Fair Shake Holyoke Medical Center, Other Hospitals Mull Lawsuit Against State over Funding

Caring for a large population of low-income residents has long been a passion of Hank Porten, president and CEO of Holyoke Medical Center, who knows that his facility meets a critical need in treating the poor.

That’s why HMC, along with five other hospitals, is considering suing the state over what they feel is chronic underfunding of the care they provide to residents below the poverty line.

The other parties to the discussions, which have already involved state Attorney General Martha Coakley, include Berkshire Health System in Pittsfield, St. Vincent Hospital in Worcester, Merrimack Valley Hospital in Haverhill, Cape Cod Healthcare, and Quincy Medical Center; all those institutions, like Holyoke, are considered ‘disproportionate-share hospitals,’ meaning they serve a high percentage of low-income or elderly people.

State reimbursement for Medicaid services, which is the heart of the issue, is not a new problem, but one hospitals have grappled with for years, complaining that the state underpays for the actual cost of treatment — typically, anywhere from 65 to 75 cents on the dollar over the past decade.

But the reimbursement issue took on new life over the summer when Boston Medical Center, the Commonwealth’s largest disproportionate-share hospital, sued the state, accusing it of reneging on promised Medicaid reimbursement rates. The problem for many other hospitals, including Holyoke, is the perception that BMC already soaks up too much of the available funding and, by angling for more through the legal system, could harm other facilities.

“We had Boston Medical Center talking about underpayment, and as the case came forward and we began viewing it, we realized that for the vast majority of the case, we could just interchange our names,” Porten said. “And that created an issue for us. The concern we had is that, if this proceeded through the litigation or settlement process, Boston Medical Center could end up with a large amount of what’s available for disproportionate-share hospitals.”

Stirring the Pot

Boston Medical Center’s lawsuit argues that the state has financed its health-insurance reform law on the backs of poor residents by cutting money to a hospital that cares for many of them to pay for expanded coverage.

At the time, BMC estimated that it will lose $175 million in the current fiscal year and would finish this year $38 million in the red, its first operating loss in five years. For that, the hospital blamed the state for cutting the amount it reimburses BMC for treating Medicaid patients. The state now pays about 75 cents for each dollar of Medicaid-paid treatment, by some estimates.

When that lawsuit was announced, Health and Human Services Secretary Dr. JudyAnn Bigby told the Boston Globe that “the administration is greatly disappointed that BMC, which has received $1.5 billion in state funding in the past year, has chosen this path. At a time when everyone funded and served by state government is being asked to do more with less, BMC has been treated no differently.”

Porten and the other hospital administrators considering their own lawsuit would argue that Boston Medical has been given more than its fair share of state funding when compared with other hospitals across the Commonwealth that care for large populations of poor residents.

For one thing, BMC received $88 million for disproportionate-care treatment from the state in May, while the six hospitals involved in the current discussions received $42 million between them this year to treat poor patients — yet those six institutions care for more than double the volume of such patients as Boston Medical does.

“We met with the attorney general,” Porten said. “We might not be smart enough to know what amount is fair, but we’re smart enough to know that there are at least two definitions of fair now, and we want the legal system to define for us what is fair. We should be paid at Boston Medical Center’s rate, or, if we’re all being paid at our rate, then Boston Medical Center shouldn’t get additional money.

“We’re reviewing our options,” he continued, “and we’ll do what’s in the best interest of our hospitals to make sure that our disproportionate-share hospitals are paid a parity rate.”

Hospital CEOs say they understand the fiscal strain being caused by the state’s health-insurance reform, soaring treatment costs, and recession-strapped government coffers. But Porten says he’s just looking for a fair shake.

“We don’t begrudge Boston Medical what they’ve received; we all need the funding,” Porten told The Healthcare News. “But there has to be some parity. There shouldn’t be any difference between the poor of Holyoke and the poor of Boston.”