Greenwood Leflore Hospital and the Mississippi Division of Medicaid reached an agreement Thursday in a dispute that hospital leaders said could otherwise force the facility to close.

The compromise, reached during a Hinds County Chancery Court hearing, gives both sides more time to negotiate a plan for the hospital to repay $5.5 million in Medicaid overpayments made last year. The agency has already recouped about $2 million of the funds. Under the deal, the Greenwood public hospital must secure a property bond by Jan. 31 to guarantee repayment of the debt or the Division of Medicaid could withhold scheduled payments to the hospital.

The conflict began after the Division of Medicaid notified the hospital in June it would recoup $5.5 million in state-directed payments, or supplemental funds intended to offset low Medicaid reimbursement rates. Hospital leaders warned the agency in September that the proposed repayment schedule of $900,000 a quarter — with about $2 million already recovered this year — would severely strain the long-struggling hospital and could lead to its closure. The facility serves about 300,000 patients in the Mississippi Delta, a region of the state with limited access to medical care. 

The overpayments stemmed from calculations by the Division of Medicaid based on old data that did not reflect lower patient volumes after the hospital closed its labor and delivery and intensive care units in 2022. Hospitals were notified two years ago that a reconciliation would occur in 2025, according to the Division of Medicaid, though they did not know at the time how much they would owe. 

Greenwood Leflore is one of 30 hospitals overpaid a total of $48 million during the state’s 2024 fiscal year, Marchand previously told Mississippi Today.

The recoupment amount is significant for the 35-bed hospital, which operates a physician-staffed emergency room and offers general, vascular and outpatient orthopedic surgery, cancer care and a full suite of diagnostic services. The hospital’s total operating expenses were $74.7 million in the 2023 fiscal year, according to an audit performed that year. 

Tensions escalated this month after the Division of Medicaid reversed an earlier repayment agreement and instead accelerated the recovery, saying it would withhold $2.5 million in supplemental payments this month, according to an affidavit filed in court by the hospital. Weeks earlier, on Dec. 1, the agency said it would pause recoupments until March of next year, according to hospital leaders. 

“We will make our last payroll tomorrow,” interim hospital CEO Gary Marchand testified at the Dec. 18 court hearing before the agreement was reached. He warned that once the hospital announces layoffs, licensed professionals on staff will take jobs elsewhere and make it difficult to reopen the hospital, even under new leadership.

After the Division of Medicaid paused recovery of the funds for two months, Greenwood Leflore Hospital proposed several plans for repayment within three years. The hospital said these plans would buy it time to first begin receiving higher payments for Medicare patients, which are expected as a result of the hospital’s acceptance to the federal Rural Community Hospital Demonstration Program earlier this year. The program allows selected hospitals to be reimbursed based on their actual costs for inpatient care instead of a fixed amount. The designation is expected to increase the hospital’s Medicare inpatient payments by about $1.3 million a year, said Marchand in a Dec. 18 memo to staff and board members.

“We thought we had finally climbed out of the COVID hole,” Marchand said Thursday of the hospital’s acceptance into the program. The hospital also began providing skilled nursing care for people recovering after hospital stays this year, but will not begin receiving the higher payments for these services until late 2026.

But the Division of Medicaid said in September it did not agree with the solutions for repayment proposed by the hospital and denied the hospital’s request for an administrative appeal process on the matter. The hospital then appealed the matter in Hinds County Chancery Court, asking a judge to uphold the hospital’s right to recourse and pause the pending recoupments. 

Janet McMurtray, an attorney representing Mississippi Medicaid, argued the hospital did not have the grounds to appeal and it is not the responsibility of Medicaid to bail the hospital out of its ongoing dire financial straits. 

“They have not put their house in order,” she said. “…I don’t know what is going to save this hospital, but it’s not going to be Medicaid.”

The Division of Medicaid said it needed security before discussing a repayment plan, she said, emphasizing the agency’s responsibility to recoup the payment in order to keep the supplemental payments program in balance for all hospitals. 

In a letter dated Dec. 17, Senate Public Health Committee Chairman Hob Bryan, a Democrat from Amory, and House Public Health Committee Chairman Sam Creekmore, a Republican from New Albany, encouraged Judge J. Dewayne Thomas to pause the repayments to give lawmakers time to pursue remedies during the upcoming Legislative session. 

“Greenwood Leflore Hospital serves as a critical lifeline for thousands of residents, providing essential medical services that would otherwise be inaccessible,” wrote the chairmen. “Greenwood Leflore Hospital also serves as an important economic anchor in the Leflore County and wider Delta communities, employing more than 400 individuals.”

The hospital has faced a litany of financial challenges over the past several years. Before the COVID-19 pandemic began, the hospital was losing between $7 million to $9 million a year, Marchand previously told Mississippi Today.

The pandemic only worsened the hospital’s precarious financial condition. To keep its doors open, the hospital shut down departments and clinics, went up for lease multiple times, drew down millions of dollars in credit, applied for grants from the state Legislature and pursued a more lucrative hospital designation. In 2023, the hospital suspended the use of 173 beds to control costs, according to an audit. 

Marchand, who plans to step down Jan. 1, repeatedly warned local leaders and state lawmakers that the hospital was on the verge of closure. 

To become more financially secure, the facility vied in 2023 to be designated a critical access hospital. These facilities are reimbursed by Medicare at a rate of 101%, theoretically allowing for a 1% profit. But its initial application was denied because critical access hospitals must be located 35 miles from the nearest hospital, and South Sunflower County Hospital in Indianola is closer, at 28 miles away. 

Greenwood Leflore was one of three hospitals in the state chosen for the Rural Community Hospital Demonstration Program in April.

The state-directed payments helped to stabilize Greenwood Leflore’s finances after it was forced to close valued services. But those payments are set to be reduced over time beginning in 2028 as a result of federal cuts to Medicaid included in the “One Big Beautiful Bill Act” signed by President Donald Trump in July. The hospital will remain open for now, but its long-term financial outlook may depend on how it adapts as those payments are gradually reduced.