Thursday, August 18, 2022

Deep Dive: Looking at the $3.2 million NHRMC spent on the partnership exploration process [Free]

Each of New Hanover Regional Medical Center's 17 Emergency Medical Services vehicles is equipped with monitors that incorporate artificial intelligence technology.  (Port City Daily photo/Johanna Ferebee)
The process of exploring a potential sale or new partnership for the New Hanover Regional Medical Center has cost over $3 million. (Port City Daily photo/Johanna Ferebee)

WILMINGTON — While the decision to sell the New Hanover Regional Medical Center to Novant Health has been divisive, to say the least, most agree it’s likely the biggest and most important public process in recent history — a process that’s come with a hefty price tag.

Over the last year, NHRMC has spent in excess of $3.2 million dollars on public relations, consulting, and advertising related to the exploration of a new partner or owner for the hospital.

That includes nearly $1.9 million spent with Navigant (recently renamed Guidehouse), the hospital’s longtime consulting firm, over $200,000 on Jarrard, Inc. for public relations support, and almost a half-million dollars in advertising. The process also included roughly $232,000 for financial analysis by Ponder & Company and $428,000 for legal analysis by Hall Render.

According to NHRMC spokesperson Carolyn Fisher, the expenses for the outside firms were justified by the magnitude of the partnership or sale exploration process and its importance to the public.

“When you think about what it is we’re trying to achieve, this is very important to the community. Obviously you could see that in the discussions and how much passion there was around it — people care, because it affects everyone. So it’s very important for the public to understand and for all of us to get to the right decision,” Fisher said.

The advertising cost, Fisher noted, was either to support the operation of the Partnership Advisory Group (PAG) formed to guide the exploration process to keep the public informed about the process — sometimes in the light of what the hospital considered misinformation.

Fisher said that NHRMC’s advertising was in no way designed or intended to sway the PAG, New Hanover County commissioners, or the public one way or another — but that it was an important part of making sure the public was involved. Fisher noted the massive $5 billion investment in the community promised by Novant made the investment made by NHRMC “certainly worthwhile.”

“The benefits of going through with this, and make no mistake it requires public support to go through — but the benefits, the $5 billion that will support mental health, substance abuse treatment, it will support many more healthcare services throughout the region. It will support better quality care and health equity … just look at what will be invested from that community foundation and what it could [do] to support the local economy,” Fisher said.

Advertising: $491,000

NHRMC spent its advertising money largely in two waves. The first wave focused at least in part on countering what the hospital considered ‘political exploitation’ of and ‘misinformation’ about the exploration process The second wave focused on the PAG’s evaluation that a substantial partnership would be necessary (as opposed to the ‘status quo’ option) and, later, that Novant was its recommended partner.

The first round of advertisements featured PAG co-chairs Barb Biehner and Spence Broadhurst, who reiterated what had by then become a constant message from the PAG — that the group will consider all options for NHRMC, including a sale, new partnerships, and maintaining local control. It also included a closing line from Broadhurst, imploring viewers to “ask those who would try to exploit this issue for political gain to stop.”

Related: A look at the $445,000 in competing ads from NHRMC and the state employees association

The commercials came on the heels of an ad campaign, paid for by the State Employee Association (SEANC), which paired criticism of the opacity of hospital pricing and what SEANC alleged was the resulting profitability, with support for North Carolina State Treasurer Dale Folwell’s ‘Clear Pricing Plan’ (SEANC had at this point already endorsed Folwell’s reelection campaign). Some of the commercials also implied that NHMRC was intent on a sale to an out-of-state, for-profit company.

SEANC spent about $200,00 on its campaign. NHRMC spent about $245,000 countering it — about half its total advertising expense for the exploration process.

The second wave was less contentious, focusing on directing the public to visit the NHRMCfuture.org website, where NHRMC had posted the meeting minutes, documents, presentations, and audio recordings from PAG meetings.

NHRMC ran advertisements on a host of media, including television, radio, print, and more. Unsurprisingly, the lion’s share of the spending was on television. NHRMC also placed ‘open letters’ from the PAG and medical staff from NHRMC and Pender Memorial Hospital, using what’s known as ‘branded content’ or ‘native content’ — the open letters appeared as articles on news sites, but were technically paid advertisements.

NHRMC Advertising spending:

  • Television (WECT, WSFX, WWAY, Spectrum) — $274,000
  • Radio (Cumulus, Sunshine, Big Talker, WHQR*) — $114,480
  • Print (StarNews, Greater Diversity) — $28,300
  • Local digital media and email ads (WECT, StarNews, Greater Wilmington Business Journal, Wilmington Chamber of Commerce) — $18,124
  • Social Media (Facebook, Instagram, Twitter, LinkedIn) — $16,200
  • Billboards — $8,300
  • Google display ads — $3,400
  • Branded content (Port City Daily, WECT) $3,125
  • WAVE bus — $176

*Money spent with WHQR is considered ‘underwriting,’ which unlike advertising has restrictions, including prohibiting a ‘call to action.’

Guidehouse/Navigant: $1,888,272.16

Navigant provided much of the planning logistics to set up PAG meetings as well as providing research to develop presentations and serving as go-betweens for the PAG and the healthcare systems who submitted proposals.

Navigant has been NHRMC’s strategic consultant for many years; despite the flurry of activity over the last year, the spending over the last year has not been significantly out of line with previous years (NHRMC has contracted Navigant for $4,556,659.88 between September 2015 and October 2019).

Related: NHRMC reevaluates privacy needs, releases sale-exploration contracts with strategic advisor

The company’s initial engagement was to essentially test the waters, to see if any healthcare systems would be interested in exploring a partnership or sale. When the process was first announced in July 2019, Navigant’s contract was held as confidential under state law, according to NHRMC. Several months later, NHRMC modified Navigant’s contract to help support the PAG’s work, and ‘reevaluated’ the contract’s status, making it public.

Jarrard, Inc.: $204,829.41

At the end of May 2019, about two months before the potential sale or partnership process was announced, NHRMC engaged PR firm Jarrard, Inc.

Related: Here are the details on the consulting firm hired by NHRMC ahead of vote to explore sale

Jarrard’s initial contract was to “render strategic communications and engagement consulting services solely for the purpose of assisting legal counsel in rendering privileged and confidential legal advice to New Hanover Regional Medical Center (‘NHRMC’) – including formulating legal strategy – in connection with certain highly confidential matters involving legal due diligence, potential drafting and negotiation of legal documents, and related communication matters that implicate state and federal rules and regulations and present potentially material liability risks to NHRMC and its affiliated owner of NHRMC facilities, New Hanover County, North Carolina.”

This work was, at least in part, to help set up the legal groundwork for establishing a new partnership or owner, which would have required a good deal of communication rendered confidential by state statute.

In mid-August 2019, NHRMC engaged Jarrard for a second contract, this time to help with communications. This included setting up and helping to maintain the nhrmcfuture.org website, where all of the PAG minutes, presentations, audio, and other documents were kept online. It also included general support for NHRMC’s communication team and services like ad design that have been outsourced in the past.

Based on NHRMC’s financial records, it appears the bulk of Jarrard’s work was from the second contract. In mid-to-late August, about a week after the second contract was initiated, Jarrard had billed $38,674.56; after that, much of the work was communications based, according to NHRMC.

Ponder & Company: $232,486

Early this year, NHRMC and New Hanover County picked an independent financial advisor that neither had worked before. The PAG approved the selection — Ponder & Co. — to perform a financial analysis of the NHRMC’s next ten years. Ponder presented this analysis to the PAG in February.

The analysis showed that, if NHRMC continued to follow its strategic plan (which was not a negotiable part of the exploration process), the hospital could run into financial trouble, and even violate the terms of its bonds by running to low on ‘cash-on-hand’ by 2030.

Ponder’s analysis also showed a scenario in which several cost-reducing measures, including the federal 340B drug pricing program and the benefits of being the ‘sole community hospital’ were no longer available. In this scenario, the hospital would see considerable shortfalls — which Ponder translated into potential property tax increases of around 20% for New Hanover County residents (around an additional $100 annually per $89,000 in property value).

While some, including the Save Our Hospital group, called Ponder’s presentation a scare tactic it’s worth noting the analysis was independently performed. That said, some PAG members took issue with one of the financial ‘givens’ that Ponder used: NHRMC’s strategic plan. Some PAG members asked to reconsider that plan, but New Hanover County Manager and PAG member Chris Coudriet emphatically shut down that line of questioning, calling the plan ‘settled policy.’

Ponder’s financial analysis appeared to have a considerable impact on the PAG. Several members who had gone into the process averse to a partnership or sale, including co-chairs Beihner and Broadhurst, said that the ‘financial reality’ presented by Ponder put things in perspective for them.

Ponder also conducted a financial analysis of Novant’s ability to deliver on its $5 billion investment proposal, which included nearly $2 billion upfront and billions more in long-term investments in expanding NHRMC and supporting its strategic plan. That presentation, which was delivered last week to county commissioners, found Novant had sufficient financial stability to make good on its offer.

Hall Render: $428,111

NHRMC engaged Hall, Render, Killian, Heath & Lyman, P.C. to work on the Letter of Intent (LOI) with Novant, once the PAG had made its recommendation. The firm is that nation’s largest to focus specifically on healthcare law and complicated issues, like hospital mergers and acquisitions.

In addition to the details of the sale, the LOI also contains the structure for the proceeds, including a $1.25 billion community foundation.

While there are still technically more steps in the sale process, the drafting and approval of the LOI last week are probably the last major work (and expense) on NHRMC’s part.

The draft deal between Novant and New Hanover County will still get a public hearing and an up-or-down vote by county commissioners. Commissioners Rob Zapple and Jonathan Barfield, Jr. opposed the initial sale process. Last week, Zapple said he saw benefits in the Novant deal but still felt the process was being rushed; Barfield said he wanted to hear from the public before fully committing to the sale. While both could still oppose the deal with Novant, the sale is likely to pass by at least a 3-2 vote.


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

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