News: Quick Takes

UNC Health Care – Atrium Health merger collapses

UNC Medical Center, Chapel Hill (Image by Yeungb, Wikicommons)
UNC Medical Center, Chapel Hill (Image by Yeungb, Wikicommons)

The mega-deal combining daily operations at UNC Health Care and Atrium Health has collapsed, killing in the cradle what would have been one of the nation’s largest health systems.

Charlotte-based Atrium issued a statement Friday, March 2, about the development.

“Atrium Health has suspended discussions with UNC Health Care to form a joint operating company,” the statement said. Atrium Health board Chairman Ed Brown and President/Chief Executive Officer Gene Woods notified UNC Health Care officials Friday.

UNC Health Care, headquartered in Chapel Hill, also put out a statement about the proposal’s demise.

“After months of discussions and due diligence, UNC Health Care and Atrium Health have determined that we cannot satisfy our mutual organizational goals through a proposed partnership and joint operating company,” the UNC statement said.

“Though we will not form a joint operating company, UNC Health Care and Atrium Health will continue to partner on important issues such as improving rural health care and expanding medical education,” the statement said.

The health systems have about $14 billion in annual operating revenue and billions more in public assets between them. They operate more than 50 hospitals with some 92,000 employees. Upon signing a letter of intent and entering into partnership talks, officials said the joint operating company would provide more comprehensive health care, help to control costs, and improve teaching, research, and rural medical services.

Yet the health systems’ plans to join were panned early and often.

BlueCross BlueShield of North Carolina voiced opposition. UNC Board of Governors member Tom Fetzer, whose lobbying firm represents BCBSNC, raised issues with BOG Chairman Lou Bissette. Fetzer said the UNC Health Care Board, whose members include UNC System President Margaret Spellings, kept the BOG in the dark for almost a year about partnership talks, possibly skirting statutory notification obligations.

Former federal antitrust regulators panned the partnership, saying it was likely to drive up state Medicaid and individual medical costs, root out competition, and provide little if any health care improvements. State Attorney General Josh Stein’s office said any deal between the health systems would be scrutinized for compliance with antitrust and nonprofit laws. Health care economists warned about potential perils of hospital mergers and joint partnerships.

State Treasurer Dale Folwell demanded the health care giants put up a $1 billion performance bond with the State Health Plan to protect its 750,000 members against medical cost spikes.

On Friday Folwell released a statement expressing relief the partnership fell through.

“I’ve consistently said that I am about ‘k-n-o-w,’ not ‘n-o.’ It’s now obvious that many others agreed there was a lack of transparency surrounding the proposed UNC/Atrium merger,” Folwell’s statement said.

“We never acquired enough information to ensure that the combination of these two health care entities would not have a negative impact on the taxpayers of North Carolina,” Folwell said. “I was also concerned that this proposal involving billions in state assets never came before the Council of State, whose primary function is to review the disposition of state property.”

The news release said representatives of UNC Health Care have declined to provide any performance guarantees that the combined entities would, in fact, be able to lower health care costs.