The Washoe County School District was poised to renew a contract on Tuesday with Renown Hospital and its insurance arm to provide health care to teachers and other district employees, but the hospital’s biggest competitor, Saint Mary’s Regional Medical Center, is crying foul over the process, saying it can provide care more cost-effectively and wasn’t given a fair shot to prove it can do so.
Saint Mary’s Health Network, which includes the hospital, other health-care facilities and networked providers, submitted a proposal to the school district earlier this summer for a comprehensive health plan that it says could have saved the district anywhere between $5.4 million and $15.9 million in 2019. But the school district rejected the proposal as “non-responsive” because the district had only requested information on hospital services, not a full health plan, adding in a letter that it only sent out the bid in the first place in response to “constant badgering and lobbying” by Saint Mary’s.
The school district entered into an exclusive agreement with Renown Health to provide medical services to its employees in 2015, a move that district officials said at the time was because Saint Mary had proposed “considerably” higher rates than Renown for a contract extension and the Renown contract would save the district millions of dollars. Now, the district’s board of trustees will vote at its Tuesday meeting on whether to approve a recommended 10 percent increase in health insurance rates and renew three-year contracts with Renown and its insurance arm, Hometown Health, with a $90,000 increase on the $20.5 million contracts.
Saint Mary’s CEO Helen Lidholm said she’s “completely perplexed” about why the school district wouldn’t consider the network’s bid.
“Nobody understands why you wouldn’t look at an option,” Lidholm said. “We didn’t request an exclusive agreement. We requested it be a choice, so I don’t understand it.”
A spokeswoman for the Washoe County School District said in an email that the district was “not able to provide further information at this time” about the contract and, after, multiple subsequent follow up requests via email and phone, again declined to provide further information.
Ty Windfeldt, senior vice president of Renown and CEO of Hometown Health, said in a statement that the companies “cannot speak to other contract offers” but that they have made a “competitive bid” to the district.
“Hometown Health and Renown Health value our successful partnership with Washoe County School District and the members it serves,” Windfeldt said. “… [We] look forward to partnering with the District to provide employees, teachers, retirees and their families access to comprehensive care.”
The school district currently provides health insurance to more than 12,000 employees and their dependents through what’s known as a self-insured plan. Under a traditional, fully-insured plan, employers pay a premium to an insurance company to provide health-care coverage to employees, while under a self-insured plan, employers are responsible for paying medical bills for employees out of a special fund dedicated to paying claims.
Under the current structure, the school district contracts with both Renown, which provides services to district employees at its hospital and related health-care facilities, and Hometown Health, which acts at the third party administrator responsible for processing the claims, negotiating provider contracts and more. Until 2015, Saint Mary’s had the longstanding contract to provide health insurance to school district employees.
Both the current contract with Renown and the prior contract with Saint Mary’s were negotiated by Nevada Health Partners, an organization that was founded in 1995 as the Nevada Health Care Coalition to bring together public and private employers to collectively negotiate health-care contracts. Today, it includes Reno, Sparks, Washoe County, Washoe County School District, Douglas County School District, NV Energy’s northern operations, the Atlantis and Grand Sierra Resort, among others.
Nevada Health Partners CEO Chris Syverson said in a phone interview that she couldn’t comment on specifics about the employers with whom the coalition works. In a follow up email, she said the coalition has followed the same practices year over year, including allowing current contracted companies to provide renewal data before the coalition decides whether to go out to open bid, as it decided to do in 2015.
“This process was followed for many years with Saint Mary’s Health Regional Medical Center, and has been happy with this process until such time as they were not awarded a contract. This process has afforded Nevada Health Partners very competitive rates,” Syverson said in an email.
Lidholm acknowledged that Saint Mary’s contracts did “auto-renew” each year, but she said it doesn’t make sense to follow that process when facing a significant increase.
“With their health insurance costs increasing so dramatically, just if you look at the school district, I can’t for the life of me figure out why they would go back to pre-2015 and think that was a good idea,” Lidholm said. “To auto-renew when you’re spending that much more money? Millions and millions of dollars more a year.”
Asked about the process of auto-renewing with a proposed increase, Syverson said in an email that the contracted company “would provide a rate and we would negotiate as appropriate.”
Lidholm also said that whenever an employer wanted to add Northern Nevada Medical Center or Renown as an option to their plan, Saint Mary’s said yes.
She said that the Washoe County School District was the first to request to add Renown and Hometown Health, which Saint Mary’s allowed without asking for any rate increases, later followed by the city of Reno and Washoe County. Employees with the city of Sparks also had access to Northern Nevada Medical Center, she said.
“While it was exclusive on paper, it was never exclusive in practice,” Lidholm said.
The school district’s health insurance committee voted last month to recommend a 10 percent increase in the district’s health insurance rates to cover rising costs, down from an increase of 12.96 percent proposed by the district’s health insurance broker. The broker told the committee at the July meeting that the biggest percentage of the district’s budget currently goes to hospital and pharmacy costs, but said that the proposed 12.96 percent increase could be attributed to rising costs in a number of areas, including those two factors but also the costs of providers and technology.
Between June 2017 and May 2018, the school district paid out $52.8 million in health-care claims. The 10 percent increase in rates is intended to help the district cover those and rising costs for the district.
But Saint Mary’s argues that it could provide services to the school district’s employees without any increase at all and with lower out of pocket maximums and copays than the current plan.
The health network, using a claim cost figure of $57.8 million it pulled from the school district’s website, estimated that costs would increase under the Renown contract to $66.4 million in 2019, $73 million in 2020 and $80.4 million in 2021. Saint Mary’s suggested that, instead, it would accept a flat fee of $53.5 million to cover all medical services under what’s known as an accountable care organization plan.
In essence, Saint Mary’s would manage the fixed $53.5 million budget and be responsible for providing all necessary care to school district employees within that budget, instead of individually drawing down from the health fund per claim.
“What Saint Mary’s is really doing is saying the following: We can live with a budget. We agree to live within a budget,” said Dan Holets, president and CEO of Assured Management Insurance Services, which would serve as Saint Mary’s third-party administrator under the proposal. “[Saint Mary’s has] to manage the costs. They have to make sure people are getting treated, yes, but that they’re not getting overtreated.”
Saint Mary’s estimates that an exclusive contract would save the district $15.9 million in 2019, or, if half the school district’s employees switched over to the health network, $7.9 million. However, Hometown Health has said that it would raise its rates $1.5 million under a non-exclusive contract, while Renown would raise its $980,000, reducing the proposed savings under a 50-50 scenario to about $5.4 million, according to Saint Mary’s estimates.