Saturday, May 21, 2022

New Hanover County mulls NHRMC sale: Why now, what would change, and what remains unknown?

New Hanover County Manager Chris Coudriet (left) and NHRMC President and CEO John Gizdic. (Port City Daily photo / Benjamin Schachtman)
New Hanover County Manager Chris Coudriet (left) and NHRMC President and CEO John Gizdic. (Port City Daily photo / Benjamin Schachtman)

WILMINGTON — This week, New Hanover County announced its Board of Commissioners will decide whether or not to explore options for selling New Hanover Regional Medical Center. What, exactly, that would look like remains a series of unknowns.

Related: County Commissioners considering sale of New Hanover Regional Medical Center to ‘larger healthcare system’

In a meeting with local media outlets, both County Manager Chris Coudriet and NHRMC President and CEO John Gizdic emphasized repeatedly that, even if commissioners vote to explore a sale at their September 3 meeting, the county could ultimately still decide to retain ownership of the hospital and healthcare network.

Gizdic and Courdiet discussed the plan for about an hour with reporters earlier this week; both noted that NHRMC is in good shape, financially and otherwise. The non-profit has over a billion dollars in annual operating revenue and at least a billion dollars in assets, and, while it is exempt from millions of dollars in property tax, it doesn’t take any taxpayer money from the county. That’s unusual: in fact, NHRMC is the only hospital of its size in North Carolina that is financially independent.

So, why consider selling NHRMC?

New Hanover Regional Medical Center. File photo.
New Hanover Regional Medical Center has over a billion dollars in assets. What would change if they were sold? (Port City Daily photo / File)

Coudriet initially framed the decision to consider selling NHRMC in terms of “uncertainty in the healthcare industry,” juxtaposed with the current strength of the county’s healthcare system. In short, Coudriet argued that if “the certainty isn’t there” and the system is at its apex, it’s a prime time to consider selling, because the county would be able to essentially dictate terms from a position of strength.

Asked what some of those uncertainties were, Coudriet acknowledged that it was not clear that NHRMC could continue to operate independently. A major factor, he said, is the nearly $200 million in annual “charity care,” provided by NRHMC to patients who cannot afford some or all of their healthcare. This county-mandated service is paid for by NHRMC’s operating revenue (i.e. in large part from other payments made by patients and healthcare insurance).

Coudriet said there was no way to guarantee that NHRMC could continue to provide that level of charity care – demand for which could easily increase – without eventually turning to the county to subsidize it.

“If the cost of uncompensated care in the last year was $200 million, when the hospital does not generate enough revenue to cover its expenses — of which that $200 million is an expense — because it’s a county-owned hospital, it would be the county’s responsibility to find the revenue to support that. So taking the long-term view, and I don’t think John [Gizdic] or I would suggest that result is in the near-term future, but it is reasonable and conceivable to think that in the future, the county will have to subsidize the cost of operating the health care system in our community if we keep the same model,” Coudriet said. “So the real concern and risk is not knowing at what point the hospital is not in a positive cash position and the county has to explore all of the avenues available to it to underwrite the cost.”

Gizdic also acknowledged the uncertainty in the healthcare industry, noting that NHRMC – which has recently invested at least a billion dollars in infrastructure and new programs – plans to spend several additional billion in the future. NHRMC also has future expansion goals to keep pace with the ongoing population boom, including more ambulatory care facilities and potential new projects like a community hospital in the Scotts Hill area near the Pender County border.

Both Coudriet and Gizdic also noted that, even with the combined debt capacity of the county and NHRMC, the may not be sufficient financial ability to support bonds for infrastructure and program expansion.

Asked why an outside business would want to take on a system that might require subsidizing, Coudriet said that that success, accolades, and talent of NHRMC would attract interested parties.

Asked how an outside business could maintain all of NHRMC’s standards, facilities, and programs, and infuse new development and expansion capital, all while maintaining – and possibly while lowering – the cost of health care, Gizdic said it would essentially depend on the economy of scale. Gizdic suggested a larger healthcare system’s broader footprint and deeper pockets could allow NHRMC to do everything it wants to without raising costs or abandoning its ambitions for regional growth.

Officials say little would change

Pender Memorial Hospital, operated by NHRMC. (Port City Daily photo / Google)
Pender Memorial Hospital, operated by NHRMC. (Port City Daily photo / Google)

A common question during recent discussions would be how the county and the hospital could ensure that their commitments to “charity care” and outreach efforts to improve healthcare equity would continue under new ownership. Coudriet noted that the “county along with the hospital can craft all of its priorities in the request for proposal.”

It’s not clear what kind of agreement would provide sufficient accountability, but Coudriet noted that the county would retain the services of a consultant firm to sure up and ratify any legal language that would help the county and NHRMC maintain their joint expectations for the hospital system.

That would also extend to staffing and to some extent management and the board, Coudriet said. Gizdic added that any new owner would be expected, as part of an RFP, to maintain NHRMC’s no-layoff policy, as well as to support – and hopefully over time increase – the hospital’s minimum wage, which NHRMC has worked to increase over the state and federal minimum.

Asked if the current board and administration would remain in place under new ownership, Coudriet said:

“If we proceed, determining what a local board of governance ought to look like, what it should look like, needs to be very clearly articulated in a request for proposal. I think our view is, certainly we have tremendous assets, and if we went forward, someone would want a partner to have the assets, but they’re really acquiring the talent. And so it would be an expectation that the talent that is in place is the talent that will continue to lead the evolution of health care and the delivery of it going forward.”

Gizdic noted that other commitments, including NHRMC’s support of the Pender County Memorial Hospital and facilities in Brunswick County, would also be maintained. Specifically addressing Pender’s hospital, Gizdic noted that NHRMC’s lease to operate the facility still has two years – if NHRMC came under new ownership before then, Gizdic said he would expect that lease to be honored. After that, both Gizdic and Coudriet said they expected that relationship to be part of RFP evaluation process.

Unknowns

While a “sale” would constitute all of NHRMC’s $1 billion-plus in assets, Gizdic did say NHRMC and the county would consider a range of proposals, presumably including operations agreements that would leave county ownership intact and outright sales. Until the county crafts an RFP, it won’t be clear what kind of offers it will receive.

It’s also unclear what the county will do with the money, whether that’s a new revenue stream from a lease or a – somewhat staggering – lump sum of $1 billion (or more). Coudriet offered examples, but no specifics, of what the county would do with the income.

“Any revenue from the sale of the hospital would be reinvested into New Hanover County to help all of our residents and our businesses thrive for generations to come,” Coudriet said.

Coudriet did not say if the county would lay out specifics for how to use proceeds from the sale of NHRMC or, as one reporter suggested, whether the county would put the potential uses of the income to a bond-style referendum or simply leave it to the discretion of the board (and, presumably, future boards).

Lastly, it’s not known whether the county will opt to sell to a non-profit or for-profit healthcare system. Gizdic declined to say if he had a preference, instead stating he wanted to find a good ‘cultural’ fit for NHRMC. Coudriet did acknowledge that a for-profit hospital would become one of the county’s largest property taxpayers (NHRMC’s hospital complex alone is worth over $200 million, not to mention it’s many other property holdings).

(Editor’s note: This article has been updated to correctly note that NHRMC has worked to offer an in-house minimum wage that is higher than the state and federal minimum, not necessarily at $15 hourly minimum wage).


Send comments and tips to Benjamin Schachtman at ben@localvoicemedia.com, @pcdben on Twitter, and (910) 538-2001

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