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Case involves Calexico Hospital management firm

October 11, 2001|By AARON CLAVERIE, Staff Writer

Justices of the Fourth District Court of Appeal could give Jay Ash and Randy Smith their day in court again after they were denied by Imperial County Superior Court Judge Donal Donnelly.

In September 2000, Donnelly dismissed a lawsuit filed against the state by Ash and Smith's Calexico Hospital Management Group.

On Wednesday, three appellate justices heard the oral arguments regarding that decision in the same building where the original case was dismissed — the Imperial County Courthouse in El Centro.

San Diego attorney Dan Lawton represented the management group and a deputy attorney general from San Diego, David Taglienti, represented the state.

The background leading up to the appeal includes:

· Jan. 8, 1998 — Calexico Hospital closes when the management group running it is unable to pay employees.

· Dec. 29, 1998 — The hospital management group, made up of Ash and Smith's Divine Providence Health Care Systems and Brawley-based Clinicas de Salud del Pueblo — files a claim against the state Department of Health Services alleging the hospital was promised a "survey" that was never conducted.


A "survey" is a departmental audit that determines a hospital's eligibility for "provider numbers." Hospitals need the numbers to bill Medi-Cal and Medicare for indigent care.

The claim states the group lost hundreds of thousands of dollars because it was promised the survey and took out loans on the expected revenue it could raise after it received the numbers.

The group never received the numbers.

· November 1999 — The management group files a lawsuit against the state, the state Health Services Department and various state employees.

The suit alleges the group's civil rights were violated, it was a victim of fraud and deceit and there was a violation of state due process and equal protection rights.

The group asked for millions of dollars in damages.

At the start of Wednesday's oral arguments, Justice Gilbert Nares asked Lawton why the management group didn't file a lawsuit against the state if the state should have surveyed the building.

Lawton said the management group filed a claim against state Health Services on Dec. 29, 1998.

"They filed a claim. They waited," he said.

There was no action taken by the department on that claim, according to Lawton.

That point was contested by Taglienti, who said the Health Services board took action on the claim in April 1999.

Nares asked Lawton, "Were there facts in the (1998 claim) to apprise the state of the fraud (allegation of the 1999 lawsuit)?"

Lawton said there were sufficient facts.

Taglienti argued the claim of 1998 did not present enough facts to apprise the state of a fraud claim.

"That information (in the 1999 suit) should have been set forth in the claim," he said.

Justice Richard Huffman said an argument could be made that the claim was sufficient to warrant a response from Health Services.

Taglienti said, "I think that is a very, very favorable reading."

Huffman responded, "I'm reading the words on the page. ‘The (provider) numbers would be provided.' "

Huffman said the claim alleges the management group was guaranteed those numbers and an inspection was promised that never took place.

Taglienti said, "If you go back in time … the claim that was presented in December 1998 alleged certain facts which in my opinion did not assert fraud and deceit," he said later Wednesday from his San Diego office.

The justices will have to determine whether Donnelly was correct in his judgment that the management group filed a lawsuit that was legally insufficient to prove rights violations or fraud and deceit by the state.

The justices have 90 days to make their decision.

Staff Writer Aaron Claverie can be reached at 337-3419 or

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