The Arizona Hospital and Healthcare Association says it is dropping a lawsuit against the state over healthcare reimbursement rates for the state’s poorest residents.

The association was upset about two separate 5 percent cuts last year in the amount hospitals get paid for treating low income patients on Medicaid, known as AHCCCS in Arizona.

The association wanted to prevent one of those 5 percent cuts, but a court denied that request, prompting the association to drop the suit. There are other ways for the state to help hospitals pay for the healthcare they still provide to patients who are unable to pay, said Pete Wertheim, vice president of the association.

“We have asked the Legislature to approve a 3 percent rate increase for all hospitals across the board … also looking into some special rate relief potentially for rural hospitals," Wertheim said.

The amount the state pays for medical services for the lowest-income residents was frozen in 2007. Hospitals say those expenses are often passed along to other patients or result in cuts to services.

State budget negotiations continue between the governor and Republicans in the Legislature, so it’s still unclear how next year’s budget will affect the hospitals.