Appalachian Regional Healthcare has filed a lawsuit against the West Virginia Department of Health and Human Resources and its Bureau for Medical Services for inadequate Medicaid reimbursement rates.
The move, announced Monday, comes six weeks after the health systemfiled an intent-to-sue notice, as required by state law, on behalf of Beckley ARH Hospital. The 30-day notice was the second filed this fall against West Virginia for inadequate Medicaid payments. The West Virginia Primary Care Association filed a similar notice in mid October, though the organization has not yet formally entered litigation against the state.
According to Rocco Massey, Beckley's CEO, the notice filed by the hospital had provided a window of opportunity to negotiate a settlement with the state. In failing to work out a deal, hospital management decided to press ahead with formal legal action.
"Medicaid reimbursements have been covering only two-thirds of our costs for providing medical care, so BARH has been suffering a substantial financial loss," Massey said. "These Medicaid rates jeopardize BARH's continued ability to provide medical services to all of its patients."
Citing a policy of not commenting on current litigation, West Virginia officials declined to comment.
According to information released by Beckley, in 2009 the hospital was reimbursed $9.9 million for the $14.7 million spent providing care to Medicaid patients. Of that, $8.2 million came from federal Medicaid funds, with the state kicking in $1.7 million. Since the hospital paid roughly $1.4 million for its Medicaid provider tax, the outlay by the state amounted to roughly $300,000.
"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."
The 173-bed hospital is not a lone voice in West Virginia's Medicaid battle. October's notice of intent to sue from the WVPCA contends that the state's Bureau of Medical Services has never complied with the Benefits Improvement and Protection Act of 2000, which provides the methodology used to determine Medicaid payments.
"Due to the repeated misinterpretations of federal laws by BMS, WVPCA members have been grossly underpaid and dental expansion plans hindered," association officials said in a 12-page memorandum sent to West Virginia DHHR Secretary Patsy Hardy on October 15.
The WVPCA represents 30 community health centers, of which 28 are Federally Qualified Health Centers. WVPCA members serve more than 375,000 people, or about 20 percent of the state's population.
FQHCs are partly funded by federal grants which require them to provide services to uninsured and underinsured people regardless of their ability to pay. At the same time, federal law expressly prohibits FQHCs from using the federal grants to subsidize Medicaid services.
"WVPCA and its members stand willing to work constructively with BMS," the memorandum stated. "However, the state's health centers cannot afford to wait any longer for the reasonable payment rates to which they are statutorily entitled."
While WVPCA members are feeling the pinch, Beckley ARH is especially vulnerable, since a high proportion of its patients are covered by Medicaid.
"It's very clear, when 25 percent of our patients, or nearly one-quarter of our patients, pay us at 67 percent of our costs, that is very problematic from a hospital operations standpoint," said Massey.
Further, Massey said operational inefficiency is not an issue with the hospital, which averages 80 percent occupancy. The 2009 annual report from the West Virginia Healthcare Authority showed the hospital's cost per discharge to be the lowest among its peer group.