County Commissioners Vote On Intent To Sell Hospital

County Commissioners Vote On  Intent To Sell Hospital

County Commissioners Vote On Intent To Sell Hospital Featured

By / Local News / Wednesday, 18 September 2019 00:28

Managing Editor

NEW HANOVER CTY - The New Hanover County Board of Commissioners approved a "Resolution of Intent to Sell New Hanover Regional Medical Center" following a three to two vote during their Monday September 16th, meeting.

According to a statement issued by New Hanover County on July 23rd, "In a proactive step to evaluate how New Hanover Regional Medical Center can best serve area residents well into the future, New Hanover County and New Hanover Regional Medical Center (NHRMC) announced today that the New Hanover County Board of Commissioners will consider a resolution to explore new ownership opportunities for NHRMC at its September" meeting.

The County founded the Medical Center in 1967 and it has operated during that time as a self-sustaining entity without utilizing county tax revenues for operations.

John Gizdic, President and CEO of NHRMC, explained, "When we look to the future, we envision being part of a thriving community that is a model for health and wellness. We want to empower our staff and providers to provide exceptional care wherever it’s needed and work with our communities to minimize and eliminate some of the biggest threats to wellness. This is our mission and the vision that motivates us to explore every possible path toward achieving it."

He explained, "We’re clinically, financially and operationally strong today, but we recognize that to prepare for an uncertain future, we need to consider new ways to support investments in the people, technology and services that can make a significant difference in the health of our community."

According to the joint release from the County and NHRMC, if the majority of Commissioners vote in favor of soliciting bids from potential partners, they will work with NHRMC leaders to evaluate whether another organization could advance NHRMC priorities that include:
• Improving access to care and wellness through more consumer-centric options.
• Advancing the value of the care we provide through higher quality and lower costs, effectively managing the health of our region to not only treat the sick but keep them well.
• Achieving health equity through community partnerships and activities that remove barriers to care, enabling our residents to achieve their own optimal health.
• Supporting NHRMC staff and the culture that has made NHRMC one of the top places to work in the country.
• Partnering with providers to make southeastern North Carolina an excellent place to practice medicine so we can continue to attract talented and compassionate providers to care for our growing population.
• Driving quality care throughout the continuum and helping facilitate transitions with other providers to deliver more seamless and coordinated care models.
• Growing the level and scope of care already in place for all, regardless of ability to pay.
• Investing to ensure the long-term financial security and future of our health system.

Commissioner Rob Zapple expressed his concerns during the meeting. Those concerns include:
1. A major concern is the lack of transparency of the process created by NHRMC not releasing the information that has been gathered by NHRMC’s consultant, Navigant. This information includes the responses to questions posed to the large Healthcare systems that have already shown an interest in purchasing the hospital. There is detailed information that the hospital administration has in their possession that answers many of the questions they have said, repeatedly, need to be asked. If that information, which has been presented to all of the Commissioners, is for some legitimate reason not available for the public to view – then the hospital administration, or Navigant, should explain that – but denying that information exists has hurt the credibility of this process.
2. The hospital administration is not information gathering, if they wanted to gather information, ‘explore the options’, then they would release an RFI, Request For Information – not seek authority to release an RFP, Request for Proposal. The fact that the process is beyond an RFI indicates that it’s further down the sales cycle. An RFP provides contractually binding quotes and contractually binding operational, legal, and financial information about how the transaction would work. The RFP responses, the bids, are the vehicles used to make a contract.
3. The voice of the medical community – the hundreds of physicians, nurses and medical professionals throughout our region that will be affected by a sale of the hospital, including the medical staff of NHRMC, have not been included in the conversation surrounding the necessity of selling the hospital, bringing in a new partnering institution, or the impacts it will have on their livelihood and the relationships with their patients. The key stakeholders have been left out of this process.
4. Dr. William Hope, President of the Medical Staff of NHRMC, representing hundreds of doctors and medical professionals has written to our Board of Commissioners asking for a 90 day delay in taking a vote on the Resolution of Intent to Sell – for the purpose of educating both the physicians and the community as to the ramifications of such a decision before such a step is taken. The 90 day delay should be used to gather comments from stakeholders – both for and against a sale – through a written format that categorizes and prioritizes issues about the sale across all stakeholder groups. Then those priority issues should be reflected in the RFP – both pro and con. The RFP contains questions about how these priority issues will be handled to ensure that stakeholder concerns are addressed by the new owner.
5. In subsequent meetings with a sub-committee of physicians that was formed by the NHRMC Medical Staff organization – which both Commissioner Kusek and myself attended – the sub-committee members asked for a twelve month delay of any action – to allow the voices of the medical community to be heard and to study any possible solutions, once they fully understand the issues that are driving this race to sell the hospital. I believe that their request is reasonable and appropriate. However, early last week the legal staff of the hospital requested that the doctors that attended the meetings of the subcommittee sign Non Disclosure Agreements, that prevents them from talking with anyone outside of the hospital about issues concerning the hospital. The chilling effect that this ‘heavy handed’ attempt at controlling the actions of the professionals that provide our community’s healthcare does not fit the description of ‘transparency’. This appears to be an over reaction forced on a group of professionals who want to, ‘ask the question’, gather more information, and are trying to find answers to what is the motivation behind this race to sell our hospital.
6. It is unclear ‘who owns what’. The public stance of the hospital administration is that the County owns the hospital. However, the real estate deeds show that New Hanover Regional Medical Center a non-profit 501 (c) 3 owns the entire 17thStreet campus and the Cape Fear Hospital campus. The Betty Cameron Women’s and Children Hospital, the Zimmer Cancer Center, and the new Surgical Tower are all owned by New Hanover Regional Medical Center, a non-profit entity. Can New Hanover County sell the property, equipment and structures of another non-profit?
If they are able to do this – it will mean that the sale of major portions of the hospital’s campus is actually a dissolution of the assets of the 501(c) 3 non-profit – which is important because the use of proceeds from such a transaction are strictly controlled by NC State statute. Meaning that any plans to use the proceeds of a sale to lower taxes in NHC, or build projects – regardless of their merit - may not be possible.
As with the recent sale of Mission Hospital to HCA in Asheville, the NC State Attorney General stepped in and ordered the proceeds of that sale to be controlled by a ‘health trust’, not the local commissioners, and the proceeds of the sale be used for the benefit of a 14 county area impacted by the transaction. In the case of NHRMC that impact area would be a 7 county area – with the proceeds divided up to benefit all 7 counties, not just New Hanover County.
7.  The NHRMC Board of Trustees, working with the hospital’s administrative team, should be gathering information and developing a plan or plans that can be brought to the Board of Commissioners for a vote to proceed – including a Resolution of Intent to Sell, if the plan justifies that action. This is the process that was followed in 2003 and again in 2011 - but that is not what is happening now.  The Board of Trustees has the authority and the responsibility to seek out as much information as they need to fulfill their obligation to manage the short and long term strategies for the success of their organization. However, other than a few members of the Executive Committee, the Board was not included in the planning and information gathering that has been in process for at least 6 months. The full Board of Trustees did not take a vote on approving this process until late August, more than 4 weeks after the announcement of the hospital’s intention to pursue an Intent to Sell. When the Board of Trustees did acknowledge that they were aware of what was happening they did so by passing their own resolution that states, in part , “…encourages the County Commissioners to consider key priorities such as improving access, value and quality of care; increasing the level and scope of care and ensuring the long-term financial security of our health system….” – all responsibilities that the NHRMC Board of Trustees already have and all issues that they should be actively investigating through the issuance of an RFI, or working with their consultant, Navigant.
8. Proceeding with this resolution of Intent to Sell will close off a number of avenues that would be of benefit to the hospital and our citizens. The hospital administration should consider terminating their relationship with their consultant, Navigant, and the PR firm that they have hired. Then interview a number of investment banks with a strong and existing practice in the medical field and hire the one that they feel is the best fit for them. The bank would review their strategic options, including working with a private equity firm that could make the necessary investments needed by the hospital for a negotiated share of equity, while leaving control with NHRMC,  and report their findings to the Board of Trustees and County Commissioners. If the decision is ultimately made to explore a sale, the investment bank will be invaluable in setting up the hospital for an eventual sale to a new owner. Hiring an experienced bank to expertly manage this process will maximize the possibilities of getting the most value for NHRMC while providing the greatest benefit to its employees and the future needs of our community.
9. All of the healthcare systems that the hospital’s consultant, Navigant, contacted over the past six months responded that they would not allow local representation on their Board of Directors. Our community would have no voice in the decision making of any of the healthcare systems that were considered the top prospects for purchasing NHRMC. The hospital is the County’s largest employer at 7,000 employees, it is an economic development driver in our County and throughout southeast NC, acting as a magnet that draws businesses and people from across the United States to invest and live in our area contributing to our thriving economy. The hospital’s current financial condition is very strong with financial reserves of  $650 million and on track to earn $90 million in operational surplus this year, continuing an upward trend over the past decade. They have no competition to the east – the Atlantic Ocean, a 78% share of all health care in a 7 county region, and we are projected to see over 100,000 more people move to our community in the next 20 years – all potential clients of NHRMC. We want the control of NHRMC to remain local, serving the needs of our community that has invested in the growth, diversification of medical services and the quality of life that we now enjoy in NHC.
During the meeting County Commission Chairman Jonathan Barfield explained, "I served on the Board of Trustees of the Hospital for four years. I traveled every year to a governance institute where we actually learned over several days the trends that were happening in the hospital industry and how to best protect the assets of our local hospitals whether they be public or private. I attended many other seminars as well just to make sure I understood the complexity of that organization."

Barfield explained, "In my eleven years on this Board, the Board of Commissioners to my knowledge has never been into a conversation with the hospital about selling it. I'm the only commissioner on this Board back in 2011 to do a management agreement. And I was on the Board of Trustees of the hospital at that time."

He explained that agreement would have allowed a private company to manage the operation of the hospital. He explained, "The hospital would tap into that greater knowledge base with that larger organization but also would have gotten what I call the Walmart effect. Where when it comes to purchasing, they would have been able to purchase goods at an extreme savings. It's amazing how many gloves a hospital goes through. If you're buying gloves one on one, it may cost you ten cents, but if you are buying them in bulk it may cost you a penny and that is one of the things that would have helped drive and save cost at the hospitals."

Barfield said, "It was amazing that that Board of Commissioners said, Jonathan, if we do this it will lead to us selling the hospital and we don't want to sell the hospital. It was a four to one vote. I was the one that voted for the management agreement. I felt like it would lead to selling the hospital but it was going to give the hospital that leverage it needed. But four of the commissioners said, we don't want to sell the hospital."

He explained, "It's kind of cool having a father that served on the Board of Commissioners back in the 1980's. This is not a new topic. That book I like to read, it also says there is nothing new under the sun and things have a way of coming back like bell bottom jeans. But back in 1986 I believe the Board of Commissioners had the same conversation and at that time, I believe, stood on the right side of history and voted no along with his fellow commissioners."

Barfield read a letter he received from Hannah Dawson Gage - former Chairwoman of the University of North Carolina Board of Governors - and stated, "I would suggest that the County Commissioners be armed with the data that shows clearly what happens at all kinds of county hospital sales. That data is vast and accessible. During my time on the UNC Board of Governors which oversees UNC Healthcare, we had ample opportunity to be exposed to the changing landscape of healthcare. UNC Healthcare purchased medical practices and hospitals and as you know came to a close merger with Carolina's Medical in Charlotte. Each time we approached the purchase or merger, one fundamental question was asked, please show us an example when the sale of a hospital to the public and or private entity resulted in improved cost  and quality. We never got an answer because there wasn't one example in the United States over the last decade when cost and quality improved. Not one."

Barfield said Gage's letter read, "The data was clear. Every time there is a merger or sale, the cost of the care of the merged or acquired institute materially increases 100% of the time. Additionally, there is no evidence the quality of care materially improved commensurate with the prices. To the contrary, there is ample evidence that the availability of services typically shrink and frequently quality goes down at the County hospital for certain types of care. Also, the role of the hospital changes to include being a funnel for specialists referrals  upstream to a larger entity. Especially if that larger entity is an academic medical center. So prices go up and the market typically goes to the top and neither is equitably spread across the domain nor reinvested in source from which the increased margin comes which is a county hospital."

Barfield emphasized the importance of public input received to date and stated, "What I've heard, resounding in this community, that this is not the time to move forward with this initiative."

He said, "It's our job to be quick to listen and slow to speak."

He explained, "Prior to this coming up, we were in the process of giving the hospital the ability to pretty much do some of the things they want to do. We had a program called SystemCo in place. And SystemCo would fundamentally change the lease that we have at the hospital to give them the ability to borrow money outside of the County to build. Our current lease prohibits them from building or borrowing money, financing, to build outside of the County. So to prohibit another entity from coming in and taking the low hanging fruit, we had this document prepared," and, "Somehow that document got pushed to the side and we are having this conversation now. I believe we need to revisit SystemCo. I believe we need to shuttle and scuttle, as we say in the Navy, this resolution and allow the hospital to have those conversations outside of this RFP."

Commissioner Patricia Kusek explained, "This Board of Commissioners has a fiduciary responsibility to the taxpayers of this County. And we are responsible for evaluating all County matters, not just kicking the can down the road."

She explained, "Perhaps some of you were here 20 years ago when previous County Commissions didn't do anything about storm water management in this County and as a result of last year and this year we have flooding in lots of areas of this county. Maybe that wouldn't be the case if we had thought then about evaluating a storm water management plan. I don't want to see the hospital under water either."

Members of the audience sighed and booed Kusek for her comparison of flooding and the hospital issue. She responded, "It's my turn to speak now."

She explained she wants to explore all of the options and, "I have not made a decision about whether I think this hospital should be sold or not. I don't have enough information to make that decision but how could any reasonable person not want to investigate and research and evaluate the expert information that gives us the ability to make informed decisions. I think that's the job we were elected to do as County Commissioners."

Commissioner Zapple made a motion to amend the resolution to include a 12 month time frame for more input. That motion failed.

Commissioner Woody White explained, "I have two parents here that live in this county that are elderly. I have a wife and two children. I have an office staff. I'm 50 years old myself. I'm sure I'm going to need to go to the hospital again in the future. I've been there before. Family has. Received tremendous care. Both of my children were born there. If I'm going to be convinced to do anything other than change the status quo, it going to have to be based upon evidence that I will see that will convince me that the quality of this hospital for the next generation will improve. That access will improve. That affordability will improve. Otherwise I'm not going to vote to support it. For my own reasons. For my own family, my own children, my own office staff, my own mom and dad. So these conspiracies out there that the deal is done and these signs that you are holding up about how there is some nefarious intent or even the completely false allegation from some people that the deal is in. That there have been things done behind the scenes is an outrage and insulting to me. Because if there is any evidence of that, I suggest my fellow Commissioner and our State Senator today, who recklessly filed some complaint, should come forward and present any evidence of any back room deals, conversations, emails, text messages, clandestine meetings - which is a word that has been used - bring it forward. So it to the police. The SBI. I want to see it, because it hasn't happened. We are doing our job. You are a part of it. These decisions are difficult. And we are all very emotional about it.  Myself included. I will vote for it in the future if I'm convinced my family will be better cared for over the course of their lives just like yours. I will vote against it if I cannot be convinced of that."

The Board of Commissioners voted to adopt the resolution with Commissioners Jonathan Barfield and Rob Zapple voting no and Commissioners Woody White, Julia Boseman and Patricia Kusek voting in favor of the resolution of intent to sell the  hospital.

N.C. Senator Harper Peterson  - District 9 - and former Mayor of Wilmington submitted a complaint to the N.C. Attorney General's Office which stated:

I, Harper Peterson, State Senator for District 9, New Hanover County, wish to formally file a complaint against the New Hanover County (NHC) Commission for their failure to fully inform and openly engage the citizens of New Hanover County in the decision making process regarding the potential sale of the publicly owned hospital, New Hanover Regional Medical Center (NHRMC). Furthermore, fundamental fiduciary, legal and procedural responsibilities have been put in question and have damaged the public’s trust in fair and open government.  (NHMRC is a “charitable” nonprofit corporation that is publicly held by the citizens of New Hanover...)
The NHC Commission will consider an “Intent to Sell” resolution on September 16, which will allow, if passed, for NHC to issue a “Request for Proposal” (RFP) to qualified groups that may be interested in the purchase of NHRMC. State statute, N.C.G.S. Section 131E-13, lays out the specific process that NHC must follow, including public notices and public hearings.

Under these guidelines a sale could be considered and consummated within 90 days at the “absolute and sole discretion” of the NHC Commission.

The basis for my complaint are the following: 
- I have attended four (4) public meetings and listened to hundreds of citizens, their comments and questions, and recognize that there is great uneasiness throughout the community that this process has been rushed, and that there is concern that an impartial, fact driven and inclusive process will NOT be followed in the future. Specifically, certain County Commissioner(s) have publicly expressed a desire to sell NHRMC, have ridiculed public comment and concerns responsibly expressed at public meetings, and have suppressed and dismissed the public’s desire to extend the September 16th vote. Citizens simply want to better understand the options and implications of a sale, and insure the best possible health care for EVERY citizen for generations to come. 

These actions lead me to believe that a deal is already in the works and that a perspective buyer(s) could potentially dictate the terms of a sale agreement.  This will not be in the best interest of the seven (7) counties that NHRMC serves, nor will it be in the best interest of the over 7000 employees of the hospital, and certainly not in the best interest of the scores of nonprofit community health service groups that work with and supplement the hospital’s mission.

- There is NO clear legal record of what entity, NHC or NHRMC, actually owns the multiple properties, buildings, equipment, assets, etc. comprising NHRMC. This determination is of paramount importance, as state law, N.C.G.S 55A-12-02(g) and N.C.G.S. 131E-13, specifically directs how, and by who, proceeds from a potential sale or lease of NHMRC will be handled...

NHC has publicly stated that any proceeds from a sale could be used for ANY purpose it feels appropriate, health related or not.

I interpret the law quite differently, whereby “any distribution of assets shall be to a tax exempt organization whose purposes are consistent with the purposes of the existing corporation.” Paragraph 9 of the Articles of Incorporation of New Hanover Memorial Hospital, Inc. as amended on April 30, 1986.

This has led me to believe that the NHC Commission has NOT done their due diligence; specifically what properties they own and what properties NHRMC owns, what are the tax and market values of all the NHRMC “campus” properties, what other types of buyers, for profit, NFP, operating profiles, terms and conditions that would be desirable, etc. that will be included in a RFP. I also believe that NHC has misinterpreted state statute requirements regarding any and all proceeds from a sale and that this will only complicate this initiative.

- There is no record of a public discussion or decision by the NHC Commission to consider a matter of such enormous consequence; the potential sale of NHRMC, no record of directing the County Manager to spearhead this initiative, no record of directing the County Manager to so closely partner with NHRMC’s CEO to manage and message this initiative and speculation on its far reaching consequences.

This has led me to believe that there may be malfeasance on the part of an individual(s) within New Hanover County Government. The County Manager serves at the NHC Commission’s pleasure and does NOT act independently.  Someone or somebody is acting improperly and outside their legal bounds.
- There has been no accountability to the NHC taxpayers regarding the tens of thousands of tax dollars spent on NHC staff time, resources, marketing, etc., nor the tens of thousands of NHC tax dollars spent on contracts with third parties, including legal advisors, business consultants and communication specialists dating back months prior to the July 23rd public pronouncement that an effort would begin.

This has led me to believe that there has been “fiduciary lapse” by the NHC Commission with respect protecting the taxpayers of NHC.

- The NHC Commission and its agents have claimed that there has been NO communication or negotiation with larger hospitals as potential buyers at any time during this process, in an attempt to “test the waters.” There is now clear evidence that this is UNTRUE. 

Numerous health agencies have been engaged by the NHC’s Agents.  Moving forward it will be hard for the public to have faith in the stated intentions of the NHC Commission’s governance and its AGENTS regarding this matter. The same can be said for the NHRMC’s Board of Trustees Executive Committee and its AGENT and CEO. Their combined messaging has been in “lock step” throughout. Also of fundamental importance will the drafting of a meaningful RFP as well as the appointment of impartial and objective citizens to the Partnership Advisory Group (PAG).

The proposed RESOLUTION limits these PAG appointments solely with the County Manager and Hospital CEO, and should be expanded to allow individual NHC Commissioners to appoint, as well as allowing stakeholder groups within and outside NHRMC to choose knowledgeable representation.

This has led me to believe that the government process in this matter has been corrupted, the public confidence has been violated, and a vote of “NO CONFIDENCE” in this matter going forward is in order.

In conclusion I believe that the importance of NHRMC’s continued quality of health service to the hundreds of thousands of citizens in Southeastern North Carolina demands your immediate attention. 

A review of all actions, internal communications, outside contracts and contacts, and clandestine relationships by NHC and NHRMC relevant to this matter, prior to and after July 23rd, is warranted. 

Going forward, your attention, oversight and corrective action with regards to this extraordinary decision our community is presently considering is needed NOW!

Chris Coudriet, New Hanover County Manager, explained, "New Hanover County owns and leases real property, assets, and facilities to New Hanover Regional Medical Center ( " NHRMC "), which operates as a North Carolina nonprofit corporation serving the community. The New Hanover County Board of Commissioners provides oversight for NHRMC by appointing members to the NHRMC Board of Trustees, and the board is ultimately responsible for ensuring NHRMC fulfills its mission to serve area residents based upon healthcare industry information and input from healthcare leaders."

He explained, "It is important to ensure the community has long -term access to the high - quality healthcare services and providers they need and deserve.

With a rapidly changing and challenging health care environment, it is essential to look at the current NHRMC model to determine if it should remain stand alone or change moving forward."

Coudriet explained, "Commissioners are being asked to consider the attached resolution to begin a research phase to understand what possible partnership or ownership options exist for NHRMC, and what is in the best interest of healthcare for our community. The resolution, if approved, would begin a Request for Proposals ( RFP) process and establish a Partnership Advisory Group to advise Commissioners on the best future and organizational structure for NHRMC. Since making this public July 23, 2019, the community input we have received from citizens has emphasized the importance of this being thoughtful, open, and slower paced. Citizens need to trust and understand this process, and — if the Board of Commissioners decides to move forward — it is staff's recommendation that this proceeds in a very deliberate, fact -based manner that complies with state statute and ensures additional, valuable community input."

Coudriet said County staff is recommending no less than three public hearings. One to discuss priorities for the RFP, one to discuss all proposals received, and one to discuss the final contract.

He explained, "If the board decides to proceed in that direction. We would also encourage additional community meetings to share information and receive input throughout every stage. In addition, all proposals and any final contract would need to be made public for the community's review. The resolution also initiates a Partnership Advisory Group (PAG), which should consist of county, hospital, physician, and community leaders reflective of our community's diversity of individuals and interests. The PAG would be responsible for creating the RFP, which should be informed, in part, by input received at the first public hearing. This group should meet at least twice before an RFP goes out, and numerous times thereafter to conduct extensive due diligence and research in order to bring forward a recommendation to the Board of Commissioners. Its meetings should be public and consistent with open meetings laws, only going into closed session for review and deliberation of competitive information allowed by state law."

Coudriet explained, "This process should take many months, and would inform whether Commissioners should continue to operate NHRMC as an independent health care provider, pursue a new ownership sstructure with a larger healthcare system, or engage in a different structure in order to enhance and advance healthcare in our community. Any decision should only be made if it is in the community's and NHRMC's best interest."


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