In re Gardens Regional Hospital & Medical Center, Inc.

MEMORANDUM OF DECISION FINDING THAT THE PRINCIPLE OF EQUITABLE RECOUPMENT ENTITLED THE STATE OF CALIFORNIA TO WITHHOLD CERTAIN POST-PETITION PAYMENTS OWED TO THE DEBTOR TO RECOVER PRE-PETITION DEBT

At issue is whether the principle of equitable recoupment permits the State of California to withhold a percentage of Medi-Cal payments and supplemental hospital quality assurance payments owed to the Debtor, for the purpose of recovering unpaid hospital quality assurance fees that the Debtor was required to pay to the State under the Medi-Cal Hospital Reimbursement Improvement Act of 2013. 1 Because the Debtor’s and the State’s respective obligations arise from the same transaction or occurrence, the Court finds that the State’s withholding was a permissible recoupment.

I. Facts

The Medicaid and Medi-Cal Programs

Under the Medicaid program, the cost of providing healthcare to low-income people is shared between the state and federal governments. States administer the Medicaid program through their own specific plans. In California, Medicaid benefits are administered through the California Medical Assistance Program, more commonly *791 known as Medi-Cal. The California Department of…