About $8 million contributed by New Mexico counties to leverage federal matching funds for hospital care of indigents will go instead to satisfy a settlement between the state and the Centers for Medicare and Medicaid Services.

A review by the federal agency concluded that nine New Mexico hospitals, including Christus St. Vincent Regional Medical Center in Santa Fe, made improper deals with county governments "in order to draw down federal matching funds."

Under the federal Sole Community Provider program, which the Centers for Medicare and Medicaid Services administers, local hospitals can get about $3 of federal money for every $1 that county governments contribute to pay for indigent care. The money must come from the counties and can't be put up by private entities that stand to gain from the federal match.

The federal agency originally sought to recover $53 million from New Mexico after reviewing the state's contributions to the program for 2009 and finding "non-bona fide donations or in kind transfers" were used to leverage federal matching funds.

The state Human Services Department -- which administers the Sole Community Provider funds for New Mexico -- reached an agreement with the federal agency to settle the matter for $7.9 million.

The $7.9 million the state will use to satisfy its part of the settlement will be taken from contributions made by New Mexico counties to leverage Sole Community Provider funds in fiscal year 2012. The state will lose out on the opportunity to have that money matched at a 3-to-1 ratio by the federal government.

About $1.3 million of the settlement amount will come from Santa Fe County's contribution to the program, resulting in a loss of about $4 million in federal funds that would otherwise have gone to Christus St. Vincent Regional Medical Center to pay for indigent care.

New Mexico Human Services Department spokesman Matt Kennicott said there has been no admission of wrongdoing by any of the hospitals.

Both Santa Fe County Attorney Steve Ross and Christus St. Vincent CEO Alex Valdez say there was nothing improper in agreements between the hospital and the county in 2009 or in any other year.

Ross said the issue is one of interpretation. The Centers for Medicare and Medicaid Services, he wrote in a statement this week, "interpreted the regulations as prohibiting ANY relations of any sort between a [Sole Community Provider] hospital and a county. That is not a permissible reading of the regulations, nor is it consistent with a read of the regulations nationally."

Ross also noted that Santa Fe County and the hospital had entered into agreements for years that never were questioned by the state Human Services Department or the Centers for Medicaid and Medicare Services before this review.

Valdez said the 2009 agreement between the hospital and the county was thoroughly vetted by an attorney familiar with the program, who said he was confident that it was "compliant and justified."

But the relationship between the two entities has changed markedly since the draft financial management report was issued.

An examination of an agreement between Santa Fe County and Christus St. Vincent for fiscal year 2008-09 showed that Christus agreed to assume the cost of medical care for county jail inmates that year -- about $3.3 million -- and a myriad of other health-related services, taking on a total burden of about $10 million worth of expenses previously borne by Santa Fe County. Santa Fe County's contribution to the Sole Community Provider program that year was about $9 million, which brought about $32 million worth of federal funding to the hospital.

But last year, after news of the draft financial management report became public and new language appeared on federal forms aimed at guarding against the use of quid-pro-quo agreements to maximize Sole Community Provider matches, the county slashed its contribution to $2.1 million.

Discussions surrounding the county's Sole Community Provider contribution also have changed significantly. In years past, commissioners considered different scenarios that set the county's match at varying levels depending on which county programs the hospital would agree to fund.

Such considerations have been absent from the discussion the past two years. County Health and Human Services Division Director Steve Shepherd said the county has stopped entering into memorandums of agreement with the hospital.

The hospital has asked Santa Fe County to contribute about $7.7 million this year to leverage federal Sole Community Provider funds. The county hasn't decided yet what its contribution will be, but it must do so no later than Feb. 15.

The other New Mexico hospitals that the Centers for Medicare and Medicaid Services said violated the rules include Alta Vista Medical Center, Mimbres Memorial Hospital, Lea Regional Medical Center, Carlsbad Medical Center, Eastern New Mexico Medical Hospital, Gerald Champion Regional Medical Center, Rehoboth McKinley Christian Hospital and Clovis High Plains Hospital.

The review of New Mexico's contributions likely was triggered by the U.S. Department of Justice's decision to join in a lawsuit filed by a former employee of Eastern New Mexico Medical Center. The lawsuit, which still is pending, alleges that the Roswell hospital and other facilities owned by Community Health Systems Inc. sought to get more money from the federal program by making side deals with county governments to get the biggest county contributions possible.

Contact Phaedra Haywood at 986-3068 or phaywood@sfnewmexican.com.