Belshe

Plaintiffs-Appellants Orthopaedic Hospital and the California Association of Hospitals and Health Systems claim that DefendantAppellee Director of the California Department of Health Services violated section 1396a(a)(30)(A) of the federal Medicaid Act, 42 U.S.C. §§ 1396a-1396v (West 1992 & Supp.1996) by setting reimbursement rates for hospital providers of outpatient services without proper consideration of the effect of hospital costs on the relevant statutory factors: efficiency, economy, quality of care, and access. The district court granted summary judgment in favor of the Director. We reverse and remand with direction.

*1493 FACTUAL BACKGROUND & PROCEDURAL HISTORY ■

I. The Medi-Cal Program

Title XIX of the Social Security Act, 42 U.S.C. §§ 1396a-1396v (the “Medicaid Act”), authorizes federal grants to states for medical assistance to low income persons who are aged, blind, disabled, or members of families with dependent children. The program is jointly financed by the federal and state governments and administered by the states. The states, in accordance with federal law, decide eligible beneficiary groups, types and ranges of service, payment levels for services, and…