NEW HANOVER COUNTY — Headed for almost certain final approval, the sale of the county-owned New Hanover Regional Medical Center to Novant Health will get a final and thorough review from Attorney General Josh Stein before closing.
The AG’s office has already been put on high alert, notified by local representatives to closely watch the sale, with many equally watching the AG to see how carefully he handles the proceedings.
Related: It’s a high-tension moment as a board in flux prepares for the monumental NHRMC sale decision
Now that NHRMC’s Board of Trustees voted 17-1 Thursday afternoon to approve the sale, it’ll move on to county commissioners Monday, who will likely approve the deal. Signed documents trigger a requirement for AG oversight; the hospital previously contested its obligation (but later conceded) to give Stein’s office at least 30 days and up to 60 days to review.
On the heels of the Feb. 2019 Mission Health-HCA Healthcare sale in Asheville, the AG’s office has recent experience dealing with issues that arise following a major sale. Problems flagged by Stein shortly after the sale closed turned out to spur a monumental union victory late last month.
Early last year, HCA faced criticism from patients and the AG for how it managed its charity care program, costs incurred for services hospitals render with no expectation of being reimbursed.
Just weeks ago, HCA nurses delivered a historic blow to their new employer, voting to unionize after reported staffing shortages and unsafe working conditions during the pandemic. Their alliance is the first hospital union in the state and the largest hospital union victory in the south in 45 years.
Currently running for re-election, Stein has been warned not to let the same thing happen twice. These events undoubtedly will keep his office on its toes as it reviews NHRMC’s multi-billion sale.
Asked a series of questions related to relevant legal issues arising from the sale — namely, the redirection of $1.25 billion in public funds into a private foundation — Stein’s office said it will take many topics into consideration.
“You have hit on many important issues that our office will take a look at in our review,” N.C. Department of Justice spokesperson wrote in an email Thursday.
Why is it being sold?
The NHRMC Board of Trustees sees the origin of the sale process really developing in 2017 when it identified structural and financial barriers to growth while developing its strategic plan. Parts of this plan, namely the master facility plan, map out how the hospital aims to expand over the next two decades. This expansion, obviously, involves major capital projects — and serious financial investments — which shape the hospital’s decision to seek out partners or sell.
The details of the planned expansion, however, remained sealed from the public and Partnership Advisory Group members; “sharing all that kind of information publicly is a sure way to drive up the cost of the land/buildings you hope to acquire or cede the business to a (likely for-profit) competitor who can get there first,” according to a hospital spokesperson.
Though the depth of the hospital’s financial and structural barriers was somewhat downplayed early on (perhaps to avoid negatively impacting the competitive bid process and offer prices) physicians have been more clear how necessary the sale is as it winds down. In emails to the PAG and at the public hearing Monday, doctors spoke of patients routinely waiting hours or days for emergency care, with their conditions deteriorating, only due to a lack of space — not for a lack of local talent or expertise.
A majority of stakeholders have come to the conclusion that the hospital desperately needs the cash infusion to remain competitive in the region before it would be overtaken by a more powerful healthcare system. This way, even though the hospital is giving up all its assets to Novant, it at least has a say in what’s seen as an otherwise inevitable fall from grace.
John Andrew, the lone trustee who voted against the sale, said he felt it wasn’t the right thing to do. “I think we all need to understand we are selling an asset of the county which we will never have any more control over. We’re selling it to a monopoly, which will one day, five, ten years from now, will also sell to somebody else,” he told the board.
Andrew’s concern was far outweighed by jovial spirits and hospital CEO John Gizdic’s speech, which likened the sale to a marriage, telling trustees their courageous decision would spark a significant change for problems that would otherwise be left unanswered.
Hospital contests, then consents, to AG review
Gizdic told trustees he expects the deal to close sometime in the first half of 2021, subject to regulatory approvals. “[There’s] no real date. It’s anybody’s guess,” he said.
Citing a Business N.C. article on the recent nurses’ unionization, Gizdic distanced the Novant-NHRMC sale from the Mission-HCA deal, stating Novan’ts assurances for continued staffing are almost unheard of in a transaction of this size.
Indeed, the draft Asset Purchase Agreement guarantees employment to all 7,500 current NHRMC staff members for at least two years after the deal closes. Gizdic also addressed lingering questions that have surrounded whether the county’s pension program would remain intact, confirming pension plans up to the date of the sale would be honored.
Though the hospital originally took a stance against AG review, it quickly changed its tune.
As first reported by WECT, the hospital’s legal firm essentially argued that the sale should not be subject to AG review because of a specific language in § 55A-12-02 that states non-profit charitable or religious corporations should give written notice 30 days prior to the sale of all its assets.
The sticking point for the firm was the definition of a charitable organization. It told the AG’s Office it would brief them on the sale as it progressed regardless of its interpretation that the statute didn’t apply.
In turn, on July 29, the AG’s office told the hospital that it indeed falls under the statute and raised concerns about the proposed makeup of the new hospital board. This new hospital board will be formed upon the approval of the sale, with members appointed by the NHRMC BOT. This new 17-member board will oversee business operations at Novant and get to appoint a six-member majority to the new community foundation, tasked with awarding projects using the $1.25 billion in sale proceeds.
Envisioned as a “check-and-balance” system to protect customers, the AG’s office raised concerns that the board’s roles would be inherently in tension with one another, making it difficult to simultaneously protect customers against business pressures, manage the regional business, and oversee the $1.25 billion community foundation.
The following day, NHRMC’s counsel backed off its initial opinions, conceding the sale would be contingent upon AG review under the previously contested statute, according to email records provided by the county. More than a month later, on Sept. 15, NHRMC addressed concerns raised by the AG in a more formal letter (view all letters at the bottom of this article).
In it, the hospital downplayed the new hospital board’s role in the community foundation.
Peterson stands by
Last week, the Local Government Commission’s staff and legal counsel countered the county’s position that the new community foundation, of which it will appoint five members, would not be a unit of county government.
Because the majority of the community foundation’s members would be tied to the county (five direct appointees; six appointed by the county’s appointees) the LGC said it would “more likely than not” be considered a unit of local government for the purposes of a specific statute governing public investments the county sought to avoid.
Because the LGC lacks an enforcement arm, it’s ultimately up to the AG to weigh in on whether or not the statute and N.C. Open Meetings law will apply to this new group.
On Monday, Senator Harper Peterson reminded county commissioners of the AG’s role at the last public hearing, and asked them whether they planned to ignore the AG’s opinion.
After the hearing, commissioner Woody White condemned Peterson’s statements in an email to county and hospital leadership: “All he did was shamelessly bend the truth and the issues to fit the political narrative that he has falsely peddled for over a year.”
Last year, on the same day commissioners voted 3-2 to approve an “intent to sell” resolution (the first step required by law to begin the sale process), Senator Peterson wrote a letter to the AG’s office. He warned Stein that there “may be malfeasance” on the part of individual county staff members, namely manager Chris Coudriet, claiming that the “governing process has been corrupted.” The county and commissioners in favor of the sale have adamantly denied wrongdoing.
White referenced Peterson’s letter in his email this week, likening the senator’s public comments to his fellow commissioner, Rob Zapple’s statements. Both the senator and Commissioner Zapple deny they have defamed White.
“Presumably, if the AG or anyone for that matter, took this senator seriously, the complaint would have been forwarded to law enforcement to investigate his paranoid and defamatory allegations. If what he alleged was true in any way, people would go to jail. Personally, I wish that an investigation had been conducted because it would have resulted in complete and unilateral vindication of all the people that he and Commissioner Zapple have defamed — many of whom, now, have strong legal cases to pursue for the damages these irresponsible men have caused,” White wrote.
Peterson still stands by his Sept. 2019 letter. “Nothing has changed my mind,” he said Thursday. “There was no Genesis to this book. There was none of that. Zero. That concerns me.”
This concern, which generated public outcry early on, surrounds questions about how the idea of a sale first came about. By the time the topic was presented publicly, the possibility of selling the hospital had already been shopped around by the hospital’s consulting firm to leading healthcare systems to gauge their interest; however, it’s worth noting that prior to sending out a formal request for proposals, this market research was unlikely to include detailed offers.
In his closing remarks Thursday, Gizdic jokingly referred to Coudriet as his “accomplice,” addressing the rumors that swirled around the two early on, including allegations that they had engineered a sale before ever taking the issue public. Since July of last year, both have repeatedly denied that any such agreement existed before the formal PAG exploration process.
Now, the county’s explanation that the $1.25 billion community foundation will be run privately in order to “avoid politicization” fails the smell test, Peterson said.
“Their justification, rationale for this foundation not to be political — that’s laughable. That’s why I’m elected, to be a voice,” Peterson said.
“Are we moving toward a monarchy where we just endow a person with….? Even if it was made up of ministers and rabbis, monks, and whatever else, they need to be accountable. Open up open records and open meetings,” he said.
At press time, the AG’s office had not yet clarified whether Peterson’s original letter was being handled as an official complaint (in the letter, Peterson wrote “I wish to formally file a complaint”) or as part of the AG’s more general oversight to make sure the sale process complies with state law. [Note: On Friday, the AG’s office said it did not think there was a meaningful distinction between the two.]
“Our office is taking all of Sen. Peterson’s points into account as we closely monitor the transaction. We continue to be in regular contact with Sen. Peterson and others,” a DOJ spokesperson said Thursday afternoon.
Below, in chronological order, read the back-and-forth letters between the hospital and the AG’s Office.
NHRMC/County opinion – June 22 by Johanna Ferebee Still on Scribd
AG’s Office July 29 letter by Johanna Ferebee Still on Scribd
NHRMC’s Sept. 15 response by Johanna Ferebee Still on Scribd
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