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Hospitals force Folwell to back off State Health Plan reforms

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RALEIGH — Hospitals have won. For now.

State Treasurer Dale Folwell’s attempt to rope them into the Clear Pricing Project is scuttled.

Under the new version of the State Health Plan, hospitals will remain in the status quo, under their previous Blue Cross Blue Shield contracts. The 28,000 providers who signed onto the Clear Pricing Project will remain on it. Folwell promises to work to bring transparency to the health plan in other ways, namely bundling and lowering the cost of prescription drugs.

“There is no amount of push that will do it. They are never going to agree to non-secret contracts and lower costs,” Folwell said. “The only way to get through a boycott is to go around it, and that’s what we intend to do.”

For the past year, the treasurer and the hospitals have been grappling over the State Health Plan. Folwell demanded transparent prices that were tied to Medicare. Hospital networks protested, saying the plan would cost them millions and force struggling hospitals to close.

As Folwell raised the rate of reimbursement for hospitals, hoping to sweeten the deal, hospitals continued to balk. Deadlines passed, and North Carolina’s eight major hospital systems remained out of network.

While the end of the year approached, state employees were left in the lurch. Many expressed concerns about paying out-of-network costs for hospital visits.

Folwell’s decision to yield to the hospitals saved the employees from these short-term concerns. But without the reforms of the Clear Pricing Project, the future of the State Health Plan remains uncertain. The plan is due to go broke in four years, and it has $35 billion in unfunded liabilities.

The Clear Pricing Project tried to slash the costs of the State Health Plan to employees and taxpayers by introducing transparency to an opaque system. The state auditor declared the State Health Plan at significant risk for overpaying medical claims and wasting tens of millions of dollars. The treasurer said the state “didn’t have a clue ... what the hell we were spending this money on.”

With CPP reforms mostly stifled, the state is projected to pay $486 million more over the next three years, while adding another $1.1 billion to the state’s unfunded liability for retirees, according to a legislative actuarial report.

“We’re not going to get those cost savings from hospitals immediately,” Folwell said. “We have learned so much about what is really going on, about the inefficiencies of the health-care system in N.C. We’re going to approach this like we approach everything else in the treasurer’s office: it’s about pennies and paperclips, and we’re going to track every one of them down.”

Folwell says he will bring transparency to the system in other ways. He plans to work on creating bundles of care and on cutting the cost of pharmaceuticals.

“We are going to find every possible way to push the power down to the consumer and push the power down to the physicians,” Folwell said. “There are innovative ways to offer our state employees the certainty of what something will cost, included in one price. The range of health care service costs, not just across the state, but across the street, is astounding.”

Plan administrators look to the proposed advisory subcommittee of experts for guidance. But administrators say they have only three main “levers” they can use to keep the plan solvent: transparent prices, spending more taxpayer dollars, or raising premiums. Without the full Clear Pricing Project, they’ll probably rely on the last two levers.

In a news release, Folwell said he wasn’t disheartened.

“I could not be more proud of what the staff at the State Health Plan has accomplished,” State Health Plan executive administrator Dee Jones said in a statement. “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.”

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