A Medical Device Daily

Appalachian Regional Healthcare (ARH; Beckley, West Virginia) this week filed a lawsuit against the West Virginia Department of Health and Human Resources (DHHR) and its Bureau for Medical Services for inadequate Medicaid reimbursement rates that it says threaten the continued operation of the not-for-profit Beckley ARH Hospital (BARH). The suit was filed in Kanawha County Circuit Court.

“In November we provided the state with a 30-day notice of intent to sue with the hope during the notice period the state would work to develop a mutually acceptable settlement. Regrettably we were not able to come to a settlement,“ said Rocco Massey, community CEO of BARH. “Medicaid reimbursements have been covering only two-thirds of our costs for providing medical care, so BARH has been suffering a substantial financial loss. These Medicaid rates jeopardize BARH's continued ability to provide medical services to all of its patients.“

In fiscal year 2009, BARH says it received only $9.9 million for the $14.7 million the hospital spent to treat Medicaid patients. Of the $9.9 million in Medicaid reimbursements BARH received, $8.2 million came from federal funds. Of the $1.7 million the state put in that year to match federal funds, $1.4 million came from BARH itself through the Medicaid provider tax the hospital pays. Thus, the state put in only about $300,000 of its own funds that year for Medicaid reimbursements for BARH.

“If the state had put in just $800,000 more, the federal government would have matched it with an additional $4 million,“ Massey said. “That would have covered BARH's Medicaid deficit in fiscal year 2009.“

Massey also indicated the state's low Medicaid payment threatens access to care for Medicaid recipients as well as the general public. If BARH cannot cover patient costs the organization says it will be forced to reduce available services to all patients. The facility has an 80% occupancy level.

A disproportionately large percentage of BARH's patients, about 22%, are Medicaid beneficiaries, so shortfalls in Medicaid reimbursements significantly affect the hospital's ability to operate or make necessary capital expenditures. BARH has little opportunity to shift costs to other payers, because about 47% of its patients are on Medicare (which pays 90% of costs), and another 14% are on other government programs or are considered bad debt or charity cases (paying less than cost, if anything at all).

“The Bureau for Medical Services is required by statute to set Medicaid rates that are reasonable and adequate to meet costs incurred by efficiently and economically operated hospitals,“ said Stephen Price, an attorney with Wyatt, Tarrant & Combs of Louisville, Kentucky and counsel for Appalachian Regional Healthcare. “The bureau also is required to take into account the situation of hospitals that serve disproportionate numbers of low-income patients.“

State law provides that potential litigants must give 30-day notice before suing the state so that it might be possible to settle issues without litigation.

“We were disappointed we were not able to solve this situation without legal action, however being able to meet the needs of our patients is paramount and we had to proceed,“ Price said. “We understand the state has limited funds, but state law requires it to pay Medicaid costs.“

In other legal action:

• Allstate Insurance (Hauppauge, New York) has filed a lawsuit, its seventh this year, seeking to prove that professional service corporations are actually owned and operated by a layperson, rather than by licensed physicians or medical professionals. Allstate says it is committed to fight insurance fraud in New York and has sought to recover damages totaling $10,534,093.56 during 2010. Since 2003, Allstate has filed 27 fraud lawsuits in New York, seeking damages totaling $161,000,911.11

The latest complaint names 11 defendants, including the owners of those companies, a physician, three medical professional corporations, as well as a series of companies used to control the medical professional corporations and siphon its profits.

The pleadings allege that New York medical professional corporations known as Quality Medical, Spartak Medical, and Richmond Medical, were fraudulently incorporated through a scheme using the name of a licensed medical physician, and that Michael Kipnis, Julia Kipnis, Gennady Belzer and Igor Tsimmerman, none of whom were physicians, secretly own and control the professional corporations through a series of companies that they own and control, including ITA Family, LGB, and KYDS. The pleadings further allege that these defendants submitted or caused to be submitted or otherwise facilitated the submission of fraudulent claims to Allstate through medical professional corporations that were never eligible to bill or collect no-fault benefits.

• A New York State Supreme Court Queens County jury returned a $7 million verdict against Patrick Monteleone, MD and Christopher Louis Lamendola, MD, because they failed to diagnose and treat cardiac tamponade (bleeding into the chest) in their patient who underwent cardiac bypass surgery on Nov. 17, 2004. As a result of their failure to relieve pressure in the chest cavity, Owen McNamara sustained a cardiac arrest after having undergone successful cardiac bypass surgery at St. Francis Hospital (Lake Success, New York). McNamara needed further cardiac surgery as a result of the cardiac arrest and then went on to spend two-and-a-half years in hospitals and rehabilitation facilities and suffered multiple complications including: kidney failure, nerve damage, brain injury, tracheostomy, multiple bed sores, sepsis and shock.