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 ry.riv...@dailymail.com or 304-348-1796.