With a 4-1 vote from New Hanover County commissioners Monday evening, NHRMC and the county can now negotiate a legally binding agreement with Novant Health to buy the hospital.
The move officially puts Winston-Salem-based Novant Health at the front of a competitive process that drew proposals from a handful of health systems wanting to buy the county-owned NHRMC and offering billions in proceeds to the county and hospital investment for the chance to do so.
The commissioners Monday voted to approve a nonbinding letter of intent between the county, NHRMC and Novant Health. Commissioners Julia Olson-Boseman, Pat Kusek, Woody White and Jonathan Barfield backed the approval – though Barfield warned he would not support a final deal without more community input. Commissioner Rob Zapple was the sole vote against moving forward, not because he was necessarily opposed to the idea overall, he said, but because of what he called a rush to OK the early negotiation terms.
The commissioners voted 3-2 in September
to explore a sale or outside partnership for the hospital.
Commissioners chair Olson-Boseman referenced the work done by the 21-member Partnership Advisory Group (PAG) that went through the six submitted proposals from health systems and recently voted unanimously to recommend Novant
“We as commissioners have put our trust in this group to do their due diligence, provide us with a thoughtful and careful recommendation on the best path forward, and they have done that,” she said. “I trust them and believe that our community and our health care system have an incredibly rare opportunity that has the power to transform and touch every single person’s life in New Hanover County.”
Zapple said he was not opposed to a deal with Novant, but he was against voting on a letter of intent Monday.
“The devil’s always in the details,” he said, adding that he talked with Novant CEO Carl Armato and was “absolutely convinced that he is sincere and earnest in his assurances that he believes that his organization can help our community’s health care needs.”
But Zapple said that the letter of intent [LOI] up for approval spelled out the financial deal and terms that would become part of a definitive agreement – documents he said he first saw on Friday.
“It was my original understanding that the commissioners were going to be asked to vote on the recommendation of the PAG at today’s meeting, and an approval of their recommendation would then trigger the beginning of the drafting of the letter of intent,” he said, calling the document process rushed. “But it was this past Friday morning – two-and-a-half days ago – I received an email from our county manager informing all commissioners that we would be asked to approve this final version of the letter of intent.”
Olson-Boseman said during a meeting break after the discussion that the issue has been discussed over the past year and that there’s flexibility in the letter of intent’s provisions as part of the negotiations.
Barfield said hospital, county and Novant officials needed to do more work to get public buy-in about the issue. And if that doesn’t happen, he said he would not add his vote to support the final deal.
“I voted with the last vote to continue the process so that I could be fully informed,” he said, referencing the unanimous vote by commissioners on the three finalists including Novant. “And I want to make an informed decision on what’s best for me; I can’t do that without all of the information presented.”
Last week, the NHRMC Board of Trustees – the other group that would have to sign off on a final deal – gave its approval
to move forward in a 16-1 vote.
Under a proposed sale agreement, Novant Health has offered to pay $1.5 billion at closing, contribute $50 million to the existing NHMRC Foundation, move its Novant Health Brunswick Medical Center to NHRMC’s operations, spend $600 million on routine capital expenses over the next decade and commit $2.5 billion for strategic capital projects, including those that have been outlined in the hospital’s strategic plan.
Monday’s vote means both sides – along with UNC Health and UNC School of Medicine, which signed onto an agreement with Novant to expand its presence at NHRMC – can start negotiating terms of a definitive agreement. An agreement would be required to be made public, discussed at a public hearing and voted on by commissioners and hospital trustees.
Officials say they expect that to happen in September or October. During that time, through Oct. 31 when the now-approved letter of intent expires, the county and hospital can’t negotiate with other parties. If a sale is approved, the closing would take place within 180 days after the deal is signed.
There is a break fee of $25 million for either side if the purchase agreement is terminated.
While the letter of intent is not binding, it includes a number of areas from employee protections for the next two years to relationships with independent provider partners that have begun being hashed out with Novant, including a proposal for how the county might spend its proceeds
from a sale.
The spending proposal was the only part of the letter of intent that had been released publicly before Monday. To read the rest of the letter of intent, click here.
“For me, this was all about asking the difficult questions about ensuring outstanding health care for our community for generations,” Kusak said. “But it’s also been about putting any proceeds that might be realized from this … for the good of this community in perpetuity. And that’s forever.”
White said the proposed endowment from the sale proceeds was a reason he supports the move.
“This decision is one of which, in public life, I will be most proud to have played a small role in it now,” he said. “I will go to my grave ultimately knowing that I made a permanent impact on this community in ways that I can’t even imagine today.”