Treasurer Folwell Expands Rural Hospital Initiative Adjustments in Rates Will Pay Rural Hospitals an Additional $52 million Over Previous Proposal

(RALEIGH, N.C.) – State Treasurer Dale R. Folwell, CPA, and the State Health Plan (Plan) announced today that they are increasing the reimbursement rates for many rural hospitals under the Plan's Clear Pricing Project (CPP) announced last October. Changing the reimbursement rates will result in a $52 million annual increase from the original plan for many rural facilities that treat Plan members. This strategy further supports the delivery of and access to health care in rural communities. ​

CPP was announced in October 2018 and unanimously approved by the State Health Plan's Board of Trustees. Beginning January 1, 2020, the Plan will move away from a commercial-based payment model to a reference-based government pricing model tied to Medicare rates. Health care providers will be reimbursed for their services at Medicare rates plus an average of 82 percent. 

Reference-based pricing is intended to provide transparency in provider rates by indexing fees to a transparent, published methodology. This will allow members to know what they are supposed to pay for medical services letting them make informed decisions regarding their health care. 

These new adjustments will increase payments to rural providers by 20 percent from the original proposal further supporting rural communities and health care providers while still saving taxpayers almost $258 million and Plan members almost $57 million.

“Our approach has always been to help rural hospitals be in a position to provide vital health services in outlying communities. However, the problems with rural hospitals' finances existed long before I became state treasurer," said Treasurer Folwell. “Our original CPP-payment models provided substantial support for hospitals in rural communities. After many meetings with health care providers across the state, the team at the State Health Plan was able to expand the number of rural facilities included in the initiative, allowing increased reimbursement rates that further support their profitability and independence."

In developing CPP, the Plan's strategy was to increase payments to independent primary care physicians, behavioral health specialists and critical access hospitals, many of which are rural, as a way of providing higher reimbursements to areas that have traditionally been undercompensated.

“Our strategy has always been to focus on those medical providers that can most impact our members' health," said Dee Jones, executive administrator of the State Health Plan. “After further review, we adjusted payment rates for rural hospitals in North Carolina."

In addition, the Plan is also talking to many large hospitals and medical providers about “alternative payment arrangements" to lower health care costs and improve the health of the Plan's members. These models include medical-procedure “bundling", Accountable Care Organizations, as well as other outcome and evidence-based programs. However, Jones points out that establishing transparent pricing is mandatory to making these new payment models effective.

“So many people have talked about 'value-based medicine' but how can you have 'value-based medicine' when you don't know the 'value' of what you're getting?" asked Jones. “You can't cut costs until you know what things cost. Clear, transparent pricing is our first goal. Once we achieve that, we are committed to discussing new ways of reimbursing medical providers."

The State Health Plan, a division of the N.C. Department of State Treasurer, provides health care coverage to more than 720,000 teachers, state employees, current and former lawmakers, state university and community college personnel and their dependents, including non-Medicare and Medicare retirees.