California Medicaid Cuts Expected to Critically Reduce Access to Rural SNF Care

On December 19, a Los Angeles federal court will hear the California Hospital Association (CHA)’s request for a preliminary injunction on the application of Medi-Cal cuts to skilled nursing facilities (SNFs) in acute care hospitals. The Centers for Medicare and Medicaid Services (CMS) recently approved the 10 percent reduction to certain payments by Medi-Cal, California’s federally-funded Medicaid program, in order to save a projected $623 million in the state’s general fund. Approximately 1 in 5 California residents is covered by Medi-Cal.

Stating that “(t)he state has submitted extensive data demonstrating that the…cuts will not jeopardize Californian’s access to care, and has agreed to ongoing monitoring access to care for the affected services,” CMS consented to the following payment reductions:

  • 10 percent to various outpatient providers, including physicians, clinics, optometrists, laboratories, dental, therapists, durable medical equipment and pharmacy
  • 10 percent to providers at freestanding nursing and adult subacute facilities
  • 10 percent to providers at distinct part/nursing facility-B services, as well as a rate freeze

The California Department of Health Care Services (DHCS) concluded that it would be imprudent to implement the 10 percent cuts to home health services, children’s services and distinct part subacute facilities. However, DHCS is seeking approval of further budget reductions, including the imposition of copayments on services covered by Medi-Cal and the implementation of a “soft cap” on visits to physicians and clinics. In addition, reductions could soar to over 20 percent if prior cuts, which were obstructed by legal action, become operative.

Of particular concern to California providers and beneficiaries, is the effect of the cuts on skilled-nursing care in rural areas of the state. According to Matthew Rees, the chief executive officer of a rural hospital district, “97 percent of our (skilled nursing) patients are Medi-Cal.” The California Hospital Association (CHA) recently conducted a survey of hospital-based SNF providers, which revealed that 50 percent of hospital-based SNF respondents would close their facilities as a result of the cuts. Another 22 percent of respondents stated they would discontinue services to Medi-Cal beneficiaries and an additional 13 percent would reduce the number of beds. Many doctors may choose not to treat Medi-Cal patients due to the payment reductions.

While SNFs unaffiliated with hospitals will not receive payment reductions, the CHA projects that many of these “freestanding” facilities, will also be forced to close or reduce services due to anticipated cuts to Medicare payments. Freestanding SNFs are not common in rural areas, as they are in urban areas, so rural beneficiaries would be forced to seek skilled-nursing care outside of their communities and away from their families. Rees gave an example that if his unit were to close, the nearest equivalent care is located 75 miles away. 

In addition to CHA’s request for preliminary injunction, CHA, the California Medical Association, and the California Pharmacists Association have filed a lawsuit against the U.S. Department of Health and Human Services (DHS) and the State of California challenging the cuts. The plaintiffs allege that DCHS has repeatedly ignored their requests for documentation of their communications with CMS that show justification of the payment reductions. They allege that DCHS violated state law by not providing the public with information concerning the conduct of the people’s business.