Feds Investigate CHS Health Plan
Carolinas HealthCare System’s tie to health benefits firm has led to conflict questions.
By Ames Alexander aalexander@charlotteobserver.com Posted: Thursday, Mar. 17, 2011
The U.S. Labor Department is investigating Carolinas HealthCare System following questions about whether its relationship with a health benefits company it co-owns poses a conflict of interest.
The company, MedCost, provides health benefits to the Charlotte-based hospital chain’s roughly 30,000 employees.Some observers have questioned whether the arrangement creates a conflict, because MedCost is supposed to negotiate with hospitals and doctors’ offices – including those owned by CHS – for discounts on treatment for employees.
CHS officials say they see no conflict. The MedCost health plan offers good benefits at a competitive price, they say.
Scott White, a spokesman for the hospital system, said the Labor Department has not informed CHS that it’s investigating. In September, he said, a Labor Department official notified CHS that the department had decided not to investigate.
“Nothing has occurred since that time to indicate that this has changed,” White wrote in an e-mail to the Observer Wednesday. “We were asked earlier this year to supply documentation to the (Labor Department) and have done so.
“…We have cooperated fully in the past and would do so in the future if required to.”
To protect employees, the federal Employee Retirement Income Security Act, known as ERISA, prohibits most employers from using companies they own to provide health benefits for employees – unless they can show they’re putting workers’ interests first.
CHS officials contend they’re not governed by the federal law because of a provision that excludes governmental employers. CHS, one of the nation’s largest public hospital systems, is known as a “hospital authority.” The not-for-profit system receives public funding for treating the uninsured.
White says the system has provided the Labor Department information “about our governance.”
The department will likely determine whether the hospital system must comply with ERISA.
In a March 8 reply to a citizen who requested documents under the federal Freedom of Information Act, department official Isabel Colon, in the regional office in Atlanta, wrote: “Information in this office pertaining to Carolinas HealthCare System involves an ongoing investigation.
“…The records and documents you requested were compiled for law enforcement purposes and are a part of ongoing enforcement proceedings.”
Colon declined to disclose the records, saying that could interfere with enforcement proceedings.
The citizen who requested the documents asked not to be named because he’s concerned that it could adversely affect his employment. He asked both the Labor Department and U.S. Sen. Kay Hagan to look into the issue last year.
A Labor Department spokesman said this week the office can neither confirm nor deny any pending investigations.
But a spokeswoman for Hagan, a Democrat, confirmed the “matter is under investigation,” referring a reporter to the Labor Department.
CHS owns, manages or leases more than 30 hospitals, including Carolinas Medical Center. The hospital system jointly owns for-profit MedCost with N.C. Baptist Hospital of Winston-Salem.
Employees at N.C. Baptist sued that hospital in 2009, arguing it didn’t look out for the best interests of workers when it chose MedCost to provide medical benefits.
The employees alleged the hospital chose MedCost so it could charge inflated amounts for the medical treatment Baptist provided its employees. MedCost acted as a preferred provider organization or PPO.
N.C. Baptist admitted no wrongdoing but settled the suit, agreeing to take steps to lower medical costs for employees.
N.C. Baptist is regulated by ERISA. Unlike CHS, it’s a private hospital.
For their part, CHS officials say they have a strong incentive to provide a competitive health plan.
“If you don’t, your work force will choose those who do,” Brett Denton, a lawyer for the hospital system, told the Observer last year.
The Labor Department investigates alleged violations of ERISA and often tries to persuade employers to comply voluntarily. When that fails, the agency periodically sues employers to protect employee benefit plans.
Last year, the department conducted about 3,100 investigations nationwide. Roughly three quarters of those resulted in corrective actions by employers.
Staff writer Karen Garloch contributed.
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