Hospitals sue state over Medicaid payments

Dartmouth-Hitchcock Medical Center and Concord Hospital are suing the state Department of Health and Human Services and its commissioner, John Stephen, for not paying some $1.58 million in Medicaid money that they say is due to teaching hospitals.

The suit, filed in U.S. District Court in Concord, charges that the Legislature refused to go along with a department proposal to cut the funds, but they weren’t paid anyway.

But Stephen told NHBR Daily that the money was cut out of the budget and never put back in.

“Our opinion is clear and unequivocal. The program was eliminated, and the funding is not there,” he said

Besides, said Stephen, it was “not an appropriate way to spend limited Medicaid dollars” to educate doctors when the state needs that money for direct services to the poor and disabled.

According to the suit, Medicaid pays more to teaching hospitals because such hospitals cost more to provide health services. While states aren’t required to supplement the reimbursement to the hospitals, all but three states do so. The state contribution is then matched by the federal government.

In recent years, however, the state HHS Department has been attempting to cut back on the reimbursement. It did eliminate one category of supplemental funding, which helps teaching hospitals pay for capital improvement costs — a move that was approved by the federal government at the end of 2005. But the Legislature did not endorse a recommendation to cut either the direct or indirect funding for “graduate medical education” costs, according to the suit.

During the most recent legislative session, the Senate Finance Committee cut indirect costs — for medical equipment and technology required to offer an accredited residency program – but the full Senate reinstated that funding, the suit said.

But it was the direct cost – which pays for salaries of the physicians enrolled in residency programs – that was not paid over the past two years, according to the suit. Dartmouth-Hitchcock would have received roughly 90 percent of the $1.58 million owed.

For Concord Hospital, the $160,000 in dispute is a tiny fraction of a $280 million budget, but it’s the principle of the thing, said the hospital’s chief financial officer, Bruce Burns, told NHBR Daily. “And the amount owed to Hitchcock is significant.”

Stephen said the state already reimburses Hitchcock at a higher rate than most hospitals and it receives a payment for catastrophic situations on top of that. To pay it even more money is just not justified.

“The physician that is not practicing in a teaching hospital returns the same or similar services than the physician at the teaching hospital,” Stephen said.

Stephen said that Gov. John Lynch agreed with him when the governor first took office in 2005 and took the funding out of the budget. (The governor’s office declined comment until it had a chance to review the suit.)

Stephen said that the money was never put back in. And, while the suit says that those changes were never made in the state plan, or approved at the federal level, Stephen said, it is the budget that counts.

“That’s the law of the land,” he said.

The money the hospitals are seeking went back to the general fund and paid for things like early intervention services and to alleviate the developmental disability waiting list, Stephen said.

Both sides agree that the money was reinstated in the upcoming budget (for 2007-2008), though Stephen made it clear that he disagreed with that action.

Officials at Dartmouth-Hitchcock could not be reached by NHBR Daily deadline. – BOB SANDERS