This is a modern day re-telling of the familiar Bible story of David and Goliath. In our version, David is played by State Treasurer Dale Folwell. The Philistine giant Goliath represents the large hospitals in our state.
Like David, Folwell is also a shepherd. His flock includes more than 700,000 current and retired state employees; he is administrator of the State Health Plan.
Because the state doesn’t adequately fund the 5-9% annual cost increases, there is a threat to its short-term solvency. A much more serious crisis is looming: about $35 billion in unfunded liabilities the plan has incurred.
Did we mention that Folwell is a forensic accountant? Dr. Larry Crumbly, in the “Journal of Forensic Accounting,” explains, “You have an external auditor – that’s like a guard dog.
“Maybe a bulldog. An internal auditor is a seeing eye dog. A forensic accountant is a bloodhound.”
The seeing eye dog in Folwell examined the plan’s numbers, the bloodhound started sniffing for ways to save money, then the bulldog took charge.
Folwell asked the hospitals to reveal what they charged for various procedures, saying more transparency was needed to understand how health plan members were charged.
Hospitals responded that pricing was a highly-complicated issue and said they didn’t want to reveal proprietary information. Folwell said that if hospitals couldn’t or wouldn’t tell him what they charged, he would tell them what the State Health Plan was going to pay, using a formula based on a percentage above what they accepted from Medicare.
No self-respecting Philistine is going to stand for such a threat, and neither were the hospitals. Game on. Which side was going to prevail?
Folwell issued a deadline for hospitals to sign onto his “Clear Pricing Plan” if they were going to serve those in the State Health Plan next year. They refused, with the exception of five small hospitals. Folwell sweetened the pot by increasing the percentage paid over the Medicare rate and extending the deadline. The hospitals still refused to sign.
Crowds gathered as the clock for a decision was running down. Folwell received a letter from the N.C. Association of Educators urging him to concede.
Folwell blinked and agreed to a proposal from Blue Cross with the Blue Options Network, an agreement that would allow members to keep the same doctor and hospital networks they now have, but essentially moved them to value-based healthcare, where providers get paid for health outcomes, instead of the traditional fee-for-service model.
Folwell was correct in demanding transparency and its time will surely come soon.
Hospitals were also correct in saying this isn’t just a black or white matter and many factors are at play in procedure pricing.
They cite a federal law that requires them to treat anyone who comes to their doors, regardless of ability to pay. However, indigent care is not a huge percentage of their overall costs.
Neither is the justification for their accumulating large surpluses on the grounds they are necessary for the purchase of new machines or to pay out malpractice lawsuits. Transparency is essential to reigning in healthcare costs.
Unlike the Biblical narrative, Goliath won round one, however I’m betting Folwell is gathering small stones and this battle is far from over.
Tom Campbell is former assistant N.C. state treasurer and is creator/host of NC SPIN, a weekly statewide television discussion of NC issues that airs on UNC-TV. Contact him at www.ncspin.com.