New Hampshire was the second state this month to be sued for legislation that funnels federal payments previously made to hospitals into state budgets.

Ten hospitals in New Hampshire filed a lawsuit last week in U.S. District Court in Concord, N.H., alleging that New Hampshire is violating the Medicaid Act by not providing sufficient reimbursement to hospitals and physicians to treat Medicaid patients.

Earlier in July, the Washington State Hospital Association filed a lawsuit in state court to block a law that would allow the state to make up a shortage in its general fund with the proceeds of a hospital tax.

Also at hand is a case before the U.S. Supreme Court that will determine whether providers can sue in federal courts to enforce Medicaid law. The administration filed an amicus brief in May arguing that they cannot. Arguments in the case are scheduled for Oct. 3.

Steve Ahnen, president of the New Hampshire Hospital Association, said aspects of the suit in California are “consistent” with the suit in New Hampshire.

New Hampshire’s budget, which went into effect July 1, will cut $230 million in disproportionate share funding for some hospitals and health systems in New Hampshire over the next two years. The hospitals allege that eliminating DSH payments is “contrary to the express requirements of federal law and the equally unambiguous concerns of Congress.”

Hospitals that filed suit are Dartmouth-Hitchcock (Lebanon); Elliot Health System (Manchester); Catholic Medical Center (Manchester); Wentworth-Douglass Hospital (Dover); Exeter Health Resources (Exeter); Southern New Hampshire Health System (Nashua); St. Joseph Hospital (Nashua); LRGHealthcare (Laconia); Cheshire Medical Center (Keene); and Frisbie Memorial Hospital (Rochester).

Several of those hospitals are planning to close affiliated physician practices to new Medicaid patients, shut down community-based programs and cut jobs, according to the lawsuit. Elliot Health System, which owns 264-bed Elliot Hospital, said it laid off 182 employees as a result. Cheshire Medical Center, a 140-bed hospital, said it could cut up to 20 positions.

Dr. John Schlegelmilch, chief medical officer at Cheshire Medical Center, said the hospital will take a $13 million hit this year, including the estimated $7.9 million it owes for the Medicaid Enhancement tax, and which will no longer be refunded, and the roughly $5 million it expects to spend on Medicaid patients without being reimbursed. “It will affect our ability to maintain access,” Schlegelmilch said. “It’s a very large unexpected expense.”

The new budget is expected to reduce $230 million in DSH payments and $28 million in other payments, which include graduate medical education payments, catastrophic payments and deferral of outpatient cost settlements.

Prior to the change in the state budget, hospitals in New Hampshire paid 5.5% of their net patient services revenue to the state as part of the Medicaid enhancement tax. The payments were matched by the federal government and returned to the hospitals. Now, the matching funds will be given to the state’s general fund.

Calls to the New Hampshire Attorney General’s office were not returned.