- Associated Press - Monday, August 11, 2014

SIOUX FALLS, S.D. (AP) - South Dakota officials are investigating the legality of an arrangement in which Avera Health is covering out-of-pocket expenses of state employees for some medical services.

Avera has offered to help state workers with their medical bills if they seek the care they need from Avera rather than from two competitors that secured state contracts after competitive bidding. Avera, which owns St. Mary’s Hospital in Pierre, says the arrangement spares many state employees a drive from the state capital to Sioux Falls for medical care.

“Care should be delivered close to home,” said Rob Bates, Avera’s senior vice president of managed care services.

Competitors Sanford Health and Sioux Falls Specialty Hospital say Avera is subverting the bidding process.

“You can’t waive someone’s copay and deductible to gain their business,” said Blake Curd, a surgeon and part owner of Sioux Falls Specialty Hospital.

The South Dakota Bureau of Human Resources is looking into the matter, Commissioner Laurie Gill told the Argus Leader newspaper (http://argusne.ws/1mCeajG ).

A change in the state’s health insurance plan this summer identifies preferred providers to give medical care to state employees and their families in five major, or Tier 1, categories. Sanford won the bidding to be the preferred provider in three of the five categories: cardiac, orthopedic and bariatric services. Sioux Falls Specialty Hospital won the bid for services in gastroenterology. Avera secured the contract for kidney care.

The move was part of a wider effort to save money for the health plan, which had been operating in the red. State employees who choose services from a facility other than the preferred provider pay more out of pocket for their care. Avera has offered to cover that difference in cost for 10,000 patients.

Bates said it is common sense.

“Many times you would have to drive hundreds of miles to reach a Tier 1 provider,” he said.

Curd, who also is a state senator, said, “I think it’s illegal.”

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Information from: Argus Leader, http://www.argusleader.com