BECKLEY – Appalachian Regional Healthcare Inc. has issued a 30-day notice of its intent to sue the West Virginia Department of Health and Human Resources and its Bureau for Medical Services for inadequate Medicaid reimbursement rates that threaten the continued operation of the not-for-profit Beckley ARH Hospital.

Appalachian Regional Healthcare is claiming that the reimbursement rates are so low they are threatening the livelihood of the hospital and jeopardizing BARH's continued ability to provide medical services to its patients.

"We do not take this step lightly, but do it to protect our patients," 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."

BARH received only $9.9 million for the $14.7 million the hospital spent to treat Medicaid patients in the 2009 fiscal year.

Of the $9.9 million in Medicaid reimbursements the hospital received, $8.2 million came from federal funds. Of the $1.7 million the state put in to match federal funds, $1.4 million essentially came from BARH itself through the Medicaid provider tax the hospital pays. The state put in only $300,000 of its own funds that year for Medicaid reimbursements for BARH, according to a press release issued by the hospital.

"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 said they hope the state Medicaid program will adjust reimbursement rates to reasonable levels that balance the needs of patients and providers and those of the state's resources.

"We hope that during this 30-day notice period the state will reach out to us to work out a mutually agreeable solution," he said. "That is the reason why the Legislature established the 30-day notice period."

BARH's notice of intent to sue the state's Medicaid program is the second notice issued recently, the first being last month when the West Virginia Primary Care Association, who is representing community health centers, filed a similar notice of intent to sue.

Approximately 22 percent of BARH's patients are Medicaid beneficiaries, so shortfalls in Medicaid reimbursements significantly affect the hospital's ability to operate or make necessary capital expenditures.

Since BARH is a not-for-profit hospital, it has little opportunity to shift costs to other payers, since approximately 47 percent of patients are on Medicare, which pays 90 percent of costs, and another 14 percent are on other government programs or considered bad debt or charity cases.

"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," said 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."

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 hope that state officials will use the next 30 days to revise Medicaid reimbursement rates and raise them to adequate levels so we can avoid legal action, but we are prepared to move forward if we cannot reach agreement," Price said. "We understand the state has limited funds, but state law requires it to pay Medicaid costs. This proposed legal action is similar to actions Appalachian Regional Healthcare has taken successfully in Kentucky."

Massey said the lawsuit could be filed anytime after the 30-day notice period ends, "unless productive negotiations are under way that could lead to an out-of-court solution."

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