Everhealth Foundation, Inc. v. Department of Health Services

Respondent Department of Health Services (DHS) disallowed appellant Everhealth Foundation’s (Everhealth) claim for reimbursement under Medi-Cal for two types of costs: (1) payments to three medical equipment leasing companies, and (2) the cost of housing certain Everhealth employees. The superior court denied Everhealth’s petition for a writ of mandate to vacate this decision. We affirm.

Facts

Everhealth Foundation, previously known as Whittier Hospital, was a not-for-profit participant in California’s Medi-Cal program. In the late 1960’s, Everhealth began expanding its facilities and updating its equipment. Due to a lack of credit worthiness, however, it was unable to obtain necessary financing from institutional lenders.

Three partnerships were formed at different times to help finance the ongoing expansion program: (1) Colima Equipment Leasing Company (Colima), formed in 1968; (2) Whittier Leasing Company (Whittier), formed in 1972; and (3) Friendly Hills Leasing Company (Friendly Hills), formed in 1976. General partners in all three' companies were affiliated with Ever-health as physicians, administrators, corporate members, or board of directors members. Each…