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Hospital Sues WV Over Medicaid Reimbursements

 |  By John Commins  
   November 12, 2010

Appalachian Regional Healthcare, Inc. filed notice this week that it will sue the West Virginia Department of Health and Human Resources and subsidiary Bureau for Medical Services for low Medicaid reimbursements that threaten the financial viability of Beckley ARH Hospital.

"We do not take this step lightly but do it to protect our patients," Rocco Massey, CEO of BARH, says. "Medicaid reimbursements have been covering only two-thirds of our costs for providing medical care, so BARH has been suffering a substantial financial loss. These Medicaid rates jeopardize BARH's continued ability to provide medical services to all of its patients.”

In fiscal year 2009, the health system says, the 173-bed, not-for-profit BARH received only $9.9 million for the $14.7 million the hospital spent to treat Medicaid patients. Of the $9.9 million in Medicaid reimbursements, $8.2 million came from federal funds. Of the $1.7 million the state put in that year to match federal funds, $1.4 million came from BARH itself through the Medicaid provider tax the hospital pays. The state put in only about $300,000 of its own funds that year for Medicaid reimbursements for BARH, the health system alleges.

"If the state had put in just $800,000 more, the federal government would have matched it with an additional $4 million," Massey says. "That would have covered BARH's Medicaid deficit in fiscal year 2009."

The West Virginia Department of Health and Human Resources offices were closed on Thursday, Veterans’ Day, so state officials were not available for comment.

BARH's 30-day notice of intent to sue West Virginia's Medicaid program is the second such notice issued recently. Last month, the West Virginia Primary Care Association, representing community health centers, filed a similar notice of intent to sue over inadequate Medicaid reimbursements.

About 22% of BARH's patients are Medicaid beneficiaries, so low reimbursements affect the hospital's ability to operate or make capital expenditures. BARH has little opportunity to shift costs to other payers because 47% of its patients are on Medicare—which pays 90% of costs—and 14% are on other government programs or are considered bad debt or charity cases, the health system says.

"The Bureau for Medical Services is required by statute to set Medicaid rates that are reasonable and adequate to meet costs incurred by efficiently and economically operated hospitals," said Stephen Price, an attorney for Appalachian Regional Healthcare. "The bureau also is required to take into account the situation of hospitals that serve disproportionate numbers of low-income patients."

West Virginia law provides that potential litigants must give 30-day notice before suing the state so that it might be possible to settle issues without litigation. "We hope that state officials will use the next 30 days to revise Medicaid reimbursement rates and raise them to adequate levels so we can avoid legal action, but we are prepared to move forward if we cannot reach agreement," Price said. "We understand the state has limited funds, but state law requires it to pay Medicaid costs. This proposed legal action is similar to actions Appalachian Regional Healthcare has taken successfully in Kentucky."

Appalachian Regional Healthcare, Inc. is a nine-hospital, not-for-profit health system that serves about 350,000 people in eastern Kentucky and southern West Virginia, with 4,700 employees and a network of more than 600 active and courtesy medical staff. ARH provided more than $120 million in uncompensated care for the uninsured and underinsured. With more than 550 employees, Beckley ARH is the third largest employer in Raleigh County in Southern West Virginia, the health system says.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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