Casual observers might have been surprised by the anger and vitriol in a recent email from a Cone Health official to leaders of the State Health Plan.

But Cone Assistant Director of Finance Frank Kauder’s impassioned diatribe was just the most extreme salvo in a long-simmering feud pitting North Carolina’s major health care systems against state Treasurer Dale Folwell, the health plan’s supervisory board and those who speak for thousands of state employees.

“Your plan to cut payments to hospitals could possibly be the most moronic idea I have ever seen come out of our state government,” Kauder said in his blunt critique that closed by urging the recipients to “burn in hell you sorry (SOBs).”

Backed by the State Employees Association of North Carolina, Folwell has been trying since last year to clarify in precise, contractual terms what health care systems can charge for each of the various conditions and ailments they treat.

The aim is to bring down costs overall and make sure that plan members know in advance what various treatments likely will cost them.

Folwell said in an interview last week that he is open to compromise, but what hospitals and other health-care providers are charging the State Health Plan for their services must be lowered significantly in a “transparent” format with pricing that everyone can understand.

“We’re just trying to take prices down to what they were two years ago,” said Folwell, whose office has projected his initiative would save the insurance plan for state employees about $258 million next year.

The new format also should save those covered by the plan more than $50 million in out-of-pocket costs, his office estimates.

Meanwhile, Cone Health has sought to distance itself from Kauder’s July 1 missive that came to light last week. CEO Terry Akin sent a conciliatory email to nearly 70 state legislators who represent parts of the eastern Triad or who serve on state House and Senate health committees.

Akin said in the letter sent Friday evening that Kauder had been misrepresented in some media reports as being one of the hospital system’s executives.

“The employee is a line-level assistant manager who is in no way engaged in executive level discussions,” Akin said. “Nor does the language he used in his email at all reflect the way any members of our leadership team think.”

Akin also noted that Kauder sent the email only to Folwell and other trustees of the State Health Plan “and not to members of the General Assembly or others in state government.”

He indicated that Kauder did not send the email from a Cone Health work email, but rather from “his private email address.”

“The terrible judgement (sic) exercised by this single employee was very unfortunate and in no way helpful at a time when our leadership team and I have been seeking nothing other than to build bridges for collaboration on the future of health care for our state,” Akin said.

But in interviews last week, Folwell said he’s had a rocky relationship with Cone Health leadership during the last year.

“These days, people don’t consume health care. It consumes them,” Folwell said.

Hospital executives have bristled at such criticism and after months of tension, nerves on both sides of the confrontation are frayed. Cone Health, UNC Health Care, and most other major health systems across the state so far have rebuffed the pared-down reimbursement plan slated to take effect in January.

Their critics think the hospital systems are playing a losing hand.

“We’ve been asking since 2011 for transparency,” said Ardis Watkins, director of government relations for the state employees association. “We’ve seen state audit after state audit saying, ‘You need to know what you’re paying.’”

“The system is not broken. It was designed that way,” Watkins said of the current pricing regime. “But we are not tolerating the way the system is designed any more.”

Folwell said last week that about 25,000 individual medical providers have signed onto the revised plan that takes effect in 2020.

But the State Health Plan’s current impasse with major hospital systems leaves state employees from Highway Patrol troopers to teachers, university professors and environmental regulators unsure what their health care might cost next year — or whether they will have to change practitioners or drive long distances to find someone “in network.”

If, for example, Cone doesn’t ultimately reach agreement with the State Health Plan, plan members in Greensboro presumably would either have to travel to another community served by a hospital that is part of the plan or pay higher “out-of-network” fees for local treatment.

As of last week, the smaller, financially troubled Randolph Health system in Asheboro was one of several relatively small hospital systems across North Carolina to sign up for the revised State Health Plan.

The statewide plan covers more than 720,000 teachers, other state employees and government retirees.

Those affected include Greensboro resident Frank Donaldson, a senior lecturer in UNCG’s department of media studies who has had knee replacement and heart bypass surgeries at Moses Cone Hospital, and whose orthopedist practices under the Cone umbrella.

Last year, Donaldson got socked with a $2,000 bill for a diagnostic procedure at Cone that laid the groundwork for his subsequent bypass surgery.

“That was for an outpatient procedure at an in-network facility,” Donaldson said in a Thursday interview. “I can only imagine what the cost would have been if that had been an out-of-network procedure.”

It’s great that university and other state employees occasionally get pay raises, he said. But if the cost of their health care rises dramatically, the value of any increase declines proportionately, Donaldson said.

And for those employees who have seen little or no salary growth in recent years, “you have a situation where you’re actually going backward,” Donaldson said of the potential impact.

By late last week, the hospital systems had retreated into news-release mode as the media pressed them for definitive answers about what they were going to do and why.

Cone Health declined a News & Record request for an interview, as did Kauder.

UNC Health Care, which operates the former Morehead Hospital in Eden under the UNC-Rockingham banner, responded to inquiries from the N&R with a previously released, written statement on the “Clear Pricing Project,” Folwell’s name for the new plan.

The Chapel Hill-based health system also provided a copy of its own suggested reworking of the State Health Plan, which Folwell already had dismissed as a rehashed version of proposed reforms earlier declared unacceptable.

“Their 11th hour counteroffer was a silly back-to-the-future strategy that was presented to the previous treasurer and State Health Plan administration over three years ago,” Folwell said, noting that his predecessors had rejected it back then “because of its lack of transparency and no concrete, measurable savings.”

UNC Health Care disputes that characterization, noting in a recent position paper that among other things its proposal includes a detailed “price transparency pledge.” The pledge would include new programs to both help State Health Plan patients estimate their treatment costs in advance and compare published State Health Plan rates with what other providers are charging.

Folwell’s revised plan hinges on the concept of “reference based pricing” that would link how much hospitals and other health-care providers could charge to increased percentages of the relatively low fees paid by the Medicare program for seniors and others with certain disabilities.

In other cases, the revised plan would establish set fees for certain series of examinations, tests and procedures that usually are required in treating particular conditions or diseases.

The plan treats smaller, often struggling hospitals in rural areas more leniently than their urban counterparts. For example, it allows rural hospitals to charge twice the Medicare rate for inpatient services, while limiting others to 160% of that rate.

Hospital executives and their industry association say the plan’s impact on health-care systems would be devastating; they predict an overall reduction of $400 million in annual revenue.

Cone Health projects that the plan would cost it roughly $26 million in lower fees.

Akin and other North Carolina health-care executives promote the concept of “value-based care” as a better choice than Folwell’s revised plan that has been adopted by the State Health Plan’s board of trustees.

Under the hospitals’ alternative approach, health systems would agree to accept a lump sum for treating heart problems, respiratory ailments and all the other chronic conditions affecting health plan members.

If they were able to provide all necessary treatment for less than the plan agreed to pay, health systems could keep the difference.

On the other hand, they would “cover the deficit” if they ended up spending more than budgeted on plan members, Akin said in a column about the concept he wrote for the N&R earlier this year.

“This model ensures we focus not only on those who are sick, but do all we can to keep people healthy and well,” Akin wrote. “We focus on preventive care and work especially closely with people who are chronically ill to make sure they get the care they need, when and where they need it.”

The state employee association’s Watkins said it sounds good until hospital executives get pressed for specific details and they struggle to explain exactly how it would work in practical terms.

Watkins said she does not see any room for Folwell to compromise his basic demands and still do right by the state workers that she represents.

“It would not be a compromise, it would be a dereliction of duty for the treasurer to agree to overpay beyond what is necessary to make a reasonable profit,” she said.

Randolph Health also responded in writing to the N&R’s interview request, sending a copy of its July 1 news release that explained why it was breaking with many of its larger counterparts in the health-care industry and signing onto the revised plan.

“As the only hospital within this community, it is imperative that we continue to provide critical care services with trusted providers to plan members,” managers of the Asheboro hospital said.

In addition, they said they were not in a financial position “to decline anything that is advantageous for the citizens of Randolph County” and the hospital itself.

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Contact Taft Wireback at 336-373-7100 and follow @TaftWirebackNR on Twitter.

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