Clinic Can’t Keep Money Away From State

SAN FRANCISCO (CN) - A Bay Area health clinic can't stop the state from seizing some of its federal funding to make up for prescription drug overpayments, a federal judge said.

California's Department of Health Care Services can continue collecting prescription drug reimbursements from a clinic while awaiting a Ninth Circuit ruling in a prescription drugs fees fight.

U.S. District Judge Claudia Wilken on Friday refused La Clínica de Raza's request for a preliminary injunction. The clinic wanted the state enjoined from seizing federal Medicaid and Medicare prescription drug money to make up for overpayments to the clinic.

Wilken found the clinic did not show it is likely to succeed on the merits or suffer irreparable injury or undue harm without an injunction. She found "not persuasive" the clinic's argument that the money at issue "would allow it to serve the community."

To the contrary, Wilken wrote, "defendants are harmed if they are delayed in recouping the funds to which they are entitled."

La Clínica and North East Medical Services took issue with how California implemented a prescription drug benefit in 2006. Some Medicaid patients also are eligible for Medicare benefits, making them "dual-eligibles." Under the 2006 legislation, the burden for paying for dual-eligibles' prescription drug costs shifted from state Medicaid programs to the new federal program.

The clinics claimed California should have subtracted the dual-eligibles' prescription drug costs from the fixed per-visit rate for Medi-Cal patients.

Calling that "administratively burdensome," the state gave the centers two options: They could subtract the cost of all pharmacy services, including for patients who are not dually eligible, and have California pay them for Medi-Cal-covered pharmacy services on a fee-for-service basis.

Or the clinics could keep their per-visit rate and then pay the state what they received from the federal program at the end of each fiscal year.

North East Medical Services chose the first option for 2006 and 2007, made no payments in fiscal year 2008 and then switched to the second option.

La Clínica went with the second option. Both clinics then sued, claiming the second option constituted illegal "seizure" of their federal Medicare funds above what they would owe under the fixed, per-visit rate.

A federal judge dismissed the lawsuit as barred by the Eleventh Amendment, and the Ninth Circuit agreed that the centers cannot sue the state for past payments. But the Ninth Circuit panel ruled that the clinics "may seek genuine prospective relief" for any future payments California might try to collect under the second option.

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