Belshé

*235 Opinion

Summary

The State Department of Health Services (Department) properly used a hospital’s average overall costs and not its psychiatric unit costs in computing reimbursements due the hospital for psychiatric services to Medi-Cal patients.

Facts and Proceedings Below

Appellant Memorial Hospital-Ceres provides care to patients insured by Medi-Cal, including short term psychiatric care. Medi-Cal is the State of California’s health insurance for the poor. Respondent Department administers the Medi-Cal program.

Medi-Cal employs two significantly different methods for determining the quantum of reimbursement due to hospitals or “providers” treating Medi-Cal patients. These are a “retroactive” payment system and a “prospective” payment system.

Under the “retroactive” method, historically used by Medi-Cal and the federal programs on which it was modeled, providers of Medi-Cal services are reimbursed for their customary charges, or reasonable costs, whichever are less. Medi-Cal advances estimated reimbursements during the fiscal year, then settles with the provider at year’s end for any excess or shortfall.

Under the “prospective” method, initiated in the early 1980’s in…