The state employees’ benefits board voted on Friday to renege on a contract to expand health-care options for patients in Northern Nevada after Hometown Health threatened that tens of thousands of patients would not be able to access its parent company Renown’s provider network if the contract was approved.

Renown, through its insurance arm Hometown Health, submitted a proposal earlier this month to the state Public Employees’ Benefits Program (PEBP) Board to keep current hospital contract rates flat for state health plans for the next 20 months and limit increases for the two years after that to 2 percent if the board decided to forego a two-year pilot program with Saint Mary’s and Carson-Tahoe Health. The board had approved that agreement at a March board meeting and it was slated for final approval by the Board of Examiners in May.

But Renown and Hometown Health also threatened that if the board moved forward with the pilot program, they would have to increase rates to adjust for any patient migration from Renown to Saint Mary’s and that Renown would be unable to serve as the provider network for tens of thousands of patients who are transitioning over from an HMO (health maintenance organization) plan to an EPO (exclusive provider organization) plan starting July 1, including those in 14 rural counties without other options for accessing care. Hometown Health says that it has an exclusive arrangement to use its parent company Renown’s provider network, and that approval of the pilot program would have put Hometown Health in violation of its contract with Renown.

The board’s 9-1 vote to reject the contract with Saint Mary’s and Carson-Tahoe on Friday didn’t come easily, with several board members voicing that they felt that Renown had put them in a corner and left them with no other options than to reject the pilot program for fear of leaving thousands of employees without a provider network.

Board chair Patrick Cates, who is also the director of the Department of Administration, said that he’d “love” to move ahead with the pilot program but thought the likely outcome would be “potential chaos for our members, stranding the EPO populations without any network and would likely result in significant rate increases for our members.”

“I say that regrettably,” Cates added.

Public commenters — who largely consisted of Saint Mary’s employees, those in the Northern Nevada health-care community and state workers, overwhelmingly voiced support for the pilot program — saying that competition between Renown and Saint Mary’s would drive costs down while expanding options for patients.

As board members mulled which way to vote, Hometown Health’s proposal was briefly thrown into jeopardy in the middle of the meeting when the company’s CEO, Ty Windfeldt, clarified that the proposed caps on hospital rates only applied to so-called direct costs, such as per diems or specific set rates, but that Renown could still change its chargemaster, a list of billable items to a patient’s insurance company, which means costs could still increase by up to about 5 percent. But after Haycock conferred with Hometown Health and Renown during a brief recess, the companies agreed to hold their rates consistent across the entire agreement, regardless of how the chargemaster could change.

“If chargemasters increase, decrease, regardless, we will not pay any more tomorrow than we are paying today,” Haycock said, summarizing the agreement.

PEBP began negotiating with Saint Mary’s last year after it looked into developing controls for hospital costs and didn’t receive what it described as an “actionable response” from its current network. The pilot project, according to PEBP, met the program’s three overall strategic goals: increasing access to care, improving the experience for members and reducing costs.

Saint Mary’s agreed to several contract terms, including overall reimbursement for hospital services at 135 percent of Medicare, tiered reimbursement for medical group services, joint replacement surgical implants reimbursed at cost and no balance billing to PEBP members. At the meeting, Saint Mary’s also touted the quality of its care, pointing to its four-star rating from the Centers for Medicare and Medicaid Services — Renown has a one-star rating — and it’s A rating in the Leapfrog rankings, compared to Renown’s C.

“An A is an A and a C is a C. If I get on Yelp and I look at restaurants and Yelp has a one-star rating from 500 customers, like Renown has in the star rating system, I don’t eat there,” said Saint Mary’s lobbyist John Griffin. “If there’s a four out of five stars, I eat there.”

But Renown’s executive vice president and chief medical and academic officer, Douglas Merrill, downplayed the ratings, telling the board that they reflect information from several years ago and that Renown tends to have sicker patients because they are the only hospital in Northern Nevada with a trauma center and a pediatric hospital. (The Association of American Colleges has said that the ratings, which summarize 57 quality measures, don’t take into account differences in patient populations and complexity of conditions certain hospitals treat.)

Overall, Saint Mary’s attempted to emphasize to the board the benefit that they believed competition would bring to the community. Griffin noted that it was only the approval of the pilot program that brought Renown and Hometown Health to the table to “sharpen their pencils and come up with some better terms.”

“What does it say about what Renown was doing to the taxpayers of the state and the state employees before this? Were they overcharging? Were they overbilling? All of a sudden with competition, we get a 2 percent cap?” Griffin said. “This is the result of competition. Let everybody compete on cost and quality of care.”

Prior to the final vote, board member Christine Zack, chief strategy and business development officer at TheAmdCard, suggested that the board move forward with the Saint Mary’s and Carson-Tahoe contracts and beseeched Hometown Health and Renown to honor their cost controls. The board voted down that proposal seven to three.

“This board always seems to be up against a wall on decision making, and it’s really irritating,” said the board’s vice chair Donald Bailey, a retired Nevada State Printer and president of the Retired Public Employees of Nevada chapter in Sparks. “I feel like I’m between two mules pulling in opposite directions.”

PEBP Executive Director Damon Haycock expressed the same concern, saying before the final vote that be believed that if the board moved forward with the contract, Hometown Health and Renown could either send them a termination letter, leaving the state with no network for two plans, or increase the rates for those plans to “whatever they want.”

“I find it extremely disappointing and frustrating,” Haycock said.

Several of the board members voiced an interest in increasing competition in the future to avoid the feeling of “being held hostage,” as board member Tom Verducci put it. Haycock promised the board that “we are not done” when it comes to fostering competition to increase quality.

“We just believe at this point in time that we’re stuck,” Haycock said. “But that doesn’t mean we’re stuck forever.”

Updated 4-28-18 at 10:33 a.m. to correct that the new plan year starts July 1. 

Updated 5-8-18 at 8:24 a.m. to update PEBP Board member Christine Zack's current position.