Hospital officials in California's rural counties say the latest round of cuts to Medi-Cal could leave thousands of the state's neediest people without access to medical care.

At particular risk, they say, are elderly and long-term patients who need skilled-nursing care.

"This is a real crisis," said Anthony Wright, executive director of Health Access California, a patient advocacy group. "We have been skeptical of providers' claims in other areas, but not with Medi-Cal cuts."

The cuts are intended to save the budget-strapped state up to $623 million. Reimbursement rates will be trimmed as much as 10 percent, but earlier cuts blocked by legal action could also take effect, making the effective reductions 20 percent or more.

"This is a difficult decision," said Norman Williams, a state Department of Health Care Services spokesman. "California is facing a tremendous shortfall. There is pain."

Medi-Cal is the name for the state's federal Medicaid program. It serves more than 7 million low-income Californians – approximately 20 percent of residents – and costs the state more than $41 billion a year, about 13 percent of the budget.

A variety of groups are seeking to stop the cuts through the courts, and a crucial U.S. Supreme Court decision looms, with national implications for federal health programs.

It's not clear when the cuts, once scheduled to kick in Thursday but blocked by a preliminary injunction, will begin. When they do, federal officials said, they will be retroactive to June and providers will have to pay refunds.

A wide swath of Medi-Cal providers and services statewide are affected by the cuts. But hospital administrators in rural areas say their facilities for elderly and long-term care will be hit especially hard, and many will be closed.

"It's going to be tough for us – 97 percent of our (skilled nursing) patients are Medi-Cal," said Matthew Rees, chief executive officer of the Mayers Memorial Hospital District in Fall River Mills, eastern Shasta County. His district has 76 patients at two sites in Fall River Mills and Burney.

Because so many of the patients are on Medi-Cal, there is no other source of revenue to shore up operations. Though some also have Medicare, that offers only limited skilled-nursing coverage.

Reimbursement rates vary according to the size of a facility, patient volume and costs. Rees said that when the new cuts and the previously blocked cuts take place, his facility will receive $201.36 per day per Medi-Cal skilled-nursing patient, down about 20 percent from $250.89 now.

According to a May survey by the California Hospital Association, half the state's hospitals that run skilled-nursing units said they would close them because of the cuts. Another 35 percent said they would reduce beds or end service to Medi-Cal patients.

"Freestanding" nursing facilities – not affiliated with hospitals – are not affected by the cuts, but there are few of them in rural counties.

In urban areas, patients whose facilities close may find care nearby. But if his unit closes, Rees said, the nearest equivalent care is 75 miles away in Redding, over mountain roads.

"The rural hospital is the focal point for all health care in the community," he said.

Administrators at other rural hospitals said their skilled-nursing patients face the same grim prospects for finding new care.

The CHA is seeking to stop the cuts through a lawsuit filed this month against the DHCS and the federal Centers for Medicare and Medicaid Services, which approved the cuts.

The suit argues that the cuts violate federal law guaranteeing Medicaid patients "equal access" to health care and "will have disastrous consequences for California hospitals, Medi-Cal beneficiaries and many California communities."

Providers say California is already near the bottom of the list of states in Medi-Cal reimbursement rates and fear the cuts will force more providers out of the system.

In addition to concerns about hospital skilled-nursing facilities, the CHA worries that more doctors will stop accepting Medi-Cal patients as reimbursement rates decline.

Rees is among a number of hospital administrators who have attached their names and stories to a preliminary injunction filed Nov. 22 in federal court in Los Angeles. A hearing on a motion to continue blocking the cuts while the CHA's suit is heard is scheduled Dec. 19.

The state's dental and pharmacists associations and the National Association of Chain Drug Stores filed their own suit seeking to stop the cuts.

The U.S. Supreme Court, meanwhile, is set to deliver a decision on whether the provider groups even have a legal right to challenge Medicaid cuts. Such a suit blocked 2008 and 2009 cuts in California. The court heard arguments in the case in October.

Medicaid providers in many states are watching the case to see if they can use lawsuits to block rate cuts. Federal officials worry that allowing court challenges to rate decisions could, among other complications, endanger health care reform before it has even begun.

State DHCS officials defend the reductions, saying they came after a study of their effect on patient access to care that looked at 23 factors, including changes in Medi-Cal enrollment, long-term-care bed vacancy rates and physicians' visits.

DHCS spokesman Williams said the state will continue to watch those areas as part of "a unique monitoring plan … to ensure that access meets federal standards." If access diminishes too severely, the cuts will be reduced, he said.

Rural hospital administrators are not comforted by the state's reassurances.

"We're between a rock and a hard place," said Gary Herbst, chief financial officer of the Kaweah Delta Healthcare District, which operates two skilled-nursing facilities with 70 beds in Visalia and one of the three hospitals in Tulare County.

"The natural thing is to close," he said, "but where do we put the patients then?"

From Visalia, the closest hospital-run nursing facilities are 42 miles away in Fresno or 70 miles away in Bakersfield.

At the Eastern Plumas Healthcare District in Plumas County, 93 percent of the 59 skilled-nursing patients are on Medi-Cal at its facilities in Portola and nearby Loyalton.

Tom Hayes, the district's CEO, said he is preparing his staff for the possibility of closing and moving patients. Some staffers worry that elderly patients may not survive the transition.

Inez Fagliano, 86, a skilled-nursing resident in Portola since 2009, has written letters opposing the cuts to her state and federal representatives, including Gov. Jerry Brown. She is not optimistic about preventing transfers for herself and her fellow residents.

"They might as well put us on an ice floe like the Eskimos used to do – just send us out to sea," Fagliano said.

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Bee correspondent Jane Braxton-Little contributed to this report. Call The Bee's Darrell Smith, (916) 321-1040.

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