The N.C. Local Government Commission came close this week to denying Atrium Health the ability to issue $600 million of debt. Such an action, which was recommended by State Treasurer Dale Folwell and the commission staff, could have caused disruptions to the big Charlotte-based health care system’s finances, Atrium officials said at the May 4 commission meeting.
The dispute centered on a philosophical argument, supported by Folwell and State Auditor Beth Wood, that it is illogical for a not-for-profit organization with $7 billion of available capital to borrow $600 million through tax-exempt financing.
Folwell, Wood and commissioner Mike Philbeck of Shelby voted to deny Atrium’s proposal. But five commission members, including Secretary of State Elaine Marshall, supported Atrim’s plans. The money will be used for a variety of improvements at the system including renovating its Pineville hospital tower.
The financing is a routine part of the system’s continuing effort to operate efficiently and maintain its Double AA credit rating, Mark Keener, Atrium’s vice president of treasury services, said at the meeting. Atrium plans to invest about $3 billion on its Charlotte-area operations over the next few years with the $600 million helping pay for improvements at the lowest-possible cost, added Allen Robertson, a Robinson Bradshaw lawyer in Charlotte who represented Atrium at the meeting.
Having to come before the LGC for approval opened Atrium to a barrage of criticism from Folwell, who has been battling the N.C. hospital industry ever since his election in 2016. The Republican, who was reelected last year to a second four-year term, oversees the N.C. State Health Plan, which represents 750,000 employees and retirees.
“The cartelization of health care in North Carolina is on a pace that no other state is seeing and you are the biggest player in that,” Folwell said. “The cartelization by all objective measures results in lower quality care, reduced access and higher costs.”
The treasurer urged Atrium to “have some restraint” in its spending and expansions. Not-for-profit, publicly chartered health care systems aren’t supposed to operate like profit-maximizing businesses such as Cary-based Epic Games, airlines or cruise-ship operators, Folwell said. He cited polls showing more than 70% of Americans say they are “one medical bill away from being blown up” financially because of the expensive U.S. health care system.
Folwell added that Atrium’s investment portfolio grew from $5 billion to $7 billion over the last two years, despite the pandemic, and that the system consistently makes more money from investments than its core medical business. “You aren’t really a health care company,” he said. “You are really a financial management company.”
Robertson responded that many North Carolina public institutions, including cities, counties and hospitals, have earned a national reputation for operating in a sound, prudent manner over the years under the guidance of the Local Government Commission. Atrium’s approach has led to a strong credit rating that should be maintained, he said. Atrium, the largest employer in the Charlotte metropolitan area, also operates systems in Georgia.
Failure by state officials to approve Atrium’s debt would probably raise concerns at credit rating agencies that track Atrium’s finances, Keener said.
While LGC member Ron Penny said he shares some of Folwell’s complaints about the health care industry, he noted the LGC isn’t the forum to address those issues. Penny, who is secretary of the N.C. Department of Revenue, noted that state law enables entities to borrow money for “expedient” reasons, which he said gave Atrium the opening to borrow the money despite its robust capital base.
Folwell said that Winston-Salem-based Novant Health recently issued taxable debt through a Wisconsin-based entity rather than going through the LGC. Novant is financing its recent $5 billion purchase of Wilmington’s hospital system. Asked after the meeting why Novant made that decision, Folwell said he thinks the system preferred to avoid the LGC’s scrutiny.