Ridgecrest Reg'l Hosp. v. Douglas

RIDGECREST REGIONAL HOSPITAL, Plaintiff and Respondent, v. TOBY DOUGLAS, as Director, etc., Defendant and Appellant.

B261398

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO

April 5, 2016

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BS146499)

APPEAL from a judgment of the Superior Court of Los Angeles County. James C. Chalfant, Judge. Affirmed.

Kamala D. Harris, Attorney General, Julie Weng-Gutierrez, Assistant Attorney General, and Richard T. Waldow and Kristen T. Dalessio, Deputy Attorneys General, for Defendant and Appellant.

Law Offices of Thomas J. Weiss, Thomas J. Weiss and Lindsay K. Seltzer for Plaintiff and Respondent.

____________________ Dissatisfied with an audit adjustment issued by the California Department of Health Care Services (the Department), Ridgecrest Regional Hospital (Ridgecrest) filed an administrative action. The administrative law judge (ALJ) eventually dismissed Ridgecrest's administrative appeal on the grounds that he lacked jurisdiction to grant the requested relief. Ridgecrest filed a petition for writ of mandate, seeking an order reversing the dismissal of its administrative appeal. The trial court granted Ridgecrest's petition, and Jennifer Kent,¹ as Director of the Department, appeals. Relying largely upon Mission Hospital Regional Medical Center v. Shewry (2008) 168 Cal.App.4th 460 (Mission I), Mission Hospital Regional Medical Center v. Douglas (May 25, 2011, C062792) 2011 Cal.App. Lexis 4036 [nonpub. opn.] (Mission II), and Hi-Desert Medical Center v. Douglas (2015) 239 Cal.App.4th 717 (Hi-Desert), the Department asserts that Ridgecrest is collaterally estopped from pursing its administrative appeal and that the ALJ properly determined that he lacked jurisdiction to grant relief to Ridgecrest.

We do not agree with the Department. The elements of collateral estoppel have not been shown, and the ALJ had the authority to grant the requested relief. Accordingly, we affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

I. Factual Background

A. Mission I

"The federal Medicaid program provides financial assistance to states that provide medical treatment to needy persons. [Citation.] 'California participates in the federal Medicaid program through the Medi-Cal program,' and the Department is the state agency authorized to administer the Medi-Cal program. [Citation.]

"In 2004, the Legislature enacted Senate Bill 1103,² which limited reimbursement rates to noncontract hospitals . . . .³ [Citation.]" (Hi-Desert, supra, 239 Cal.App.4th at p. 721.)

In September 2005, various noncontract hospitals, but not Ridgecrest, filed a petition for writ of mandate in Sacramento Superior Court challenging the validity of SB 1103. (Hi-Desert, supra, 239 Cal.App.4th at p. 721.) On December 19, 2006, the Sacramento Superior Court rejected most of the noncontract hospitals' allegations, and the noncontract hospitals filed an appeal. (Mission I, supra, 168 Cal.App.4th at pp. 477-478; Hi-Desert, supra, at p. 721.)

B. Administrative Action and Stay Pending Resolution of Mission I

Meanwhile in 2006 and 2007, the Department issued audit reports for the 2004-2005 fiscal year to noncontract hospitals, including Ridgecrest. (Mission I, supra, 168 Cal.App.4th at p. 483.) On July 13, 2007, the Department issued an audit report for Ridgecrest, including adjustment 1, which is a $216,246 reduction pursuant to SB 1103. On July 30, 2007, Ridgecrest filed an administrative appeal challenging adjustment 1, claiming that SB 1103 was invalid.

The hearing on the administrative appeal was originally scheduled for December 20, 2007. But, on September 24, 2007, Ridgecrest contacted the ALJ, writing: "The singular issue involved in this matter relates to [SB 1103] and its application to nonricontract hospitals in California. Ridgecrest . . . is a nonricontract facility. Currently, the same issues involved in this case are being heard in a pending state court action, [Mission I]. [¶] Because the decision in [Mission I] will impact this case, we are requesting that the matter be taken off calendar."

The ALJ granted Ridgecrest's request and took the hearing off calendar.⁴

C. Victory for the Noncontract Hospitals in Mission I

"On November 19, 2008, the Court of Appeal, Third Appellate District, reversed the trial court's judgment on one legal ground only, concluding that the Legislature had failed to comply with the notice and comment procedures of title 42 United States Code section 1396a(a)(13)(A). (Mission I, supra, 168 Cal.App.4th at p. 480.) The Court of Appeal ordered the Sacramento Superior Court to issue a writ of mandate prohibiting the Department from applying [SB 1103] in calculating the [noncontract hospitals'] rates for the state fiscal year 2004-2005. (168 Cal.App.4th at p. 493.)" (Hi-Desert, supra, 239 Cal.App.4th at p. 722.)

D. Motion to Enforce the Writ; Writ Granted as Requested by the Noncontract Hospitals

"After remand, on April 22, 2009, the Sacramento Superior Court issued a writ of mandate prohibiting the Department from applying SB 1103 in computing reimbursement rates for the fiscal year 2004-2005. [Citation.] The parties disputed whether this decision applied retroactively. The Department believed that, by this time, it had already applied [SB 1103] and reimbursed most of the noncontract hospitals. The [noncontract] hospitals, on the other hand, claimed that Mission I's holding entitled them to both retroactive and prospective relief. [Citation.] Thus, the [noncontract hospitals] filed a motion to enforce the writ of mandate, asking the trial court to order the Department 'to recalculate the reimbursement amounts for 2004-2005 for all plaintiffs and to reimburse them the amounts they would have received for that fiscal year had Stats[.] section 32 [of SB 1103] not been applied.' [Citation.] (Hi-Desert, supra, 239 Cal.App.4th at p. 722.)

"The trial court granted the [noncontract] hospitals' petition, and the Department appealed. [Citation.]" (Hi-Desert, supra, 239 Cal.App.4th at p. 722.)

E. Court of Appeal Reverses Trial Court (Mission II)

"The Court of Appeal, Third Appellate District, reversed the trial court order enforcing the writ, holding that the trial court 'lacked jurisdiction to authorize additional relief beyond what [had been] ordered.' [Citation.] The Court of Appeal reasoned as follows: In Mission I, the [noncontract hospitals] only sought 'prospective declaratory and mandamus relief'; they did not request any other type of relief, including 'financial reimbursement.' [Citation.] While the Court of Appeal was expressly 'sympathetic to plaintiffs' and the trial court's efforts to ensure the state does not enrich itself pursuant to its unlawful acts, which are here established by the Legislature and the Department's decision not to challenge Mission . . . I substantively in their petition for review[,] . . . the enforcement burden rested on plaintiffs. If they wanted to be reimbursed for monies wrongfully withheld or taken, they were burdened to make all appropriate allegations and pleadings for that to occur. They did not do this in Mission . . . I.' [Citation.]" (Hi-Desert, supra, 239 Cal.App.4th at p. 723.)

F. Motion to Amend the 2005 Petition and the New Petition

"Following Mission II, on November 18, 2011, the [noncontract] hospitals moved to amend the 2005 petition in Sacramento Superior Court to allege a request for reimbursement. On the same day that the motion for leave to amend was filed, the [noncontract] hospitals filed a new petition in Sacramento Superior Court (Mission III),⁵ mirroring the 2005 petition, but expressly praying for reimbursement in a manner similar to their proposed amended petition. The Sacramento Superior Court denied the motion to amend the 2005 petition on the grounds that the pleading was substantively identical to the newly filed Mission III petition. The [noncontract] hospitals did not appeal that ruling." (Hi-Desert, supra, 239 Cal.App.4th at p. 723.)

"In April 2013, the Department and some of the [noncontract] hospitals settled the original 2005 petition. Later, the [noncontract] hospitals filed a notice of dismissal of the Mission III petition without prejudice." (Hi-Desert, supra, 239 Cal.App.4th at p. 723, fn. omitted.)

G. Dismissal of Ridgecrest's Administrative Appeal

On August 26, 2013, the Department filed a motion to dismiss Ridgecrest's administrative appeal on the grounds that (1) Ridgecrest's claim was barred by the doctrine of res judicata, and (2) the ALJ lacked jurisdiction to set aside adjustment 1 and grant Ridgecrest's request for retroactive relief. Ridgecrest opposed the motion.

On October 9, 2013, the ALJ granted the Department's motion on jurisdictional grounds. It reasoned: "Since the audit report was issued before the prospective injunction in Mission I was rendered, the Department was not enjoined from applying Section 32 to the audit. [Ridgecrest] contends it is not seeking a determination of the validity and enforceability of SB 1103 in this administrative appeal, but that it seeks a reversal of the audit adjustment made pursuant to section 32 on the basis of the [C]ourt of [A]ppeal decision in Mission I. . . . [T]he Mission I court did not rule on whether Section 32 was valid at the time that the Department conducted its respective audits. Yet here, in seeking reversal of audit adjustment 1, [Ridgecrest] is requesting that this tribunal go beyond the judgment in Mission I and grant it retroactive relief by finding that Section 32 was invalid at the time the subject audit report was issued. This tribunal simply lacks jurisdiction to grant such relief because under ...