Game of Chicken – North Carolina Style

Hundreds of millions of dollars and medical care for more than half a million people are at stake in what amounts to a game of chicken over a cut in how much the largest health insurance plan in North Carolina pays for care.

Deadline approaches for changes in State Health Plan with zero hospitals signed on

By Travis Fain, WRAL statehouse reporter

RALEIGH, N.C. — With less than two weeks to go before the deadline, only a fraction of health care providers around the state have signed new contracts with the State Health Plan for government employees and teachers.

No hospital is among them.

Hundreds of millions of dollars and medical care for more than half a million people are at stake in what amounts to a game of chicken over a cut in how much the largest health insurance plan in North Carolina pays for care. If the sides can’t strike a deal, every hospital in the state and an untold number of doctors will be out-of-network for state employees, teachers and retirees on the plan, boosting their out-of-pocket costs and causing confusion.

The State Health Plan, as it works now, has some 15,000 contracts in place covering roughly 65,000 providers. The new plan, set to take effect Jan. 1, has 640 finished contracts on hand, representing 10,000 providers, though the actual number may be higher due to a backlog in processing.

The State Treasurer’s Office, which runs the plan, said it expects those numbers to tick up massively by July 1, the deadline to get the contracts signed. It wants to save employees and state taxpayers money by pegging what the plan pays doctors and hospitals to what Medicare pays, plus an average of 82 percent.

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Treasurer Dale Folwell has railed against the current pricing system, where prices for similar procedures vary widely and contracts are negotiated in secret, hospital by hospital, by the plan’s administrator, Blue Cross Blue Shield of North Carolina.

The State Employees Association of North Carolina backed Folwell’s push for lower costs, and the board that oversees the State Health Plan gave unanimous approval to the shift last fall.

The state hospital association says Folwell’s proposal would upend health care in the state, cutting into the money hospitals depend on to fund emergency rooms and other services that don’t pay for themselves. Hospitals have called on Folwell repeatedly to delay the changes and negotiate some other end, and so far they’re holding the line against the new contracts.

A hospital-backed bill to block Folwell’s move to reference-based pricing passed the House in April, but Senate President Pro Tem Phil Berger said Monday that it’s unlikely to move in the Senate.

“I think we will continue to see how this plays out,” Berger, R-Rockingham, said.

What happens next, Folwell said Tuesday, “is to be determined.”

The fight is one of the most intense in state politics, and it’s moving parallel to the debate over Medicaid expansion, which would pull down billions in federal money for the state’s medical industry, and a fight over control and money at Vidant Health’s flagship hospital in Greenville.

Folwell and SEANC have asked state employees to call their local hospitals about signing the new deals.

“If they say no, ask them why they are against transparency and lowering the cost of health care,” Folwell suggested in an alert that went out to plan members.

Hospitals are lobbying the legislature for the delay bill. North Carolina Healthcare Association spokeswoman Julie Henry said this week that the group understands Folwell’s desire to cut costs and “get the State Health Plan on a more stable course,” but the plan’s most recent financial statements show “there’s enough time to come up with a better plan.”

Berger said he doubts a legislatively mandated delay would help. The House bill would create a study group and lock in the current system to the end of next year while future steps are planned.

“I suspect … that we’d be in the same position when we get to that date,” Berger said.

The State Health Plan was once managed by the General Assembly itself, something the Republican legislative majority changed after it came into power. Berger said he’s not interested in second guessing the way Folwell, a fellow Republican, runs the plan.

“If we get into micromanaging how the treasurer is making decisions, then we may as well just take the State Health Plan back,” he said.

The plan announced a deal Monday with the Community Care Physician Network, describing it as the largest independent doctor’s network in the state. Last week, the plan announced a deal with MinuteClinic, which has more than 70 locations in North Carolina at CVS pharmacies and Target stores.

But without the state’s 100 or so hospitals, it’s difficult to see how the State Health Plan can meet one of its key mandates: Providing a statewide network of quality health care for more than 700,000 people. Some 550,000 of those people are on plans that would be affected by Folwell’s shift to Medicare-based pricing.

“It’s great that MinuteClinic has signed on,” Henry said, “but MinuteClinic can only do so much.”

Henry said the association doesn’t speak for hospitals when it comes to the new contracts, in part to avoid an antitrust violation. The group “cannot advise our members on contractual matters,” she said.

SEANC Executive Director Robert Broome suggested this week that, if the association has not crossed that line, “they sure do seem to push the limits.”

“I think it would be highly unusual for all these hospitals to collectively decide not to participate,” he said.

Broome provided an email that went out to hospital executives June 11, after Broome began calling board members at different hospitals around the state about signing the new contract.

The email, from former Vidant chief executive and current N.C. Healthcare Association President Steve Lawler, says in part: “We would advise that Mr. Broome’s requests remain unanswered.”

“We ask that Treasurer Folwell work together with healthcare providers to find a solution that works for everyone,” the email says, “because at the end of the day, this is about the people of North Carolina.”

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