For years, independent health-care providers have resisted consolidation in the medical market. State Treasurer Dale Folwell hopes to lend them a hand with State Health Plan payment reforms.
“We think the long-term success of health care in North Carolina is going to be based on independent physicians, independent behavioral health specialists, and actually independent hospitals who are able to figure out how to provide the highest-value, lowest-cost product to any of their customers,” Folwell said Tuesday, Jan. 8 during his monthly Ask Me Anything teleconference with reporters.
Reforms he is leading will offer many health-care providers pay increases from the State Health Plan because they earlier reimbursement plans short-changed them.
Folwell has rolled out a reference-based pricing model. Medicare reimbursement rates are the starting point, and are negotiated up from there. He said on average the state will pay health care providers 177 percent of the Medicare rate. He projects a $300 million savings for the State Health Plan, and $65 million for members.
The proposal has been well-received by providers, Folwell said, and he expects thousands of primary care physicians and mental health professionals — the central points of contact for most patients — to sign on. Most would see higher payments. Some providers who currently charge the state 700 to 900 percent of the Medicare reimbursement rate would take a hit.
“We’re not out here evangelizing on how to fix health care for the whole state,” he said, instead looking for the best deals for 720,000 active and retired state employees. Still, he acknowledged, with the State Health Plan spending $3.4 billion annually, and covering about 1 in 10 state residents, its actions could ripple markets.
Getting higher pay from the State Health Plan could help independent providers resist the pressure to go corporate, and preserve an important level of competition that can curb medical costs. It would also allow independent providers to maintain flexibility in writing prescriptions and making referrals, Folwell said.
Doctors working for large health systems generally refer patients to in-house diagnostic services, which might not always be the best option, and drives up costs, Folwell said, citing a recent Wall Street Journal expose.
Folwell also wants greater transparency, including hospitals posting procedure costs. He cited the recent example of a State Health Plan member who was told by a provider it would cost $1,200 up front for an echocardiogram, but was unable to find out how much the total cost would be. After four days of research the employee was able to get the procedure done 30 miles from home for less than $250.
Folwell inherited a State Health Plan that is vastly underfunded. S&P Global issued a report in late November showing the plan is less than 5 percent funded. Folwell has said fully funding the $34.4 billion deficit would require every North Carolinian to pay almost $3,200.
Pew Charitable Trusts has cited North Carolina as having one of the nation’s highest combined unfunded liabilities for retirement and health care plans, just behind Illinois.
“For nearly 40 years promises were made for state employees and retirees to be eligible for health care, but no money was ever put into reserve for that purpose,” Folwell said.
The N.C. Healthcare Association, whose members include hospitals and large health care systems, has put up stiff opposition to Folwell’s reference-based pricing proposal. Its lobbyists met with lawmakers in November attempting to get legislation passed blocking the move.
Association spokeswoman Julie Henry said the organization’s opposition to Folwell’s plan is unchanged.
“We are continuing conversations with legislators about our concerns, and the impact the proposed plan will have on access to health care, not just for state employees and retirees, but for entire communities,” Henry told Carolina Journal.
Members “are advocating for the State Health Plan to adopt proven methods to provide and coordinate quality-driven care to improve the lives of state employees and retirees, while achieving efficiencies in cost both for the plan and for taxpayers,” Henry said.
Folwell also is continuing to reduce unfunded liabilities in the state retirement system. Last year the pension plan paid out more than $6 billion in benefits, and had negative earnings. The unfunded liability grew by several billion dollars.