Hawai'i physicians and hospitals are urging the governor to release $8 million in Medicaid reimbursements by the end of the month or they say the money, plus another $10 million in federal matching funds, will be lost.

The funds were approved by the 2007 Legislature to address physician services under the QUEST and Medicare programs that serve the uninsured and underinsured. Doctors and hospitals for years have said there is a huge gap between the cost of providing care and state and federal reimbursements.

The reimbursement shortfall has led physicians to leave the Islands and created what some are calling a healthcare crisis in the state.

Rep. Josh Green, D-6th (N. Kona; Keauhou; Kailua, Kona), a physician, said he doesn't understand why Lingle hasn't released the money. He said her inaction places the $10 million in federal matching funds in jeopardy.

"Gov. Lingle has an excellent track record of supporting healthcare," Green said. "That's why it is so difficult to understand why the administration would allow $18 million to expire at the end of the month. With state revenues under pressure, it makes sense that we leverage the federal matching funds available to us."

Lillian Koller, director of the state Department of Human Services that oversees the Medicaid and QUEST programs, said the governor has authorized the release of $8 million for the 2009 fiscal year, which begins July 1. But Koller said releasing the $8 million for the current fiscal year that ends June 30 would not be prudent.

"This concern about releasing the money for retroactive bonuses to physicians going back a year didn't make sense to the administration, given the revised projections of the Council of Revenues and the fact that this money wasn't intended for bonuses," Koller said. "It was intended to be paid on a real-time basis to physicians who were rendering services to our Medicaid clients."

Koller said if the Legislature wanted to make the $8 million available, it would have included it in her department's budget and not in the form of a separate appropriation. She added that the federal government matches state spending dollar for dollar, meaning the state will not be losing a $10 million lump-sum payment.

"The matching $10 million is simply the normal matching federal money that the federal government pays us in Medicaid every time we spend a dollar in state money," Koller said.

She pointed out that the administration increased Medicaid rates for the first time in 11 years two years ago, to $20 million. Funding was doubled to $41 million for 2008 and to $80 million in 2009, Koller said.

Green said the Department of Human Services has adjusted its Medicaid reimbursement rates for physicians just twice in the past 18 years. But he said the cost of providing healthcare continues to rise, and physicians are unable to absorb the increasing losses.

A study prepared last year by the Hawaii Health Information Corp. determined that Hawai'i hospitals are being reimbursed at about $8 for every $10 of treatment they provide to Medicare, Medicaid and state Quest patients. In 2006, the report said, Medicare, Medicaid and Quest losses for hospitals statewide were more than $240 million.

Virginia Pressler, executive vice president of Hawaii Pacific Health, said the state is "taking advantage" of physicians who continue to treat needy patients despite continued losses. HPH operates Kapi'olani Medical Center for Women & Children, Kapi'olani Medical Center at Pali Momi, Straub Clinic & Hospital and Wilcox Memorial Hospital on Kaua'i.