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County Releases More Details About Potential Hospital Sale Proceeds

By Vicky Janowski, posted Jul 13, 2020
If Novant Health buys New Hanover Regional Medical Center, an 11-member nonprofit board would be in control of an estimated $1.25 billion from the sale of the county-owned hospital.
 
That money, according to a proposed outline of how sale proceeds might be spent in New Hanover County if a deal is reached, could go toward things such as universal pre-K, college scholarships, a workforce housing trust fund and other examples.
 
Click here to read the draft proposal.
 
Winston-Salem-based Novant Health has offered $1.9 billion to the county for the hospital (as well as another $3.1 billion to fund NHRMC’s routine and strategic capital needs in the years ahead.)
 
Besides $1.25 billion under control of a new community foundation and placed in an endowment, the proposed spending plan also includes $300 million for a stabilization fund for the county, $300 million for a stabilization fund for NHRMC and $50 million for a mental and behavioral health fund. While the hospital serves patients from the seven-county area, NHRMC is owned by New Hanover County.
 
New Hanover County commissioners on Monday are scheduled to discuss the status of hospital talks with Novant Health and vote whether to move forward on negotiations with the health system.
 
If commissioners agree to proceed with a letter of intent with Novant, whose offering also includes a partnership with UNC Health and the UNC School of Medicine, any final deal would still have to be released to the public before being voted on by commissioners and hospital trustees. But Monday’s vote could clear the way for a potential sale in the coming months.
 
The commissioners’ decision comes after the Partnership Advisory Group recommended sticking with Novant out of the three bidding health systems that were finalists, and after the hospital trustees board also backed Novant as the forerunner.
 
It was during the trustees’ meeting last week when details about how sale proceeds could be spent first came up publicly when the group released info in a resolution.
 
County officials Monday morning released more information that is included in the draft document. The document is part of the proposed letter of intent with Novant Health.
 
In it, the proposed plan calls for the foundation to be created before the sale’s closing, with county commissioners appointing five of the board members and the existing hospital board filling the foundation’s other six spots. It would operate independently of the hospital. Elected officials could not sit on the foundation.
 
The foundation, under the proposed outline, could disperse up to 4% of the endowment’s market value each year.
 
The endowment created by the foundation would provide financial support for New Hanover County in the areas of “(i) public primary, secondary, and post-secondary education, (ii) health and social equity, (iii) community development, and (iv) community safety,” the document stated.
 
Examples of possible initiatives falling under those areas that are listed include:
• “Comprehensive, no-cost broadband connectively county-wide;
• NHC Teacher Fellows program for traditional and charter school graduates committed to returning to local public schools;
• School facilities designed for mid-21st Century education delivery;
• Eradicate food deserts across the county;
• Expand access to high quality, fair cost physical and mental health clinics for county residents;
• On-demand, cost-effective transit system for dependent and choice riders;
• Small business micro-loan program;
• Minority- and Women-Owned Business support programs;
• Open space and public water access preservation;
• Support and resources for community-led restorative justice programs;
• Modern development and training of law enforcement, to include cultural competency and implicit bias;
• Comprehensive flood, storm surge and wind mitigation investments”
 
The proposed foundation would have to give county officials an annual report on its activity and grants.

"The county has worked with Commissioners, NHRMC leadership and Trustees to develop a framework for these funds that ensures stability for the county, the hospital’s employees, and our residents," New Hanover County County Manager Chris Coudriet said in a statement Monday. "This is a significant amount of money that must be invested wisely and strategically. As such, the letter of intent outlines that the assets must be managed in a way that is ‘sacred and protected for the community in perpetuity.’ The Board of Commissioners will discuss the draft investment allocations and the community foundation at its meeting today and, if Commissioners vote to move forward with a Letter of Intent with Novant Health, then this framework will become part of a definitive agreement that is negotiated and finalized in the coming months.”
 
For the other set asides at closing, the draft document also discusses in more detail the plans specifically for the NHRMC; county; and mental and behavioral health funds.
 
NHRMC-$300 million
Under the draft proposal, Novant would pay $300 million in an account controlled by NHRMC for NHRMC Transition Stabilization Escrow to in part “administer NHRMC’s existing pension plan following its transfer to the County, (ii) provide for certain payments to be made, over time, to affected NHRMC employees to mitigate adverse impacts associated with such employees’ transition from NHRMC’s existing pension plan to Buyer’s retirement benefits plan, (iii) provide stabilization payments for NHRMC employees to facilitate the transition of the Business from Sellers to Buyer, and (iv) address the staff and provider resiliency funding needs of the organization.”
The money also would be used for expenses for winding down NHRMC and transferring ownership if a sale happens.
 
New Hanover County-$300 million
The proposal also calls for a County Revenue Stabilization Fund, with $300 million also in a reserve fund or escrow account controlled by the county. Examples of how the money could be spent – with the agreement of four of the five county commissioners – include paying off county debt; financing county building projects, putting aside savings for emergencies such as natural disasters and pandemics or to fill budget shortfalls; and minimizing future tax and fee increases.
 
Mental and Behavioral Health Fund-$50 million
These funds, according to the document, would go toward funding for long-term, residential substance abuse treatment programs; allocating grants to evidence-based programs; and expanding access to mental health services independent of state assistance.
 
The New Hanover County Board of Commissioners meets at 4 p.m. Monday at the New Hanover County Historic Courthouse, 24 N. Third St., with social distancing measures in place. The meeting also will be broadcast live on NHCTV.com as well as Spectrum Channel 13 and Charter Channel 5. Click here for the agenda. The Business Journal will email out coverage about the meeting to readers.
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