Court of Appeal Upholds Utilzation Controls On Psychology Services Provided By Community Mental Health Clinic

In a setback to community health and the State of California's attempts to handle its budget issues by cutting back services to those most in need, a recent Court of Appeal decision, Mendocino Community Health Clinic v. State Department of Health Care Services, upheld utilization controls imposed by the Department of Health Care Services on psychology services at the rate of two visits per month an outpatient to a community mental health clinic. The Third District Court of Appeal ruled that this regulation does not violate the federal Medicaid Act.

The statute at issue is Welfare and Institution Code Section 14132(a) which provides that Medi-Cal, which implements the federal act, will cover outpatient psychological services rendered at a federally-qualified health center (FQHC) “subject to utilization controls.” The Department then adopted a regulation limiting Medi-Cal coverage of psychology services to a maximum of two per month.

After the two-visit-per-month regulation was adopted, Medi-Cal told the Mendocino clinics it would not reimburse them for more visits than that for fiscal years 2003-2004 and 2004-2005. The clinics sought administrative review in the Sacramento County Superior Court and won at that level by ruling that that as a “federally-qualified health center” under the act, it was entitled to payment for all necessary treatment rendered to its Medi-Cal patients.

The clinics argued that the regulation limiting payment was intended to address overbilling by individual practitioners, not by federally-qualified health centers, or FQHCs, which have a special status under the Medicaid Act. They also argued that they provide “core services” that must be paid for by Medi-Cal under federal law.

The Department appealed. The Court of Appeal overturned the Superior Court and ruled in favor of the Department. The Opinion reasoned that although federal law  requires full reimbursement for core services provided by FQHCs, it does not preclude states from enacting utilization controls in limiting the number of such visits.  

In sum, the Department cannot pay less than 100 percent of reimbursement but it can impose utilization controls. The fact that the federal legislation did not address utilization controls one way or the other was a significant factor in the Court of Appeal's opinion. 

For the mentally ill, limiting services to two per month regardless of the severity or need for treatment is contrary to the intent of federal law. 

Posted by Tracy Green, Esq., a Medi-Cal attorney in Los Angeles, California.