Cautionary tales from other markets as county considers sale of NHRMC

Cautionary tales from other markets as county considers sale of NHRMC
Updated: Aug. 26, 2019 at 2:31 PM EDT
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An early photo of New Hanover Regional Medical Center, taken in 1967, 15 years after the bond...
An early photo of New Hanover Regional Medical Center, taken in 1967, 15 years after the bond issue that made the hospital possible (Source: New Hanover County).

NORTH CAROLINA, N.C. (WECT) - The chorus of voices questioning the potential sale of New Hanover Regional Medical Center (NHRMC) is hard to ignore. Two recent public hearings on the issue were standing room only, with the vocal majority opposed to selling the public hospital to a private company. Yet a majority of county commissioners still appear inclined to move forward with exploring that option, with an “intent to sell” vote set for September 3.

“This isn’t fun for me. It’s not fun for the other commissioners to deal with some of the emotional and personal outbursts, and ugliness that we’ve seen and continue to see,” Commissioner Woody White said of the push back he’s received for entertaining the possibility of a sale.

However, he said even if it’s not popular, he will continue to do what he thinks is in the best interest of the county. “It’s not an option to do nothing and just hope that things work out. Because the landscape is shifting so fast in how the hospital earns its money,” he said.

For many people financially tied to the area’s largest employer, the news that a sale was even being considered came as a shock.

By many measures, NHRMC is doing incredibly well. Just this summer, the hospital’s nine-person executive team made the cover of Wilmington Biz Magazine with title The $1 Billion Band: NHRMC’s team doubled revenue to $1.2 billion in the past decade (and more growth is coming).

“They are making money, they are growing like crazy, and they’ve got a lock on the market,” County Commissioner Rob Zapple said of why he thinks many companies would be interested in buying NHRMC. “We’re sitting here talking about selling? I would turn it around and say, ‘Why don’t we continue doing what we’re doing and expanding the good work we’re doing and taking advantage of all those things I just mentioned?’”

In the minority on the county commission, Zapple opposes exploring the sale of the hospital.

In addition to possibly selling the hospital, some county leaders also want to look into entering a management agreement with an outside company or partnering with an educational institution. Both of those options would give the county access to resources to expand the hospital for our growing population, and better leverage to negotiate rates with insurance companies and for other big purchases. White said keeping the status quo is also a viable option if county commissioners don’t like what they see when they explore their options to sell or merge.

“If any of us thought that any of the quality of care metrics would lower, we would not support it,” White added.

SOUND OFF: After 52 years as a public hospital, New Hanover Regional Medical Center could be headed for new ownership....

Posted by WECT News on Friday, August 23, 2019

But some doctors worry a decrease in the quality of care is exactly what will happen, as well as an increase in costs for patients.

“I’ve never heard a really great story about what happens when a hospital system is purchased," Wilmington neurologist Thad Coin told WECT. “I think we may not understand how good of a hospital we have.... I do worry that becoming part of a larger system we will lose our connection to who we are supposed to serve which is the citizens of New Hanover County.” Coin is an MD in private practice. He has affiliate privileges but is not on staff with NHRMC.

Since many were blindsided by the news of a potential sale, and worried what it could mean for their livelihood, the medical staff of NHRMC requested a 90-day delay of the vote. But most commissioners do not appear inclined to stall the vote.

Since many of you are trying to understand the potential impacts of a sale without a lot of time, WECT has researched some of the potential hospital buyers, along with a few cautionary tales about hospital systems in other North Carolina markets. By definition, all of these hospitals save lives every day. The focus of this story is simply to assess these companies’ reputations as employers, corporate citizens and health care providers in their current markets.

Non-profit hospitals enjoy significant financial perks. These huge organizations with hundreds of millions of dollars in revenue pay no taxes and in exchange provide charitable services to the community. But a 2012 investigation by The Charlotte Observer and The News & Observer found that large nonprofit hospitals in our state have driven up health care costs, paid millions to their own executives, and left thousands of patients struggling to pay their medical bills.

Atrium Health

Atrium Health, formerly Carolinas HealthCare System, is one of the biggest hospital networks in North Carolina. They recently changed their name after buying a hospital system in Georgia. The not-for-profit system is headquartered in Charlotte, and has 7,200 hospital beds and over 60,000 employees. Columbus Regional Healthcare System in Whiteville is already part of the Atrium portfolio. The company ranked #16 in Forbes’ annual ranking of Best Employers by state for North Carolina.

(John D. Simmons (custom credit))

According to the company’s website, Atrium is a “self-supporting public organization.” Legally, it is the Charlotte-Mecklenburg Hospital Authority, doing business at Atrium, but in practice, county commissioners have complained that public oversight is limited. Among other issues, they noted the hospital board holds its meetings at 7 a.m. and the public is not allowed to speak. The County Commission chair can approve or veto nominations, but cannot make their own nominations to Atrium’s board of directors. System officials have explained the setup was designed to remove political influence from the board.

Atrium’s mission statement is “to improve health, elevate hope and advance healing – for all.” In addition to its stated goals for patients, Atrium touts its ability to help doctors with marketing, billing, technology, and other parts of the business side of running a medical practice, as well as giving physicians they employ the stability of a salary. But as with many corporate enterprises, company executives also set goals in 2016 of increasing margins and cutting expenses by $300 million by making things more efficient.

Last year, about 50 Charlotte pediatricians employed by Atrium abruptly left the company, according to an article in the Charlotte Agenda, which is a locally owned news outlet in Mecklenburg County. Those doctors chose not to renew their contracts after Atrium decided to substantially cut their pay. The proposed pay cut came after Atrium conducted a national compensation study that indicated the doctors were being paid significantly more than average.

The pediatricians who left Atrium were concentrated in South Charlotte, where the cost of living is higher. Parents who had been taking their children to the same doctor for years were left scrambling. They either had to switch to a new pediatrician or attempt to find where their pediatrician had moved. According to published reports, the doctors who left Atrium were bound by non-disclosure agreements, making it difficult for them to keep patients informed about where they were going.

“My boys have been seeing her since they were born,” one mother posted on Facebook about one of the doctors leaving Atrium according to an article in the Charlotte Agenda. “I really don’t want to have to find a new pediatrician. Help!”

Nearly every doctor with Mecklenburg Medical Group sued to leave Atrium last year. One of the largest physician groups in Charlotte, the 92 doctors claimed Atrium’s changes were undermining patient care. The doctors claimed Atrium cut the number of registered nurses assigned to each doctor, and replaced receptionists at local clinics with a call center in Mint Hill. Doctors were also upset with “unreasonable” terms going into effect in their 2018 contracts.

"Though purporting to be a non-profit institution, Atrium — with its bloated management bureaucracy... is acting as the exact opposite of the non-profit health care provider that it claims to be,” the suit claimed. The doctors later dropped their lawsuit after Atrium released them from a non-compete agreement and allowed them to open an independent clinic.

It’s not just doctors and patients who have raised concerns.

The federal government sued Atrium in 2016 for alleged antitrust violations, accusing Atrium (then Carolinas HealthCare) of “using its market power to undermine its smaller competitors’ efforts to attract patients by competing on the price and quality of their services.” Atrium was the largest provider of acute inpatient hospital services in the Charlotte area.

Atrium ultimately settled that lawsuit. They admitted no fault and denied breaking the law, but they are now banned from entering into contracts with insurance companies that limit competition and price transparency.

“We can’t allow Atrium to use its size and market dominance to the detriment of healthcare consumers,” Attorney General Josh Stein said after the settlement agreement.

In 2017, Atrium paid a $6.5 million settlement after being accused of improperly up-coding claims for urine drug tests to receive higher reimbursements. The lab director at one of their hospitals filed a lawsuit that resulted in the settlement.

Atrium tells WECT it looks forward to hearing the outcome of the county commissioners’ September 3 vote about potentially selling the hospital. A company spokesperson noted Atrium already provides some services for NHRMC on a contract basis. During Hurricane Florence, Atrium flew teams of nurses and medical providers to Southeastern North Carolina. Those teams treated 900 patients in Pender County, and delivered two babies. They also relieved Wilmington hospital staff who had been on duty throughout the storm.

HCA Healthcare

Tennessee-based HCA Healthcare is another major player in North Carolina. The for-profit company manages 185 hospitals in the United States and United Kingdom, and recently purchased the six-hospital Mission Health system in Asheville for $1.5 billion. The purchase added nearly 12,000 employees to their publicly-traded company. HCA also owns Grand Strand Medical Center in Myrtle Beach, S.C.

The company made $47 billion in revenue last year, putting it in 67th place of largest companies in the US by revenue on the Fortune 500 list. While their numbers are impressive, their quality of care ratings by some measures are below average. According to an analysis by the Asheville Citizen Times, Mission Health hospitals had an average rating of 4.33 stars out of 5 in the federal government’s Hospital Compare program before the takeover. HCA hospitals, by comparison, averaged 2.73 stars. The national average for hospitals in the US is 3.15 stars.

Grand Strand Regional Medical Center
Grand Strand Regional Medical Center

An HCA spokesperson questioned the methodology of the Hospital Compare rating system. HCA pointed to other studies, including one by the Leapfrog Group (which studies hospital safety) that found 78 percent of HCA Healthcare-affiliated hospitals earned an A or B, compared to 56 percent nationally. HCA also noted IBM Watson Health’s 2019 “100 Top Hospitals” annual study, which found 10 of the best performing hospitals in the nation are a part of the HCA Healthcare family.

In the early 2000s, HCA paid the federal government $1.7 billion to settle a Medicare fraud case, that alleged the company was overpaid after submitting false claims to the government. At the time, it was the largest Medicare fraud investigation in U.S. history. An HCA spokesperson said the underlying claims in that case happened during a brief period over 20 years ago during a merger with another hospital group.

In 2012, the New York Times reported HCA manipulated its claims to private insurance companies and the government to increase reimbursements. The paper showed a pattern of HCA physicians in Florida performing unnecessary heart surgeries on patients, putting their lives at risk, and driving up costs to increase profits for the hospital system. The paper reviewed a confidential memo written by HCA’s ethics officer which substantiated the claim of unnecessary procedures. A registered nurse blew the whistle about the practice, and told the Times the company retaliated by not renewing his contract.

“After a two-year intensive review, the DOJ decided not to intervene in the whistleblower lawsuits in Florida, and the plaintiff agreed to dismiss his case,” HCA told WECT when asked about that case.

Because HCA is for-profit, Asheville and Buncombe County will make about $15 million in annual property taxes off the hospital. Much of the proceeds from the sale of the hospital were used to create Dogwood Health Trust. The non-profit group will spend $50 million or more each year on social service initiatives designed to improve the overall well being of western North Carolinians, in theory improving their overall health and saving the hospital system money.

In 2018, HCA Healthcare says it provided nearly $3.3 billion in charity care, uninsured discounts, and other uncompensated care across its vast hospital network. The company also provided $41.8 million in cash donations to charitable organizations in 2018. But North Asheville resident Kerry Levin was skeptical that the charitable services being provided in his community would be worth the potential decrease in the quality of care provided at his hospital.

“They’re out to make money and that sometimes gets in the way of taking care of clients,” Levin told the Asheville Citizen Times.

Because Mission Health was a non-profit hospital system, the sale had to be approved by Attorney General Josh Stein. Stein allowed the deal to go through after extending the time HCA is required to provide certain services at its rural hospitals. The original deal guaranteed those services for five years. Stein extended the contract guarantee to ten years. Additionally, Stein brought in an independent monitor to make sure HCA sticks to the terms of the contract.

Local hospital executives and county commissioners said they would be less interested in selling to a for-profit operation. When asked about potentially purchasing NHRMC, HCA provided the following response:

“Regarding any development news, these types of discussions happen all the time in healthcare. Sometimes they lead to something, and many times they don’t. For that reason, we’ve found it’s best not to talk about discussions we may or may not be having unless or until we have something to announce.”

UNC Health Care

UNC Health Care, based in Chapel Hill, has 11 hospitals in its network and 33,000 employees. UNC Health Care was ranked #5 in Forbes’ annual ranking of America’s Best Employers by State. The state-owned outfit would not comment on its potential interest in purchasing or partnering with NHRMC.

“UNC Health Care regularly evaluates opportunities for growth or collaboration, but we typically do not discuss those conversations or future plans,” the organization’s spokesman, Phil Bridges, said.

In the last several months, evidence has surfaced detailing a potential UNC Health Care takeover of Vidant Health, the hospital system at East Carolina University in Greenville.

“Vidant is not surprised by recent reports confirming the University of North Carolina System has been actively working behind the scenes to take over Vidant and ECU Physicians. It is part of a coordinated effort by outside interests and Raleigh politicians to take a dominant position in governance, deal terms, etc. in eastern North Carolina,” Vidant officials wrote in a prepared statement in May.

Evidence of UNC Health’s potential desire to expand was found in a confidential report produced by outside consultants for UNC, which was later leaked to the media. It shows plans for acquiring small- to mid-sized hospital systems. Driving that suggestion are a number of challenges facing the health care industry, including new competition in the state’s hospital industry, Medicaid reforms, and the potential repeal of certificate-of-need laws, which would greatly enhance the ability for new players to compete against existing hospitals.

UNC Health Care said “inaccurate news reports” about the potential takeover were misconstrued.

“The leaked document was prepared by a consulting firm hired by the UNC Board of Governors to illustrate and educate them on what the consolidating health care market might look like in the future. It was not prepared to evaluate partners or to pursue new partners....” UNC Health Care said in a prepared statement. "UNC Health Care has no plan, secret or otherwise, to acquire or partner with Vidant Health.”


File photograph of Novant Health Presbyterian Medical Center, Novant’s main hospital in...
File photograph of Novant Health Presbyterian Medical Center, Novant’s main hospital in Charlotte is on Hawthorne Lane. Novant said about 41 doctors are seeking to break away from the health care system.(Charlotte Observer (custom credit) | Charlotte Observer)

Another hospital group that may make a bid for NHRMC should it be put up for sale is Novant. The Winston-Salem based health care company already owns the largest hospital in Brunswick County. The company has 29,000 employees across four states. In 2019, Novant Health was ranked #38 in Forbes’ annual ranking of America’s Best Employers for Diversity, and #6 in North Carolina in Forbes’ annual ranking of America’s Best Employers by State.

Novant has let go approximately 700 employees in two separate layoffs since 2012. Asked about their interest in NHRMC, Novant Health said they are waiting for commissioners to vote exploring a sale before they make any decisions.

“Novant Health is always looking at opportunities to expand access to care, but at this time we have nothing to announce,” company spokesperson Kristen Barnhardt told WECT. Barnhardt noted Novant has had a presence in Brunswick County for 13 years, and added 225 jobs to the Brunswick market in the last five years. In 2018, she said Novant Health provided $8.1 million in unreimbursed financial assistance to patients.

With stakes this high, proponents of previous sales mobilized on many fronts to ensure the deal went through, and there is evidence the county is organizing its own public relations campaign promoting the benefits of a sale now.

During the Mission-HCA deal, Attorney General Stein received 180 letters supporting or opposing the sale. Despite a great deal of concern voiced about the sale at public forums, 70 percent of the letters sent to the attorney general favored the establishment of Dogwood Health Trust, and by extension, selling Mission Health. Those letters supporting the sale came primarily from prominent community leaders. Asheville Citizen Times found they were written in response to a coordinated campaign by hospital leadership, asking people who favored the hospital sale to write Stein. The campaign may have tipped the scale by inundating the Stein’s office with support for the sale.

WECT has uncovered emails that show a similar campaign is underway now in Wilmington. The county has reached out to the Department of Health and Human Services to ask them about their “messaging” regarding the potential sale of the hospital, and say they were assured “any opinion they gave regarding NHRMC would be neutral and certainly not negative.”

We also found an email the county sent to Live Oak Bank, inquiring if executives there might be willing to “help your employees understand the conversation” about the possible sale of the hospital. The county even asked if Live Oak executives would consider writing a letter to the editor on the future of the hospital.

NHRMC spokeswoman Carolyn Fisher said if commissioners decide to put the hospital up for sale, the process of evaluating potential buyers would be public and take a minimum of several months to complete.

“There are going to be pros and cons to consider. The RFP (request for proposals) process is meant to discover exactly what those are so we can weigh them against each other. This is an important discussion and no decisions have been made,” Fisher said.

In addition to the public community meetings, County Manager Chris Coudriet and NHRMC CEO John Gizdic have met with the Wilmington Chamber of Commerce, and spoke at the August installment of the Greater Wilmington Business Journal’s Power Breakfast series, answering questions about the process and what it means for the county.

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