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Legislators Vote for Governance Changes in UNC Health Care System, Look to Study Sale of Rex Hospital

April 11, 2012 by Rose Hoban in Featured, Hospitals

UNC’s Health Care System could be seeing major changes to its governance structure this year and potentially to its ownership of Rex Hospital in 2013.

Saja Hindi

Legislators sitting in a committee reviewing UNC’s ownership of Rex Hospital approved sending a controversial bill to the full legislature yesterday that would change UNC Health Care’s governance and trim the system’s ability to make independent business decisions.

The bill passed the Select Committee on State Owned Assets narrowly, on a contentious 8-7 vote.

UNC Hospital at night

UNC Hospital Image courtesy, UNC Healthcare

If enacted, the nine-page draft bill would decrease the size of the health care system’s board of directors by more than half, and move it directly under the UNC Board of Governors. It would also remove many of the health care system’s flexibility provisions regarding purchases, property and property construction. The bill draft also requires the health care system to provide more indigent care. And it changes the board’s mission statement to the exact wording used before the General Assembly approved changes to UNC’s governance in 1998.

Rep. Tim Moffitt (R-Asheville), the bill’s sponsor, said his recommendations make the system more effective and efficient.

“As someone that works in the arena of governance, it is something from my standpoint that is a glaring issue in regards to being effective and being more nimble in today’s more rapidly changing environment,” Moffitt said.

The Board of Directors’ composition would decrease from 27 members to 12. Nine of those members would be appointed by the UNC Board of Governors. The other three seats would be for health system officers. This was the size of the board until the General Assembly approved changes in governance in 1998.

Moffitt said he has serious questions about the 1998 legislation to change the board’s structure and size. He also admitted he was unsure of whether the system has experienced problems as a result of the 1998 revamp.

Several legislators expressed strong objections to moving forward with the bill due to a lack of information. Members only received the 9-page draft at the beginning of the day yesterday.

Lawmakers from both sides of the aisle said they didn’t feel comfortable addressing an issue some felt was outside the committee’s mandate.

“This is a 9-page bill that we’re seeing for the very first time right now, and I for one, don’t know what’s in it and it does concern me. And I’m going back to look at what the charge of this committee was — to look at selling state-owned assets. This doesn’t do, doesn’t sell, doesn’t keep,” said Rep. Julia Howard (R-Mocksville).

“It’s pretty much just restructuring of a board — which may be a good thing, I’m not saying it isn’t. I don’t know. But, I for one am not prepared to vote on this piece of legislation this morning,” she said.

Representative Bill Owens (D-Elizabeth City) said there are a lot of organizations throughout state government in similar situations, and it was not fair to single out this group, especially without studying the issues in detail.

“How many of the state agencies are we going to change? Why are we looking at this one? And is it something that’s really broken? Or are we fixing something that’s not broken and just picking on this one board when we have so many other boards?”  he said. “There’s 120 of us. Are we going to recommend we reduce it to 60 of us because it’s definitely too many? But I don’t think people would accept that constitutional amendment.”

Moffitt said he could not provide specific examples of why reducing the number of board members would be more efficient, but claimed larger boards are less flexible and more cumbersome.

“In the management consulting arena, we really have models that we try to perfect over and over. Twelve is the appropriate size, or in certain instances, 13 would be acceptable,” Moffitt said. “We just find those to be more accommodating to rapidly changing business environments and they’re just more effective.”

UNC Health Care spokeswoman Karen McCall said passing the bill would hamper the system’s efforts to deliver the best care it can. She said there is a lot of education that they will try to provide to legislators before the short session.

“The main question is we can’t figure out what problem the House select committee is trying to solve. The health care system has been very successful — we have high patient satisfaction, are financially sound,” she said. “The Board of Directors has done an excellent job in governing us, and we can’t determine what’s the problem that they’re trying to solve.”

“We don’t know what inefficiencies that Rep. Moffit has seen in our board structure, and none of those were brought to our attention,” she said. “We got the same notification that the rest of the committee did.”

Senate leaders have indicated they would not allow the bill to move if it makes it to their chamber.

Lawmakers Push Rex Healthcare Decision to a Later Date

Committee members also considered a shorter bill related to the healthcare system, recommending the UNC health care system sell its interest in Rex Hospital, but declined further action.

Rex Hospital

Rex Hospital. Image courtesy Rex Healthcare

Rep. William Brawley (R-Matthews), the bill’s sponsor, said he was asking for no action prior to the short session, he merely for committee members to study the issue further.

“I had taken a position fairly early. It seemed to me that they should not maintain the hospital. However I also recognize that this is not a trivial issue,” Brawley told the committee.

WakeMed officials made a $750-million takeover bid last year for Rex Healthcare, saying state ownership gives its competitor unfair advantages, such as taxpayer subsidies, treating fewer uninsured patients and receiving a higher reimbursement for Medicaid care.

But UNC Health Care’s board rejected the bid, stating it would not be in the best interest of residents, Wake County, or the state, and instead proposed a truce on non-competitive efforts of both hospitals.

“We had quite a bit of debate on this. This is a situation where UNC healthcare operates four hospitals, and the one in Wake County has become a generator of funds, which they are using to support other opportunities,” Brawley said.

According to Brawley, several questions have come up regarding whether the university should be running a statewide health care system and whether additional benefits that accrue to the four counties should be taken out statewide.

“It gets very complicated and it’s very controversial, and unwinding Rex Hospital is not something that can be done quickly, so I wanted to bring this forward for discussion, but I do not intend to move for a recommendation on this,” he said.

The bill will be taken up again before the 2013 legislative session.

The committee meets one more time in April to look at a final report to the legislature before the current session convenes in May.

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