New Hanover Regional Medical Center is proof that government entities can run lucrative businesses. The Wilmington-based health care system — which is an operating division of New Hanover County — has averaged operating profit of more than $84 million over the last two years. Revenue has increased 17% to $1 billion over that period. Total assets exceed debt by $1 billion.
New Hanover Regional also wins awards for its quality and as a good place to work for its 7,000 staffers. It’s the biggest employer in southeastern North Carolina, by far.
But hospital and county leaders apparently doubt that success can continue, so they’re setting up a likely sale of the system. They cite rampant hospital industry consolidation, increased pressure on reimbursements and the need to raise lots of capital as factors for considering a sale.
It may happen quickly. County and hospital officials have scheduled two community forums in mid-August, then the county board is expected to vote whether to seek a buyer on Sept. 3.
Many hospitals in North Carolina are part of not-for-profit authorities with limited ties to county government. New Hanover never created an authority, so the county itself issues debt to pay for hospital capital projects. It’s the largest county owned system in the U.S. that operates without county tax support, says CEO John Gizdic.
But financing as much as $1 billion in projects over the next 10 or 15 years through county-backed bonds may not be viable with potential tax increases, says Gizdic, a 15-year hospital employee who became CEO in 2017.
Dr. William Hope, New Hanover Regional’s chief of medical staff, told Wilmington TV station WWAY, “I think the idea that our hospital will continue on as a county-owned hospital that doesn’t receive tax dollars for the long run in the next 10 years is probably not something that is sustainable, with all of the things that are happening in health care.”
Over the last three years, New Hanover has boosted efforts to improve public health in its region, versus strictly focusing on treating sick people.
“There is a scenario that secures the future and helps us accelerate those efforts faster tan we can do on our own without raising taxes,” Gizdic says. “It could be life changing for the community.”
So look for New Hanover to follow the track of Asheville-based Mission Health, which sold to for-profit HCA Healthcare in February. The $1.5 billion sale created a community foundation that will provide $50 million to $75 million in annual funding to improve health outcomes in western North Carolina. Mission Health has annual revenue of about $1.4 billion and also operated profitably.
N.C. State Treasurer Dale Folwell says hospital sales inevitably decrease health care competition and lead to higher prices. Instead of a sale, he suggests New Hanover Regional consider trimming expenses and avoiding expensive, unneeded expansions.
Gizdic emphasized the process is in its infancy.. But speculation about potential buyers is already occurring and it includes virtually every major N.C. system and, of course, HCA, which also owns a big hospital in nearby Myrtle Beach, S.C.
“I’ve had absolutely no conversations with anybody about a potential deal,” he says. “There are no proposals on the table. We’re trying to see what our options are.”