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A group of legislators Tuesday took the first step toward reining in UNC Health Care by proposing to limit its ability to grow and compete with local hospitals such as rival WakeMed.
In a narrow and rushed vote, eight representatives voted to prohibit UNC Health Care from growing beyond its current footprint and put in place quotas on indigent care in counties where UNC does business. The legislators also proposed to limit the size and power of UNC Health Care’s board of directors.
The proposal, which can now be taken up in the May legislative session, addresses complaints that WakeMed has been making for more than a year: that UNC Health Care was competing so fiercely in local communities that it had put private county hospitals at risk.
UNC and its supporters quickly criticized the proposal, saying it would put the hospital system at risk.
“As a doctor, the first thing you learn is to do no harm,” said Bill Roper, CEO of UNC Health Care. “The legislature, if they move forward with this bill, would create massive harm. What’s the problem for which we are purporting to fix?”
Tuesday’s action stems from a protracted dispute between Wake County’s two largest hospitals: WakeMed and Rex Hospital, which UNC bought in 2000.
In 2010, after WakeMed lost the allegiance of a premier cardiology practice to Rex, WakeMed began complaining that Rex is using the power and resources of UNC to unfairly compete in the Wake County market. In May 2011, WakeMed’s board issued an unsolicited bid to buy Rex for $750 million.
The bid was rejected by UNC’s board but prompted the House to create a special committee to examine whether Rex ought to be sold. On Tuesday, the committee sidestepped the question of selling Rex and instead put forward a number of provisions to limit UNC Health Care.
Bill Atkinson, CEO of WakeMed, was heartened by the committee’s actions and called for more work.
“It’s a good step in the right direction, but there’s a lot left to do,” he said. “People shouldn’t be offended by the questions being asked.”
For UNC, the vote was ironic.
In 1998, legislators stepped in to level the playing field between UNC Hospitals and its next-door competitor Duke. Duke had gotten a foothold in the lucrative Wake County healthcare market by buying Raleigh Community Hospital, but the state’s public hospital wasn’t set up to buy hospitals. Legislators changed that by creating UNC Health Care, a public hospital system with the autonomy and resources it needed to compete with hospital giants. Two years later, UNC bought Rex Hospital and began competing in Raleigh.
On Tuesday, UNC found itself on the other side of that debate.
The proposal to rein in UNC comes at a time of great consolidation within the health industry. Hospital systems such as UNC and WakeMed have been rushing to buy or affiliate with other medical groups to achieve greater bargaining power with insurance companies.
The fate of UNC Health Care is far from settled. Many of the representatives in the special committee weren’t in favor of pushing any recommendations forward to the full House. And some who voted in favor of the measure thought they were voting on a very limited portion of the bill, not the full nine pages of changes delivered to committee members during the meeting.
The proposal, because it came out of a study committee, can now be considered in the House during the short session in May. Senate leaders, however, promised a frosty reception if it crossed chambers.
Rep. Julia Howard, a Mocksville Republican, said during the meeting that she felt unduly rushed and asked the measure be postponed.
“This is a nine-page bill that we’re seeing for the very first time right now,” said Howard. “I, for one, don’t know what’s in it.”
The proposal passed in an 8-7 voice vote, and spectators struggled to calculate which members voted which way.
If adopted, the bill would cut the maximum number of spots on UNC Health Care’s board from 27 to 12. It would defer much of the board’s power to the Board of Governors for the larger university system. It would also require nonprofits under UNC Health Care, including Rex, to file 990 tax forms.
Rex Hospital, which considers itself a private nonprofit, was excused in 1995 from filing such forms because of its connection to a public university; WakeMed had complained that the exemption made Rex less transparent.
Roper said the bill would effectively undo all of UNC Health Care’s success, making it harder for the system to teach doctors, treat the poor and harness research dollars for cutting edge treatments.
A powerful ally agreed with Roper.
Senate GOP leader Tom Apodaca suggested he would bury the bill in the Senate Rules Committee he chairs if the proposal came to the Senate. He said that the government shouldn’t intrude any further into health care market issues in these confusing times.
“We have no interest in this at all,” Apodaca said. “It’s a turf battle here locally.”