City Draws Fire Over Health Plan


“The hospital was forced to file suit against 10 individual patients. In the end, the insurance companies payed the requested amount, the individuals paid their out-of-pocket expenses and eventually the repricing company stopped the practice.”

Editor’s Note: This article does not tell the whole story and may be misleading. We called the city for more information and found this to be an interesting case study; City of Richmond eschews managed care contracts and instead implements a reference based pricing model for their self-funded health plan in a local one hospital town. Hospital pushes back hard, city stands firm and to this day continues to pay medical caregivers through their reference based pricing model. This is more evidence that Cost Plus / Reference Based Pricing will work only as long as the Plan Sponsor is “all in” and willing to take a stand.

Richmond city officials continue to look at options in their effort to hold down health care costs for employees.

But that process has caused a rift in the city, particularly in talks with Reid Hospital about pricing and providing care.

It also has drawn fire from the Wayne County Area Chamber of Commerce, whose Issues & Advocacy Committee recently released a position statement urging the city to continue talks with Reid.

“That’s what we’re doing,” said Richmond Mayor Sally Hutton. “We just haven’t gotten anywhere. The bottom line is we are trying to find the best package to hold down costs for the city and for our employees.”

The city currently is using a firm called ELAP to “reprice” the cost of medical procedures and treatments at hospitals and other medical facilities. That firm samples the cost of procedures at various facilities and then establishes an amount that insurance will pay hospitals and other medical care providers.

That is not acceptable to Reid.

“It’s not an accurate representation of costs,” said Craig Kinyon, Reid president/CEO. “What they are calling costs excludes some major items of cost. It’s absolutely not a proxy for cost.”

One of the costs for Reid is the shortfall in Medicare and Medicaid reimbursement from the federal government. Another is the cost for patients who don’t pay or can’t pay.

“Those are costs of doing business,” Kinyon said.

Kinyon said a firm tried the same tact in 2008, offering payments for procedures and treatment that were well below the bills submitted by Reid.

The hospital was forced to file suit against 10 individual patients. In the end, the insurance companies payed the requested amount, the individuals paid their out-of-pocket expenses and eventually the repricing company stopped the practice.

“We certainly hope the city does not continue down this road,” he said.

Kinyon said when patients come to the hospital for treatment, they sign a form saying they are responsible for the bill. He said he hopes to avoid a similar scenario as the one that played out in 2008.

Chamber officials agree.

“The new plan chosen by the city has the potential to have undesirable outcomes,” committee members wrote in the position statement. “Short-paying invoices is not an appropriate way to manage health care costs.

“Being adversarial rather than working together to find win/win solutions is a recipe for disaster,” the statement said.

But Hutton said the city will continue to evaluate Reid’s and other proposals.

“Our employees have found much cheaper rates at hospitals in Winchester, New Castle, Oxford and Dayton,” she said. “We’re looking at other plans and searching for the savings.”

Sue Roberson, city director of human resources, said she felt “ambushed” by the chamber position letter. It came at a chamber meeting she was invited to with Reid officials.

“I didn’t find out until the last minute that it was coming,” she said. “I certainly felt they could have handled it better.”

The chamber letter said a partnership between Wayne County and Richmond Community Schools has resulted in health care savings for both.

County Commissioner Ken Paust said “there’s always somebody who is cheaper” but overall he is pleased with Reid.

“They’ve been good to work with. They have the latest technology and the latest equipment. These costs are something we just have to constantly work to contain,” Paust said.

Aleasia Stewart, Richmond Community Schools’ executive director of human resources, said school officials have added obesity, smoking, employee assistance and other programs to help control health care costs.

“It’s a combination of all those things,” she said. “It take a lot of different things in addition to working with Reid, but working with Reid is an important component.”

Roberson said the city’s health care costs topped $6 million last year.

“We’re looking at what else we can do. With Reid, we still have some pretty significant concerns in terms of cost. We’re continuing to look at employee wellness,” she said.

That is one area of agreement for the city, the chamber and Reid.

“You need to start there, establishing a wellness program for employees, a relationship for them with a physician, trying to manage their health care,” Kinyon said. “We believe the best way to reduce health care costs is by keeping people well and at home.”

“The best strategy to reduce the city’s health care expenses is an increase in preventative care and managing chronic illnesses,” the chamber’s position statement said.

Roberson said the city has begun that effort and already has cut some health care costs. She said in 2011, the average health care cost to the city per employee was $17,090. In 2012, that number was $16,134.

In 2013, it was $14,500.

“That’s because we’ve done some cost containment measures,” she said. “We had the spousal carve out, health fairs and we’ve kept premiums the same for four years. We thought an employee clinic would also help this effort, but council did not agree.”

The administration proposed the clinic, budgeting $500,000 for it, but the Richmond Common Council removed the expenditure from this year’s budget.

Kinyon said, “We appreciate the health care goals Sue has articulated and we would like to be a part of the attempt to address that.”

“We continue to pass ideas back and forth. Hopefully, we reach an agreement,” he said.

Staff writer Bill Engle: (765) 973-4481 or Follow him on Twitter at