Health Care

Next Steps: What's Ahead For The NHRMC, Novant Deal

By Neil Cotiaux, posted Nov 6, 2020
The locally approved sale of New Hanover Regional Medical Center is under review by the state attorney general. (Photo by Michael Cline Spencer)
The approved sale of New Hanover Regional Medical Center to Novant Health is now under review by N.C. Attorney General Josh Stein, and residents of Southeastern North Carolina have wasted no time in letting their feel­ings be known.
After nearly a year of exploring a possible sale or partnership for NHRMC, the 21-member residents’ panel known as the Partnership Ad­visory Group voted unanimously on Sept. 29 to recommend the sale of the county-owned hospital system. Soon after, the NHRMC Board of Trustees and the New Hanover County Board of Commissioners approved the deal, setting the stage for a historic change of ownership by the middle of next year.
“Tonight, we finish as one united team … you kept an open mind, you learned, you evaluated, you chal­lenged, and in the end, you did what many thought wasn’t possible. You reached a unanimous recommenda­tion,” NHRMC president and CEO John Gizdic said as the PAG gave its thumbs-up.
But if the PAG’s vote was unani­mous, lone dissenters sitting on the hospital board and the county board of commissioners broke ranks and a second local group, Save Our Hospi­tal, launched a lawsuit to try to ob­tain county and hospital documents related to the sale.
Now, with a review underway by Stein, key promises made by Novant in the Asset Purchase Agreement (APA) are undergoing scrutiny with the possibility that some commit­ments could be amended and clari­fied as was done when Stein reviewed HCA Healthcare’s deal with Mission Health in Asheville.
When asked last month how long the review might take, Stein’s office said “It’s always difficult to esti­mate.”

Novant’s commitments include $1.25 billion to establish a commu­nity endowment; $300 million for a county revenue stabilization fund; a $200 million employee resiliency fund; $50 million for a mental and behavioral health and substance use disorder treatment fund; more than $3 billion for routine capital expenses and strategic master plan projects; and a sidebar arrangement with UNC to train more health care professionals.
Public opinion remains heated, with complaints about the deal dom­inating more than 70 comments filed with Stein’s office as of Oct. 19.
Many of those negative comments concern the structure and transpar­ency of New Hanover Community Endowment Inc., the charitable foundation that will fund education, health and social equity, community development and community safety projects using interest income from proceeds of the sale.
New Hanover County considers the foundation to be an “indepen­dent” one, in contrast to a finding from the Local Government Com­mission of the state treasurer’s office that it would “more likely than not” be considered a unit of county gov­ernment and therefore subject to a list of lower-yield, lower-risk invest­ment vehicles.
County officials say being free of the state’s investment restrictions allows the nonprofit foundation to utilize a wider range of options that would grow the endowment’s assets faster for the public good. According to County Manager Chris Coudriet, the Local Government Commission’s guidance represents “an informal staff opinion” and not the force of law.
Because a majority of the foun­dation’s 11-member board will be chosen by NHRMC’s newly reconsti­tuted hospital board, county officials believe, the foundation cannot be considered part of local govern­ment. Five foundation members – a minority – have already been chosen directly by the county commission­ers, who also have ratified the 17 members of the new hospital board first chosen by the outgoing trustees.
While an independent endowment could grow its philanthropic nest egg faster, it would not – at least on its face – be subject to the state’s open meetings law, and that has critics of the hospital deal skeptical.
“The county commissioners are making the trust a private trust so there is no public knowledge of their funds so they can invest in anything they want,” area resident Neal Shul­man told Stein’s office.
“Any community foundation created must be a public entity subject to open meetings laws and full accountability and transparency of how the interest earned will be spent,” wrote Jessica Cannon.
“There should be transparency and public input regarding how these funds are dispersed and 51% of foundation board members should be county residents with no employ­ment ties to Novant,” said Peyton Earey.
In rebuttal, Coudriet points to language in the foundation’s amend­ed bylaws that require the foundation to present a report on grants and other distributions twice a year and also have its president and CEO take questions at a public meeting “at least semiannually.”
“There’s not less than four oppor­tunities for the community to engage directly with the endowment. That’s the minimum,” Coudriet said.
“The endowment is free to make its own rules about how many public meetings it has in the course of a year, whether it’s going to invite the public in or the media,” he added.
As the attorney general’s office continues its review of the deal, Save Our Hospital continues to press its case in New Hanover County Supe­rior Court.
Citing an alleged lack of transpar­ency, the group filed the lawsuit on Sept. 29 in an effort to slow com­pletion of the deal and asked Judge Phyllis Gorham to issue a temporary restraining order blocking the sale until related documents could be made public. The judge ruled against doing so.
Attorneys representing the county and hospital in the legal complaint have argued that they have complied with Save Our Hospital’s records re­quests that are releasable under state law and that other requests from the group are too wide-ranging to fulfill.
Novant Health has now requested to intervene in the suit “to protect the confidentiality of certain infor­mation that Novant Health provided New Hanover County and New Hanover Regional Medical Center during the negotiation and due dili­gence process,” Novant spokeswom­an Kristen Barnhardt said.
“Save Our Hospital protestors [sic] claim the process was rushed and secretive,” one supporter of the sale, Eileen McConville, told the attorney general’s office. “Nothing could be further from the truth. There were open meetings, minutes online, pro­posals online and answers to all our questions.”
While legal issues have received attention in recent weeks, the thrust of the deal – uniting the health care systems to improve the delivery of care in a financially sound manner – remains the primary focus of activity heading into 2021.

As of Nov. 6, the attorney general was waiting to see if he would return to office in Janu­ary. The results in Stein's matchup against challenger Jim O'Neill was close enough to make it one of the races in the state dependent on the vote count of ballots mailed by Election Day.

If approvals remain on track, NHRMC and Novant officials have said they expect the sale to close by the middle of next year.
One strategy designed to provide a higher level of care is to move some nontertiary services away from NHRMC’s main campus and place them at new and existing locations across the system’s footprint.
Shelbourn Stevens, president and COO of Novant Health Brunswick Medical Center, believes such an approach will allow his hospital to cover some gaps in specialty services.
“I have my long list of things I would like to talk about for Bruns­wick Medical Center and how we can continue to grow services here because in some of my specialties I only have one or two of that spe­cialty,” he said. “And if they’re not on call, that patient needing that specialist then ends up going to New Hanover or another facility.
“The long-run strategy would be to have enough specialists to cover, so for those patients that could stay local we can keep them local and then leave those beds at New Ha­nover open for the higher level of care,” Stevens said.

One gap that NHRMC has already filled is cardiology. Cape Fear Heart Associates, part of the NHRMC Physician Group, provides inpatient cardiology care at Novant Brunswick and diagnostic procedures such as catheterizations and echocardiograms.

“They’ve been doing a lot more testing, they have a presence next door in the medical office building and they’ve been doing mobile cardiac care,” Stevens said.
Such talk is helping to ease con­cerns about the impact the union of the two hospitals might have on Novant employees, who number about 450 at the Brunswick campus, excluding physicians and specialists.
“They really see this as a good thing to grow our hospital, especially with the population growth, just keeping up with the demand,” Stevens said.

In the purchase agreement, Novant pledges to retain all of NHRMC’s employees at the time of closing for a minimum of two years.
“The partnership will not nega­tively affect NHRMC and Novant Health employment levels,” Novant’s Barnhardt said.
Farther north, Novant is making a minimum three-year commitment to keeping Pender Memorial Hospi­tal open as NHRMC addresses its underutilization of beds by referring patients to the hospital’s acute/swing unit, which in turn takes pressure off NHRMC’s main campus. The arrangement has strengthened the Burgaw hospital’s revenues.

Financial data posted by the American Hospital Directory showed Pender Memorial just about breaking even at September 2019.
While there has been talk of con­structing a replacement hospital for Pender Memorial someplace along the Interstate 40 corridor, no agree­ment to do so has been reached.
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