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Novant, NHRMC CEOs Discuss Agreement

By Neil Cotiaux, posted Oct 1, 2020
On the heels of growing support for the proposed purchase of New Hanover Regional Medical Center by Novant Health, the CEOs of the two health systems appeared virtually at the Greater Wilmington Business Journal’s 2020 WilmingtonBiz Conference & Expo on Thursday to make one final pitch for approval of the deal.
 
In a fast-paced one-hour conversation, John Gizdic, president and CEO of NHRMC and Carl Armato, president and CEO of Novant, highlighted key aspects of the proposed deal, which is subject to approval by NHRMC’s Board of Trustees and the New Hanover County Board of Commissioners, a two-step process that is scheduled to be wrapped up on Monday.

(Click here to see the full talk.)
 
With a definitive agreement for the $1.5 billion purchase of NHRMC now completed, Gizdic told Expo attendees that all of the commitments that Novant made in its original proposal and through the terms and conditions in July’s Letter of Intent have been carried over into the recently-completed Asset Purchase Agreement.
 
“There are no significant changes from the Letter of Intent,” he said, adding that he hopes the deal will be closed during the first quarter of 2021.
 
Keyed to sales proceeds currently estimated at $1.9 billion, the deal involving Novant Health, New Hanover County, UNC Health and the UNC School of Medicine reaffirms key commitments made earlier by Winston-Salem-based Novant.
 
Those commitments include $1.25 billion to establish an independent community foundation; $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; another $50 million to the NHRMC Foundation; and more than $3 billion for routine capital expenses and strategic master plan projects.
 
Although Gizdic said there would be no “immediate dramatic changes” at the hospital if the deal goes through, one very visible change that could catch the public’s eye is a new community hospital in Scotts Hill that would represent a $200 million project in NHRMC’s capital plan for which a certificate of need was recently submitted to the state.
 
“We are talking about an entirely new community hospital” with 36 initial beds that would complement the current emergency department in Scotts Hill, Gizdic said.
 
Armato said the facility would ensure that people “don’t have to travel too far for care” and would be consistent with other plans in the Asset Purchase Agreement for more localized delivery of medical services.
 
Prioritizing capital needs such as the Scotts Hill project would be one of the responsibilities of a reconstituted hospital board, a topic that has drawn increased public attention in recent days due to questions about how much power Novant might wield over the local board.
 
“The new local board will be determined locally … Novant Health has no power to appoint members to that board,” Gizdic said.
 
Armato added that the Novant Health board has “never rejected” a board member that had been nominated in the Charlotte, Winston-Salem and Virginia markets where it operates.
 
A “majority” of the existing hospital board of trustees will roll over to the post-sale board as it is developed, Gizdic said. An initial list of appointees to the reconstituted board is part of the purchase agreement and is expected to be acted upon by the New Hanover County Board of Commissioners at their meeting next Monday.
 
Ultimately, the hospital board will become “self-perpetuating” with its members filling vacancies that arise. Novant’s ratification of such nominees could not be “unreasonably withheld,” according to the final sales agreement.
 
The issue of who sits on the reconstituted board has drawn growing public attention given the fact that the board will appoint six of the 11 members of the $1.25 billion community foundation board that will come into being separately.
 
Critics fear that Novant could somehow end up having an influence over a huge pool of local charitable funds.
 
“Novant Health has no decision-making authority on that foundation or the use of those funds,” Armato said.
 
While the current hospital board and county commissioners prepare to vote on whether to proceed with a sale of the hospital, Gizdic and other leadership at NHRMC are continuing to explain to the hospital’s 7500 employees what a sale to Novant would mean for their futures.
 
If the sale goes through, “Everybody will be vested” in the hospital’s existing pension plan when it is frozen at closing, Gizdic said. “They will not lose a penny of their benefits.”
 
Utilizing the $200 million employee resiliency fund outlined in the sales agreement, “The vast majority of that fund first and foremost would go to that pension” with the balance addressing other transitional issues, Gizdic said.
 
The sales agreement also enshrines Novant’s pledge to retain all of NHRMC’s employees at the time of closing for a minimum of two years.
 
The final agreement includes a strengthened commitment to train health care professionals needed in Southeastern North Carolina, including increasing the number of medical students trained at UNC School of Medicine’s Wilmington campus and by expanding partnerships across the service area to train more dentists, pharmacists, physical therapists, nurses and other medical professionals.
 
NHRMC trustees meet at 5 p.m. today. The Business Journal will send out an update after this evening’s vote to email newsletter subscribers.
 
NHRMC Trustees Vote
Thursday, Oct. 1, 5 p.m.
SEAHEC Classroom (limited to 25 people, so largely virtual meeting)
Call in:  (910) 386-0001 and access code: 28428
 
NHC Commissioners Vote
Monday, Oct. 5, 4 p.m.
New Hanover County Historic Courthouse, 24 N. Third St., in Room 301
The public can attend the meeting, but capacity will be limited due to COVID-19 and social distancing guidelines will be followed. The meeting will be available to view live on NHCTV.com and NHCTV’s cable stations: Spectrum Channel 13 and Charter Channel 5.
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