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St. Joseph Hospital in Nashua.
Tuesday, July 26, 2011

Hospitals sue NH on Medicaid

CONCORD – Nashua’s two hospitals joined eight others in New Hampshire on Monday to sue the state over a plan that uses more than $100 million in Medicaid money to balance the budget.

Lawmakers’ decisions to raid Medicaid coffers to balance the budget amounts to a violation of federal law and endangers equal access to health care for low-income patients, according to the lawsuit.

Southern New Hampshire Medical Center and St. Joseph Hospital, two of the city’s largest employers, and the eight other hospitals are suing Nicholas Toumpas, commissioner of the state Department of Health and Human Services, over a plan that uses more than $200 million in Medicaid funds to balance the two-year state budget.

“This action by the governor and the Legislature is the most significant threat to our community’s health that I have seen in my 23 years at SNHHS,” Tom Wilhelmsen, president and CEO of Southern New Hampshire Health Services, said.

SNHMC stands to lose about $10 million annually, Wilhelmsen said, which will force the hospital to lay off employees.

The suit alleges that the plan violates federal law and threatens “immediate and irreparable injury to the public.” It asks that the plan be immediately halted.

Senate President Peter Bragdon, R-Milford, and House Speaker William O’Brien, R-Mont Vermon, declined to comment on the lawsuit before their lawyers could review it.

“Neither the House nor Senate have received a copy of what the hospitals filed today.  We will have to hold off on commenting until the speaker/senate president have been briefed,’’ said Carole Alfano, Senate communications director.

The suit is over whether lawmakers can keep the $115 million annually in so-called bed tax payments that hospitals make so the federal government will make a matching payment. Since 1991, hospitals have been reimbursed once the state got the federal payment.

This year, the Legislature decided to not only keep the federal money, but also the initial $115 million it collected from hospitals.

“The state has broken a long-held promise to New Hampshire hospitals by this action,” Wilhelmsen said.

That makes payments a new tax, according to health care leaders, and combined with what were already some of the lowest Medicaid reimbursement rates in the country, it means hospitals will pay the state more than they get from the state for treating Medicaid patients, Wilhelmsen said.

“Therefore the state is no longer funding hospitals as they are obligated to under federal regulations. That’s the essence of the suit,” he said. “I think the point is that all of a sudden, the state has turned this into a tax.”

SNHMC and its network of primary care physicians, Foundation Medical Partners, treated more than 12,000 Medicaid patients in 2010, spending $21.8 million and was reimbursed $9.3 million by the state. If those numbers hold steady and the hospital’s $10.4 million bed-tax payment isn’t reimbursed, the hospital would lose more than $22 million, according a supplemental court filing written by Michael Rose, SNHMC’s chief financial officer. Other state Medicaid reductions since 2008 have cost the hospital more than $7.7 million already, according to Rose.

Because of the cuts, the hospital is exploring cutting its pediatric beds in half, from eight to four, and eliminating its 30-bed behavioral health unit, as well as rationing its treatment of Medicaid patients, according to the Rose.

St. Joseph Hospital spent $8.3 million on Medicaid patients last year and was reimbursed $2.9 million. That loss, plus its $3.1 million bed-tax payment, would cost the hospital about $8.5 million, according to chief financial officer Richard Plamondon.

Dr. William Stephan, St. Joseph’s vice president of medical affairs, said without changes, the hospital will have to lay off a “significant piece” of its support staff and shutter a number of optional programs, such as daycare, home care programs and ambulance service, that lose money but are valuable to patients.

The longer term effect will be that hospitals will have to arrest any development, ending investment in new programs and technologies, Stephan said.

“It’s going to freeze our growth, and we’ll lose those services that don’t make money but are valuable,” he said.

The suit asks the court to bar Toumpas from implementing the reimbursement reductions and to set new rates that recognize the “efficiency, economy, and quality of care, and equal access” to health care. If the suit fails, hospitals will be forced to cut services and limit access to programs and facilities for Medicaid patients, according to the suit. SNHMC is examining changes to its behavioral health and pediatrics units, according to spokesperson Judith Bennett. It may also have to delay access to non-emergency services, she said.

“This is not a single moment in time that we have to weather; this will require a permanent change in the way that we do business,” Wilhelmsen said.

Wilhelmsen said no patients needing urgent care would ever be turned away, but elective procedures and waits to get appointments with primary care physicians could get longer and longer.

Other hospitals are considering closing their associated doctors offices to new Medicaid patients or terminating those Medicaid contracts with the state altogether, according to the suit.

Dartmouth-Hitchcock’s Children’s Hospital is considering closing or suspending its neonatal intensive care unit. DHMC might need to ground the DHART rescue helicopter, according to the suit.

Since the budget plan was proposed, health care leaders have said it would eviscerate hospitals’ services, forcing them to cut services, employees and programs, as well as increasing patient costs.

A spokesperson for Gov. John Lynch stressed that the four-term Democratic chief executive did not favor such a deep cut to the hospitals.

“This doesn’t come as a surprise. The budget proposed by the governor was very different from the one passed by the legislature. The governor took a more balanced approach and did not propose such a drastic cut to hospitals,’’ Lynch press secretary Colin Manning said.

The proposed budget Lynch offered in February would have cut $20 million in payments to the hospitals and used the savings to support health care spending elsewhere in the Department of Health and Human Services’ budget.

Joseph G. Cote can be reached at 594-6415,; also check out Joseph Cote (@Telegraph_JCote) on Twitter. Kevin Landrigan contributed to this story.