By ROCCO MASSEY

BECKLEY -- Beckley ARH Hospital and its parent organization, Appalachian Regional Healthcare Inc. took a step in November that we wish we did not have to take. We issued a notice that we intend to sue the West Virginia Department of Health and Human Resources and the DHHR's Bureau for Medical Services over inadequate Medicaid reimbursement rates.

It is regrettable that we have had to consider such action, but it is a result of years of frustration. We would rather not sue the state, but every other effort we have made to resolve the problem has been fruitless.

Since it opened in 1956, BARH has maintained a strong connection with the community it serves. It began as part of one of 10 Miners Memorial Hospital Association facilities created by the United Mine Workers of America. UMWA President John L. Lewis and former first lady Eleanor Roosevelt helped dedicate the hospital. It is out of this strong sense of community service that we seek to protect the future of BARH. I was born at BARH and have worked at the hospital since I was 18 years old, so I have always known this sense of obligation BARH has to the community.

We are considering legal action because continuing to accept inadequate and unreasonable Medicaid reimbursements would threaten the continued operation of our not-for-profit hospital and jeopardize our ability to serve all of our patients.

During fiscal year 2009, BARH spent $14.7 million to treat Medicaid patients but received only $9.9 million in Medicaid reimbursements. Of that $9.9 million, federal funds accounted for $8.2 million while $1.7 million was the state's match. But relatively little of that state match came from state funds. Most of it -- $1.4 million -- represents what BARH itself paid for the state's Medicaid-provider tax. That means that the state put in only about $300,000 of its own money to reimburse BARH for its Medicaid expenses.

Because the federal government has been paying about 83 percent of West Virginia's Medicaid costs, the state easily could have avoided the shortfall in BARH's Medicaid reimbursements. If the state put just $800,000 more of its own money into the program, the federal government would match it with an additional $4 million. That would have brought BARH's Medicaid reimbursements up to the level of the hospital's expenses.

Some people might wonder if BARH could reduce its expenses to shrink some of that shortfall. If that were possible, we would do it. However, BARH is already one of the most efficient and economical hospitals in the state. In its 2009 annual report, the West Virginia Health Care Authority found that, among its peer group, BARH's cost per discharge of $4,519 was the lowest.

In addition, BARH maintains an occupancy rate of about 80 percent, which for practical purposes is essentially full occupancy. That demonstrates the demand for BARH's services, as well as the dedication of its employees.

If Medicaid rates were adequate, such an efficient, low-cost provider as BARH would receive more than 67 percent of the costs of providing care to Medicaid patients.

Some hospitals might be able to make up for such a shortfall in Medicaid reimbursements by charging more to patients covered by insurance from private companies. But that is not practical at BARH, partly because Medicaid beneficiaries comprise a disproportionately large share of BARH's patients, about 22 percent. Patients covered by Medicare, which pays BARH about 90 percent of its costs, make up another 47 percent of the hospital's mix. Yet another 14 percent of BARH's patients are covered by other government programs, which pay less than cost, or they are considered bad debt or charity cases, which pay nothing. That leaves no room for shifting costs.

State law requires the Bureau for Medical Services to set Medicaid rates that are reasonable and adequate to meet costs incurred by hospitals that operate efficiently and economically. The bureau also is required to take into account the situation of hospitals that serve disproportionate numbers of low-income patients. But the bureau has failed on both counts.

This situation is bad enough, but it could get much worse. Under federal health care reform, states are permitted to expand Medicaid eligibility to all non-Medicare-eligible individuals under age 65, including adults without dependent children, with incomes up to 133 percent of the federal poverty level. If the federal government would base the increased amount it will pay for such individuals on the state's grossly inadequate Medicaid rates, BARH's already substantial losses from Medicaid would increase.

BARH is far from the only health care provider experiencing this problem with West Virginia's Medicaid program. The West Virginia Primary Care Association, which represents community health centers, also has filed a notice of intent to sue the state over inadequate Medicaid reimbursements. In addition, the University of Virginia Health System has decided to discontinue being a provider for West Virginia's Medicaid program because of the program's failure to increase reimbursements. It would not be surprising if other providers cut off their relationships with West Virginia's Medicaid program or take legal action against the program.

We understand that every state in the country has limited resources. However, West Virginia currently is sitting on a $360 million surplus in Medicaid. This surplus has been created as a result of the state's continual underpayments of health care providers, including BARH. With such a surplus, we believe that the state would be foolish not to take necessary action to save such crucial safety-net providers as BARH. Once again, in the case of BARH, it would take only $800,000 of state funds to leverage about $4 million in federal funds and solve the hospital's Medicaid reimbursement problem.

State statute provides that a potential litigant must give a 30-day notice before filing a lawsuit against the state. That gives the state and the disaffected party time to discuss the issues and possibly settle them without litigation. BARH hopes state officials take advantage of that opportunity. We would prefer not to sue the state. Our business is serving our patients. We want to concentrate on that service, but unless we get better Medicaid reimbursement rates, such service could be in jeopardy in the future.

Massey is chief executive officer of Beckley ARH Hospital.




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