NC Treasurer to UNC Health Care: Put up $1 billion to guarantee cost savings

Feb. 13--NC Treasurer Dale Folwell is asking UNC Health Care to put up a $1 billion bond to back its promise to cut medical costs after UNC creates a business partnership with Charlotte's Atrium Health.

Folwell issued his call for a $1 billion performance bond six days after expressing his concerns about rising health care costs to UNC Health Care CEO William Roper. Folwell oversees the State Health Plan, which covers 750,000 retirees, teachers and state employees, and says he needs to cut $300 million a year from the plan's operations to keep it solvent.

UNC Health Care announced in August it would enter negotiations to combine operations with Atrium, recently rebranded from Carolinas HealthCare, to create one of the nation's largest health care systems with some 60 hospitals and 90,000 workers. Roper and Atrium CEO Gene Woods said the partnership would result in improved health care delivered more economically.

The two giant networks are still negotiating and plan to make a decision by March 31 and have released few details. Folwell met with the UNC team last week for a status update.

"With a lack of details on this merger and little evidence that mergers like this have generated savings for the public," Folwell said in a statement, "I feel I have a fiduciary responsibility to pursue this guarantee that will protect North Carolina taxpayers."

UNC was noncommittal in a statement issued Tuesday, saying: "We are open to working with the State Treasurer on ideas to serve the health care needs of state employees at the lowest possible cost; however, we are not an insurance company. Our No. 1 job is taking care of patients. We do not control inflation or other variables associated with the cost of care."

It also reiterated that its purpose in pursuing the partnership with Atrium was to "improve health care for all North Carolinians."

The state treasurer lacks the legal authority to force UNC and Atrium to take out a performance bond to insure health care savings. Folwell said he hopes his idea is taken up by the UNC Board of Governors, which plans to review the deal between the two health care companies.

A performance bond is typically taken out by construction companies that work on office buildings or hotels or other large projects. The bond would normally be a provision in a business contract to cover any cost overruns that builders incur.

It's not clear how such a bond would work in a health care context. And it would be difficult to impose a limit on health care cost increases that may be caused by pharmaceutical pricing, equipment costs and other economic forces beyond the control of a regional hospital system.

Folwell is not the only skeptic who says that hospital consolidation gives market power to giant organizations and results in higher health care costs. Blue Cross and Blue Shield, the state's largest health insurer, recently cited the same concern and said it would not support the UNC-Atrium partnership.

John Murawski: 919-829-8932, @johnmurawski

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