Health Care

Advisory Group Picks 3 Health Systems For Closer Looks In NHRMC Pitches

By Vicky Janowski, posted May 7, 2020
Out of the six health systems that submitted proposals to buy or partner with NHRMC, the Partnership Advisory Group on Thursday evening picked three to move forward with for more due diligence.
The 21-member group voted unanimously to recommend proposals from Atrium Health, Duke Health and Novant Health.

Those recommendations now will be presented to hospital trustees Monday and New Hanover County commissioners on May 18 for their approval and direction. Either body could change or add to those recommendations for further talks, but PAG leaders said the other groups have been kept updated.
"We have 18 key performance areas that we were focused on," Spence Broadhurst, co-chair of the Partnership Advisory Group (PAG), said at Thursday's meeting, held virtually because of social distancing concerns with the coronavirus. "There were three respondents that consistently ranked higher in our objective measures that we’ve gone through on all of these 18 measures, which has allowed us to come to the point where we’re comfortable making a motion to identify the two or three respondents moving forward.”

PAG member Bill Cameron said that the group had been working in subgroups to break up the 18 measures and discuss how the proposals addressed them. He pointed out that the five subgroups each came up with the same three systems for their shortlists as well.

The Partnership Advisory Group is made up of hospital trustees, NHRMC medical staff and the community.

The vote came shortly after 8 p.m., after about two hours of closed-meeting discussion. There was no talk during the open meeting about the proposals themselves before the motion and vote.

"That's the challenge that we balance every week," Broadhurst said later Thursday evening about the amount of discussion that was public during the meeting. "We, the leadership team, we've met three or four times trying to try to balance that out. And the challenge with this is it's all strategic; it all is competitive and strategic ... The work that we share with each other, it all has components to it that just had to be handled in closed session."
Group leaders did discuss what will happen next, including virtual site visits in the coming weeks with the three recommended systems.
“We’re not eliminating the other ones,” PAG co-chair Barb Biehner said about the other proposals. (Read all the proposal documents here.)
The other three systems not included in Thursday’s recommendations were HCA Healthcare, HealthSpan/(Bon Secours Mercy Health) and UNC Health. UNC Health submitted the only one that did not include a management or acquisition offer, instead proposing to expand the existing academic partnership it already has with NHRMC.

For those on the recommendation list:

• Charlotte-based Atrium has proposed a 30-year lease, then ownership arrangement, offering $50 million upfront cash to New Hanover County; $150 million to create a community foundation “to support key health initiatives and address disparities of care in the region”; and about $791.8 million in lease payments and income sharing as well as a capital investment of $2.17 billion, including $1.15 billion for routine and strategic, investments in the first 10 years of the partnership and a behavioral health and addiction treatment facility.
• The academic system Duke Health pitched buying NHRMC but is open to other types of deals and management structures with offers in two scenarios: New Hanover County/NHRMC could keep “NHRMC’s net cash … which, when combined with additional proposed economic consideration to be paid by Duke at closing of $500 million, can be used to fund an independent, local healthcare foundation to benefit the community, or other purposes” or $1.35-$1.4 billion if New Hanover County and NHRMC prefer an-all cash closing.
• And Novant Health, owner of Novant Health Brunswick Medical Center, has dangled the largest financial carrot of $2 billion in upfront cash proceeds to New Hanover County for buying NHRMC and making it a flagship facility for Southeastern North Carolina for the Winston-Salem-based system. Under an acquisition, Novant said it was willing to fully fund capital needs in NHRMC’s strategic plan for $3.1 billion that includes about $600 million of routine capital expenditures over 10 years and $2.5 billion of strategic capital projects. Novant also said it was open to other models as well besides a purchase such as a joint venture, joint operating company or management services agreement.
The PAG issued a request for proposal in January to outside systems interested in the county-owned New Hanover Regional Medical Center. Those proposals came in March 16 and were made public April 21.

Group officials said they expect the proposal evaluations, which started in mid-March, to last through July, when they'd vote on a recommended partner for a definitive agreement. Before then, the group plans to hold the virtual site visits, vote on letter-of-intent core considerations, hear presentations from the finalists and hold other discussions. During the upcoming meetings, they also are looking to compare the partnership options with keeping things the way they are now for the hospital as well as internal restructuring of its operating model.

Gene Merritt, president of the Save Our Hospital group that has been vocal in opposing a sale or merger, said Friday that members were not suprised by the PAG's choices.

"We are disappointed that the UNC Health option was not included. We are afraid we will lose the UNC relationship," he said and repeating the group's call for a dealy in the process because of the COVID-19 pandemic.

"All three proposals call for a local board, but with limited authority. All major decisions will be made by the parent company (not in Wilmington)," Merritt added.

Four meetings from now, the group is slated to vote on keeping that status quo, restructuring or a leading choice for an outside partner.
If one of the outside deals is the preferred route, after negotiations it will be left up to the hospital trustees and county commissioners ultimately to sign off on any deal.
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