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Lawmakers settle accounts in annual claims legislation

Despite being stuck in the annual lethargy that is budget negotiations, California lawmakers still found time to pay some past due legal bills.

The Assembly gave final passage to SB 50 by Sen. Tom Torlakson, D-Antioch, a $3.5 million appropriation authorizing the Department of Justice to pay out legal settlements to three plaintiffs who won claims against the state last year. The bill by Torlakson, the chair of the Senate Appropriations Committee, is the yearly payment measure that wraps up lawsuit-related loose ends.

The bulk of the money went to Calexico Hospital Management Group, which managed Calexico Hospital in the small, Southern California border town. Last year, the hospital sued the California Department of Health Services, the state regulator responsible for certifying hospitals, claiming that officials failed to conduct timely certification surveys of the site.

This prevented them from collecting Medical and Medicare reimbursements from state and federal government. The result, the plaintiffs argued, was the crippling of hospital revenues and, eventually, its closure in 1998.

Anne McLeod, Vice President of Economic Analysis at the California Hospital Association, says such changes in Medicare reimbursements can have dramatic effects on hospitals. “From those two government programs combined, you can see [Medicare and Medical] make up almost 50% of hospital revenues on average,” said McLeod. “If there’s a stall in payment, hospital cash flow can be significantly affected.”

Last June, an Imperial County jury awarded the hospital $12 million in damages plus the cost of legal fees, a hefty sum for a 34-bed facility. The $3.1 million settlement appropriated by SB 50 effectively drops an ongoing appeal filed by the state. “We felt the settlement was in the best interest of the state,” stated a spokesperson for the Attorney General’s office.

Possibly the most high-profile case included in SB 50 was the California Teachers Association v. Schwarzenegger, the settlement from the Williams case, in which the union claimed the Governor owed public schools billions in unfulfilled Prop. 98 dollars. This claim, and the legal case that followed it, became a rallying cry for the teacher’s union in the 2005 special election. Thursday’s appropriation of $267,000 will go to reimburse the CTA for attorney’s fees, as ordered in the October 2006 judgment.

Another $78,000 settlement was granted to the Foundation for Taxpayer and Consumer Rights, which won a challenge against a 2003 law which would have made longtime patrons of insurance companies eligible for rate discounts. The foundation argued it was an anti-competitive measure which discouraged consumers from shopping around.

A trial court subsequently struck the law down. The state later lost an appeal on the matter and was ordered to pay legal costs of both the original and appellate trials, the latter of which will be paid with the most recent disbursement.


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