Specialty Hospital centers sue D.C. for reimbursement of Medicaid costs

March 29, 2013

Two facilities that treat severely ill poor patients could be forced to curtail services if the District does not fully reimburse them for Medicaid costs, according to a lawsuit filed this week.

In the suit, Specialty Hospital of Washington Capitol Hill and Specialty Hospital of Washington Hadley claim the city has failed to reimburse them $24.7 million over the past four years.

The action represents the latest controversy between the District and Specialty Hospitals of America, the parent company of both the Hadley center in Bellevue in Southwest Washington and the Capitol Hill center near Stanton Park.

From 2007 to 2010, Specialty also operated United Medical Center in Ward 8, but the city seized it amid reports that it was struggling to pay its bills and concerns over how it was being managed. Specialty sued the city and later settled for $6 million.

But Specialty remains an integral part of the city’s health-care system. Specialty’s Capitol Hill and Hadley facilities are the only two long-term acute care facilities in the District, company officials said.

The suit claims that the Department of Health Care Finance has failed to fully reimburse them for caring for Medicaid recipients, who account for one-third to half of patients at both facilities. The lack of payment is resulting in “undue hardship” and “imminent financial peril,” the suit claims.

Without relief, the care centers “likely will not be able to continue to provide critical medical services needed by the District’s patients under the Medicaid program or otherwise,” it continues.

At issue is the frequent tussle between government regulators and hospitals over the appropriate reimbursement for Medicaid patients. The reimbursement dispute often involves facilities in low-income areas where hospitals juggle their bottom lines and care for the poor.

Both the Department of Health Care Finance and the D.C. attorney general’s office declined to comment on the suit, which was filed with the city’s Office of Administrative Hearings.

But the director of health-care finance, Wayne Turnage, said his office adheres to federal reimbursement rules for Medicaid patients. “I can tell you, we follow the guidelines, and if they have costs allowed under those guidelines, we will pay those costs,” Turnage said. “If they don’t, we cannot pay those costs.”

According to the suit, the Department of Health Care Finance has been underestimating the cost of care provided at both facilities, reimbursing them as nursing homes instead of intensive-care centers.

Frank J. Wilich Jr., president and chief operating officer of Specialty Hospitals of America, said both centers operate a facility of last resort for the “sickest of the sick” and the “poorest of the poor.”

When chronically ill patients have been stabilized at one of the city’s hospitals but remain too sick to go home, Wilich said, they are often sent to one of the Specialty centers.

Wilich said that patients at the two facilities, with a total of about 150 beds, are then given extended treatment that can last more than a month. “The District is trying to pay us less than our costs, and that is not the way this is supposed to work,” Wilich said.

The suit also alleges that the facilities are not being properly reimbursed for leases, building expenses or “twenty-four-hour-a-day physician coverage to respond to patients’ needs.”

“This lawsuit is a microcosm of the broader dysfunctionality of the District of Columbia’s reimbursement system,” said A. Scott Bolden, an attorney for Specialty. “It’s got to be fixed.”

Michael Barch, chairman of the Health Council of the National Capital Area, said the District cannot afford to lose the health-care services provided by Specialty.

“If those two hospitals close, there are no other long-term care acute hospitals between Richmond and Philadelphia,” said Barch, former chief executive at both George Washington University Hospital and the shuttered D.C. General. “When that happens, these patients stay in the hospital, and the people who show up don’t get a monitored bed.”

The reimbursement issue also highlights some of the problems at Hadley. Last year, the Washington Business Journal reported that Specialty was fighting to fend off foreclosure after it accrued a $1.8 million property tax debt.

And Wilich said he worries that Specialty’s past disagreements with the District, including over United Medical Center, are clouding officials’ judgment about the costs at Hadley and Capitol Hill centers.

But Turnage strongly denied any link. “This is just an issue of what their costs are, and what is allowable under the Medicaid law,” he said.

Tim Craig is The Post’s bureau chief in Pakistan. He has also covered conflicts in Iraq, Afghanistan and within the District of Columbia government.
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