Memorial Hospital at Gulfport has paid the state $13 million and dropped state and federal lawsuits against Medicaid under a settlement between the state and the hospital, Attorney General Mike Moore said Tuesday.

The state agreed to drop a lawsuit it filed against the hospital in Hinds County Circuit Court earlier this month, claiming the hospital owed $21 million in reimbursements for Medicaid last year.

Moore said the hospital's decision to not participate in the rural hospital program had threatened the amount of federal money the state would get for Medicaid, a federal-state program that helps the elderly, disabled and needy.

Under a state law enacted last year, rural hospitals pay a fee that is matched by federal funds. That money then is returned to the hospitals through Medicaid reimbursements.

Last month the hospital filed a lawsuit in federal court against Medicaid claiming the money the state was requiring it to pay was unconstitutional. The hospital had also filed a lawsuit in Hinds County Circuit Court against Medicaid claiming the state owed the hospital $9 million from 1999.

"It will take some time before we know what impact this will have, but it's very helpful for us to have settled this case," Moore said.

The settlement comes in the midst of the state's $148 million Medicaid deficit.

Diane Gallagher, director of community and corporate relations for Memorial Hospital, said the settlement is "In the best interest of the hospital and of the people we serve." Gallagher would not discuss the settlement further.

Gov. Ronnie Musgrove said in a statement: "I'm pleased we were able to come to an agreement that assures continued access to health care on the Gulf Coast for those who need it most," he said.

Also as part of the settlement, the state's Medicaid system will work with the hospital to maximize the dollars state hospitals receive under the Centers for Medicaid Services' Upper Payment Limits Program, under which hospitals can be reimbursed more for costly services they provide to indigent patients, Moore said.