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NHC Commissioners OK Moving Ahead On NHRMC Talks With 3 Health Systems

By Vicky Janowski, posted May 18, 2020
New Hanover County commissioners on Monday added their backing for three health systems to start developing potential letters of intent for New Hanover Regional Medical Center.
 
The systems – Atrium Health, Duke Health and Novant Health – were the same picks that hospital trustees and Partnership Advisory Group members unanimously chose from the six systems that submitted proposals this year about NHRMC.
 
Since last summer, New Hanover County and NHRMC officials have been exploring the idea of changing the management structure or selling the county-owned hospital. The six outside systems submitted their proposals in March, ranging from an expanded academic program to purchase proposals.
 
“Our next step is to define key considerations for the letter of intent that will be shared with each respondent and we will work to get to know each of them better,” Barb Biehner, co-chair of the Partnership Advisory Group, said to the commissioners. “We will take part in virtual site visits as well as some small in-person visits with each organization. The organizations will offer public presentations of their proposals and will listen to the public’s feedback through a public hearing or ongoing communications that we have now.”
 
Commissioners on Monday also approved June 22 for the public hearing, which is required to be held under state law. County staff members recommended that date “when COVID-19 restrictions on gatherings will likely be loosened under the Governor’s Order and we can accommodate a larger gathering in a safe manner.”
 
Not yet being able to hold a public hearing is one reason why all the proposals are technically still under consideration.
 
“This narrowing of focus does not eliminate any of the six from consideration. It does though, allow us to do the due diligence in a more focused manner,” Biehner said. “We will also continue to weigh potential partnerships against the options to remain as we are or to restructure.”
 
Partnership Advisory Group leaders now are scheduled to speak again to the commissioners to give them an update on their site visits with the three short-listed systems and letters of intent developments.
 
While Monday’s vote was unanimous, there was a lengthy discussion about the process.

In September, commissioners Rob Zapple and Jonathan Barfield Jr. voted against a resolution to explore potential new ownership. Commissioners Pat Kusek, Julia Olson-Boseman and Woody White voted in favor of starting the RFP process.

Zapple, who asked the most questions during the discussion Monday, questioned Biehner, PAG co-chair Spence Broadhurst, PAG co-vice chair Joseph Pino and county manager Chris Coudriet about whether the hospital’s strategic plan could be released now that RFP documents have been submitted, the future of UNC’s relationship with NHRMC (UNC Health was one of the three systems whose proposals were not picked for further initial talks) and the financial impacts COVID-19 has had on health systems including NHRMC.

“The strategic plan of the New Hanover Regional Medical Center has been a large part of this discussion, and I know it’s factored into some of these huge numbers we're seeing in the billions of dollars,” Zapple said, in asking whether that plan could be made publicly available. “I know the strategic plan has been developed over a number of years. Some of those projects may not be necessary at this point, as our world continues to shift, as it does even to this day.”
 
“I will tell you that just like the proposals have redacted information or redacted information, it would be very difficult at a time when you have three competitors looking at us very seriously to then turn around and hand our strategy out in public,” Biehner responded. “When you’re competing against staying as is versus having others that potentially could become your partner, I strongly believe that you cannot hand over a strategic plan.
 
“I will tell you that the board is always seriously looking at what’s going to happen because of the financial situation. I learned from [NHRMC President and CEO] John [Gizdic] earlier today that the losses of the last couple of months have really equal to what the capital plan was, or at least half of the capital plan for the entire year," she added. "So right now capital planning and implementation of the capital is on hold until we can figure out what these losses really mean in total.”
 
Barfield asked about COVID-19 and what the PAG’s top concerns were on it, especially if cases spike again later in the year.
 
“Every company in this country now – in the world – is looking at a new normal,” Barfield said. “And I think that as this COVID-19 has approached our community … I’m sure that the leadership at NHRMC is looking at how we do business in the future. So again, I would think that the PAG is, as this thing has grown and having some in-depth conversation, I would like to think of what that new normal will look like and what would this community expect if another pandemic were to happen.”
 
White, who like Kusak is not running for re-election this year, spoke out against some of the criticism the process has come up against.
 
“For anybody that’s watching in this community that has an open mind, the idea that three very well-capitalized and long-established medical providers and systems in this state would come here and look to purchase our hospital is a positive thing for this community,” White said. “It strains credulity to me to understand how anyone other than a political motive would not see the benefits in the next generation of providing hospital services to this community.
 
“And the idea that we would sit here in independently by ourselves for the next 30 to 40 years and navigate the daily changing structures of health services, and hospital services particularly, is arrogant and vain for us to think that,” he added. “This community should welcome any of these three partners for a number of reasons.”
 
Barfield pointed out that he is one of the people running for office this year. (He is the only sitting commissioner vying for one of three open seats.)
 
“I just want to make sure that folks understand my thoughts and my thought process. It’s not about politics; it’s about what I believe is the best thing based on the information that I’ve received and the research that I’ve done,” he said. “And I don’t know where I’m going to come down. But I’m looking forward to more information to make an informed decision.”
 
Atrium Health's proposal focuses on a long-term lease of the hospital – over 40 years before it would become owner, with a pledge to spend $3.1 billion on New Hanover Regional Medical Center and the community. That includes upfront money, lease payments and capital project investments, including a behavioral health and addiction treatment facility.
 
• Duke Health, which has said it is open to discussing different partnership models, said that in the case of a purchase it proposed to either pay $500 million and let New Hanover County keep NHRMC’s net cash – estimated at $451 million in September before the COVID-19 pandemic –as well as fund the hospital’s $1.9 billion 12-year capital plan. Or, alternatively, it proposed an acquisition offer of $1.35-$1.4 billion for an all-cash closing, combined with spending at least $400 million on capital projects for the five years after a deal closes.
 
Novant Health, which also said it is open to various models, including acquisition, joint venture, joint operating company or a management services agreement, proposed up to $2 billion in upfront cash proceeds to New Hanover County for buying the hospital, and $50 million to the NHRMC Foundation, irrespective of structure. It also pledged to fully fund the capital needs in NHRMC’s strategic plan under an acquisition or a significant percentage under another type of deal.
 
For more info about the three proposals, pick up the new edition of the Greater Wilmington Business Journal on Friday.
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