Wake County leaders gave the go-ahead Monday for a controversial combination between Raleigh-based WakeMed and Atrium Health, the state’s largest hospital system, which is based in Charlotte.
In spite of significant public opposition to the deal, which critics fear will increase prices for patients and decrease quality of care, county commissioners voted 5-2 to relinquish control over WakeMed and give it to Atrium. In return, Atrium pledged $2 billion of its own money in investments to WakeMed’s facilities and $150 million for a new county-run public health initiative.
“On any given day, emergency rooms are full and there’s a shortage of hospital beds,” Don Mial, chair of the county board of commissioners, said before casting his vote in favor of the deal.
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“Now is the time for us to plan for this growth,” he added.
However, the deal isn’t finalized yet. It still needs to clear regulatory hurdles with the state attorney general’s office and the Federal Trade Commission before WakeMed can officially become a part of Atrium.
The two systems celebrated the vote in a joint statement that also acknowledged the public skepticism surrounding the combination.
“We recognize that trust is earned, and our focus now is to follow through on what we've outlined, continuing to listen to the community and demonstrating, through our actions, the value this combination will create for the people of Wake County and beyond,” the statement read.
Stein intervenes, seeking price caps from Atrium
WakeMed began as a county hospital before becoming a private nonprofit entity in 1997. Because of that history, Wake County still holds significant influence over the hospital system's operations.
County commissioners appoint the 14-member board of directors and must approve any changes to WakeMed’s articles of incorporation and the transfer agreement between the county and hospital system.
WakeMed’s board of directors, by some members’ own admission, conducted secret meetings with Atrium for more than a year before looping in the county commissioners, who were needed to move the deal forward.
Public outcry ensued after the proposed deal was announced, and the county commissioners delayed a vote on it in May, forcing the two hospital systems to go back to the drawing board and host community listening sessions over the summer.
Last week, Wake County put the vote back on the agenda for its regular meeting on Monday, Sept. 21.
However, negotiations over the terms of the deal continued into the weekend as Gov. Josh Stein lobbied Atrium to not increase prices at WakeMed following its takeover.
In the hospital business, prices are determined largely by negotiations between health systems and insurance companies. The common thinking is that through a partnership with Atrium, WakeMed would have more leverage to negotiate higher reimbursement rates from insurers.
Higher reimbursement rates typically mean increased monthly premiums or out-of-pocket costs for patients.
Atrium agreed in a letter sent to Stein on Sept. 19 to cap reimbursement rate increases at WakeMed to “1.5 times the annual Medicare reimbursement increases,” but only for five years following the completion of the deal. Atrium also requested that the governor push for comparable price caps at the other regional hospital systems, namely UNC Health and Duke Health.
Stein said he would not stand in the way of the WakeMed-Atrium combination after Atrium agreed to the price caps. But the promise to limit price increases for five years wasn’t satisfactory for some critics of the deal.
“Capping prices the way that they did is very weak,” Nathan Foster, a health policy analyst for the NC Justice Center, told Carolina Public Press.
Foster spoke out against the Atrium-WakeMed combination at a rally in downtown Raleigh on Monday and was one of the many people signed up to make a public comment at the county commissioners meeting later that day.
Even with Atrium’s concession to cap price increases, Foster expressed dismay that the system agreed to do so only for five years. He also criticized the commissioners for approving the deal before the language regarding the price caps had actually been finalized — a detail confirmed by interim county attorney Roger Askew.
“The devil is in the details,” Foster said, “so if they don't write that in a strong way, it could be even weaker than that.”
“I'm glad that prices are being discussed because that's so core to what this deal is, but I don't think the price cap really addresses the problem to the extent that I would like to see,” he added.
Atrium concedes more money, some board control
In a presentation to the county commissioners, Askew outlined several changes that had been made to the deal during negotiations between Atrium, WakeMed and the county.
Perhaps the most notable of these was the assurance that all $2 billion earmarked for upgrades to WakeMed facilities would come directly from Atrium. Previously, Atrium said most of that investment would come from WakeMed’s own revenues and would merely help fill the gaps for expenses that WakeMed couldn’t afford.
About a quarter of that money will go toward “routine expenditures” like HVAC system replacements, Askew said.
Another chunk will help fund several WakeMed projects that already have received approval from the North Carolina Department of Health and Human Services. Those include an expansion at WakeMed’s North Hospital in Raleigh, a freestanding emergency department in Rolesville and new acute care and mental health hospitals in Garner.
Atrium also pledged $150 million for what it’s calling a Whole Health Program, which is to be administered by Wake County over the next decade.
While the exact details of that initiative aren’t yet known, Wake County spokesperson Kate Maroney said the program will be primarily targeted at social drivers of health such as foster care placement shortages, homelessness, food security, in-home aides for seniors and general behavioral health.
Funding decisions will come directly from county commissioners and neither Atrium or WakeMed will have a say in how that money is spent.
Negotiations also led to slight changes in governance under the proposed combination. If the deal were to go through, Atrium would become the “sole member” of the nonprofit corporation that is WakeMed.
Under that structure, Atrium would directly appoint six members to the WakeMed board of directors. Wake County commissioners would retain appointment powers for the remaining eight board members, but they would have to choose from a trio of candidates handpicked by Atrium.
Previously, there was no residency requirement for the eight “community directors” appointed by the county commissioners, but Askew said the deal had been revised to require that those directors live in Wake County.
Another new aspect of the board structure is that the eight community directors may meet separate from the Atrium appointees to ensure that Atrium is holding up its end of the partnership agreement. If they find that Atrium isn’t meeting those terms, it would automatically trigger legally binding arbitration, Askew said.
Atrium also agreed to raise the minimally required charity care at WakeMed from 4.8% to 8%. WakeMed facilities already average well above that number at around 12%, Askew said.
Finally, Atrium promised not to pursue what Askew called “extraordinary collection actions” against patients with medical debt. Prohibited practices include selling debt to collection agencies, commencing legal action against debt holders and garnishing wages.
Shortage of beds a factor in commissioners’ minds
As Commissioner Vickie Adamson put it, the revised deal is “a lot less bad than it was to start with.”
Adamson still voted against the deal, calling it a “sad day” for Wake County. She was joined by Commissioner Tara Waters, but the two were outvoted by the other five commissioners, who framed the combination as necessary for ensuring the continued growth of WakeMed.
Before casting her “yes” vote, Commissioner Shinica Thomas spoke about experiencing the need for new hospital beds firsthand.
“I’ve been to the emergency room at WakeMed twice in the last year, taken there by ambulance,” Thomas said.
“I spent the better part of my most recent two-day stay in a bed next to the registration desk at the North campus, because we need more beds. We need more rooms.”
CPP’s recent investigative series Battling for Beds found that North Carolina has lagged behind in expanding hospital capacity to meet the demands of quickly growing urban centers like Wake County.
The delay in getting new beds operating is tied to the state’s certificate-of-need law, which requires hospital systems to apply for a limited number of new hospital beds. In hotly contested regions like Raleigh, where UNC, Duke and WakeMed all have hospitals, approved projects can be stuck in legal limbo for years because of lengthy certificate appeals processes.
A partnership with Atrium may not get those appeals resolved any faster, but it could better position WakeMed to compete for new beds and medical equipment as the Research Triangle continues to grow.
“We are also concerned by the increase in our population, of 66 people moving into our county every day, or 24,000 people per year.” Mial said.
After approval, regulatory review awaits
Next, the WakeMed-Atrium deal will receive scrutiny from both the state attorney general and the Federal Trade Commission.
Attorney General Jeff Jackson’s powers in this context are limited to certifying that the proposed combination adheres to the law. In a statement, Stein urged the General Assembly to grant the office more authority to "review hospital transactions and protect North Carolinians from the increased prices and decreased quality they often bring.”
The FTC, meanwhile, has broader authority to potentially block the deal if it finds that it is anti-competitive or harmful for patients. It did just that with a proposed hospital acquisition in Ohio earlier this year.
In that case, however, the proposed acquisition would have decreased the number of hospital systems in the affected county. Because Atrium currently doesn’t have a presence in the Research Triangle, it isn’t likely that an FTC review would find the deal anti-competitive in that regard.
Still, the federal agency said in a press release that it is dedicated to reviewing and stopping “bad hospital deals.”
“Financial distress is not a blank check for mergers that would substantially reduce competition between hospitals and risk leaving patients with higher costs and lower quality care,” FTC chairman Andrew Ferguson wrote.
This article first appeared on Carolina Public Press and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.