WakeMed has filed a public records request with UNC Health Care to determine if taxpayer funds have been used by UNC Hospitals and Rex Healthcare to lure doctors away from WakeMed and shift services to UNC-affiliated health care providers.

UNC officials dispute that the state-run hospital system’s actions are predatory, or part of a takeover scheme, as WakeMed’s chief executive officer has claimed.

“Specifically, the records request is to determine if UNC Health Care and Rex Healthcare are improperly using taxpayer dollars to compete with WakeMed and other health care institutions by investing in physician practices and other facilities,” Bill Atkinson, president and CEO of WakeMed, said earlier this month. UNC Health Care bought Rex in 2000, as part of a statewide bond referendum, for about $100 million, although some have put the price tag at twice that.

Atkinson and other WakeMed officials claim the state-owned UNC Health Care has used taxpayer money to expand its network of providers, particularly in profitable areas such as cardiac care, leaving the private, nonprofit WakeMed to shoulder 80 percent of costs for treating uninsured patients in Wake County. For instance, Rex Healthcare recently announced it will create a cardiovascular physicians’ group and open three new offices in Wake County.

Unlike UNC Health Care, WakeMed receives no state or federal subsidies for treating uninsured patients other than reimbursements for Medicare and Medicaid services.

“There is a built-in reward for government, from government, that in itself is not fair,” says Atkinson. “We are making up for the extra public load that academic centers theoretically do.”

According to UNC Health Care officials, the state-owned health care system, including Rex Healthcare, has provided $282 million in “uncompensated” care this fiscal year. Uncompensated care includes costs for treating the uninsured, unpaid hospital bills by insured patients, and the differential between what UNC Health Care is reimbursed for Medicaid and Medicare services.

“We are not reimbursed for this care,” says Jennifer James, a spokesperson for UNC Health Care. UNC Health Care received a $36 million appropriation from the state this fiscal year. “Less than 2 percent of our total budget comes from state appropriations.”

Rex Healthcare does not receive any state appropriations, James says.

Debbie Laughery, vice president of public relations for WakeMed, said the UNC health system is reimbursed for 100 percent of the reported costs for treating Medicaid and Medicare patients. By comparison, treatment for uninsured patients cost WakeMed nearly $71 million during the 2009 fiscal year, Laughery said.

Atkinson said those costs eventually are passed on to patients who are insured. “It’s sort of taxation without representation, when you get down to it,” he says.

In part, WakeMed officials are seeking:

• All records constituting or reflecting correspondence or communications, other than correspondence or communications relating to identifiable patients among UNC Health Care, Rex Healthcare, certain officials at UNC Health Care, and subsidiary organizations with members of WakeMed’s medical staff

• Audited financial statements for UNC Health Care, Rex Healthcare, Rex Physicians LLC, and Triangle Physicians Network

• Records, including IRS forms, filed by UNC Health Care and Rex Healthcare

UNC Health Care officials say they are reviewing the request but deny that efforts to recruit doctors from WakeMed are part of an eventual takeover. Atkinson told The News & Observer earlier this month that UNC Health Care officials are trying to force WakeMed “into a position where we’re out of options.”

“The claims that we are ‘predatory’ and seeking to ‘take over’ WakeMed are completely unfounded,” says James. “Physicians are approaching us because they want to work with UNC and Rex. Our guiding philosophy has been to partner with the best physicians in a community and to ensure that we get patients to the right care at the right time.”

Atkinson disagrees. “This is coming from physicians in the market,” he says.

Another motive behind the public records request is to determine the legal status of Rex Healthcare. Despite the fact that Rex is state-owned, it operates as a private, nonprofit hospital. “Of particular concern is the fact that Rex has been consistently one of the lowest providers of charity care in the state and does not provide its fair share of indigent care,” WakeMed officials said.

“We have had a working relationship with UNC proper for over 30 years,” says Atkinson. “We are a major teaching site for UNC for residents and fellows. We pay for the residents. We pay for the faculty. We are a teaching institution and have been that way for over 50 years. The waters are muddied around Rex. You don’t know where they stand on any given day. What’s the overall plan of the university and those areas outside traditional academic medicine?”

In September, Rex issued $123 million in bonds to upgrade its facilities. In 2009, WakeMed sold $170 million in bonds for the same purpose.

Atkinson says he hasn’t ruled out a lawsuit if the records reveal what his instincts suggest. “This is extremely important, especially in [light of] the changes that are coming in state government,” he said, referring to the expected $3.7 billion budget deficit for next year. Outgoing UNC system President Erskine Bowles has suggested that the system may have to cut spending by as much as 15 percent.

Kristy Bailey is a contributor to Carolina Journal.