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UNC System board puts off Vidant’s board nominees

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The governance feud between the University of North Carolina System Board of Governors and Vidant Health, the 1,708-bed health system that serves most of eastern North Carolina, appears on again.

The UNC board Friday declined for the second consecutive month to consider a slate of three directors proposed for Vidant Medical Center by Greenville-based Vidant, according to sources familiar with the matter.  The governors decided not to vote on Vidant’s plan to reappoint two current members, Greenville-area businessmen Jim Chestnutt and Phil Hodges, and add a new one, Deborah Davis, a former Vidant executive now with Virginia Commonwealth University Health System in Richmond, Va.

“All I heard was that I wasn’t going to be reappointed,” Hodges says. “I was asked to be reappointed by Vidant, but it was denied by the board of governors. I’m pretty well in the dark. I assumed it was sour grapes, but obviously they didn’t want to reappoint us. Is it punishment? I don’t know.”

Vidant CEO Michael Waldrum and officials of the UNC System declined interview requests. The appointments had been listed on UNC meeting agendas in March and April.

The spat began last year when Vidant officials alleged Chapel Hill-based UNC Health Care was plotting to take over the eastern North Carolina provider. During the dispute, Vidant said in a press release there was a “coordinated effort by outside interests and Raleigh politicians” to seize control of Vidant by stacking the board of directors with appointees favorable to UNC.

Then-UNC System board chairman Harry Smith denied those allegations, adding that the only talk of a merger came in a meeting sought by Waldrum.

The organizations are closely aligned because ECU, which is part of the UNC System, operates Brody School of Medicine, which is a national leader in producing family practice phyiscians. Brody students are trained at Vidant, which started as a Pitt County-owned system before operating control was transferred to a not-for-profit authority.

After Pitt County officials formulated a plan last year to appoint all of Vidant’s members, rather than sharing that responsibility, UNC and East Carolina University sued the county and Vidant. The impasse was resolved when the two sides agreed that Pitt County would appoint 11 members, and Vidant seven with approval from the UNC Board of Governors. The state also agreed to release $25 million it had withheld from Vidant.

Last week, Smith, who left the UNC board earlier this year, says he has urged the system’s board to reject Vidant’s nominees and insist on a new slate. “They are still in essence trying to pick their own board,” he says. During the 2019 flap, he adds, “I told them we were going to put strong, independent board members on there who fully understood that they had a responsibility to East Carolina, the Brody School of Medicine and the state, not Vidant. Vidant is a classic example of an organization that needs a board overhaul and higher expectations of its CEO.”

The dispute comes at a difficult time for many hospital systems, which face financial pressures after cancelling most nonessential medical procedures to focus on treating coronavirus patients. Last year, Vidant reported operating income of about $40 million on revenue of nearly $2 billion. In March, Vidant said it had an “$18 million budget shortfall” in the first quarter of its fiscal year and announced 191 layoffs in corporate offices and eight hospitals. A hospital spokesman declined to update the system’s financial picture this week.

The dispute comes as the other large eastern N.C. health care system, Wilmington-based New Hanover Regional Medical Center, considers a potential partnership or sale. Six systems, including UNC Health Care, Duke Health, Novant Health, Atrium Health, Bon Secours Mercy Health and HCA Healthcare, have provided detailed plans for tying up with New Hanover. The county-owned system, which reported operating profit of $106 million on revenue of $1.5 billion last year, is studying the bids, which are expected to be made public Tuesday.

In more normal times, a combination between the Greenville and Wilmington systems would seem to be a possibility given their mutual interest in eastern North Carolina’s welfare. Asked about Vidant’s decision not to bid for New Hanover, a spokesman provided a statement: “We continually evaluate our system of care and make decisions we believe will help further our mission which is to improve the health and well-being of eastern North Carolina.”

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