Blue Cross NC CEO isn’t a fan of Carolinas, UNC Health Care collaboration

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After less than four months on the job, Blue Cross and Blue Shield of North Carolina CEO Patrick Conway showed he can play rough. He sent a letter this week (see below) opposing the proposed tie-up between UNC Health Care and Carolinas HealthCare System, citing research indicating that hospital combos invariably lead to higher costs. Costs matter to Blue Cross, which insures 3.9 million people.

UNC and CHS officials initially said the deal isn’t a merger and, whatever it is, does not require any outside approvals. That’s apparently no longer the case, with UNC System President Margaret Spellings noting that federal regulators will study the matter. In an interview yesterday with the Raleigh News & Observer, she sounded supportive of the transaction.

CHS and UNC haven’t disclosed any details to the public or promoted transaction’s benefits since its Sept. 1 announcement.

The public isn’t alone in lacking clarity: People familiar with the issue say the hospital systems have not provided outside groups any third-party analysis outlining financial and other benefits. Blue Cross has not received anything, says spokesman Austin Vevurka.

What’s also unclear, deal critics said, is what UNC Health Care gains from the transaction, given its robust financial health and market leadership in the affluent Triangle. The business had cash and accounts receivable of $920 million as of June 2016, with annual operating income of nearly $200 million, its last annual report shows.

The UNC Board of Governors could discuss the matter publicly this week. In any case, look for Blue Cross’ opposition to embolden opponents of the transaction.

UNC Health Care responded to Conway with a statement that “Blue Cross Blue Shield of North Carolina has drawn premature and unfounded conclusions about our proposed partnership with Carolinas HealthCare System. An agreement for this partnership is still being negotiated and the new organization does not yet exist.”

The partnership will position UNC Health Care to better “reduce costs, improve patient outcomes and increase access to high quality care — especially in rural North Carolina.”

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Here is Mr. Conway’s letter to Gene Woods, President & CEO of Carolinas Healthcare System, and
Dr. Bill Roper, CEO of UNC Health Care

Dear Mr. Gene Woods and Dr. Bill Roper:
Blue Cross Blue Shield of North Carolina (Blue Cross NC) enjoys a strong, positive working relationship with Carolinas HealthCare System and UNC Health Care. Both health care systems provide quality care to patients and serve our state well. We look forward to continuing to work with you and partnering even more deeply towards our shared goals of higher quality of care and lower costs for the people of North Carolina.
Blue Cross NC has a responsibility to our customers to help slow rising health care costs. After a thorough review of independent research which shows that when health care systems combine costs for consumers go up, Blue Cross NC cannot support your proposed combination. However, we are open to continued dialogue if you can demonstrate how this combination will lower costs and improve quality over the long-term.
I respect both of you personally and know that you are mission-driven and of the highest integrity. While we disagree on this issue, I look forward to continuing to work with both of you and your health care systems independently to ensure North Carolinians receive the highest quality and most affordable health care possible.
Sincerely,
Patrick H. Conway, MD, MSc
President and CEO
Blue Cross and Blue Shield of North Carolina

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