The Arizona Hospital and Healthcare Association has dropped its lawsuit against the state. The group had sued over a 5 percent cut in the reimbursement rate from the state for hospitals and physicians treating Medicaid patients. From Phoenix, KJZZ's Mark Brodie reports.

Senate President Steve Pierce speaking Thursday. Behind him, from left: Bruce Pearson, John C. Lincoln Hospitals; Laurie Liles, AZ Hospital & Healthcare Association, Sen. John McComish (Photo by Mark Brodie - KJZZ)

MARK BRODIE: The cut took effect last October, and was part of last year’s state budget. It followed another 5 percent rate cut in April, and a previous rate freeze. The Hospital and Healthcare Association had sued to try and block the latest provider rate cut, but a federal judge dismissed the suit. Association President and CEO Laurie Liles says her group is now working with state lawmakers to find solutions to several problems with health care funding.

LAURIE LILES: We considered our options, and we could have chosen to pursue the case or to appeal it. We chose not to because it’s the right thing to do, it’s in the interest of all parties for us to work together and move forward.

BRODIE: Liles says she hopes that work leads to action on a number of issues, in addition to the five percent provider rate cut. Senate President Steve Pierce called the decision to drop the lawsuit an olive branch from the hospitals, and hopes to take up the issues next year.