LOS ANGELES (CN) — A federal judge in Los Angeles on Monday blocked California's health department from canceling a contract with the nonprofit AIDS Healthcare Foundation.
"The department has acted as a bully, and shown a callous disregard for its patients in order to silence a critic," said the nonprofit's founder and president Michael Weinstein during a press conference held over Zoom.
The foundation, known commonly as AHF, says it serves 1.6 million patients in 45 countries and labels itself the "largest provider of HIV medical care in the world." Both Weinstein and AHF, which began in 1987 as an AIDS hospice and grew into massive organization with upwards of $1.4 billion in annual revenue, seem to be forever embroiled in controversies. Some have revolved around contract disputes with the state and LA County. Others have been more political: Weinstein, and by extension AHF, have taken positions on condoms in adult films (Weinstein favors mandating them), the HIV prevention pill Truvada (Weinstein has been critical of it), prescription drug prices and even rent control. Weinstein has also positioned himself as one of the leading contributors to the region's anti-density movement, which seeks to stymie the construction of large apartment buildings.
The lawsuit in question concerns a long-standing contract AHF has with California to manage a health care plan for Medi-Cal patients living with AIDS. According to AHF, the health plan is the first in the nation to serve only AIDS patients and remains one of only a handful. It serves roughly 825 patients and receives about $1.4 million in reimbursements from the state per month.
Weinstein said the plan has been around since 1995, though it has been amended over the years. The contract with the state is subject to periodic negotiations. By 2021, these talks had grown acrimonious. According to a declaration by a Department of Health Care Services (DHCS) administrator, AHF had "requested to expand their eligible beneficiary definition," had "demanded higher rates for its services, and repeatedly threatened DHCS with political retribution and litigation." In September 2021, an AHF employee emailed someone at the department threatening to terminate the contract — in less than four months.
As the two parties continued to negotiate in person, AHF sent a letter to patients on Nov. 12, 2021, informing them, "the Medi-Cal health plan which is operated by AHF, may sunset on Dec. 31, 2021." The letter went on to criticize the state, saying that it had "been unable to offer AHF rates that are enough to cover the health care costs of" its members despite several years of "continuous budget surpluses," and went on to suggest that the recipients of the letter call the department to let them know "how you feel about its decision not to adequately fund" the health care plan."
As the judge wrote in his 41-page decision, "the entire dispute revolves around" the 1-page letter.
The state health department said the letter was a breach of contract and demanded a retraction, which was not forthcoming. In June 2022, the department announced it would not renew the contract past Dec. 31, 2022, citing “serious breaches of its contracts in sending a notice of expiration to its members" as well as a “history of difficulties” it's had with AHF. Though it was technically a decision not to renew a contract, in practical terms, it meant patients would have had to switch health care plans.
"AHF talked too much," said AHF general counsel Andrew Kim, on the Zoom call, "It was too much of a hassle. The state seems to think these programs exist for the good of the bureaucracy, not for the patients they serve." He added that the letter was protected free speech "encouraging patients to speak up."
AHF sued the department this past September, claiming the department was violating its right to free speech. In his ruling, U.S. District Judge Maame Ewusi-Mensah Frimpong, a Joe Biden appointee, wrote "the adverse action (not extending the contract) is imminent, while the harm of chilling AHF’s speech is ongoing." He enjoined the department from not renewing the contract but the case is ongoing, which means the department could eventually prevail.
A department spokesman has yet to provide a comment on the judge's ruling.
During the Zoom call, Weinstein called on Governor Gavin Newsom to intervene and tell DHCS to "drop their appeals and work with AHF."
The fight with the department has echoes of a dispute between AHF and LA County a decade ago.
Throughout the 2010s, Weinstein and AHF repeatedly clashed with the county over contracts, as well as a series of audits which accused the nonprofit of overbilling the county for services. AHF sued in 2012, asserting the audit was the county's way of retaliating against AHF for taking certain positions. A federal judge dismissed the suit in 2014, writing, “Rather than a sincere attempt to vindicate their First Amendment rights, the court fears that plaintiffs instituted this action in an effort to obtain a tactical advantage in their ongoing political battles."
After the ruling, then-County Supervisor Zev Yaroslavsky told the Los Angeles Times: "Contrary to some high-minded First Amendment motivation, he’s shown to be a thug... He’s used his nonprofit organization in a crass and bullying political way to get his way, which is to avoid being held accountable.”Follow @hillelaron
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.