The many Whidbey Island residents with the military’s Tricare health insurance can continue getting care at Whidbey General Hospital.

Last month the hospital threatened to drop Tricare due to low reimbursement rates from the government, a prospect that sent shivers through the community. But now it appears that all parties are moving toward a funding solution.

Almost literally on the eve of terminating the contract with the military health care provider, a timely conference call Thursday morning with Whidbey General administration and local and regional Tricare representatives produced discourse that turned some frowns upside-down.

“Today I think we finally made the breakthrough,” hospital Chief Executive Officer Scott Rhine told Greater Oak Harbor Chamber of Commerce members at Thursday’s luncheon. “They told us that they did agree that Whidbey General, that smaller rural hospitals in close proximity to military bases, did need higher levels of reimbursements.”

Reimbursements from Tricare, the Department of Defense’s health care program for members of the uniformed services, their families and survivors, have been well below hospital costs. The corresponding losses for the hospital were becoming overwhelming. A strongly-worded letter from the hospital was sent to Tricare in August, making clear the dire situation the reimbursement system had created.

A special hospital board meeting was called for Monday to consider terminating the contract. Rhine said the meeting has been cancelled. A cacophony of raucous applause from the chamber guests successfully conveyed their relief.

The disparity seems to center on the classification of Whidbey General as a “critical access hospital.” Whidbey joined the group of approximately 1,200 hospitals at the end of 2005 in order to increase government sponsored reimbursements. The designation was designed specifically to provide cost-based reimbursement for Medicare patients in smaller, rural hospitals. With Tricare, the move backfired.

Scott Celley, external affairs vice president with TriWest Healthcare, said in the course of passing legislation for the critical access hospitals, the reimbursement rates did not take affect for outpatient services, nearly 80 percent of Whidbey General’s business.

“Tricare generally follows Medicare for most services,” Celley said. “Up to this point we have been affording Whidbey General the maximum reimbursement that law allows.”

Rhine said TriWest, the private sector contractor for the Defense Department that negotiates and arranges military health care contracts, assured the hospital a proposal would be drafted and presented to the Office of Management and Budget by Oct. 10.

“The proposal, in essence, would be to increase the critical access hospital reimbursement to what Medicare is paying, not just on Whidbey Island but across the country,” Rhine said. “We’re excited to hear that.”

The hospital is currently reimbursed by Tricare 39 cents for each dollar for most services. Medicare reimburses 56 cents per dollar.

Celley said Tricare Management Activity, which is responsible for managing the health care system, will conduct an evaluation not only for Whidbey General, as Rhine mentioned, but for all critical access hospitals.

“Whidbey General gets credit for bring this issue to the floor,” he said.

TriWest President and CEO David McIntyre, Jr., made no effort to mask his company’s commitment to addressing and ultimately resolving the issue that has sparked fear in many local military families.

“TriWest and the Tricare Regional Office-West have been diligently working to resolve this issue, and we are grateful for Whidbey General’s decision to continue as a valuable partner in caring for the deserving men and women in uniform,” he said.

Rhine said although the outcome of the evaluation is unknown, the good faith agreement is enough to continue accepting Tricare.

“This is a positive indication,” the CEO said. “We know now that Tricare does understand the problem. They want to work with critical access hospitals. And that’s enough for us to continue to work with them on a positive basis.”

“They will continue as a Tricare provider as the evaluation goes through,” Celley confirmed.

Whidbey General Hospital is in a unique position because of its geography and continual stream of military patients. McIntyre acknowledged the need for an evaluation, and if possible, a revamping of the reimbursement system.

“We support the government’s decision to recognize Whidbey General Hospital’s unique and significant role as the only major hospital serving the large military population on the island,” he said. “We are pleased that the government is evaluating the needs of the Whidbey military community, as they consider a method of addressing the difference between Medicare and Tricare reimbursement for critical access hospitals in a comprehensive way,” McIntyre said.

“Just the fact that it’s gotten to this point was a huge relief to us and I believe it will be a positive thing in our community,” Rhine said optimistically. “Because I think eventually it will happen.”