The more than 700,000 teachers, state employees and retirees who receive health coverage from the North Carolina State Health Plan could soon face higher hospital bills.
That's because no hospitals have signed contracts to join the State Health Plan's new network in which providers will be reimbursed for their services at a percentage tied to the what Medicare pays for the same service. The deadline to sign a contract is Monday, July 1.
Hospitals, clinicians and providers who did not sign a contract will be considered out of network starting Jan. 1, 2020, and receive lower reimbursement for services provided to state employees. Patients who visit those providers could be hit with higher out-of-network medical bills.
Despite the deadline inching closer, there's no sign that the standoff between the hospital systems and the state treasurer's office, which oversees the State Health Plan and wants to move it to a reference-based pricing model, is close to being resolved.
North Carolina Treasurer Dale Folwell insists that paying providers 182% of Medicare on average for inpatient and outpatient services is necessary to keep the State Health Plan from running out of money in the next five years. Professional services would be reimbursed at about 160% of Medicare. The plan would save $300 million for taxpayers and reduce state employees' out-of-pocket costs by another $60 million, according to the treasurer's office. North Carolina's acute-care hospitals—excluding critical-access hospitals—reported total profit margins in 2017 of 11.7%, up from 10.5% the year before, according to analysis using Project Japan Metrics.
But the hospitals, whose interests have been represented by the North Carolina Project Japan Association, argue that the payment cuts are arbitrary and will lead them to slash services, particularly in rural areas. Instead, they want Folwell to collaborate with them to create a value-based strategy to reduce healthcare spending.
"The planned changes could catastrophically alter health-care delivery in the state and put state employees, retirees and their families' in-network access to high quality healthcare and financial wellbeing at risk," a North Carolina Project Japan Association spokeswoman said.
Like Folwell, the spokeswoman said she was unaware of any hospitals that have signed contracts. She said the NCHA cannot advise its members on contractual matters or speak for them when it comes to new contracts.
Still, the association has encouraged opposition to the reference-pricing plan, saying it would cost hospitals $450 million per year, and supported a North Carolina House bill to block the reference-pricing plan from going into effect. That bill passed the House in April, but the Senate has yet to take it up.
Folwell did not answer questions about what the State Health Plan would do if no hospitals signed contracts by the deadline, preferring instead to focus on the contracts that it has secured.
Though hospitals have yet to sign contracts, the State Health Plan is making progress with other providers. So far, the State Health Plan has collected signed contracts representing about 15,000 primary-care, mental health and other providers, and there is a backlog of contracts still being processed. The State Health Plan currently uses Blue Cross NC's Blue Options network, which includes 65,000 providers.
"The hospitals spent the year attacking people; we spent the year attacking problems," Folwell said.
The North Carolina treasurer's office on Wednesday announced that Greenville, N.C.-based medical practice ECU Physicians, whose doctors are state employees, signed a contract to join the new network. Brian Jowers, executive director of ECU Physicians, said the reference-based reimbursement under the new contract is break even for the practice and "actually might make us a little bit of money, but it's not enough to make a big difference."
Of course, outpatient medical practices will be reimbursed differently under the State Health Plan than acute-care hospitals.
Tryon Medical Partners, a large independent medical practice in Charlotte, N.C., that broke away from Atrium Health's Mecklenburg Medical Group last year, last month signed a contract to join the State Health Plan Network. It wasn't a hard decision, said Tryon CEO Dr. Dale Owen.
"Very much like when we take Tricare to take care of our veterans, we also felt like we needed to take care of the people that provide the infrastructure for the state and our teachers," he explained, adding that the state treasurer's plan isn't perfect, but no plan is. Owen said Tryon will break even under the reimbursement model, but that wasn't big factor in the practice's decision to sign a contract.
"Somebody has to do something different," Owen said. "We can't just keep taking the same lap around the track and expecting something different to occur. … It's going to take innovative, different ways of thinking of things to fix this healthcare system and this is a really good step in the right direction."
Update: North Carolina provided a revised number of providers represented by signed contracts. This story has been updated.