Atrium Health benefits from a unique distinction other hospitals don’t have
You may think there’s not much difference between Charlotte’s two major hospital systems, Atrium Health and Novant Health. But unlike Novant, Atrium is considered a unit of local government. In fact, Atrium’s legal name is the Charlotte-Mecklenburg Hospital Authority. Now not everyone agrees with that local government designation and the abilities it gives Atrium.
It’s something reporter Michelle Crouch has investigated. She wrote about it for the Charlotte Ledger Business Newsletter and NC Health News. And she joins me now to talk more about it.
Marshall Terry: So let’s begin with that local government designation. How did Atrium get it, and what does it entitle Atrium to?
Michelle Crouch: So back in 1943, hospital leaders in Charlotte asked the legislature to create a special type of government unit called a hospital authority. And they said at the time that their goal was to keep the politics out of hospital administration. That entity, that status gives them a couple of pretty big benefits. First of all, they have huge tax breaks — they're exempt from local, state and federal taxes, and that includes property taxes on any property that they own, even land that's not being used for a medical purpose.
Another advantage that they have is antitrust immunity. So as a unit of government, they are exempt from a lot of regulations, and that includes damages from antitrust suits. So that's allowed it to grow with a lot less scrutiny than a hospital system like Novant, perhaps.
And then they also have the power of eminent domain — and what that means is that they can force property owners to sell, to make room for new hospital projects. It's unclear if they've ever used that power, but even being able to threaten to do that gives them more power than a private hospital system would have. So, all of those powers and privileges have really helped them grow and turn into the multistate, multibillion-dollar hospital system that they are today.
Terry: Now you write that not everyone agrees with this local government entity designation Atrium has. It has come up in two recent court cases and also the former head of Novant told you he had concerns about it. What arguments did they make?
Crouch: Well, I talked to Paul Wiles, he's the former CEO of Novant, and he told me that he always felt like Atrium had an unfair advantage. When they needed to be a government entity and take advantage of those benefits, they were. But at other times, they acted as a private entity. Both of those court cases tried to make the point that Atrium does not resemble and does not act like a local government entity. They pointed out that they operate in multiple states, unlike other local government entities, that they pay their executives millions of dollars and that elected officials have very little say over the operations of the hospital. And then they also pointed out that Atrium does not seem to abide by the open meetings and public records laws in the same ways that other public bodies do.
Terry: And that’s what I want to get into next. So how it works is, if you want to talk at a local government board meeting you can show up and speak during the public comments portion of that meeting. Or you can see an agenda and other documents. That's part of state law. But Atrium doesn't follow that necessarily. Can you break that down?
Crouch: I've covered local government before. So, when I started covering the authority a little more than a year ago, I knew that they were a public body. First, I requested their agenda and they told me that the agenda wouldn't be available until I arrived at the meeting. Then after I attended the first meeting, I noticed that there wasn't a lot of conversation or any deliberation taking place at the hospital board meeting, so I asked to attend their committee meetings. But they told me that those were not open to the public. And then, of course, there's the fact that they don't set aside any time for public comment, and that is also very different from other local government meetings.
Terry: And how does that compare to how other hospital boards in North Carolina operate?
Crouch: Well, there aren't many hospital authorities left in the state. I got a list of eight of them that have ever existed in North Carolina from the Secretary of State's office. But I went down the list and most of them have either been purchased or merged with other larger hospital systems. But I did find one that was still operating in eastern North Carolina. It's called the Carolina East Hospital Authority, and their lawyer told me that they do allow a member of the public to speak at the meetings. All they have to do is ask, and they also open the hospital board committee meetings to members of the public.
Terry: So what’s been the response to your story?
Crouch: Well, after my story ran, three Mecklenburg County commissioners decided to attend the hospital board meeting last week. And afterward one of them said that for a public meeting, it didn't seem very public. Atrium talked a lot at the meeting about all of the good that they do in the community and also how generous their financial assistance policy is.
And when I was writing the story, they sent me a statement that emphasized that they are following the law. And I think that's really what it comes down to, Marshall, is that North Carolina statutes designate Atrium as a local unit of government. And so in both court cases, the judges said well, we have to give these benefits to a unit of local government and since the North Carolina statute says that they are a public entity, there's really nothing we can do. So, for anything to change, experts have told me that it would be up to the legislature to change the law regarding hospital authorities.