California hospital must pay charity care costs, appellate court rules

Panorama City, Calif.-based Deanco Healthcare isn't entitled to a reduction in its charity care requirements despite the implementation of the ACA, a California appellate court said March 15

In 2010, the California attorney general approved Deanco's purchase of Los Angeles-based Mission Community Hospital with conditions. One of the conditions was that the hospital would continue providing a minimum amount of charity care services to the community for six years after the purchase. Another condition was that if it failed to meet the annual threshold of charity care, Deanco was required to make up the shortfall by making a payment to a nonprofit public benefit corporation providing direct medical care to patients in the community.

Deanco began operating the hospital in October 2010 and officially purchased it in July 2013. Meanwhile, in March 2010, Congress enacted the ACA to reduce the number of uninsured Americans. 

After Deanco acquired the hospital, the amount of charity care provided by the facility declined drastically due to the ACA, and Deanco was required to pay millions of dollars to a public benefit corporation.

In 2017, Deanco asked the attorney general to reduce its charity care obligations by 52 percent. The attorney general declined the request without providing justification. After the attorney general's decision, Deanco filed a petition for a writ of mandate in the trial court challenging the decision.

According to the court, to reduce its charity care obligations, Deanco had to show "a change in circumstances that could not have reasonably been foreseen at the time of the [AG]'s action."

In its decision, the trial court said that the decrease in the number of uninsured and underinsured individuals caused by the ACA was not reasonably unforeseeable, and that Deanco's request for modification was deficient for failing to show the efforts Deanco had made to avoid the need for an amendment. 

The appeals court upheld the trial court's opinion that Deanco should have foreseen the potential effect of the ACA on its duty to provide a certain amount of free or low-cost care.

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