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Lawsuits allege Medicaid underpays

CHARLESTON, W.Va. -- West Virginia's health insurance program for the poor is under siege from hospitals and doctors who say the state doesn't pay them enough to care for the sick.

The state Medicaid program, which uses a mix of state and federal dollars to provide insurance to 270,000 low income West Virginians, now has been threatened with at least two lawsuits alleging it significantly underpays doctors and hospitals.

The latest came Thursday from Appalachian Regional Healthcare Inc., the not-for-profit parent company of the Beckley ARH Hospital, which is the third-largest employer in Raleigh County.

About a quarter of the Beckley hospital's patients are on Medicaid. Currently, the state reimburses the hospital 67 cents for every dollar in care the hospital provides to the 17,000 Medicaid patients it sees each year.

Beckley ARH officials said if the conditions continue the hospital will have trouble buying new equipment, keeping staff pay competitive and even staying afloat.

"We can't continue to exist in a world where nearly one quarter of our patients pay us at 67 percent of our cost," said the Beckley hospital's CEO Rocco Massey.

Health care providers - hospitals large and small and individual doctors - have long complained about the poor payouts of government-run programs like Medicaid and Medicare, the federal program for the elderly.

At ARH, Massey said the state's Medicaid payments have not kept up with inflation.

There is, he said, an "ever-increasing gap between what we're paid and the cost it takes us to provide the service."

Allegations of underpayment by West Virginia's Medicaid program seem to have a hit a tipping point in recent weeks.

In mid-October, the West Virginia Primary Care Association, which represents community health centers, said it would sue the state because its network of centers and clinics is "grossly underpaid" by Medicaid.

Also last month, the University of Virginia Health System announced it would stop taking Medicaid patients from West Virginia because this state's payment rates are "substantially below cost."

Massey said pressure has built up after years of chronic underpayment.

"You're going to see more and more lawsuits," he said.

Right now two groups end up footing the bill because government programs underpay for care: hospitals' bottom lines and people who have private insurance. As government insurance rates hold steady, hospitals have less money to invest in new equipment and private insurance companies are asked to pick up the tab, result in a so-called "cost shift."

Delegate Don Perdue, D-Wayne, who chairs the House Health and Human Resources Committee, said raising Medicaid reimbursements rates in West Virginia by a "fair amount" would help the state by doing two things.

First, Perdue said, doctors who are hesitant to take too many Medicaid patients would change their ways. Doctors have to keep their number of private insurance patients relatively high, lest they be unable to pay their own bills because of underpayment from the government programs. If Medicaid paid more, they would be able to take more Medicaid patients.

Second, treating more people could lower costs in the long run because people who have regular checkups may be able to avoid certain critical illnesses. Avoiding those critical illnesses, some say, actually reduces cost.

But, right now, Perdue said neither of those things are happening because Medicaid reimbursement rates are so low.

"It's a symptom of a greater disease of our state not really managing its Medicaid funding in a way that improves health outcomes and thereby reduces cost," Perdue said. "We've been treating the bottom line and we've not been treating the patient."

Massey said Beckley ARH fares especially poorly because of its relatively high number of patients who receive government-backed insurance. Besides the 22 percent who are on Medicaid another 47 percent are on Medicare, which pays about 90 cents on the dollar.

In the 2009 budget year, the hospital said it provided treatments costing $14.7 million to Medicaid patients. In return, the state paid it $9.9 million.

Of that, the vast majority - $8.5 million - was federal money. While states operate their own Medicaid programs and set the rates they pay doctors and hospitals, the federal government provides a generous match.

In West Virginia, the feds typically pay about 75 cents or so of each dollar the state spends. Right now, because of the federal stimulus program, that match is higher.

Of the $9.9 million it received from Medicaid, the feds put in $8.2 million and the state paid $1.7 million, according to ARH documents.

But, at Beckley ARH, there is a rather staggering statistic. The hospital pays a so-called Medicaid providers tax.

In 2009, the tax cost the hospital $1.4 million. So, of the $1.7 million it received in Medicaid payments from the state, the lion's share was the hospital's own tax dollars coming back to it.

West Virginia, in other words, was able to treat 17,000 Medicaid patients for less than $300,000 in state money.

The chronic underpayments are going to catch up with both the hospital and the state, said Stephen Price, an attorney representing ARH.

"If you're not making enough money to replace your car, someday you'll be without a car," Price said.

The hospital filed a 30-day notice of its intent to sue, something the state requires when it faces such lawsuits. Hospital officials said they hope the state will work things out with them before they are forced to fill the lawsuit.

John Law, a spokesman for the state Department of Health and Human Resources, which operates the Medicaid program, said the agency does not comment on pending litigation.

But, Law said, the agency doesn't negotiate Medicaid rates with specific hospitals or health care providers.

Contact writer Ry Rivard at or 304-348-1796.


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