Hospital seen as an attractive asset in a growing health care market
WILMINGTON — As the community debates the merits of possibly selling the county-owned New Hanover Regional Medical Center, officials have stressed that the hospital will enter any negotiations from a position of strength.
“We’re clinically, financially and operationally strong today, but we recognize that to prepare for an uncertain future, we need to consider new ways to support investments in the people, technology and services that can make a significant difference in the health of our community,” said John Gizdic, New Hanover Regional’s president and CEO, earlier this week.
The hospital’s positive balance sheet stands in stark contrast to many of the recent hospital ownership changes across North Carolina, where the entity looking for a new owner of partner often felt it had little choice considering its financial situation.
Tom Stukes, a health care transactions attorney with Womble Bond Dickinson in Greensboro, has been involved in many hospital sales and mergers over the years. He said he agrees with local officials that kicking the tires on any ownership change makes sense while the hospital still has the financial ability to walk away from any possible deal it doesn’t like.
“I think it’s a smart, forward-thinking strategy by the folks down there,” Stukes said.
Stukes said New Hanover isn’t alone in wondering what changes — from reimbursement rates to new mandates from the federal and state governments — could be coming to the health care industry and if it’s prepared to handle them.
“It’s something everyone is thinking about and wondering what to do about,” he said.
For many in the health care business, the answer is to get bigger and bulk up so you have the market share and clout to better weather any changes.
“So you have that flexibility to meet the needs, requirements of what might be coming down,” Stukes said.
Regarding the hospital’s community mission, Stukes said any transaction would have to pass muster with the N.C. Attorney General’s Office to make sure the public service component is protected and the new owner follows through with any protections it agrees to in a deal.
“They’re there, really, to make sure that what might not make much sense from a business point-of-view but does from a community point-of-view is included in any transaction,” he said of the attorney general’s office.
What could happen to New Hanover Regional’s public mission to serve the area’s poorest and most vulnerable residents if it changes hands has been a concern for many community leaders since the idea of a sale was first broached on Tuesday. Gizdic said the hospital provided nearly $200 million in uncompensated health care in the last year.
When Tennessee-based HCA Healthcare, a for-profit company, purchased nonprofit Asheville-based Mission Health earlier this year for $1.5 billion, HCA agreed to several stipulations, including a commitment to keep Mission’s money-losing rural hospitals open for at least 10 years.
This week, N.C. Attorney General Josh Stein told the Asheville Citizen-Times that the deal — which included the establishment of a private nonprofit foundation, the Dogwood Health Trust, to support health care programs and initiatives in 18 Western North Carolina counties — seemed to be working so far.
“In all measures, six months in, we feel good about it,” he said, adding that his office will soon hire an independent monitor “just to ensure HCA lives up to its commitment.”
New Hanover Regional is easily the biggest hospital in Southeastern North Carolina.
But several smaller, rural hospitals in the area are now managed or owned by health care systems that are larger than New Hanover Regional and have the financial wherewithal to meet a purchase price that could easily surpass $1 billion.
Up Interstate 40 from Wilmington, financial concerns brought Pender Memorial Hospital and New Hanover Regional together in 1999. A few exits farther inland, the hospital in Duplin County also sought to partner — and is now owned — by a larger health care system, Vidant Health.
Duplin County Manager Davis Brinson said the Greenville-based health system has brought new resources and stability to the former publicly-owned Duplin General Hospital.
“They’ve been able to do things, bring resources and people in and perform upgrades, that we simply wouldn’t have been able to do,” he said.
Brinson said while there were some concerns raised about the loss of local control when the hospital was sold to Vidant in 2013, he said officials feared what might happen if they didn’t act to shore up the rural medical center’s bottom line.
“They saw that if we didn’t make this move, we may lose our hospital,” he said. “It was the only option, and the best option for the community.”
With its large footprint in Eastern North Carolina, Vidant is seen by many as one of the logical possible suitors for New Hanover Regional.
“Vidant Health is aware of recent developments regarding the future of New Hanover Regional Medical Center. At this time, it’s too early in the process and we don’t have any additional information to share,” said Vidant spokesman Jason Lowry in a statement to the StarNews.
Looking to expand?
With 162 beds, the next largest hospital in Southeastern North Carolina is Onslow Memorial Hospital.
The hospital earlier this year decided to partner with UNC Health Care — an agreement that retains local ownership and governance of the Jacksonville medical center.
But the deal also allows Onslow to tap into the width and breadth of the state-owned UNC Health Care system, giving it that access to economies of scale so many smaller hospitals and health systems are seeking in today’s uncertain times.
“We anticipate achieving additional cost savings and enhanced clinical services for our patients,” said Penney Burlingame Deal, president and CEO of Onslow Memorial, in a December release announcing the upcoming partnership.
That relationship with the Jacksonville hospital coupled with UNC Health Care’s strong presence in and around the Triangle has many wondering if it would make a strong push for New Hanover. A call and email to the health care system to gauge its possible interest in New Hanover Regional weren’t returned last week.
Another possible interested party with a strong presence in Southeastern North Carolina is Novant Health. Based in Winston-Salem, the health care provider owns the largest hospital in Brunswick County — the 74-bed Novant Health Brunswick Medical Center in Supply.
Since a resolution to explore the possibility of selling New Hanover Regional won’t be considered by the county commissioners until Sept. 3, Novant spokeswoman Kristen Barnhardt on Friday said the health system had no comment at this time.
Suitors near and far?
Other potential players for New Hanover Regional that have footprints in Southeastern North Carolina include Charlotte-based Atrium Health (formerly Carolinas HealthCare System), which manages Columbus Regional in Whiteville, and Bladen County Hospital owned by Fayetteville-based Cape Fear Valley Health System. New Hanover Regional and Carolinas HealthCare had discussed forming a partnership earlier this decade, although those talks eventually floundered.
Stukes, the Greensboro attorney, said he also wouldn’t be surprised to see HCA, which owns Grand Strand Medical Center in Myrtle Beach, S.C., along with many Western North Carolina hospitals, to show interest along with other players both in and outside of North Carolina.
“All are looking to expand their patient base, and scale is important, so I think all of them would be interested,” he said. “And with its growing market and reasonably attractive payer-mix, where it’s not all Medicare or Medicaid, I expect New Hanover Regional to be a very attractive property.”
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