AUGUSTA – Gov. John Baldacci, addressing an issue that has occasionally dogged his Democratic re-election bid, and the Maine Hospital Association, which has not always been his best friend, announced an agreement Wednesday designed to pay off hundreds of millions of dollars owed to hospitals for services they rendered to Medicaid patients.

If the governor is able to follow through on his pledge, the deal could salve a longstanding financial sore point for the state and its hospitals.

“We applaud the governor’s hard work to come to this agreement with Maine’s hospitals,” said Steven Michaud, the association’s president.

Not everyone is so thrilled.

“It’s a big step in the right direction, but the agreement does not meet the needs of Franklin Memorial Hospital,” said Richard Batt, the Farmington hospital president.

Franklin Memorial has a budget of $60 million a year and is running $500,000 in the red. The state owes the hospital more than $5 million, Batt said, with some of the debt dating back years. Under the governor’s deal, Franklin Memorial won’t start seeing that money until fiscal year 2008. The debt won’t be paid off until 2011.

“There’s no way that works for us,” Batt said. “There’s no way that even comes close to working for us.”

He vowed to discuss the situation with the Baldacci administration and pursue quicker payments using “any and all options.”

Including, eventually, court.

Other local hospitals, including Stephens Memorial in Norway, St. Mary’s Regional Medical Center and Central Maine Medical Center in Lewiston, were happier about the governor’s agreement, though cautious.

“What we have to see is the actual endorsement by the Legislature,” said Chuck Gill, spokesman for CMMC, which is owed $28.5 million.

Although Baldacci and the hospital association have an agreement, the Legislature must sign off on it.

“I will work my hardest to move the agreement forward in Appropriations. If TABOR passes, I don’t see how we will be able to fulfill the agreement and I have had conversations with the Maine Hospital Association about that,” said state Sen. Peggy Rotundo, D-Lewiston, in an e-mailed statement.

Less than a month from the gubernatorial election, Baldacci’s rivals on Wednesday questioned his actions – or at least the agreement’s timing.

Chandler Woodcock, Baldacci’s Republican opponent, had already challenged Baldacci’s assertion that he balanced the budget while the state owes millions to hospitals, and he stepped up his criticism following Wednesday’s announcement. In a statement, he called it “election year politics at its worst.”

Hospital association lobbyist Mary Mayhew said the deal had been at least three months in the making, but another Baldacci opponent in the race for the Blaine House also suggested the timing was suspect.

“It’s interesting that he decided to do that on the eve of the election,” said independent candidate Barbara Merrill, a state representative from Appleton.

Under the plan, the state would raise weekly hospital payments by adding $82 million in state funds during fiscal years 2008 and 2009. That would produce $221 million in combined state and federal funding, according to the Baldacci administration and the hospital association.

During those same two years, the state would include $20 million to pay for 2004 hospital debts. That would produce a total of $54 million in state and federal money, the joint statement said.

The agreement calls for another $102 million in state money – for a total of $275 million in state and federal funds – to be budgeted for fiscal years 2010 and 2011 so that all remaining MaineCare hospital debts would be covered.

Green Independent Party candidate for governor Pat LaMarche, who has called for universal single-payer health care, said patching the system isn’t good enough.

“Clearly, paying our bills is a necessity,” she said, but added that Medicaid is increasingly burdened with “a rapidly growing impoverished sector.”

Hospital officials said Medicaid, also known as MaineCare, insures 270,000 people in Maine.

“I am pleased that we have been able to move forward in assuring appropriate payment to Maine’s hospitals in a timely fashion,” Baldacci said. “We have a shared commitment to the people covered under the MaineCare program and to the providers who care for them.”

Timely or not, the hospital association – which has been among those butting heads with the Baldacci administration over Dirigo Health funding – gave its blessing.

“As caregivers, hospitals know how important this program is to ensuring that the neediest Mainers, both children and adults, receive the care they need when they need it,” Michaud said. “MaineCare must be preserved to ensure the health of our most vulnerable citizens.”

The agreement aims to leverage about $347 million in federal Medicaid matching money.

The Baldacci administration would commit to raising $204 million in equal installments over the next four years.

Staff writer Lindsay Tice and The Associated Press contributed to this story.

According to the joint statement, the state could accelerate scheduled payments if revenue surpluses allow. But just last week, Baldacci’s administration said state government faces a potential gap of $570 million between available resources and anticipated demands for the next two-year budget cycle that begins in mid-2007.

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