D-H Threatens Suit Over Vt. Medicaid Payments
Lebanon — Dartmouth-Hitchcock has threatened to sue the state of Vermont for using what it regards as a discriminatory payment schedule and denying the large medical care network millions of dollars in compensation for care for low-income people covered by a state-federal health insurance program.
The rate at which Vermont reimburses D-H for such care is “not only unfair but it also threatens the sustainability of D-H as a provider to Vermont Medicaid patients,” John Kacavas, the medical network’s general counsel, wrote in a letter to Vermont officials dated Aug. 6.
Kacavas’ letter said Vermont’s payment schedule is unconstitutional and violates several provisions of the Medicaid law. D-H plans to file a lawsuit in October that would ask a judge to halt Medicaid payments to all hospitals by Vermont so long as the alleged discriminatory rate structure is in place, Kacavas said in a telephone interview last week.
A Vermont official responded by holding out the prospect of a rate adjustment but questioning whether D-H had a case that would stand up in court. In a Sept. 10 letter, Howard Pallotta, general counsel of the Vermont Department of Health Access, which has primary responsibility for establishing reimbursement rates, said his agency would “conduct a rate review of the problems Dartmouth-Hitchcock asserts in its letter because we think that is important.”
Sean Sheehan, a department spokesman, said the review would focus on D-H’s complaints but would not entail public hearings or a proceeding before an administrative law judge.
A meeting between department officials and D-H representatives had been held but discussions had been inhibited by D-H’s lawsuit threat, he said.
In his letter, Kacavas said Vermont’s “in-state base rate for inpatient services is $7,611.45, whereas the rate for D-H is $5,224.80.”
That rate is detailed in a document dated Nov. 1, 2013, in which Vermont officials submitted their payment policies for review by the federal Center for Medicare and Medicaid Services, according to the letter.
Sheehan said he could not comment on those estimates because of the threat of litigation.
I n his letter, Pallotta denied that Vermont’s Medicaid rate structure is “discriminatory.” In fact, he wrote, “the inpatient and outpatient rates we pay Dartmouth-Hitchcock are actually higher than Vermont pays other out-of-state hospitals.” Sheehan said more detailed information about those rates was not immediately available.
Vermont Medicaid’s hospital reimbursement rates — which are adjusted in individual cases to reflect the severity of illness and complexity of treatment involved — are much higher than those paid by New Hampshire, D-H’s home state. New Hampshire Medicaid has a base rate for inpatient services at large hospitals of $2,832.85, according to Paul Minnehan, the vice president for state government relations of the New Hampshire Hospital Association. For smaller hospitals, the rate is $3,147.61. Granite State rates are the same for in-state and out-of-state hospitals, but slightly higher for patients covered by the New Hampshire Health Protection Plan, which expanded Medicaid eligibility.
Between January 2009 and November 2013, Vermont’s Medicaid reimbursement rate for in-state hospitals rose 49 percent while the rate for D-H rose 14 percent, according to a data sheet compiled by D-H. New Hampshire rates haven’t changed since 2008, according to a rate benchmark survey posted on the state Health and Human Services Department website.
In an interview, Kacavas said Medicaid payments for services from Vermont and New Hampshire were “both very low” and that he wasn’t sure which state had the lower rate. Rick Adams, a spokesman for D-H, said that that issue was not raised in Kacavas’ letter and questions about the comparative reimbursement rates in the two states were “missing the point.”
Kacavas’ letter also said that Vermont’s Medicaid reimbursements to D-H for outpatient care were lower than those paid to Vermont hospitals, and that the state improperly denied D-H compensation it was entitled to as a teaching hospital and in exchange for treating large numbers of low-income patients.
But the letter from Pallotta, the lawyer for Vermont, questioned whether D-H had a case to bring. Kacavas’ letter on behalf of D-H gave “a false impression about the ability of (D-H) to sue Vermont regarding rates,” Pallotta wrote. He also argued that Kacavas made “a false assumption, to start, that (Vermont’s Medicaid) rates are discriminatory.”
Kacavas expressed doubt that the dispute would end soon. “We’ve tried to negotiate a resolution,” he said. “It does not appear that we are going to get to yes in a negotiated disposition.”
Kacavas said that, despite his letter’s assertion that Vermont’s current rate structure posed a threat to the “sustainability” of its services to Vermont Medicaid patients, the hospital would continue to provide care to them.
Low payments for care for Medicaid patients are a perpetual and universal sore point for hospitals. D-H’s current complaint focuses on disparities inside the rate structure used by Vermont, from which tens of thousands of Medicaid patients seek care at D-H (although not as many as from New Hampshire).
The stakes in the current dispute — anywhere from $9 million to $11 million annually, “the numbers are fluid,” said Kacavas — may seem small for a hospital and clinic network that posted $1.4 billion in revenue in each of its last two fiscal years.
But in its most recent fiscal year, which ended June 30, D-H missed a target set by lenders to boost its operating margin to 4 percent. Instead, D-H’s operating margin was only about 1.9 percent, according to an unaudited financial report to bondholders.
Medicaid services make up a small but significant portion of revenue at D-H — about $78.5 million in fiscal 2014, according to its unaudited community benefits report filed with New Hampshire nonprofit regulators. That’s about 6 percent of the hospital’s revenue.
That year, D-H’s population of Medicaid patients included 73,400 Vermonters who accounted for 8,600 inpatient admissions and 313,000 outpatient visits, according to a data sheet compiled by the hospital.
Adams did not respond to requests for comparable counts of New Hampshire Medicaid patients.
The current dispute is unfolding in a complex legal landscape that was made even more complicated by a U.S. Supreme Court decision in March that restricted the ability of hospitals and doctors to go to federal court to challenge state Medicaid laws and practices. By a 5-4 vote, the court overturned district and an appellate court decisions in favor of providers.
Pallotta’s letter cited the Supreme Court decision and noted that it appeared to foreclose some key legal arguments that otherwise could be raised by the hospital. D-H’s other claims, including that Vermont failed to properly allow public review of its rate plan, would be difficult to prove in court, he wrote.
But Kacavas’ letter said the recent Supreme Court ruling had “little to no bearing on D-H’s statutory claims,” and D-H’s legal case depended on constitutional and legal arguments not affected by the recent case.
Jane Perkins, a managing attorney in the National Health Law Program’s office in Carrboro, N.C., said it appeared the recent Supreme Court ruling would not prevent D-H from pursuing its case in state court or, if it based its case on claims of violations of the Constitution’s equal protection or commerce clauses, in federal court.
Adams said the hospital’s claim against Vermont would be based on those clauses of the Constitution.
But Perkins said it would probably be difficult for D-H to obtain an injunction to prevent Vermont from making payments to Medicaid providers, as such payments are subject to federal regulation. “Medicaid is supposed to operate in the best interest of recipients,” she said.
Rick Jurgens can be reached at rjurgens@vnews.com or 603-727-3229.
