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Election may affect fate of Wilmington’s hospital ownership

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Wilmington’s leadership has a big decision pending: Whether to sell its thriving hospital, which many expect to fetch $1 billion or more. The ultimate decision makers are the five New Hanover County Commission members, so this week’s primary election may have an impact.

It’s a story that Business North Carolina examines in-depth in this month’s edition. The basic issue is whether the New Hanover County government wants to stay in charge of running a big health care system — the region’s biggest employer — while the industry consolidates.

Some community leaders think it’s time for a change, prompting the county commission to appoint a study group made up of 21 community representatives. By mid-March, the Partnership Advisory Group will have received detailed pitches from as many as nine big health care systems detailing plans on how they could better operate New Hanover Regional Medical Center.

Those interested parties include the four biggest N.C. hospital systems: Atrium Health, Novant Health, UNC Health Care and Duke Health; industry kingpin HCA Healthcare; plus four other groups. Perhaps the most intriguing bidder is Optum, a subsidiary of Minnetonka, Minn.-based UnitedHealthcare Group, the biggest U.S. health insurer. The proposals will be made public after redactions of proprietary information, New Hanover officials have said.

New Hanover Regional is attractive because it’s a lucrative monopoly in a growing, vibrant market. The system posted revenue of $1.45 billion and operating income of $106 million last year. The 7% operating margin is among the best reported by the big N.C. hospitals.

Theoretically, handing off control of New Hanover Regional could lead to a $1 billion check from a for-profit buyer, or pledges of $1 billion in investments and new programs from a not-for-profit suitor that would otherwise be the responsibility of New Hanover County taxpayers.

But there’s a problem: Many folks in Wilmington don’t want a sale. Local developer Gene Merritt started an interest group to oppose a change of control last fall and he’s quickly attracted support. His group polled the 15 candidates for New Hanover County Commission in Tuesday’s election. The six Democratic candidates, including incumbent Jonathan Barfield, said they oppose a sale, along with four of the nine Republicans. Two Republicans said they are undecided, while three didn’t respond.

The “Save Our Hospital” group started by Merritt held a January public meeting discussing the impact of a sale on hospital quality, access and cost that attracted more than 200 people. The event included a talk by State Treasurer Dale Folwell, who has criticized consolidation among N.C. health care systems.

Three people will be elected to the five-person board, joining incumbent holdovers Julia Olson-Boseman and Rob Zapple. Olson-Boseman voted to proceed with the study group last year, while Zapple was opposed. It will be interesting to see if the current board moves ahead with a decision before the November general elections, when opponents might have a majority.

John Gizdic, who is CEO of the system, and former Mayor Spence Broadhurst, who co-chairs the advisory group, explained the rationale for a potential change in governance in the BNC story. Their basic point is that the county may never have a better opportunity to partner with a larger group.

They emphasize no decision has been made.

A sale in Wilmington would follow HCA’s $1.5 billion acquisition of Asheville-based Mission Health in February 2020.

A year later, several elected officials and dozens of consumers in the Asheville area are complaining about declining customer service and stricter charity care stemming from HCA’s ownership. That prompted N.C. Attorney General Josh Stein to issue a letter last week expressing “deep concern about what I’ve been hearing about HCA — and I want answers.”

In an statement, HCA responded that it was communicating with Stein “and we welcome the opportunity to continue the discussion with him about our commitments to our community.”

While the big N.C. hospital systems are not-for-profit authorities that don’t have shareholders, HCA is a public company that reported a 10% operating margin last year on $51 billion in revenue last year. Unlike other N.C. systems, HCA has to meet investor demands for steadily rising profit.

Stein had the power to block HCA’s Mission acquisition last year, but didn’t, Merritt notes. On the New Hanover transaction, “Josh Stein has the authority to kill any deal. We’ve visited with him two times but he told us there’s nothing to be done until a deal is on the table.”

 

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