Medicaid feud puts $59 mil in limbo

County hospital ties up funds; state budget at risk

Mary Jo Pitzl and Yvonne Wingett
The Arizona Republic
Jun. 2, 2007 12:00 AM

A feud over millions of dollars for health care has turned into a test of wills at the state Capitol, with the potential for cutting off money intended for low-income patients and blowing a big hole in the state budget.

At issue is how much money should go to the public hospital in Maricopa County, which serves poor and uninsured patients, and how much should be retained by the state, which also picks up the health care tab for many low-income clients.

For Maricopa Medical Center, this is the time to take a stand against the state, which the center's operators feel has wronged them for years.

For the state, it's a misplaced battle cry, and one that is not drawing much sympathy from lawmakers weary from a long session. They perceive it as an eleventh-hour pitch to grab millions of dollars.

County hospital operators are refusing to sign a document necessary to release $59.6 million in federal Medicaid dollars to the state unless lawmakers guarantee the money will flow back to the county hospital.

"I consider it taxpayer fraud," said Mike Cowley, vice chairman of the board of directors of the Maricopa Integrated Health System, which runs the county hospital district. "Our board is not willing to participate in this scam. I don't believe it was ever the intention of the federal government that money that's supposed to be earmarked for health care ends up going into the state General Fund to pay for whatever the state wants to use it for."

But state officials say they simply want to continue divvying up the federal dollars as they have for years.

"Disproportionate share"

This is money that the federal government sets aside to compensate hospitals that serve a "disproportionate share" of low-income patients. For years, the money has flowed through the state and been distributed to Maricopa Medical, the state hospital (which serves the mentally disabled) and private hospitals.

Although Maricopa Medical gets just over $59 million, all but $4.2 million of that money is ultimately returned to the state. The agreement was brokered after Arizona voters expanded the state's health care coverage for the poor in 2000.

That program brought more people into the Arizona Health Care Cost Containment System, the state's alternative to Medicaid. That shifted responsibility for covering the costs of low-income patients from Arizona's county hospitals to the state, said Tom Betlach, deputy director of AHCCCS.

For example, in 2000, the state was sending $60 million in Medicaid dollars to Maricopa Medical Center, Betlach said. In 2006, that figure had grown to $125 million.

But in recognition that Maricopa County was still saddled with low-income patients and uninsured residents who didn't meet AHCCCS requirements, the state-county agreement set aside part of the disproportionate-share dollars for those cases. The total: $4.2 million.

But that hardly makes a dent in the estimated $120 million annual cost that Maricopa Medical takes on by treating indigent patients, said Betsey Bayless, chief executive officer of Maricopa Integrated Health System.

"The bottom-line issue is that the federal government provides a certain amount of funding for services that are provided by Maricopa Integrated Health System," said Bayless. "And my board believes that our system should receive those monies."

Bayless and her board see an opening to make their case, thanks to a new agreement between the state and the Centers for Medicare and Medicaid Services. It requires Maricopa Medical to certify how much it has spent on indigent care as a condition of the state collecting disproportionate-share dollars from the federal government.

That requirement is echoed in Senate Bill 1093, which contains many of the health-related items for the upcoming state budget.

Refusing to sign

But Maricopa Medical is refusing to sign the certification unless the state guarantees it the full amount of disproportionate-share dollars, as the federal plan stipulates. If it doesn't sign, the $59.6 million in federal dollars won't materialize. The state Senate and Gov. Janet Napolitano are counting on $55 million of that flowing back to the state, with $4.2 million earmarked for Maricopa Medical.

"I recognize the state's budget is almost completed, and so they're concerned about this," said Bayless. "They've been able to count on this money in the state budget, I recognize that. I also recognize that the money was intended for indigent health care."

On Friday, the Maricopa Integrated Health Service board reiterated its intention to withhold the certification.

The tactic is not wearing well with many lawmakers, who say the issue is being raised too late in the legislative session. But the issue didn't bubble up until SB1093 got its first public airing in early May.

The certification is not due until June 2008, so there is time to work out differences, said Rep. Bob Stump, chairman of the House Health Committee.

Stump, R-Peoria, like many House Republicans, believes SB1093 is unnecessary. The House has not included the mandatory certification requirements in its budget.

But Senate Appropriations Chairman Bob Burns, R-Peoria, said that without the bill, the state budget would be short $55 million.

"The train's out of the station, people are set on getting out of here (the state Capitol)," Burns said, explaining that the complex disproportionate-share issue is not going over well with many legislative members.

Among the disenchanted

Count Sen. Carolyn Allen, chairwoman of the Senate Health Committee, as one of the disenchanted.

"They have quickly lost my sympathy," she said of Bayless and her board.

Allen, a Scottsdale Republican, ticks off a litany of issues, from what she said was a misrepresentation by the health district board chairman of a phone call to the hiring of what she called "junkyard dog" lobbyists by the health district board. Also, the board's representatives came to the Legislature late in its session and approached lawmakers with what Allen said was a chip on their shoulder.

"Being aggressive and angry with all of us doesn't work," she said. "So I'm done."

But House Majority Leader Tom Boone said the problem stems from the fact that the governor and AHCCCS negotiated a new AHCCCS agreement without bringing the Maricopa Medical board to the table.

"We'd like to stay out of that dispute," Boone, R-Peoria, said. He acknowledged that if there are budget ramifications, the House has to ultimately deal with them, but for now, "We're saying, you guys work it out."

Last updated on December 16, 2009