WILMINGTON — When New Hanover County announced in late July that it would be exploring options for selling the New Hanover Regional Medical Center, it triggered an avalanche of speculation — what would this mean? Who would benefit? Who might lose out?
Since then, the county has established a Partnership Advisory Group (PAG) to help represent the community in the process, and both the county and New Hanover Regional Medical Center (NHRMC) have made efforts to remain open and transparent about the process, including providing details, documents, and contracts — although in places curtailed by state statutes that restrict information about public hospital operations.
Still, some in the community remain uneasy about the process, and rumors, allegations, and theories about “what’s really going on” continue to circulate. These include allegations made by elected officials — including County Commissioner Rob Zapple and State Senator Harper Peterson — a newly-formed non-profit Save Our Hospital organized to stop the sale, in opinion pieces published in local media outlets, and, of course, on social media.
Concerns included kick-backs and back-room deals, golden parachutes and lobbying contracts, and the ever-present suggestion that a deal has already been inked (although evidence of that has yet to surface).
Port City Daily has collected a variety of these concerns to take a closer look at them.
Articles about exploring the hospital sale posted on social media inevitably receive the comment: “follow the money.” The refrain was shouted at the recent Save Our Hospital launch. It was also articulated more fully in a recent StarNews opinion piece by Clauston Jenkins in StarNews, asking if anyone involved in the sale process would contractually benefit, or gain new business.
So far, there’s no evidence that anyone involved would stand to gain through a clause in their contract.
According to Carolyn Fisher, NHRMC spokesperson, “There are absolutely no financial incentives linked to any type of partnership arrangement for any member of the NHRMC Board of Trustees or NHRMC staff.”
NHRMC President John Gizdic has explicitly denied that there are any contractual clauses that would benefit him in the event of sale; Gizdic stated that he was, in essence, putting his job on the line in the sale exploration process. Port City Daily requested Gizdic’s employment contract, but it is protected by state statute. Gizdic is the only person with an employment contract with NHRMC, according to Fisher.
County Manager Chris Coudriet has also denied any contractual benefits from a change of hospital ownership. According to Jessica Loeper, county spokesperson, “there are not any kick-backs or personal benefits that the county is aware of for any Commissioner related to this conversation.”
As for whether or not the commissioners would benefit financially from the process through their private businesses is not for the county to decide, Loeper said. While commissioners are encouraged to consult with the county attorney’s office if there are questions about potential conflicts of interest, they each decide for themselves before deciding whether or not to recuse themselves from a vote.
Speaking of the money, there’s been speculation — and concern — about what exactly would happen to the revenue from a sale or lease of NHRMC.
Some, including State Senator Peterson, have suggested that state statute requires any proceeds to be put into a trust or dedicated fund for health-related services, not unlike the Dogwood Health Trust that came from the $1.5 billion purchase of Asheville-based Mission Health by for-profit health company HCA.
The county maintains that, since Mission Health was a private (not publicly owned) non-profit, its dissolution and sale took place differently than a sale of NHRMC might. Since NHRMC is publicly owned, all the facilities are leased to NHRMC by the county; if NHRMC was dissolved in a sale, the proceeds would be returned to the county. The revenue would still face some regulation, but it could be more broadly utilized than the Dogwood Trust.
“Based on NHRMC’s articles of incorporation and the above-mentioned lease agreement, the county would be able to direct any potential revenue into an investment vehicle for the county (subject to applicable rules and regulations) and/or fund certain public initiatives,” Loeper said.
Was an ‘intent to sell’ resolution necessary?
Another point of contention for both State Senator Peterson and Save Our Hospital has been whether or not the ‘intent to sell’ resolution was necessary. The resolution title, which is dictated by statute, clearly made a bad impression on many and made it difficult for the county and NHRMC to explain — or, least, to convince — some in the community that the process initiated by the ‘intent to sell’ resolution was open-ended and could result in a sale, a partnership, or retaining NHRMC as a county-owned hospital.
Or, as Derrick Anderson, host of Let’s Talk on 104.9 FM, has posted repeatedly on Facebook: “Done deal.”
The counter-argument, voiced frequently by now-Chairman Julia Olson-Boseman and Gizdic, is that without an RFP, the county wouldn’t have an accurate idea of what offers are out there.
It seems that the county and NHRMC did explore some of their options, both in a 2018 report delivered to both parties and, earlier this year, market research done by Navigant, the hospital’s consulting firm. That research was not made available to the public, although much of it is restricted by privacy statutes for public hospitals.
Loeper noted that the “intent to sell” resolution allows the PAG to explore options for keeping NHRMC independent. Loeper also provided a synopsis of the county’s earlier efforts:
Prior to this discussion, in 2018 the county and NHRMC had a report compiled by First Tryon Advisors, the county’s financial advisor, to provide an overview of the existing structure and limitations for NHRMC, components of a restructure option that would create a parent company for NHRMC, and what the next steps would be to implement that new structure. This research was done more than a year ago to provide the hospital and county with information about an alternate corporate structure (called “SystemCo” in the report) that would help NHRMC overcome a number of limitations, one of them being the hospital’s ability to borrow money outside of the county. Through that research, it was found that there were still limitations for the hospital including access to capital, scale, and several other factors. This led the county and hospital to begin considering other potential options – which led us to where we are today.
Evaluating options could certainly be done through preliminary market research. But in order to fully understand what the market is and what another healthcare organization is willing to do in terms of partnership in any form, it requires the step of sending requests for proposals. Without a “resolution of intent” another healthcare entity would likely be willing to submit answers through a questionnaire about their potential willingness to partner, but you wouldn’t be able to ask for actual, in-depth proposals that allow you to truly evaluate what options exist. And without a “resolution of intent,” we wouldn’t even be able to move forward with a change in structure like SystemCo, mentioned above.
PR and consultant firms
It’s been suggested that Jarrard has actively been working to steer public opinion in favor of a sale, or to more directly steer the PAG’s decision making.
According to Fisher, Jarrard has been involved in the conversation but has not attempted to steer the outcome. No one from Jarrard has had any communication with PAG members except Gizdic and Coudriet, Fisher said.
“Jarrard has supported NHRMC and county staff in developing communications around the announcement of the exploration and through the vote of the New Hanover County Commissioners. Communications have focused on the need to carefully explore options and make the right choice for the region. They have not tried to steer the public toward a sale or other conclusion. This is a complicated subject impacting a lot of people, so supplementing our communication resources was necessary to help manage the volume of work,” Fisher said.
NHRMC has been invoiced $146,114 by Jarrard since they were contracted in late May; around $107,000 of that has been invoiced since mid-August when Port City Daily first reported on the company.
There has also been some concern about Navigant’s role in the sale exploration process.
It’s worth noting that Navigant has been contracted by NHRMC for years; the hospital used the company for 16 “strategic engagements” over the last four fiscal years, none of which involved a sale. NHRMC has contracted about $4.5 million in engagements with Navigant since September 2015. Details on these engagements are scarce because much of what Navigant does (along with NHRMC’s contract with the company) are shielded from public records requests by state statute.
Fisher said that while the PAG will work to shape the objectives of a request for proposals (RFP), the document that will help establish what the county expects from a potential partner, Navigant will craft the actual RFP.
“Navigant will craft the RFP to reflect the goals and objectives approved by the Partnership Advisory Group. Navigant has a great deal of experience in working with organizations to understand their priorities and support the development of RFPs that will elicit the type of information from responding organizations that will best inform decision-making. The Partnership Advisory Group is actively involved in reviewing and providing changes to the drafted goals and objectives at this time and will be working through suggested questions in the coming weeks,” Fisher said.
The whole point of lobbyists is to help shape policy behind the scenes, so it’s understandable that, on an issue fraught with concerns over transparency, questions about lobbyists would come up.
During the ‘Save Our Hospital’ launch last month, several attendees raised questions about Tom Fetzer, who lobbies both for New Hanover County and NHRMC, as well as for Blue Cross Blue Shield (the insurance company that dominates the market share of North Carolina). Because the interests of private insurance companies may not align with those of the community served by a hospital, the issue of potential conflicts of interest was raised.
NHRMC said neither Fetzer nor any other lobbyist had been involved in the sale exploration process. The county has involved two of its lobbyists, but not in an active ‘advocacy’ role, according to Loeper.
“From the county’s perspective, Mr. Fetzer, along with the county’s other advocacy partners, have been kept generally informed throughout the process. After the announcement in July, the county did ask Mr. Fetzer and Mr. [Douglas Carmichael ‘Mike’] McIntyre (two of our lobbyists) to inform our legislative and executive branches in state government and offer the county’s assistance to answer any questions. This was only for informational purposes and it was not an advocacy request. They have been provided with the same information the public has and have not been otherwise involved in the process,” Loeper said.
Loeper added that, because neither Fezter or McIntyre had been formally engaged, the county had no concerns about conflict of interest.
Atrium (formerly Carolinas HealthCare)
Atrium, formerly known as Carolinas HealthCare (CHC), has been widely discussed as a potentially interested party, along with HCA, and others. Atrium has drawn particular attention for several reasons, including Gizdic’s 14 years in administration for the company prior to joining NHRMC in 2005. There’s also the fact the NHRMC favored a 2011 management deal with the company; the deal ultimately fell flat, but three years later NHRMC entered a lower-level services agreement with CHC.
Part of that 2014 services agreement included a ‘consulting’ role for CHC. NHRMC included the opportunity to brainstorm with CHC-owned hospitals facing challenges similar to those faced by NHRMC as one of the selling points of the deal.
According to Fisher, NHRMC has not consulted Atrium on the possibility of a sale. County officials also said they’d had no conversations with Atrium about a sale; Gizdic said there was no “mission creep” for the hospital’s agreement with Atrium — that is, no attempt to evolve their current arrangement into a takeover behind the scenes.
NHRMC employs more than 7,400 people, so the future of wages and retirement benefits is an obvious concern.
Gizdic has been emphatic that any new partner or owner would have to commit to NHRMC’s current policy of living wages and continue to develop higher standards for worker compensation (which is part of the hospital’s long-range mission). But beyond the employees of NHRMC, pensions have been seen as a barometer for a potential change in ownership, as has been the case in a number of hospital merger negotiations.
Several NHRMC employees reached out to Port City Daily with concerns over a letter sent by the hospital in August. Traditionally, according to these employees, NHRMC has sent updates on employees’ pension status with estimates based on where their pension would be when they reach a range of ages (i.e. 55, 62, and 65 years old) — the idea being to show employees what they could count on when they retired. The August letter showed employees their current pension status; this led to employee concern that the hospital was preparing for a pension freeze, perhaps ahead of a sale.
Fisher said the hospital was not planning or laying the groundwork for any kind of freeze or change in the pension program. She said the August letter was sent in response to employees who wanted to clarify where their pensions were at the present time (i.e. which benefits were already secure).
PAG and the final decision
While few have disparaged the character or commitment of the PAG members, several have suggested the PAG’s creation is largely for show. State Senator Peterson and Anderson both have said repeatedly they believe a deal is done (although they have not produced evidence to that effect). Save Our Hospital founder Gene Merrit initially said he did not believe the PAG would sincerely consider any non-sale options, although he has since softened that message slightly and met with the PAG.
It’s important to ask how much authority the PAG will have in the final decision. Will the PAG’s decisions — the language of the RFP, preferred partner(s), language for the final agreement — be binding? Or will commissioners be able to make a motion to alter those documents and decisions before voting on them?
According to Loeper, the PAG will have the final say over the language of the RFP and the list of five potential partners to send it to (although additional proposals are also expected). The final decision, and the details of a final deal, would still be up to the county commissioners, although not before public hearings are held.
“The Board of Commissioners have authorized the Partnership Advisory Group to craft the RFP, develop a list of potential proposers, and evaluate proposals that are received. The RFP and a list of potential proposers will be shared with the board as information in its final format (they will not be voted on by the Board of Commissioners). An official vote by Commissioners won’t take place until the proposals come back and the PAG makes a recommendation to the board on their suggested path forward (whether that is with one or more proposals and/or an alternate path). If this process were to move forward into a final agreement, the Board of Commissioners would have the authority to modify language that it finds is in the best interest of the healthcare system and the community prior to voting on that agreement. It’s worth noting that before those two votes, there would be public hearings on the proposals and on any final negotiated contract (if that is the direction of the PAG and board),” Loeper said.
The big question: Is a change good for the community?
Beyond all these concerns there is a more fundamental question on people’s minds: is a sale, any sale, to any buyer whether for-profit or non-profit, a good idea, or will it ultimately diminish services and increase costs?
There’s no shortage of experts who have weighed in on the issues, many of whom suggest hospital mergers and acquisitions lead invariably to increased costs, and while the quality of care is sometimes maintained, other times key facilities and talents are relocated to other hospitals as large health systems with dozens of hospitals seek to increase efficiency and revenue (you can read more about those here, along with some of Gizdic’s responses to those concerns).
It’s also tempting to draw parallels — to the sale of Mission Health, the demise of Philadephia’s Hahnemann University Hospital, or the proposed merger of Atrium and Winston-Salem-based Wake Forest Baptist Health, which this week drew fire from North Carolina Treasurer Dale Folwell.
But, while those — and many other — examples will bear examining in the coming weeks and months, they each have their own set of circumstances.
Officials have said that, without knowing specifically what’s on the table, it’s impossible to say whether or not change will be good for the community. By the same token, once there are offers on the table, it will be easier to draw comparisons, and officials will have harder challenges to face, and harder questions to answer.
Send comments and tips to Benjamin Schachtman at firstname.lastname@example.org, @pcdben on Twitter, and (910) 538-2001