eighth birthday to raise a malpractice claim. The statute of limitations for minors may be extended if the child’s parent or guardian and defendant’s insurer or health care provider have committed fraud or collusion in the failure to bring an action on behalf of the minor for professional malpractice.

Although there is no universal answer to the question, in today’s litigious environment HLB recommends retaining medical records indefinitely. If indefinite retention is not possible, medical records should be retained for at least 10 years from the last time you rendered medical care to the patient. However, all medical records for minors should be retained until at least one year after the child reaches the age of majority and for at least 10 years. A physician should also retain the medical records of pregnant women for at least 19 years, which is at least one year after the unborn child reaches the age of majority, regardless of whether the care administered was related to the pregnancy itself.

For questions regarding your own records retention policy, contact HLB Attorney Hope Levy-Biehl at (310) 551-8140.

Q&A is a regular feature of Health Law Perspectives. If you have a question you would like addressed in a future column, please send your query to HLB attorney Robert Valencia by e-mail at, or send your question to Mr. Valencia at : Hooper, Lundy & Bookman, Inc., 1875 Century Park East, Suite 1600, Los Angeles, CA 90067.

For media assistance, please contact Maura Fisher at 202-580-7714.