Asante v. Cal. Dep’t of Health Care Servs., __ F.3d __, 2018 WL 1570659 (9th Cir. Apr. 2, 2018)
Nineteen hospitals located outside California filed a federal action against the California Department of Health Services and its director. They asserted that DHS violated the dormant Commerce Clause of the United States Constitution—which prohibits states from burdening interstate commerce—by adopting certain Medi-Cal reimbursement policies favoring in-state hospitals over out-of-state hospitals. The district court found a violation of the dormant Commerce Clause and granted the out-of-state hospitals partial summary judgment, but the court denied monetary relief. Both sides appealed.
The Ninth Circuit reversed, holding that DHS was exempt from the dormant Commerce Clause because it acted as a market participant (rather than a regulator) in setting reimbursement rates for hospitals providing services to Medi-Cal beneficiaries. Like other market participants, the hospitals and beneficiaries were not required to deal with DHS, but they voluntarily chose to participate in its Medi-Cal insurance program. And like private insureds, Medi-Cal beneficiaries must ascertain whether a hospital they wish to use participates in the Medi-Cal program. Furthermore, DHS did not act as a regulator because it did not impose restrictions reaching beyond the parties with whom it transacted business; DHS dealt only with Medi-Cal providers and did not regulate third parties. The fact that federal funds (and regulations) were used when DHS paid benefits did not take the case outside the market participant exception.
Prepared by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy, LLP
California Society for Healthcare Attorneys
1215 K Street, Suite 800
Sacramento, CA 95814
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