Folwell proposal worries hospital
By Jon Hawley
Sunday, December 16, 2018
Sentara Albemarle Medical Center is warning against the North Carolina state treasurer's plan to reduce the payments the State Health Plan makes to hospitals, but it remains unclear how the change would affect Sentara Albemarle itself.
State Treasurer Dale Folwell made waves in October when he announced the State Health Plan would base providers' payments on what the federal government pays through Medicare. The change will save the SHP $300 million after it goes into effect on Jan. 1, 2020, and allow reduced premiums for state employees and their dependents, according to Folwell.
If the treasurer's correct, that would reduce insurance costs for about 3,600 people in Pasquotank County, based on a breakdown of the State Health Plan population Folwell’s office provided. He also reported the SHP covers about 1,400 people in Chowan, about 1,200 in Perquimans, about 1,100 in Currituck, and about 800 in Camden. Statewide, the plan covers about 727,000 people, including teachers and state troopers.
Health systems continue battling against Folwell's cuts, however. As reported earlier this month by The Daily Reflector, Vidant Health, the largest provider in northeastern North Carolina, is warning the changes would cost it $40 million a year, consuming almost 80 percent of its operating margin, which it relies on to reinvest in the 29 communities it serves.
Sentara Albemarle, which is part of a health system based mostly in Virginia, does “not have as strong of a position as Vidant” on Folwell’s recommended cuts, according to spokeswoman Annya Soucy. Hospital officials declined requests for an interview last week on Folwell's proposal, instead providing a statement Friday.
“Medicare reimbursement rates are lower than the actual cost of care,” the statement reads, also describing Folwell's proposal to tie SHP to “Medicare edicts” is “turning decision-making about the plan over to the federal government.”
The statement continues, “This reduction in reimbursement will have a negative impact on healthcare providers in North Carolina and make providing care in rural communities even more challenging where high-cost drivers of the plan, like chronic diseases, are more prevalent.”
The statement notes Sentara Albemarle provides $13 million a year in uncompensated hospital care, but does not estimate how much revenue the hospital would lose if Folwell's plan goes into effect.
The debate between Folwell and health systems is not only about the State Health Plan's rising costs, but about transparency in pricing. Folwell has criticized Blue Cross Blue Shield and providers for not releasing their negotiated rates, making it unclear if the State Health Plan is getting charged a lot more than what the insurer pays.
In an interview with The Daily Advance on Thursday, Folwell also explained this is not a new problem. He noted that, even in 2011, State Auditor Beth Wood wrote in a performance audit that “the Plan is at risk for overpaying medical claims because the Plan's auditors do not have access to BCBSNC (Blue Cross Blue Shield) contracts and cannot independently verify that the plan receives proper contractual discounts from BCBSNC's provider network.”
The treasurer's office has also found some providers charge the State Health Plan more than what Medicare pays. An October letter from the State Health Plan found it paid last year, on average 158 percent of Medicare rates for inpatient care, 291 percent of Medicare for outpatient care, 185 percent of Medicare for critical access inpatient care, 233 percent of critical access outpatient care, and 126 percent of Medicare for professional services. In one case, it noted the State Health Plan paid a staggering 994 percent of Medicare for professional services.
In tying the SHP to Medicare, Folwell is proposing to pay a flat 155 percent of Medicare for inpatient care, 160 percent of Medicare for professional services, and 200 percent or more of Medicare for outpatient, critical access inpatient, and critical access outpatient.
The bottom line, Folwell said, is that providers will be paid about 177 percent of what Medicare pays. That will be a reduction for some, but should actually increase payments for some services, including primary care and behavioral and mental health.
While acknowledging his proposal will mean cuts for some providers, Folwell reiterated he believes the changes are both necessary and justified.
“We have to live within our budget,” he said of State Health Plan spending.
The plan costs about $3 billion a year but is growing at 7 to 9 percent a year, faster than inflation and faster than its planned growth of 4 percent, he said.
Folwell also continues to disagree that the State Health Plan should, like other patients and insurers, subsidize the cost of uncompensated care; hospitals are required by law to provide life-saving care regardless of patients' ability to pay.
Folwell also reiterated that reports over the years have found major waste, fraud and abuse within health care spending — though he expressed no opinion on how cost-effective Sentara Albemarle's services are.
State employees and their families need to be remembered in the debate about providers' payments, Folwell stressed. The State Health Plan's rising costs mean many teachers and state troopers cannot afford family coverage, which can cost $8,400 a year, he said.
Though his cuts might reduce costs to state employees, it’s also possible providers would seek to recoup the money by raising costs to other patients.
Julie Henry, of the NC Healthcare Association that represents hospitals and other providers, said Friday that providers are working to rein in costs, partly as a response to the federal Affordable Care Act. However, she said Folwell's plan would cut providers by $430 million statewide, and she argued his plan is rushed, unnecessary, and developed with little input from providers.
The State Health Plan is also within its budget this year, based on an SHP report this month, Henry said.
“It has not been a thoughtful process,” Henry said, describing Folwell’s target of $300 million in savings as arbitrary. “We want to be at the table” in any discussions about cutting reimbursements.
Henry also said Folwell's criticisms about pricing transparency are a “deflection,” claiming that contracts between health providers and BCBS cannot legally be disclosed.
In trying to rein in health care costs, Henry pointed toward an article in the “NC Medical Journal” calling for better management of high-cost conditions, such as cancers and diabetes, making sure patients take their prescribed medications, such as statins to lower cholesterol, more consistently.
Though Folwell maintains Medicare does account for differences between providers — “down to the zip code,” he said — the NCHA opposes the State Health Plan tying its payments to Medicare rates, even if Folwell increased the rates he's proposed now. Henry opposed that methodology and noted most states' health plans are handled as private insurance plans, not government plans.
In its statement, Sentara Albemarle also urged Folwell to “continue working with health systems and the NCHA to avoid” a loss of services and barriers to access for state employees. While the hospital declined to discuss details of how it prices services, the statement also claimed Sentara Healthcare “has been proactive in efforts to publicize hospital charge masters.” Charge masters are hospitals' lists of services and prices.
According to published reports, state lawmakers are considering blocking or delaying Folwell's plan, in response to outcry from providers. One of those lawmakers, Rep. Josh Dobson, R-McDowell, did not return a request for comment last week.