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By Liora Engel-Smith
Novant is the future of New Hanover Regional Medical Center, the county board of commissioners decided on Monday night, ending a nine-month process of searching for a suitor for the county-owned hospital.
“In 53 years of serving New Hanover County and the surrounding communities, New Hanover Regional Medical Center formed a legacy of high-quality care and unwavering commitment to improve the health of the community,” said Carl S. Armato, president and CEO of Novant Health in an emailed press release following Monday night’s decision. “Novant Health is committed to maintaining that excellence and (sic) look forward to making a significant impact to enhance and expand the health of southeastern North Carolina and beyond.”
Novant’s proposal floated options ranging from affiliation to an outright sale. But an advisory group recommended the sale, which would net the county roughly $2 billion. An additional sum of more than $2.5 billion will go to improvements to the system’s facilities and expansion of services.
Also part of the proposal is a partnership with UNC Health and UNC School of Medicine to expand New Hanover Regional’s medical education program, a commitment the parties spelled out in a separate letter of intent, signed after Novant submitted their original proposal.
Letter of Intent – UNC Health Novant Health (PDF)
Monday’s Board of Commissioners vote clears another hurdle for Novant, whose proposal was endorsed unanimously by the 21-member Partnership Advisory Group and New Hanover Regional’s Board of Trustees by a vote of 16-1 earlier this month. The parties will now begin negotiation of the final terms of the sale, a process that will include additional due diligence by Novant and UNC.
The commissioners are expected to vote on the final documents following negotiations with Novant no later than October 2020.
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What’s in that price tag?
Novant Health is committing to:
- Pay $1.5 billion at closing;
- Contribute $50 million to the New Hanover Regional Medical Center Foundation;
- Spend $600 million on routine facilities improvements over the next 10 years; and
- Spend $2.5 billion on strategic capital projects, including priorities in New Hanover’s master plan and other facility work.
The purchase will be “debt free, cash free,” meaning that New Hanover County will retain the cash the hospital currently has and will be responsible for repaying current debts. In factoring the closing price and the hospital’s current financial resources, the sale will net the county almost $2 billion in cash.
Following a roughly two-hour discussion, the commissioners voted 4-1 in favor of the proposal.
Replying to comments from residents who alleged that the county and the advisory group wanted a sale all along, Partnership Advisory Group co-chair Spence Broadhurst at a July 8 virtual information meeting said that the process began with the “blank piece of paper.”
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“We started with the status quo — that’s doing what we’re doing now — and there were so many restrictions to that that really, over time, we came to a consensus that there’s got to be a better way,” he added.
Other types of arrangements, including affiliation in which the hospital would retain some local control, was “one of the poorest options we had,” he added, because it involved some loss of freedom, but with fewer of the parent company’s financial resources being dedicated to the Wilmington area.
That way forward, the county commissioners affirmed on Monday night, is a sale to Novant.
Many suitors both from in and out of state have lined up to partner, affiliate or purchase the state’s largest county-owned hospital in Wilmington, even as community members signaled their reluctance to give up local control. The contender list included some of the state’s most prominent health care systems: Duke, UNC and Atrium, to name a few.
In addition to hefty sums of money, the candidates all offered the hospital enticing inducements, ranging from money for community causes to substantial investments to facilities. The New Hanover Health system, which includes numerous clinics and a 647-bed hospital proved to be an attractive option, even in a state with many uninsured people, whose charity care can destabilize hospital finances.
In the world of North Carolina hospitals, New Hanover Regional is somewhat unusual: The largest hospital in the southern coastal region is situated in an area with many Medicare-insured seniors, fewer Medicaid enrollees than most other regions and even fewer self-pay, or uninsured, patients. That payer mix helped New Hanover Regional maintain a positive margin from operations before the coronavirus pandemic. That trajectory is likely to continue, especially as the region’s population grows in the coming decade.
Even with favorable financials, though, New Hanover officials have said they do not have enough resources to respond to the growing needs of the community. The backing of a larger partner, they’ve said repeatedly, is the best option for the community.
The Winston Salem-based Novant wants to turn New Hanover Regional into a hub similar to Charlotte and Winston Salem, according to its proposal. The partnership also allows UNC and its school of medicine to preserve and expand a nearly 50-year-old medical residency partnership with New Hanover Regional.
Under the letter of intent, UNC and Novant commit to expanding the branch campus of the UNC School of Medicine to 30 residents, up from 18, by 2026. They maintain this will strengthen the pipeline of students who are interested in working in rural areas, and create outreach clinics and offer telehealth services from Chapel Hill, among other features.
Ahead of Monday’s vote, Partnership Advisory Group co-chair Broadhurst said he was “incredibly confident” that the hospital and the county could reach an agreement with Novant by the fall deadline put forth in Monday’s resolution.
“I don’t see a scenario under which that doesn’t work out, because we’ve been doing our due diligence over the last number of weeks,” he added.