North Carolina Caves – Hospitals Win Big

“By spending millions of dollars to oppose us and by using cartel-like tactics, these organizations were able to convince most hospitals to boycott the State Health Plan,” said Treasurer Folwell. “If big hospitals could do this to their largest customer, just think what they can do to the individual average citizen or business.

NC State Health Plan Announces Network for 2020

Network Will Include Major Hospitals Providing Full State Coverage Without Interruption

(Raleigh, N.C.) – State Treasurer Dale R. Folwell, CPA, the State Health Plan (Plan) and Blue Cross Blue Shield of North Carolina (Blue Cross NC) announced today that the Plan’s network for 2020 will consist of Blue Options Network and the new North Carolina State Health Plan Network. Combined, this network will consist of more than 68,000 providers.

The network begins January 1, 2020 and will be offered to the more than 727,000 members of the Plan during Open Enrollment this fall. The network is designed to comply with access to care requirements for hospital coverage as well as build upon the Plan’s success in recruiting 28,000 medical providers, including 5 hospitals, who are committed to open contracts and lower prices.

For members, this means they will continue to have access to the provider network they utilize today along with some new providers that were not previously part of the Blue Options Network.

The network will continue to be administered by Blue Cross NC, the Plan’s third-party administrator. Blue Cross NC has been instrumental in setting up this network and will play a vital role going forward to assure the network’s success. The Clear Pricing Project does not impact retirees on the UnitedHealthcare Group Medicare Advantage Plans.

“We look forward to working with Treasurer Folwell and the State Health Plan to implement these changes and ensuring that teachers and state employees have uninterrupted access to quality care,” stated Patrick Conway, MD, Blue Cross NC President and CEO.

“The Clear Pricing Project is just the beginning. I appreciate that 28,000 providers – independent primary care providers, behavioral health providers, independent provider networks and the 5 courageous hospitals – have chosen to provide care to those who serve in state government,” said Treasurer Folwell. “These medical providers should be applauded.”

The more than 28,000 providers that signed on to the Clear Pricing Project will eventually be offered the opportunity to participate in alternative payment arrangements. These arrangements, or models, include medical-procedure “bundling,” Accountable Care Organizations, as well as other outcome and evidence-based programs designed to deliver quality care at affordable prices.

The decision to create the network comes after more than a year of meetings and negotiations with providers. At a stakeholder meeting in July 2018, Treasurer Folwell asked medical providers to help cut $300 million from the $3.3 billion annual spend for the Plan. The spending reductions are needed because medical and pharmaceutical spending is increasing 5 to 9 percent annually, while the Governor and General Assembly have provided only 4 percent increases year-over-year. At current spending rates, the Plan estimates that it will run out of money by 2023.

When providers and association representatives offered no viable solutions to address the Plan’s financial crisis, Treasurer Folwell and the Plan announced the Clear Pricing Project in October 2018. The Plan announced it would move away from a commercial-based payment model to a reference-based, transparent, government pricing model based on a percentage of Medicare rates to reimburse health care providers for their services. Medicare provides a standard reimbursement measurement that is transparent and adjusts for provider differences. The State Health Plan Board of Trustees unanimously passed a resolution supporting the initiative.

The proposal was immediately met with vehement opposition from the North Carolina Health Care Association which included a multi-million dollar “dark money” campaign under the auspices of Partners for Innovation in Health Care.

“By spending millions of dollars to oppose us and by using cartel-like tactics, these organizations were able to convince most hospitals to boycott the State Health Plan,” said Treasurer Folwell. “If big hospitals could do this to their largest customer, just think what they can do to the individual average citizen or business. We’re in a medical arms race in North Carolina. Every dollar unnecessarily or inefficiently spent on health care is a dollar that can never be spent on education and other core functions of government.”

Folwell added that he is not disheartened; he appreciates the support of the Board of Trustees and cares about the financial impact and health outcomes of the Plan’s members.

Opponents of the Plan’s effort to cut costs and provide transparency to medical pricing presented road blocks at every turn including arguing that the Plan will ruin rural health care as well as the finances of large urban hospital conglomerates. The Plan responded to these concerns by expanding its rural reimbursement strategy as well as later increasing reimbursement rates to urban and rural hospitals.

“We’ve been exceedingly generous offering almost double what Medicare pays and yet not one large hospital would sign on – even those getting increases in pay,” added Folwell. “The fact is that transparent pricing terrifies them. Transparent pricing would end decades of secret contracts and high costs causing them to have to actually have to compete for customers like any other business does in a free-market society. The power belongs in the hands of the member.”

The Plan’s final proposal increased payments to medical providers, on average, from 182 to 196 percent of Medicare. Urban hospitals saw their combined inpatient/outpatient ratios go from 178 to 200 percent of Medicare on average. Hospitals reimbursements were increased an additional $116 million from the proposal announced in March. State taxpayers would have saved $166 million and Plan members an additional $34 million in reduced costs. Additionally, the Plan twice extended the enrollment period for hospitals to sign on.

Dee Jones, executive administrator of the Plan, said that in addition to the staff at the Plan, she intends to rely on the Board of Trustees and the proposed advisory subcommittee of experts to provide guidance on steps forward to reduce costs and increase medical pricing transparency.

“I could not be more proud of what the staff at the State Health Plan has accomplished,” said Jones. “We created a brand-new network of 28,000 providers from the ground up. The goal going forward is how do we leverage that network to sustain the Plan by reducing costs through alternative payment arrangements while, at the same time, establishing medical pricing transparency so consumers can make informed decisions when purchasing health care.”

Jones noted that the financial crisis of the Plan has not changed. This fact is reinforced by a third-party analysis prepared by The Segal Company, “House Bill 184, Study State Health Plan Design, March 15, 2019,” the original of which is on file with the General Assembly’s Fiscal Research Division. The Segal analysis shows that absent the full implementation of the Clear Pricing Project, the state would pay $486 million more over the next three years for health coverage for employees, teachers, and retirees and an additional $1.1 billion would be added to the state’s unfunded liability for retirees.

“We have three ‘levers’ we can pull to keep the Plan solvent with the existing benefit offerings,” said Jones. “First, we can cut costs by increasing transparency and giving the buying power to the consumer, which is what we’re trying to do with the Clear Pricing Project. Second, the Governor and General Assembly can appropriate more taxpayer dollars to the Plan. Third, we can increase member premiums, copays or deductibles. With hospitals boycotting the Clear Pricing Project, it will make it difficult to lower family premiums in 2020, which was a goal of the project.”

The State Health Plan, a division of the N.C. Department of State Treasurer, provides health care coverage to more than 727,000 teachers, current and former lawmakers, state university and community college personnel, active and retired state employees, and their dependents.