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Hospitals request more time in Medicaid lawsuit

The 10 hospitals suing the state over cuts to Medicaid rates asked a judge to halt proceedings yesterday until federal officials have decided whether former governor John Lynch and lawmakers cut the rates illegally.

If approved, the time-out would almost certainly further delay the state’s move to managed care, which is already seven months – and $12 million – behind schedule. That’s because the state can’t move forward until the hospitals sign on with the managed care companies, and the hospitals have said they won’t do so while the lawsuit is pending.

It’s proving an expensive standoff for both sides.

The hospitals are fighting for about $190 million in back Medicaid payments. Meanwhile, Health and Human Services Nicholas Toumpas has said the state will lose $1.5 million in savings for each month it fails to implement managed care. It was supposed to start in July.

Yesterday’s filing by the hospitals wasn’t what U.S. District Court Judge Steven McAuliffe requested from them a month ago following a December hearing. In fact, he rejected their request for a delay then. McAuliffe instead asked the hospitals to tell him how they’d resolve the financial dispute over Medicaid cuts.

Hospital attorney Scott O’Connell of Nixon Peabody said yesterday he and his co-counselors realized they couldn’t until federal Medicaid officials have weighed in on all the rate cuts.

“We said, he can’t do anything until this is decided,” O’Connell said.

At issue are a number of cuts Lynch and lawmakers made in Medicaid reimbursement rates beginning in 2008 in order to balance the state budget. O’Connell said those cuts – to inpatient and outpatient rates and for uncompensated care – cost the 10 hospitals nearly $190 million.

In November, federal Medicaid officials approved some of the Medicaid cuts, but they approved them only to November 2010, not all the way back to 2008, when they began. They have yet to rule on the remaining cuts.

In their request for a stay to further court proceedings, the hospital’s lawyers told McAuliffe they can’t proceed until federal Medicaid officials have decided all the outstanding rate changes. In addition, they’ve asked the federal officials to reconsider their November approvals. Among other things, the hospitals want a federal decision on the legality of the rate cuts from 2008 to 2010.

The hospital filed their request late yesterday. The state attorney general’s office, which is defending the state against the lawsuit, has until late February to file a response.

(Annmarie Timmins can be reached at 369-3323, or on Twitter @annmarietimmins.)

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