University of Kansas Hospital officials on Friday announced the settling of a yearlong dispute that’s expected to trigger the release of millions of dollars in Medicaid payments from the federal government.

“This is a major accomplishment that will help both the hospital and the state Medicaid program continue to serve the people of Kansas,” said hospital president and CEO Irene Cumming.

The payments will be used to offset a portion of the hospital’s uncompensated care costs, which are expected to exceed $60 million in 2004.

The amount of the settlement is not yet known.

“That’s still being calculated,” said Dennis McCulloch, the hospital’s director of public relations.

The dispute arose after federal officials questioned long-standing policies — called “intergovernmental transfers” — that allowed states to increase their Medicaid payments to create unintended windfalls. Some states used these windfalls to fund highways, schools and prisons.

Kansas, like most states, took advantage of the transfer mechanism but was not accused of misspending its Medicaid payments.

“There’s never been any evidence that Kansas abused the system,” McCulloch said. “But the feds did not want to move forward until a system was in place to keep it from happening here as well as in those states where it was happening.”

In her statement, Cumming praised the state’s congressional delegation, Gov. Kathleen Sebelius and the Kansas Department of Social and Rehabilitation Services for their help in breaking the deadlock.

“They kept the attention of the federal officials on this issue at hand,” McCulloch said. “The biggest problem we had was getting answers we could respond to.”

Attempts to reach federal officials for comment Friday afternoon were unsuccessful.

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The settlement also signaled the end of a dispute over roughly $30 million in “disproportionate share” payments to hospitals that provide unusually large amounts of indigent care.

Forty Kansas hospitals are entitled to these payments. The University of Kansas Hospital is expected to receive the lion’s share, about $8 million.

“There wasn’t much disagreement over disproportionate share,” McCulloch said. “It got caught up in the intergovernmental-transfer issues.”

Lawrence Memorial Hospital is not eligible for disproportionate share payments, officials said; Ransom Memorial Hospital in Ottawa is.