Appalachian Regional Healthcare sues West Virginia DHHR, Bureau for Medical Services over Medicaid reimbursements

Dec 29 2010

Appalachian Regional Healthcare, Inc., yesterday filed a lawsuit against the West Virginia Department of Health and Human Resources (DHHR) and its Bureau for Medical Services for inadequate Medicaid reimbursement rates that threaten the continued operation of the not-for-profit Beckley ARH Hospital (BARH).  The suit was filed in Kanawha County Circuit Court.

"In November we provided the state with a 30-day notice of intent to sue with the hope during the notice period the state would work to develop a mutually acceptable settlement. Regrettably we were not able to come to a settlement," said Rocco Massey, community chief executive officer of BARH. "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, 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 BARH received, $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. Thus, the state put in only about $300,000 of its own funds that year for Medicaid reimbursements for BARH.

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

Massey also indicated the state's low Medicaid payment threatens access to care for Medicaid recipients as well as the general public. If BARH cannot cover patient costs it will be forced to reduce available services to all patients. The facility has an 80% occupancy level.

A disproportionately large percentage of BARH's patients, about 22 percent, are Medicaid beneficiaries, so shortfalls in Medicaid reimbursements significantly affect the hospital's ability to operate or make necessary capital expenditures. BARH, a not-for-profit hospital, has little opportunity to shift costs to other payers, because about 47 percent of its patients are on Medicare (which pays 90 percent of costs), and another 14 percent are on other government programs or are considered bad debt or charity cases (paying less than cost, if anything at all).

"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," noted Stephen Price, an attorney with Wyatt, Tarrant & Combs of Louisville, Ky., and counsel 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."

BARH is not the only entity attempting to force the state to meet its legal obligation. The West Virginia Primary Care Association, representing community health centers, recently filed a notice of intent to sue over inadequate Medicaid reimbursements.

State 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 were disappointed we were not able to solve this situation without legal action, however being able to meet the needs of our patients is paramount and we had to proceed," Price said. "We understand the state has limited funds, but state law requires it to pay Medicaid costs."

BARH will continue to service the community and its patients as usual as the lawsuit proceeds.