As hospitals fight cost-cutting reforms to the State Health Plan, State Treasurer Dale Folwell remains undaunted.
The treasurer’s fight to overhaul the state health plan has pitted state employees and taxpayers against the hospital industry. Folwell promises to save taxpayers $258 million and plan members almost $57 million by tethering payments to Medicare prices.
That money has to come from somewhere, though, and the hospitals are fighting the cuts to their revenue, Fowell said Tuesday, July 9, in his monthly Ask Me Anything telephone conference with reporters. The state health plan is less than 4 percent funded, and unless something changes it will be unable to pay providers by 2023, the treasurer says.
Under the former system, the plan paid providers based on confidential rates. In other words, the government shelled out money without knowing the price of providers’ services or what they charged the state insurance program. According to a statement from the treasurer, the state “didn’t have a clue” what it was paying or “what the hell we were spending this money on.”
Supporters of the Clear Pricing Project argue this lack of transparency led to widespread price inflation. Meanwhile, the state auditor released a performance audit in 2011 that criticized the old system for opacity.
“You can’t cut the cost until you know what the cost is,” Folwell said. “We’re in desperate need of transparency.”
Hospitals countered that these price differentials were crucial for swallowing the cost of caring for the uninsured. They warn that binding prices to Medicare would destroy rural hospitals and gouge tens millions of dollars from the budgets of hospitals across the state.
Cone Health CEO Terry Akin has said that the new system would slice Cone’s budget nearly in half, saying in a statement the new health plan would “reduce, and in some cases eliminate, services we provide daily. Thereby, risking our ability to invest in the future.”
The fighting was ugly in newspaper opinion pages, but now it has evolved into an escalating game of chicken. The treasurer demands that hospitals register, while hospitals refuse to do so. When the contract period expired last week, nearly 25,000 providers signed on, but only three hospitals had signed.
“I’m not sad or surprised by their decision not to provide health care to hardworking state employees and retirees,” Folwell said. “But what business would turn down the amount of profit that we’re offering these institutions unless nobody knew what we were paying to start with?”
Some 720,000 state employees have the most to gain, but they also stand directly in the crossfire. If hospitals don’t register by January — deadline just six months away — state employees risk paying out-of-network costs, just as though they did not have insurance at all.
When UNC Health’s dark money scandal broke, WBTV revealed UNC Health had paid almost $60,000 to the N.C. Healthcare Association to fund the 501(c)(4) organization Partners for Innovations in Healthcare, which targeted the Clear Pricing Project. The hospitals’ solidarity has the State Employees Association of North Carolina calling them a “cartel.”
“The hospitals are trying to gin up fear and apprehension in state employees with this idea that by Jan. 1, you’ll be out of network if you seek car at their facility,” said SEANC Executive Director Robert Broome. “As a business tactic, I’m not at all surprised because it’s right out of the hospitals’ playbook. They are in effect holding state employees and retirees hostage. And while it may be an acceptable business tactic, to me, it is a moral outrage.”
Meanwhile, smaller providers are gathering around the treasurer’s plan in the hopes of “leveling the playing field.”
“This proposal provides a glimmer of hope to the private practitioner that his/her healthcare practice may be able to compete with these larger systems,” Rehabilitation Associates Network said in a letter to the treasurer.
The CEO of Tryon Medical Partners, one of the first to sign onto the plan, has all but lauded the treasurers’ attempts to introduce clear pricing.
“The doctors didn’t want to settle for the status quo, so they felt like it was their civic duty to support what Folwell was proposing,” said Tom Williams, spokesman for Tryon Medical Partners. “You can’t expect change by doing the same stuff.”
The House pushed through House Bill 184 to create a legislative study committee, which would effectively freeze all attempts at reform for at least a year.
“This deadline that was last week was not the end of everything,” Folwell said. “It was just the beginning. The beginning of the evolution of the state health plan using its buying power on behalf of people who teach, people who protect, and people who serve our state.”
Editor’s note: The story initially misspelled Cone CEO’s Terry Akin’s name. We regret the error.