Carolinas HealthCare is combining operations with UNC Health Care
It didn’t take long for Carolinas HealthCare CEO Gene Woods to make a big splash in North Carolina, as predicted in our March profile, “Picking up the beat.” The Charlotte-based system is combining operations with Chapel Hill-based UNC Health Care in a complex transaction that doesn’t involve money or assets changing hands — at least not yet. The partnership would create a $14 billion system with Woods, 52, overseeing both operations. UNC CEO Bill Roper, 69, will become chairman of a new board.
Woods says combining the largest hospital systems in Charlotte and the Triangle will improve quality and affordability because patients will have access to the best of both organizations and scale can reduce costs. “Health care just costs too much right now,” but is reaching a point where prices should decrease, Roper told the Triangle Business Journal.
The deal is not about boosting the hospitals’ leverage in negotiations with insurers, hospital executives say. “We look forward to seeing how they will lower health care costs so that we can pass those savings on to our customers,” says Blue Cross Blue Shield of North Carolina spokeswoman Darcie Dearth.
Both organizations are money machines. With annual revenue of about $10 billion, CHS reported a net income of $542 million during the first half of this year. About 70% of the gain stemmed from an increase in investment values due to strong financial markets. Profit from operations declined 25% to $141 million in the period because of lower reimbursements and higher costs.
UNC had record net income of $231 million on revenue of $3.6 billion in 2016. Over the last six years, the system has reported $830 million of net income.
Big transactions often spark other deals, with Novant, Vidant, Wake Forest Baptist, WakeMed and others likely to make big moves. Duke University Health System is aligned with for-profit LifePoint Health. “Stay tuned, there will be more consolidation” over the next three to five years, says N.C. Rep. Donny Lambeth, a health care consultant. “We’re very likely to end up with a couple of big systems.”
A sticking point could be how lawmakers and the UNC Board of Governors view a loss of independence of one of the state’s jewels. Who has responsibility for UNC’s pension liabilities is also a key issue, Lambeth says. Woods isn’t dallying: He wants the deal to close by January.
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