WILMINGTON — On July 23, 2019, citing increased financial uncertainty and the level of funding needed to expand facilities and services amid the area’s rapid growth, officials announced plans to explore selling New Hanover Regional Medical Center.
Barring any last-minute hurdles, on Monday, Feb. 1, 2020 — 18 months later and in the midst of the area’s worst health crisis in a century — the county-owned health system will officially become Novant Health New Hanover Regional Medical Center. It will operate as a part of Novant’s Winston-Salem-based private nonprofit health network.
When the deal closes Monday, no immediate changes are expected at NHRMC or any of its affiliates. Behind the scenes, however, a complex 850-page purchase agreement (dubbed “Project Longleaf”) involving dozens of parties, will have been executed. At the end of the day, NHRMC will be a private entity and New Hanover County will receive $1.5 billion to get out of the hospital business. A new foundation created to address a host of issues in areas such as public health and safety, education and workforce development will receive $1.25 billion of the windfall.
The county also will be removing a major potential liability from its books. Although NHRMC has never received local tax dollars, there were no guarantees that would — or could — continue, especially with $2 billion in capital costs forecast.
County and hospital leaders have stressed from the beginning that selling NHRMC would be about ensuring a viable future, not a financial windfall. When the possibility of a sale was announced, NHRMC President and CEO John Gizdic — who will continue in his role under Novant — said the hospital had been able to “defy the odds for many years,” remaining financially healthy and able to expand facilities and services. When looking to the future, however, Gizdic said the increasing uncertainty in funding and the need for a large infusion of capital showed those odds changing. With the publicly owned hospital legally limited in its capacity both to borrow money and to expand outside the county, a partnership or sale to a larger system was seen as a viable way forward.
“Any money would be secondary to advancing health care and the well-being of the community,” New Hanover County Manager Chris Coudriet said the day the possibility of a sale was announced.
Ensuring a stable future for NHRMC may have been the main motivation for exploring a partnership or sale, but the amount of money a sale was predicted to bring was hard for officials to ignore.
Pat Kusek, a county commissioner when the sale possibility was announced, called it a once-in-a-generation chance to improve life in New Hanover County.
“This is such an opportunity for our county,” Commissioner Julia Olson-Boseman told the StarNews, offering a litany of ways the proceeds could benefit the county.
The word “transformational” was used frequently as leaders envisioned the impact a $1 billion investment could have on education, health care, and a host of other issues, some that have plagued the county for decades.
Just as no changes are imminent at NHRMC, it will take a while for the bulk of $1.25 billion to have an impact. The foundation’s exact structure and operational plans are still a work in progress. Overnight the foundation will become one of the largest charitable organizations in the state and a nationwide search for an executive director is expected.
“We don’t envision any money being dispersed in the first year,” Spence Broadhurst, the foundation board’s chair, told Port City Daily recently.
When the transaction is being executed Monday, the funds from Novant will flow into a variety of funds, and the purchase agreement restricts how the money will be used.
For accounting reasons, the approximately $1.25 billion that will fund the foundation will initially go to the county. The county will in turn grant the money to the foundation in terms laid out in a contract that places conditions on its use.
Of the remaining money, $300 million will go to the county to serve as a “Revenue Stabilization Fund,” money the commissioners can draw on to support its budget in certain situations, such as hurricane recovery and revenue losses from an economic downturn. $50 million will go into a county Mental and Behavioral Health Fund.
$200 million will go to the NHRMC Employee and Provider Resiliency Fund, established to offset any future pension losses current NHRMC employees might experience as a result of switching to Novant’s retirement plan.
$100 million of the sale proceeds will be put into an escrow account to cover any NHRMC “trailing pre-closing obligations.” After a certain period, any unused funds from that account will go to the county.
The NHRMC Foundation, which will remain an independent organization, will receive $50 million.
The agreement also requires Novant to fund $600 million in NHRMC routine capital expenditures within 10 years and allocate $2.5 billion to fund strategic capital needs.
Another major part of the deal — and one of its key selling points — is an expanded presence in specialty care and medical education in the Wilmington area by the UNC Chapel Hill School of Medicine and UNC Health network. No specific timetable has been released for those initiatives.
As part of the agreement, Novant Health Brunswick Medical Center will become part of NHRMC. Both hospitals have been heavily involved in Covid-19 vaccination efforts, with Brunswick Medical Center’s patient portal used to schedule vaccination appointments countywide in Brunswick. New Hanover County doesn’t have an online portal yet to serve everyone, though NHRMC has been using its MyChart portal for its patients to schedule vaccines.
It is not clear if the two hospitals will immediately begin any joint vaccination efforts.
A spokesperson for Novant Health said the health system’s leadership are expected to comment on the sale and transition process Monday.
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