RALEIGH – As the health care market continues to adapt to medical, economic, and political trends, North Carolina lawmakers need to decide what role they envision for state government in the delivery of health care.
And they better do it quickly.
Some recognize the urgency of the issue. When Republican leaders in Raleigh drew up their state budget plans for the coming fiscal year, they reduced taxpayer subsidies for the University of North Carolina’s hospital system, called UNC Health Care. The subsidies are intended to defray some of the cost of uncompensated charity care at UNC Hospitals in Chapel Hill. But other hospitals in the state also rack up unpaid bills for charity care and don’t get a special reimbursement from state taxpayers.
Frustrated by what they perceived as UNC Health Care’s unfair subsidy and aggressive pursuit of physician practices, the largest hospital system in Wake County, WakeMed, made a $750 million bid for UNC-owned Rex Hospital in Raleigh. WakeMed used to be a county hospital but is now a private nonprofit. Rex used to be a private nonprofit but is now owned by the state.
UNC officials responded with scorn and rejected WakeMed’s offer. That’s not the end of the issue, however, as it is not really up to university leaders.
Under the state constitution, an appointed UNC Board of Governors derives its authority to operate the university system from the General Assembly. It has no power to overrule policy decisions by elected representatives. “The General Assembly shall enact laws necessary and expedient for the maintenance and management of The University of North Carolina and the other public institutions of higher education,” the constitution states. If the legislature decides to put Rex Hospital on the list of state-owned assets that ought to be considered for privatization, the Board of Governors can’t second-guess the decision.
I should say that I’m not yet convinced the state should take WakeMed’s offer. Perhaps other nonprofit or for-profit hospital systems will want to make a bid for Rex. It would be in the interest of state taxpayers to entertain all reasonable bids for the hospital, which is well-run and profitable. Furthermore, I agree with Senate leader Phil Berger that any proceeds from the sale, as one-time revenues to the state, ought not to be used to paper over operating deficits. Instead, proceeds should be used to reduce state indebtedness (which would reduce debt service costs in the budget) or for one-time purchases, repairs, or renovations of other state facilities.
At the same time, I think that state lawmakers ought not to let this issue sit too long. UNC Health Care has already expressed an interest in entering other hospital markets in the state. Its officials are currently negotiating a management agreement with a Hendersonville hospital, for example.
State government has been in the hospital business for a long, long time. The state operates psychiatric hospitals in Morganton, Goldsboro, Butner, and Raleigh. And UNC campuses in Chapel Hill and Greenville host research and teaching hospitals.
There may be no practical way of privatizing these institutions in the foreseeable future. But surely the legislature should question the wisdom of allowing any of these institutions to acquire any more hospitals, physician practices, or other health care assets as long as they remain agencies or instruments of state government. It is impossible for these institutions not to derive artificial advantages in the marketplace via operating subsidies, tax exemptions, and access to government financing.
The optimal size, shape, and management of hospital systems ought to be sorted out through market competition, not government policy. State ownership of the means of production really is socialism, and socialized medicine is not the right solution to North Carolina’s fiscal and health care challenges.
Hood is president of the John Locke Foundation.