News: CJ Exclusives

Treasurer wants to protect taxpayers, state workers from UNC Health Care merger costs

Folwell asks for $1 billion bond in case merger of medical giants winds up draining state treasury

UNC Medical Center, Chapel Hill (Image by Yeungb, Wikicommons)
UNC Medical Center, Chapel Hill (Image by Yeungb, Wikicommons)

State Treasurer Dale Folwell wants UNC Health Care to post a $1 billion performance bond guaranteeing medical costs would not increase for State Health Plan participants, or hit state taxpayers in the wallet, if the system enters into a proposed partnership with Carolinas HealthCare.

Folwell, who raised concerns with reporters earlier this month about the proposed joint operating company the two health-care giants are negotiating, announced Tuesday, Feb. 13, he is asking UNC Health Care officials for the good faith money.

Folwell says the bond is needed to safeguard the stability of the State Health Plan under his purview. The plan represents more than 750,000 teachers, state employees, retirees, current and former lawmakers, state university and community college personnel, and their dependents.​

“We are open to working with the state treasurer on ideas to serve the health care needs of state employees at the lowest possible cost,” said UNC Health Care spokesman Alan Wolf. “However, we are not an insurance company. Our No. 1 job is taking care of patients. We do not control inflation or other variables associated with the cost of care.”

Wolf said the goals of the partnership “are to improve health care for all North Carolinians, increase access to care and reduce medical costs — for state employees, the underserved and all of our patients. Through our partnership, we believe we can capitalize on the strength of our two organizations to better control costs, and benefit the public accordingly.”

Wolf said a decision on the partnership is expected by the end of March.

The two health-care providers announced last August they hoped to form a new organization. Combined, the two entities would operate more than 50 hospitals employing 90,000-plus people. That would constitute one of the largest nonprofit health care providers in the nation with profits of more than $1 billion per year.

Health care economists have raised concerns about the spate of hospital consolidations sweeping the country. Former federal antitrust regulators have told Carolina Journal mega-mergers among hospital networks create powerful entities that rarely reduce costs, and more likely use their newfound might to ward off competition, thus driving up costs and insurance premiums.

According to a news release from Folwell’s office, during a recent UNC Board of Governors meeting he was asked about the proposed agreement. He said he didn’t have enough information to form an opinion.

“I’ve spent my whole professional and personal life trying to do business with people where what they say is as important as what they sign their name to,” Folwell said.

“With a lack of details on this merger, and little evidence that mergers like this have generated savings for the public, I feel I have a fiduciary responsibility to pursue this guarantee that will protect North Carolina taxpayers,” Folwell said.

He raised the question of a performance bond during a recent meeting with Dr. William Roper, the UNC Health Care CEO who doubles as dean of the UNC School of Medicine, and others.

The bond would be underwritten by a bank or insurance company. UNC Health Care, or the combined entity, would buy the bond guaranteeing health-care costs would actually decrease as Roper promised. If they didn’t, the bond would repay any increased costs to the state.

Folwell said he is eager to work out bond details with Roper.

“We have to cut $300 million in plan expenses,” Folwell said. “We spend $450 million a year with these two hospitals. We have a $34 billion unfunded health care liability for retiree coverage that has been growing for 40 years. Given the fact that we are in a medical arms race, we just can’t take the chance that the combined organization will increase costs for the taxpayers of this state.”