In November 2017

It’s easy to think that the merger between Carolinas HealthCare System and UNC Health Care is all about Charlotte and the Triangle, the popular girls at the dysfunctional high school we call North Carolina. A lot of it is. But it’s also about places such as Guilford County. There, CHS has a management-services agreement with Cone Health, which essentially controls health care in the northern half of the county. On the southern end, UNC owns and operates High Point Regional.

They have been fierce competitors. Now, they plan to be something different. Hopefully, they will be collaborators, and by that I mean they will use their collective clout, scale and brainpower to drive efficiencies and improve access to health care while keeping costs in check. That’s the first possibility. I worry they could also be co-conspirators. When it’s over, they will have a near monopoly on hospital care in Guilford County and concentrated power in many other markets. Monopolies are often like dictatorships. They can appear to be very good until they become very bad.

I want the first. We need the first. But I am troubled by the lack of clarity and transparency to date in the merger between CHS and UNC. So I worry about the second.
It’s important to understand a little bit about these two organizations, so let’s take them one at a time. CHS is still, legally, the Charlotte-Mecklenburg Hospital Authority, but it has grown into something altogether different, sprawling across the Carolinas like the shadow of the Fury 325 roller coaster at Carowinds. CHS is not a traditional nonprofit, and it’s also not a pure government agency. It refers to itself as a “not-for-profit self-supporting public organization,” and this middle ground allows it to zig and zag.

For example, CHS produces several sets of annual results. The one that is proudly displayed in its public report treats CHS like the water department. Revenues equal expenses, and there’s nothing left over. The second, reported to ratings agencies, only includes about 60% of the entire $9.8 billion enterprise and reports operating income of $216 million.

UNC is equally complex. What started as the UNC Hospitals in Chapel Hill now controls medical centers from Hendersonville to Kinston and has revenue of about $3.6 billion (with operating income of $197 million). It is administered as something called an “affiliated enterprise” of the University of North Carolina, but there’s no statutory definition of that term. My suspicion, having known enough bill drafters through the years, is that the lack of definition was intentional. It allows a wide range of conduct and opportunity, for better or worse.

UNC’s board is appointed by the UNC Board of Governors. CHS’ comes from the Mecklenburg County commissioners. But these appointments carry no fealty. According to the hospital systems, there are no regulatory or elected bodies that have to sign off on the merger or set its terms. None.

So, to take one hypothetical, CHS, which is nearly three times as large as UNC, could conceivably wind up with two-thirds of the seats on the new governing body. That would mean that this new board, one weighted with the interests and input of Mecklenburg County, would have oversight of our premier state-owned teaching hospital. We joke about Charlotte wanting to run the state. Folks, this is how it happens.

The idea behind these arm’s-length governance structures was to take politics out of health care management, and they have — to a degree. But it’s also removed critical public oversight. Most of us stakeholders — patients, taxpayers, neighbors — have no real say in what happens. Because we have no vote, we have no voice.

I can say with some level of certainty that after this deal goes through, the next hospital mega-mergers will come quickly. All of us will still be on the sidelines watching and hoping they turn out all right, which is what most of health care is about anyway. Maybe Wake Forest Baptist and Novant will bury the hatchet. Duke could team up with Vidant and the big independents left in Cumberland, Moore and Buncombe counties. Eventually there may come a day when there is just one hospital company that serves most of North Carolina. Then it can play tug of war with Blue Cross and Blue Shield of North Carolina over our wallets, while both tell us they are looking out for our interests.

(Editor’s note: After this column was published, Wake Forest Baptist agreed to acquire High Point Regional, which has been part of UNC Health Care since 2012. Terms of that transaction were not immediately disclosed.)

 

 

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