In The News

$12M Judgment Issued against State

June 6, 2006

The Department of Health Services must pay $12 million to two men who claimed they were deprived of Medicare and Medi-Cal reimbursements after DHS did not conduct reimbursements after DHS did not conduct required reviews of Calexico Hospital, a jury decided, the San Diego Union-Tribune reports. The sum is believed to be the largest verdict awarded against DHS or its employees, according to plaintiffs' attorney Dan Lawton.

In the case, Randy Smith and Jay Ash in 1996 contracted with the Heffernan Memorial Hospital District, which owned the hospital. Calexico was emerging from bankruptcy protection and needed an operator.

State health inspectors conducted an evaluation of the hospital in August 1997, but the hospital did not pass the inspection when a machine caused a power outage. The hospital closed for two days, and health inspectors cited a number of deficiencies that needed to be corrected.

Ash and Smith claim those problems were corrected and they requested another inspection in October 1997. However, Lawton said the DHS assistant deputy director by that time had already determined that the hospital would close. In December 1997, state officials told Ash and Smith that they needed Blue Cross Insurance to review and approve another form in order for an inspection to be conducted, which Lawton argued was a pretext for closing the hospital.

Ash and Smith had run out of funds by that point and closed the hospital.

In the verdict, jurors said the state had deprived Ash and Smith of due process in a way the “shocked the conscience.”

State lawyers said they will appeal the decision, Deputy Attorney General David Taglienti said that “[i]t was the hospital's failings to meet minimum state and federal guidelines the caused the end result.”

(Morgan, San Diego Union-Tribune, 6/5). 

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