The North Carolina Treasurer announced Tuesday that he is calling on UNC Healthcare to provide the State Health Plan (SHP) with a $1 billion performance bond guaranteeing that the planned merger between UNC Healthcare with Carolinas HealthCare System would not result in increased costs for taxpayers.
State Treasurer Dale Folwell wants the bond as protection for taxpayers against a possible increase in costs to the SHP that could result from a merger, looking for a guarantee from the healthcare provider to back up language saying that the merger will result in decreased healthcare costs.
In August of last year, the two health care providers announced they were going to form a new organization, that combined, would operate more than 50 hospitals employing 90,000-plus people. If the merger is successful, the combined group would represent one of the largest non-profit health care providers in the nation with profits of over $1 billion per year.
Dr. William Roper, chief executive of UNC Health Care and dean of the UNC School of Medicine who will serve as executive chairman of the new organization, said in August when announcing the proposed merger that the impetus for the merger is to bring stability to uncertain times in medical care and that with the groups combined that they will have enough leverage to drive down healthcare costs.
However, many have questioned whether the new organization would have too much power, potentially driving up health care costs for all North Carolinians.
During a recent UNC Board of Governors meeting, Folwell was asked his opinion about the proposed agreement where he indicated that he did not have enough information about the proposal to form an opinion yet, but does have concerns.
“I’ve spent my whole professional and personal life trying to do business with people where what they say is as important as what they sign their name to,” Folwell said. “With a lack of details on this merger and little evidence that mergers like this have generated savings for the public, I feel I have a fiduciary responsibility to pursue this guarantee that will protect North Carolina taxpayers.”
During a recent meeting with Roper and others, Folwell asked if UNC Healthcare objected to pursuing a performance bond, which is a written guarantee from a third party that guarantees a certain result.
The bond would be underwritten by a bank or insurance company and UNC Healthcare, or the combined entity, would purchase the bond guaranteeing healthcare costs would actually decrease as indicated by Roper in August.
If that fails to happen, the bond would pay the state back any increased costs.
“We have to cut $300 million in plan expenses,” Folwell said. “We spend $450 million a year with these two hospitals. We have a $34 billion unfunded healthcare liability for retiree coverage that has been growing for 40 years. Given the fact that we are in a medical arms race, we just can’t take the chance that the combined organization will increase costs for the taxpayers of this state.”
The treasurer added that he looks forward to working with Roper and others on the details of the bond.
The SHP, a division of the Department of State Treasurer, provides health care coverage to more than 750,000 teachers, state employees, retirees, current and former lawmakers, state university and community college personnel, and their dependents every year.