When the 21 members of the Partnership Advisory Group sat down for its first meeting on Oct. 29, 2019, to begin charting the future of New Hanover Regional Medical Center they were hardly in lockstep.
In fact, that was one reason some had been chosen for the special committee, which would help make one of the most consequential decisions in the county’s history.
“The group has many different opinions. Some, in fact, have been vocally against considering a sale,” New Hanover County Manager Chris Coudriet said in the weeks ahead of that first meeting. “What they do have in common, however, is a desire to help choose the right path forward. They will be giving a lot of time to this effort, and it’s not going to be easy work for any of them.”
(Click here to read about the Power Players of the NHRMC deal, including the PAG members, as part of this year's WilmingtonBiz 100.)
For the next year, advisory group members did just that, spending hundreds of hours in meetings, at community forums, on social media Q&As and ultimately with teams from three major health systems deemed finalists in the bid to purchase NHRMC from the county.
Those initial doubts Coudriet predicted were backed up by several PAG members.
“My goal was not to drink the Kool-Aid,” said advisory group member Hannah Gage, who was highly skeptical of a sale when the possibility was first announced.
But the Wilmington businesswoman and former chair of the UNC System Board of Governors said the more she understood the challenges NHRMC faced the more she became convinced the sale was the best option. So did the others.
When it came time to finish their mission – recommend to elected officials and hospital leadership whether NHRMC should remain county-owned or explore a sale or partnership – the 21 members voted unanimously on Sept. 29 to support a $5 billion deal with Novant, a private nonprofit health-care system based in Winston-Salem.
That paved the way for the authorizing votes from the NHRMC Board of Trustees and New Hanover County Board of Commissioners.
As part of the deal for the hospital, which has been owned by the county since it opened in 1967 and operated by the nonprofit organization NHRMC, Novant pledged to pay the county $1.5 billion and invest more than $3 billion in the hospital on capital projects and routine capital expenses.
The sale is expected to close sometime in the first half of next year with the bulk of the proceeds going to a newly established community foundation.
Sum of Its Parts
While many of the steps involved with selling a county-owned hospital were required by state law – including a still-pending review by the state attorney general’s office – convening an advisory group was not.
County and hospital leaders who opened the door to exploring NHRMC’s future soon banked on the PAG making the process more deliberative and palatable to the community.
And it worked.
Even county commissioner Rob Zapple, the only one of the five commissioners to vote against the deal on Oct. 5, said that in the end he disagreed with details about how the community foundation will function but not a change in ownership – an idea he initially had sharply criticized.
“The process, driven by the PAG, has determined that Novant Health is the best potential company to purchase New Hanover Regional Medical Center,” Zapple said before voting, adding that his talks with local medical community members and Novant Health CEO Carl Armato shaped his opinion as well.
When the PAG first met, it became clear that its volunteer members wanted to keep all options open.
“The larger the group, the bigger the organizational direction and challenge can be … but I think everybody came in with an open mind and sort of a blank piece of paper to really get to the right answer,” said Spence Broadhurst, who with NHRMC trustee Barb Biehner, served as co-chair of the group.
Unlike some other government-owned or nonprofit hospitals, NHRMC’s net financial position for the fiscal year ending Sept. 30, 2019 was healthy, up by $107.5 million or 11.2% from the prior year. But federal and state reimbursement below the rate of expense growth, the cost of technology, more uninsured patients and a steady stream of consolidations represented clouds on the industry’s horizon, NHRMC officials warned.
Biehner, director of operations at Coastal Carolinas Health Alliance who came to the PAG with decades of executive experience in health care, also knew there were local limitations on how much money the hospital could obtain for future projects.
As a municipal facility, NHRMC could only use bond proceeds to finance projects within New Hanover County, limiting its ability to expand in the six other counties in the region it serves.
With a debt capacity of $150 million and no local taxes available to tap, NHRMC would struggle to fund a $1.9 billion strategic plan needed to deliver quality health care to a growing population, Biehner said.
Five months in, the PAG’s mission took on added significance when the first case of COVID-19 surfaced in New Hanover County on March 18.
“I think it really brought to life a lot of the challenges that our medical center was facing. As we went through the pandemic, that became very obvious,” said Broadhurst, regional president of First National Bank.
NHRMC canceled nonessential procedures and absorbed mounting costs, accelerating its financial burn rate and further complicating the hospital’s long-term planning.
By that point, however, the advisory group had already reached out to prospective suitors.
“As we mapped out our proposal, we pushed back to respondents instead. ‘How has this pandemic impacted your proposal to us?’ Here’s where we are in the whole process, and they all fully understood it,” Biehner explained. “The bottom line really came down to we’d be better with a partner to go through anything like this pandemic we were all struggling with rather than trying to do it on our own.”
Facing the Public
The PAG not only played an extensive role in the sale. With limited formal involvement from the commissioners and NHRMC board, the advisory group became the public face of the contentious and complex process.
It wasn’t planned that way. The July 23, 2019, announcement that the hospital’s future was being explored laid out a process driven by NHRMC and county leaders and staff. No special committee was mentioned. The only public role mentioned was a series of community forums.
But NHRMC president and CEO John Gizdic and Coudriet, who spearheaded the initiative, said they both firmly believed from the beginning that there needed to be a public process, and the community needed to be involved.
“From the beginning, we knew there would have to be a process and a group of community members involved in preparing the RFP (Request for Proposal) and doing the analysis,” Coudriet said recently.
“Community involvement was always central to the strategy. (But) to say that on July 23 we knew that we would call it the Partnership Advisory Group, and that it would end up being 21 members … that we knew that level of clarity” would be disingenuous, he said.
At a pair of standing-room-only community forums in August, the sentiment toward the idea of a sale was overwhelmingly negative, with “why the rush?” a common question.
Coudriet said that those two forums and meetings with civic and other groups helped frame what the public involvement should look like.
On Sept. 16, 2019, the board of commissioners voted 3-2 to move forward with exploring a sale/ partnership. The resolution also called for a Partnership Advisory Group “to help develop priorities for the Request for Proposal (RFP), evaluate the proposals received, and provide a recommendation on next steps to the Board of Commissioners and NHRMC Board of Trustees.” The PAG was established a month later. Although the county previously had formed public groups to evaluate complicated issues (solid waste and city-county consolidation were two) its scope, size and mission made the PAG unprecedented.
“I think it is fair to say that the PAG ended up being larger than we probably would have imagined at the outset,” Coudriet said recently. “And that was so that we could ensure maximum community participation.”
The complexity of the health care industry also meant some expertise was needed, Coudriet said, noting that five physicians served on the PAG, which was established as a joint subcommittee of the commissioners and NHRMC trustees.
NHRMC’s Board of Trustees added five of its members to the PAG. Nine members came from the community, including leaders from nonprofits, businesses and community groups. And Coudriet and Gizdic rounded out the rest of the spots.
No one who was asked to sit on the group turned them down, Coudriet said.
Whether or not it was the intention is not clear, but forming the PAG clearly took some of the growing political heat off the board of commissioners.
Alex Hall, a Wilmington attorney and former state legislator, was a fierce opponent of the sale process as it was carried out. Hall was particularly bothered that Gizdic – whom he views as a chief-proponent of the sale – was closely involved in choosing the PAG’s members. Hall remains convinced that the PAG members were hand picked to ensure that what he believes already was a done deal was approved.
At the start of the process, Gizdic said that he did not endorse any particular outcome, only that NHRMC and the county clearly understood how best to secure the future of health care in the region. The PAG’s leadership insisted that the group was fiercely independent and went into the process with no preconceived idea of what the outcome would or should be.
Hall is a leader and legal counsel for Save Our Hospital, which became the most organized and outspoken opponents of the sale process. The group went to court in September seeking to delay a final vote on the deal, but Superior Court Judge Phyllis Gorham denied the motion.
Although Hall remains highly critical of how the process was handled from the start, he had high praise for the PAG.
“In my opinion they could not have been more open and accessible,” he said recently. “Anytime I ever called (the PAG leaders) they were always willing to meet with us to hear what our concerns were.”
By forming the PAG, Hall said, leaders were able to quell what he described as a “tremendous backlash to the sale.”
Hall said SOH will remain active and follow how the deal – and promises that came with it – plays out.
As a longtime civil engineer, Wilmington’s Rod Andrew initially wasn’t sure how much he could contribute when he was appointed to the NHRMC Board of Trustees in 2012. (The group was previously appointed by county commissioners but will be replaced by a self-perpetuating local hospital board with the sale.) But with the health system in the midst of a construction boom, Andrew was able to provide an engineer’s perspective on some major projects.
That was the expertise he brought to the board; something else would become his passion – he fell in love with the hospital, notably the dedication and skills of employees. As a trustee, Andrew was by no means a power player. He never was chosen for the executive committee, where, he said, most major issues are discussed and vital decisions made. But as a retired professional, he had the time – and desire – to go above and beyond in his service to the hospital. He’s also a longtime hospital volunteer.
Seven years into his tenure on the board, he was surprised to learn that the county was considering selling the 7,000-employee system. But it was how he first learned about it that surprised him most – reading media coverage of the announcement the day after it was announced.
“I was shocked, you know, I have not missed a single board meeting in eight years,” he said. “And that was a real shock.”
Andrew would go on to be the only person among the hospital board of trustees and PAG members to oppose the sale.
Like Hall, Andrew said the PAG was made up of good, well-intentioned people. But he believes the board of trustees’ rightful role was essentially usurped.
“We were already on the ground running,” he said. “They had to get up to speed on hospital procedures and operations.”
Andrew is not optimistic about NHRMC’s future, especially for the employees.
“I got to know the nurses and the staff and the culture of those folks and how hardworking they were and conscientious,” he said. “That was a family; it really was. And I don’t think that’s going to be maintained.”
The future of the health system’s employees was a key issue for the advisory group as they did research and interviewed officials from the three finalists Atrium Health, Duke Health and Novant Health (six health systems overall responded to the RFP with partnership proposals).
For her part, Biehner was pleased to see Novant make a commitment to retain all interested NHRMC employees at closing for a minimum of two years.
“I’ve been there and experienced it as an employee,” she said, explaining how as CEO of a Bon Secours facility in Pennsylvania she had lost her position in a sale “and I think what really drove me to push to be involved is that I wanted to make sure that our employees and medical staff didn’t get the short end of the stick on it.”
As the panel sifted through the merits of the finalists’ proposals, Broadhurst was struck by how closely Novant Health’s and NHRMC’s cultures meshed.
“It was when I read their mission and values and compared it to ours at NewHanover Regional Medical Center, and they were almost identical,” he said. “That led to a conversation on culture and how you treat people, employees, patients, et cetera … When I really saw that culture and values just absolutely mirrored what our current medical center was doing, I think that was a real ‘aha’ moment for me.”
For Broadhurst, the crowning touch in the deal is the $1.25 billion of sale proceeds for an independent endowment that will invest the money and use an estimated $40 million-$50 million annually to address social issues.
Broadhurst is one of five people picked by the county commissioners to serve on the foundation overseeing that endowment (elected officials, those who’ve left office within the past two years and hospital trustees are not allowed to sit on it). The others are PAG members Gage and Virginia Adams, former dean of the UNCW School of Nursing. Non-PAG members are Stedman Stevens, CEO of VU Systems and former NHRMC trustee, and Shannon Winslow, strategic account executive for RxBenefits.
As of press time, the newly assembled local hospital board had not yet announced its picks for the remaining six spots.
“The impact that’s going to have on our community is just remarkable – health care, education, maybe law enforcement, housing, the opioid crisis,” Broadhurst said about the endowment’s potential. “We are going to have open, public meetings and discussions and dialogues way over and above what’s called for in the bylaws because it’s the right thing to do.”
Editor’s note: This year we added a special category on the WilmingtonBiz 100 list of The Power Players to include the key local players involved in coming to a multi-billion-dollar deal to sell NHRMC to Novant Health. Read more about this year's honorees by clicking here.