WILMINGTON — On Tuesday, New Hanover County released the proposals for new partnerships for New Hanover Regional Medical Center, including offers for a new academic partnership, long-term leases, and billion-dollar offers for full acquisition.
A total of six proposals were received, including one for-profit company — HCA Healthcare — and five non-profit (including academic) organizations, Bon Secours Mercy Health, Duke Health, Novant Health, UNC Health Care, and Atrium Health (a company with whom NHRMC already has an extensive relationship, including management of its physician group). The Partnership Advisory Group (PAG) initially considered 29 healthcare systems, including 16 that expressed interest and 13 that the PAG contacted; none in the latter group submitted a proposal.
The six proposals include a variety of investment offers to help NHRMC continue to develop and expand, ranging from hundreds of millions to $5 billion. There are also several cash offers to buy NHRMC, along with offers for long term leases. It should be noted that most of the proposals indicate a willingness to negotiate partnerships if the county doesn’t want to outright sell NHRMC. Several of the proposals include maintaining the current NHRMC board and leadership team.
The county plans to release the executive summaries for each proposal, as well as the complete proposal from each healthcare system with some information redacted. According to NHRMC CEO John Gizdic, the redactions were ‘very minor.’
The county will also release the first round of follow-up questions, sent by the PAG to clarify various points in each of the proposals. According to Co-Chair Spence Broadhurst, the PAG expects several rounds of questions and answers before the proposals can be considered ‘finalized’ for consideration.
Last week, members of the PAG, NHRMC leadership team, and County Manager Chris Coudriet met with Port City Daily to answer some high level-questions, including how the PAG will define and evaluate ‘local control,’ to what extent the sizeable cash offers have factored into the PAG’s process, how Covid-19 might affect both NHRMC’s and potential partners’ bargaining position, and where the process goes from here.
Read more: Questions about NHRMC proposals: ‘local control,’ Covid-19, cash offers, and more [Free read]
Below, the executive summary and key points for each of the six proposals. You can find the full proposals and answers to PAG questions here. The public is invited to share their comments about the proposals at any time by emailing Advisory Group members at PAGcomments@nhcgov.com.
Atrium Health
Atrium Executive Summary – … by Ben Schachtman on Scribd
Bottom line:
- $3.1 billion investment over 40 years
- $2.17 billion in capital investments, $1.154 in the first 10 years
- $941.8 million investment in the ‘New Hanover’ community, including upfront cash to the county ($50 million), earmarked funds for a ‘Community Foundation’ ($150 million) and $791.8 million in lease payments and profit sharing
- New Hanover County would retain legal ownership of NHRMC
- NHC would be free of debt obligations from NHRMC
- Nine-member board, with six residents of New Hanover or surrounding counties
- For a minimum of ten years, Atrium will nominate two NHRMC directors to Atrium’s 27-member board (residency of these directors is not specified)
Capital investment:
Atrium’s executive summary includes an “innovative Behavioral Health and Addiction treatment facility” as part of its capital investment. In addition, the proposal does tout Atrium’s ability to ‘transform rural healthcare,” which would likely involve capital investment.
Other considerations:
- Atrium Health Medical Group is one of the largest medical groups in the nation with over 2,900 physicians, including 900+ primary care physicians, across 900+ care locations.
- Atrium currently manages NHRMC’s physician group
- New approaches for ‘value-based’ health insurance plans
- Atrium provided over $2 billion in ‘community benefit’ (i.e. charity care)
- Invested $19 million to increase wages for 15,000 nurses and support staff in 2019
- Atrium will maintain teaching programs with UNC for at least 10 years
- Additional opportunities Wake Forest Baptist Health and the Wake Forest School of Medicine Wake Forest Baptist Health and the Wake Forest School of Medicine
Atrium Executive Summary – … by Ben Schachtman on Scribd
HCA Healthcare
HCA Healthcare Executive Su… by Ben Schachtman on Scribd
Bottom line:
- $1.25 billion ‘full acquisition’ or lease offers (adjusted for NHRMC’s debt and cash on hand)
- $1.1 billion joint venture (with HCA getting at least a %51 share, and up to 80%)
- Multiple proposals including outright sale, lease, and joint venture
- All transactions would result in NHRMC becoming a ‘taxable entity,’ generating an estimated $19 million in sales and property taxes for New Hanover County
- In the event of a sale, a ‘Community Advocacy Board’ would be established to represent the ‘Wilmington community.’ For a joint venture, the county would ‘be included in key operational decisions involving NHRMC.’ NHRMC would have a board of trustees, with HCA expecting ‘significant local community involvement.’
Capital investment:
HCA affirmed “that the expansion and reconfiguration of facilities to ensuring access to care or the community. HCA’s proposed capital commitment would help to satisfy this need.”
Other considerations:
- Develop a strategy regarding an ambulatory network
- Pursue initiatives for “lowering costs and increasing quality”
- NHRMC would have the opportunity to choose between its existing charity care policy and HCA’s financial assistance policies based upon whichever policy provides greater access to healthcare service
- HCA’s recent acquisition of Galen College of Nursing, would not only provide access to recently graduated nurses, but would also create a potential opportunity to establish a satellite location of the college at NHRMC
- NHRMC would benefit from HCA’s purchasing power and ‘shared services platform’
- All of HCA’s proposals would free NHRMC from current statutory restrictions on expansion beyond New Hanover County
Novant Health
Novant Health Executive Sum… by Ben Schachtman on Scribd
Bottom line:
- $5.3 billion investment
- $2 billion cash offer
- Multiple proposals including sale, partnership, or management
- Governance: NHRMC would remain a separate corporate entity, the community would have representation through a board with reserve powers, up to two seats on Novant’s board of trustees (which currently has 17 members)
Capital investments:
Novant pledges up to bring up to $5.3 billion in “total economic value to New Hanover County and the surrounding area and up to $2 billion in “upfront cash proceeds” to the county if NHRMC is completely integrated into Novant’s network. Novant also commits to funding 100% of NHRMC’s current capital needs (i.e. major projects) as identified in the hospital’s master plan.
These investments including approximately $600 million in ‘routine capital expenditures’ of ten years and $2.5 billion in ‘strategic capital projects.’
If Novant didn’t outright acquire NHRMC, but instead entered a joint venture or operating company, or a management contract, it would still contribute a “significant percentage” of NHRMC’s needs. Novant also commits to $50 million for the NHRMC Foundation to fund “unmet community needs, irrespective of structure.”
Other considerations:
- NHRMC would become the ‘flagship facility’ for Novant in the region
- Novant’s existing footprint in Brunswick County
- Novant Health has shifted 500,000 residents to ‘value-based’ plans
- Commitment to increase NHRMC’s charity care program from 200% to 300% of the federal poverty line
- No lay-offs, no employment changes without board approval, “job growth will be a priority”
- NHRMC’s senior leadership would stay in place
- Novant commits to maintaining all NHRMC existing hospital-based provider contracts, joint ventures and other physician contracts and agreements
- Expanding NHRMC’s role in providing ‘destination services’
HealthSpan Partners / Bon Secours Mercy Health
Healthspan / Bon Secours Me… by Ben Schachtman on Scribd
Bottom line:
- $1.3 billion sale, but other options possible
- $400 million in capital investments over five years
- A NHRMC foundation with discretion and funding for additional investments
- Current NHRMC board would remain in place
Capital investments:
HealthSpan indicated it would possibly invest more than $400 million if an analysis of NHRMC’s strategic plan indicated it was fiscally responsible. The foundation (not unlike the current NHRMC Foundation) would have a governing board and the ability to direct additional funding to the community.
Other considerations:
- ‘Robust’ online ‘patient-facing’ tools, including telehealth programs
- More than $2 million daily in low-cost or free care to in-need at at-risk patients — would expand NHRMC’s ability to over uninsured and underinsured patients
- Company-wide minimum wage recently increased to $15
- $60 million fund to help associates (employees) experiencing Covid-19-related hardships
- Successfully completed a $1.2 billion debt financing in April
- Alternatives: HealthSpan is “open to negotiate a wide variety of partnership and governance structures to further support NHRMC’s commitment to its community”
Duke Health
Duke Health Executive Summa… by Ben Schachtman on Scribd
Bottom line:
- Strategic partnership
- $1.35 – $1.4 billion ‘all cash at close’
OR
$500 million ‘economic consideration’ payment, and NHRMC would keep approximately $450 million net cash - $1.9 billion minimum to fund NHRMC’s 12-year capital plan
- Governance: NHRMC would retain a board responsible for financial, managerial, and operational matters; the board would have a “majority of members which will be residents of NHRMC’s service area, local physician representatives, and other local ex-officio voting members”
- NHRMC’s board would nominate two members who, with Duke’s approval, would serve on the Duke University Health System Board (which currently has 18 members)
Capital investments:
Duke commits to significant investments to “promote the development of its status as a regional destination medical center.” Duke proposes a ‘collaborative’ review of NHRMC’s long-term goals, but also commits to funding the current capital plan. Duke proposes that NHRMC use the combined $950 million (from cash payments and the hospital’s current net cash) to establish a foundation to fund community projects or ‘other purposes.’
Other considerations
- Duke would extend ‘graduate medical education’ programs to NHRMC and ‘devote significate resources’ toward fulfilling recruitment needs
- Expand Duke’s telehealth programs
- Accelerate the transition to value-based healthcare coverage
- Continue or expand NHRMC’s charity care programs
- Expand behavioral health and addiction treatment programs
- All NHRMC employees ‘in good standings’ for at least 12 months; benefits and pay will remain similar for 12 months and will be ‘market-competitive’ afterward
- Duke will evaluate ‘locating a satellite campus in Wilmington’
University of North Carolina Health
UNC Health Executive Summar… by Ben Schachtman on Scribd
Bottom line:
- 20% of NHRMC’s value in capital investments
- $375 million to support academic operations over 20 years (some funding would come from the state)
- An ‘Academic Partnership’ that would “attract and train a health care workforce to southeastern North Carolina equipped to meet both primary care and specialty care physician needs”
- Additional campus improvements and capital investments, pending further negotiations
- UNC Health representation on NHRMC board and UNC Health reserve powers
- Potential for a management agreement
Capital investments:
UNC Health’s proposal notes that “our originally submitted RFP response did not include a specific capital investment commitment which is now being requested.” The proposal continues, “A significant capital commitment by UNC Health to NHRMC will require additional provisions to be discussed and negotiated as we move forward … A management agreement will ensure a more seamless integration with UNC Health to expedite improvement and returns articulated by the Partnership Advisory Group throughout this process.”
Other considerations:
- Investing in and expanding the UNC School of Medicine Wilmington campus
- UNC Health could create a branch of the UNC Geriatrics Fellowship at NHRMC
- Collaborating to recruit physicians, including recruiting to join UNC School of Medicine (SOM) Faculty with part-time or full-time practice in Wilmington and as teachers from SOM students
- UNC Health investment would “generate a total of $34 million in total regional output, $12 million in earnings and 269 new jobs.”
- NHRMC Board and leadership team would stay in place
- The ‘Academic Partnership’ is conditional on UNC Health being chosen to partner with NHRMC
Send comments and tips to Benjamin Schachtman at ben@localvoicemedia.com, @pcdben on Twitter, and (910) 538-2001
