COEUR d'ALENE - It's a budget balancing act some health care providers are calling a Band-Aid over a big-time financial wound.

But something needs to be done so the state can balance its Medicaid budget before the next fiscal year and not lose federal dollars contributing to that pot, the Department of Heath and Welfare said.

"It hurts everybody, no doubt," said Tom Shanahan, spokesman for the Department of Health and Welfare. "We really regret we have to do it."

Beginning in late April, the Medicaid program will be putting a temporary pause on claim payments to providers. Those providers will still receive their checks - just not until the first week of July.

The holdups are so the Medicaid program can balance its budget - a state requirement - as it ends its fiscal year June 30. Claims submitted close to the deadline will be paid out after the new fiscal year budget is on the books.

Hospitals and nursing homes will experience the longest delays, between eight to 12 weeks, the department said. The rest of the providers will experience up to three-week delays for claims filed in June.

"There are no other options," Shanahan said, adding that withholding payments to straddle fiscal years was a better solution than cutting services. "The alternative was to cut reimbursement or cut services and nobody wanted to see that."

Medicaid's trustee and benefits budget was reduced by $20.5 million in state general funds, and after a federal credit based on a change in pharmacy costs, the program is anticipated to fall $135 million short in total funds.

Under the American Recovery and Reinvestment Act, better known as the stimulus, the "prompt payment" requirement makes Medicaid pay 90 percent of claims within 30 days of their filing, and 99 percent of claims must be paid within 90 days. The Medicaid payments to providers are matched at 80 percent with federal dollars.

Should the state miss those marks, that federal match rate would fall to 70 percent during the period of non-compliance, which would mean the state's general fund would have to help bridge that shortfall.

"I think its the sign of the fiscal times," said Brock Merrill, business services director at Kootenai Medical Center. "If the fiscal times don't improve, I could see this happening again."

Patients at KMC won't notice any differences or changes, as it's a billing formality and not an out-of-pocket liability, Merrill said.

Only around 10 percent of KMC patients have Medicaid.

Hospitals and nursing homes were selected for the longer delays as they account for 45 percent of the state's payouts while accounting for only a small number of claims, Shanahan said. That will make it easier for the department to still hit its 90 percent threshold.

Providers are not required to bill during the holdback period, either. They can hold them until June 27 to ensure prompt payment.

More directly affected are the organizations where a large number of patients rely on Medicaid, such as TESH, Inc., in the Coeur d'Alene Industrial Park.

The nonprofit agency is planning on taking a bank loan to cover the gap, since it's expecting around 260 clients who rely on Medicaid to take part in the agency's summer activities.

Terri Johnson, director of rehabilitation at TESH, said the programs will continue, but the agency will be stretched thin financially paying off the interest rate on the loan while it waits for reimbursement payments.

"That's hard to run a business that way," she said, adding that TESH has had to reduce staff salaries by 5 percent as well as decrease work weeks by two hours to make up for already falling revenues.

"Most agencies can't go that long," she said of the wait. "We're on a week-to-week basis, hoping for the best."

Around 30 residential providers who have clients who live with them will be affected as well, Johnson said.

She also called the payment delay a stop-gap solution, wondering "what happens next year?"

"It's a fairly significant delay," Shanahan agreed. "We can't be doing this every year. It puts a tremendous strain on the providers."