John Gizdic & Carl Armato: The CEOs behind the multi-billion dollar sale of NHRMC to Novant Health (”1on1 with Jon Evans” podcast)

John Gizdic & Carl Armato: The CEOs behind the multi-billion dollar sale of NHRMC to Novant Health

WILMINGTON, N.C. (WECT) - John Gizdic and Carl Armato are leading two healthcare organizations toward a partnership. Armato is the President and Chief Executive Officer of Novant Health, which has made an offer to acquire New Hanover Regional Medical Center, where Gizdic serves in the same roles.

Negotiations are now underway after New Hanover County commissioners voted July 13, 2020, to approve a Letter of Intent with Novant, and the deal could close by the end of October. In totality, the transaction could be worth more than $5 billion to the county and the community, and while technically it will be a sale of county-owned assets to Novant Health, Gizdic does not see it that way.

“As I talk with Carl, as we’ve explored this process, we feel like an equal part of something, not like we’re having something done to us,” Gizdic said. “To me it really reflects the relationship we’re going to have in the future with Novant Health, with UNC Health, with the UNC School of Medicine.”

Moving forward, "Let’s get those definitive agreements so we can really get into the community and talk to the community about what’s going on and what we plan on doing," said Novant CEO.

Posted by WECT News on Tuesday, July 14, 2020

“We’ve worked with New Hanover Regional Medical Center for now ten years with our Novant Health Brunswick Community Hospital, and that relationship has grown,” Armato said. “The interaction with New Hanover has proven that the cultures are aligned. The mission, the vision, the values of caring for people, caring for the community, is very much aligned. As we work together on our Airlink air ambulance and other clinical capabilities that we’ve worked on together, we’ve just grown closer to admire New Hanover Regional Medical Center for what it stands for in providing superior quality. It was very aligned with Novant Health and our mission of delivering remarkable healthcare to all in every community.”

Novant Health, which is headquartered in Winston-Salem, operates 15 inpatient medical centers and 674 outpatient location across four states (North & South Carolina, Georgia and Virginia), with a workforce of nearly 30,000 employees. Novant is one of six organizations that submitted responses to Requests for Proposals sent by the Partnership Advisory Group, the group of volunteers formed by New Hanover County leaders and tasked with charting the future of the public hospital. After evaluating all six responses, the PAG membership voted unanimously to recommend commissioners move forward with the offer from Novant.

It offers, among other things, $2 billion in cash up front to the county along with a commitment of $3.1 billion to fund the hospital’s capital improvement projects. Novant leadership also announced the organization had signed a letter of intent with UNC Health and the UNC School of Medicine, expressing the desire of “expanding the medical education program at NHRMC, including enhancing the long-standing pediatric program and other service lines as appropriate” as part of a partnership. Gizdic says Novant’s commitment to keep local leadership in place with decision-making control at NHRMC, stood out among the field of organizations expressing interest.

“It was important to the partnership advisory group, and it was very important to the community,” Gizdic said. “That was one of the things that was very impressive about Novant’s initial proposal and throughout these entire discussions, is their commitment to ensuring local control and making sure that the most important decisions about healthcare in this community are made in this community by community members.”

“When I think about all the Novant Health markets, whether it’s Charlotte or Winston (-Salem) or Virginia, those decisions are made locally,” Armato said. “We’re going to provide data and information and insights on what we see and opportunities. But, John and the local board and local physicians are going to decide what happens in the local market. For me, how I define that, that’s how we’re going to spend capital, it’s how we’re going to deploy the resources that we’re bringing in this relationship and in this partnership. All of that will be decided locally. Where should we build and open up access to healthcare? What should we do to expand the clinical quality and capability? Our relationship with UNC, how does that grow and expand so we can do more locally right there in Wilmington? My goal is to make sure people can stay home for care, so I’m going to leave it totally, those capital decisions, those investment decisions, in the hands of the local management team, the local physicians and the local board.”

When county commissioners voted on July 13, 2020, to approve the Letter of Intent with Novant, the county also released a draft outline of how to manage the $1.9 billion in proceeds from the possible sale of the hospital.

· Most of the funds — $1.25 billion — will be invested in a non-profit community foundation that will be formed that “furthers the county’s strategic priorities of health and social, equity, community development, and community safety,” according to the outline.

· The newly-formed foundation would be governed by an 11-member board of directors, with the Novant ownership appointing six members while the county appoints five. Elected officials will not be allowed to serve on the board.

· Approximately $300 million will go to an “NHRMC Transition Stabilization Escrow”, of which $200 million would be used to bridge any gap for NHRMC employee benefits (including pensions), and $100 million would be used for wind-down costs and liability escrow.

· Another $300 million will go into a reserve fund that the county can use for emergency response, debt relief, and tax and fee stabilization.

· $50 million will go to a fund that the county can use for mental and behavioral health initiatives.

Gizdic says the most important part of that deal, to him, involved protection for NHRMC’s 7,000-plus employees.

“Our teammates are what made this organization as great as it is,” he said. “Our teammates are the ones who deliver care every single day, and they are the ones who have made this organization the success that it is. Making sure our people are taken care of throughout this process, no matter what happens, is absolutely the most important thing to me. With that said, I believe the rest of the commitments Novant has made and bringing all that to bear will truly be transformative to our organization and our community.”

As for what the public might see shortly after the ink is dry on the legal documents, both men talked about more than just physical signage or logos. They say the community will recognize more tangible benefits to healthcare.

“The first thing I think the public is going to see is John and I and the local board working with local physicians to really look at opportunities to address health equity and address some of the social determinants of health,” Armato said. “Try to eliminate health disparities. You may see us also look at what other opportunities can we do to open up access to healthcare. So, I would be less focused on name changes and things that, in my mind, can be discussed and come later. We’re going to be focused on what can we do to drive value to the community that we’re here to serve and the surrounding communities.”

“Novant has a much more generous charity care policy currently than New Hanover Regional Medical Center does,” said Gizdic. “So we’re talking about the ability to implement that right away, to be able to offer more care, more affordable care to more people. The fact that community members in areas that Novant serves don’t even get a bill if they are within 300 percent of the federal poverty limit is remarkable. I’m excited about the opportunity to not only maintain the existing access that we have, but to be able to offer an enhanced charity car policy related to that.”

Gizdic and Armato said they’ve interacted as part of the state’s healthcare network for years. In our conversation, I asked what they’ve learned about each other as this current process has evolved. We talked about how healthcare itself has changed since they started their careers decades ago, and both men mention their fathers as the person who meant the most in getting them to where they are today. I hope you enjoy the interview.

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