The Arc California and United Cerebral Palsy San Diego Lawsuit

1. San Diego The Arc California and United Cerebral Palsy San Diego Lawsuit November 2012 Update

2. The Arc CA v. Douglas The Arc California; United Cerebral Palsy San Diego, Plaintiffs/Petitioners, v. Toby Douglas, in his official capacity as Director of the California Department of Health Care Services; Terri Delgadillo, in her official capacity as Director of the California Department of Developmental Services. Overview Background What Legal Grounds Depositions Status Future Plans & Timelines Where We Stand Now Contact

3. Background -February 2012 • Since 2003, the state froze reimbursement rates for community vendors rates have not been increased despite substantial increases in operating costs. • On February 20, 2009, CA cut reimbursement rates by 3% • October 19, 2010 CA reduced rates by an additional 1.25% through June 30, 2011. • On March 24, 2011, CA extended the reductions through June 30, 2012. • On July 28, 2009, CA mandated fourteen (14) unpaid holidays which removed payment from providers for services or supports, which further reduced payments. • Other Medicaid providers sued the state on the significant provider rate cuts and won their lawsuits in the California Courts. We did not sue during this time as we were continuing to negotiate with policymakers plus the rate reductions were labeled as “temporary” with clear end dates referred to as sunset dates. • The state appealed the Medicaid provider cases in California and it made it all the way up to the US Supreme Court where it was heard in October 2011 and is currently awaiting decision – expected in a couple of months. • The state continued the cut to providers and we determined that there we had no other alternative but to take the matter to court.

4. Background – May 2012 • The Federal Claims: The US Supreme Court did rule (by one vote) on the related case by sending it back to the state for further review. While this is not an obvious victory it is not a defeat and we are confident those cases will result in the same decisions in California courts. • The stay is still in effect, though we have claimed that since there was technically a ruling by the Supreme Court, the original purpose for the stay is no long relevant – the state claims the actual issue being considered has not been decided. • We (Tony Anderson, Peter Bowers, and Chad Carlock) met with CMS in Baltimore, MD, and the significant outcomes were (1) we learned that they are familiar with our action alerts and MMM, (2) they are currently working to create a definition of what “harm to the constituents” means, and (3) most importantly they agreed to involve us in defining the how to determine harm. Our meeting included several high level directors and managers from both the Baltimore headquarters and the region 9 office in California. • The state has proposed ending 3% of the 4.25% reduction to providers and the legislature has proposed sunsetting the remaining 1.25% in 1 or 2 years.

5. What Laws Are We Claiming the State Violated • Federal Law: Acting solely on budgetary considerations (implementing and enforcing the rate reductions and mandatory unpaid holidays) • (1) by failing to obtain prior federal approval before modifying the reimbursement rates; • (2) by implementing and enforcing the rate reductions and mandatory unpaid holidays for purely budgetary reasons and without giving meaningful consideration to the statutory factors set forth in Section 30(A); • (3) by failing to consider the impact of the reduction in payment rates on the safeguards required by the HCBS waiver program to protect the health and welfare of consumers; and • (4) by failing to conduct or consider appropriate rate studies. • Lanterman Act/State Law: The Lanterman Act can't be implemented anymore [with the provider rate freeze]. Our case against the state seeks to stop (1) the 4.25% cut, (2) mandatory “holidays”, and (3) the half-day billing rules for day programs.

6. Depositions: Dept of Health Care Services The State filed motions for reconsideration and an “emergency” application to stop the depositions. The court denied both motions. The State withdrew/replaced its witness 4 weeks later sanctions. Deposed DHCS on October 3rd on the Medicaid Act, the HCBS Waiver, rate-setting and the Lanterman Act, he said DHCS: • relies on DDS for fed and state compliance. • has no involvement in rate including rates under the Waiver. • says there was no impact study re the Waiver/Lanterman Act. • is not obligated to comply with the Medicaid Act outside the waiver. • it doesn’t have to comply with the provisions of the Medicaid Act (consistent rates with quality of care and access) nor obligated to rely on studies on providers’ costs in setting rates. • Doesn’t have to inform the CMS of changes in payments before or after changes are made even when they harm consumers, families, or the providers. • says unpaid holidays and half-day rule, are the same as rate cuts.

7. Depositions: Dept of Developmental Services Deposed DDS who said the department: • is responsible for complying with federal and state laws re Waiver. • Only responsible the Waiver not with Medicaid law for rate-setting. • doesn’t have to set rates based on costs to achieve quality of care/ access. • may set rates independent of considerations of the welfare or well-being of a consumer or family. • has few if any obligations to the CMS re: reports of rate adjustments. Second DDS Deposition: • he was not aware that the DDS was obliged to set equitable rates and that the rates were supposed to provide for “high quality” services and supports. • as long as the DDS complied with the IPP their obligations were met. • the “health and safety (H&S)” exemption process addresses threats resulting from a payment reduction. • There are no procedures or time lines regarding the exemption process as the RC “could file whatever it wanted to.” • unpaid holidays and half-day billing rule weren’t covered by the H&S exemption. • His testimony established that the DDS gave no consideration to the impact of the rates on consumers, their families, or their providers, and that it simply made cuts needed to satisfy the State’s required budget cuts. At one point he stated that the DDS was “tasked” with making cuts that reached the level of the desired budget cuts.

8. Current Status & Plans: The State re-filed its motion to dismiss our complaint - it will be heard 1/10/13 the same day as the hearing on our motion for sanctions. We requested sanctions based on the DDS’ violation of the court’s order to produce its witnesses no later than October 5th. Ex Parte Application for Injunction: • we will ask the court to stop the State from implementing or enforcing the aforementioned reductions in payments to providers—the 1.25% rate cut, unpaid holidays, and half-day rule. • We decided to delay because we wanted to complete the delayed deposition of the DDS’ witness and to obtain declarations from parents to further strengthen our arguments about the adverse impacts of the cuts on consumers and their families. We have received and are expecting to receive at least 4 more within the next few days.

9. Future Plans & Timelines: • Ex Parte Application. • Pending Motions: We have responded to the State’s motion to dismiss and have filed everything regarding our motion for sanctions. • Whether or not further work will be required will depend largely on two things: (1) how the court rules and (2) how the State reacts. • If the court grants our motions the State could appeal to the Ninth Circuit and request a stay. • If the court denies our request for an injunction we would then have to consider whether to appeal the court’s decision.

10. Where We Stand Now: We achieved our primary objective. The court set a hearing on January 10th, 2013, at which time the State must present evidence and law convincing the court not to enjoin it from enforcing the 1.25% rate cut, the mandatory days off, and the half day billing rule.  The court did not grant a temporary restraining order but that was most likely due to the fact the Court wants to afford the State an opportunity to fully brief the issues before it rules.   

11. Where We Stand Now:The Judge's comments and actions reflected favorably on our motion.  The judge made the point a number of times that his unwillingness to issue a temporary restraining order did not reflect unfavorably on the merits of our motion.  In addition, the court refused the State's request that the court hear its motion to dismiss on December 13th.  While the State argued that the court's ruling on its motion to dismiss might render our motion moot, the court rescheduled the State's motion so it will be heard at the same time and date as our motion.  This appears to signal that the court believes that our complaint has merit and sets forth valid claims.

12. Where We Stand Now: Additional Evidence While our moving papers present a strong case for an injunction, the court's remarks during the hearing revealed that we could present additional evidence that would greatly strengthen our motion.  Specifically, the court made reference to evidence relating to the following:     A.  The number of providers who have closed their doors over the past months or who will do so in the near future unless adequate cost-based funding is provided (e.g., within 6 months).    B.   Consumers who have been deprived of needed programs due to lack of funded programs -- that is, less or lack of access to needed services.     C.   Consumers who have experienced some quantifiable harm with respect to their health, safety or welfare -- for example, in Ms. Finch's declaration she stated that "with fewer programs suited for her particular needs, my daughter's skills have not been progressing and it appears that they may be regressing."

13. Questions?Tony AndersonExecutive DirectorThe Arc Californiatony@thearcca.org(916) 552-6619