Physicians & Surgeons Laboratories, Inc. v. Department of Health Services

The Department of Health Services (Department) appeals from a final judgment granting a petition for a peremptory writ of mandate ordering the Department to set aside an administrative decision. Respondent is an independent clinical laboratory (lab) which provides clinical testing services on behalf of physicians and clinics and is also a provider under the state’s Medi-Cal program. Two of respondent’s facilities were audited by the Department, which found that respondent was in violation of a regulation prohibiting discriminatory billing, such as respondent’s dual pricing schedule. The trial court ordered that the administrative decision upholding the regulation be set aside.

The issue presented by this appeal is whether or not the Department had the authority to enact such a regulation and, if so, whether the Department’s interpretation and application of the regulation were arbitrary and capricious. We conclude that the regulation was valid and that the Department’s interpretation and application were reasonable and not arbitrary and capricious. Accordingly, we reverse the trial court’s judgment.

Factual and Procedural Background

I. Overview

The Medicaid program is…