WakeMed and Rex Hospital reach settlement, ending public feud

WakeMed, Rex Hospital reach deal – and vow no more public criticism

mlocke@newsobserver.comMay 23, 2012 

  • The deal Rex Healthcare: Rex will remain a private, nonprofit subsidiary of UNC Healthcare. WakeMed has withdrawn its offer to purchase Rex. UNC has agreed not to solicit WakeMed for purchase, and both organizations have dropped public records requests. Mental health: UNC Health Care will invest $30 million to develop and operate a 28-bed, inpatient psychiatric facility in Wake County and commit $10 million over five years to support other mental health services. Education: WakeMed, UNC Health Care and UNC School of Medicine have a five-year contract to provide education and training as well as care to the underserved. UNC residents and medical students will continue to train at WakeMed. UNC will support WakeMed’s application for the Council of Teaching Hospitals. The agreement continues WakeMed and the UNC School of Medicine’s 40-year history of working together to educate doctors. Transparency: UNC Health Care will voluntarily file IRS Form 990s for each of its private, nonprofit health care entities: Rex Healthcare, Rex Hospital and Chatham Hospital. It also will file the 9990s for the Triangle Physician Network when its 501(c)(3) status is granted and for any future health care entities that are given nonprofit status. Playing nice: WakeMed and UNC Health Care officials have agreed to end public disagreements.

— State lawmakers announced Tuesday a cease-fire between WakeMed Hospital and UNC Health Care, bringing to a civil end an unseemly public battle that had landed at the legislature with WakeMed trying to buy its cross-town rival Rex Hospital.

With the harmony comes an unexpected boon for Wake County: a $30 million, 28-bed psychiatric facility UNC will build and operate, easing some of the charity care burdens WakeMed has carried for decades. Left alone is Rex Hospital, a UNC subsidiary that WakeMed tried to buy to level the playing field with UNC.

The spat between the state’s hospital system and Wake County’s largest hospital generated a $750 million hostile takeover bid, high-dollar lobbying efforts and legislative hearings in the last year. Earlier this month, the lawmakers called the leaders of the warring UNC Health Care and WakeMed to say enough is enough, setting in motion a series of private meetings to reach an accord. Both sides sent key experts to exhaustive meetings overseen by a legislative staff attorney to Sen. Tom Apodaca, R-Hendersonville. The leaders of UNC and WakeMed, however, were absent.

“Sometimes leadership courage is about stepping back,” WakeMed CEO Bill Atkinson said in an interview after the press conference. “Everyone thinks you lead from the front, but sometimes, you need to get on the sidelines.”

On Tuesday, Atkinson and UNC Health Care CEO Bill Roper stood near each other, smiling as state leaders offered their congratulations.

Lawmakers heralded the peace, saying both institutions brought quality and commitment to an ever fractured health care system.

“(We) are celebrating the establishment of an expanded partnership that will positively affect patient care and the training of doctors in North Carolina for years to come,” said Apodaca. We “believe these two great institutions have more things in common than differences.”

WakeMed’s complaints

The agreement is largely a victory for WakeMed, whose hostile takeover bid for Rex Hospital sparked discussion about the state’s role in the health care system and found a sympathetic ear with some Republican lawmakers about the UNC system’s burgeoning empire.

Nearly all of WakeMed’s complaints were answered as part of the deal. UNC Health Care will shoulder a larger charity care burden with the mental health hospital, potentially saving WakeMed millions of dollars. Rex and other UNC subsidiaries will be required to release more financial details, resolving WakeMed’s thwarted requests for records. And it will help WakeMed apply for a designation as a teaching hospital, an acknowledgement WakeMed has craved for years as a major training ground for UNC medical school residents.

Rex Hospital won the biggest concession. For a year, its fate rested in the hands of the General Assembly but the agreement means it will no longer be a takeover target. UNC leaders also promised they wouldn’t try to acquire WakeMed.

UNC Healthcare won by not losing. Lawmakers will no longer pursue legislation that would restrict further growth of the hospital system and force it to provide a certain amount of charity care in each county where it does business. Roper said recently the legislation would cause “massive harm” to UNC.

But the GOP-dominated House and Senate are expected to approve a bill introduced Tuesday that would overhaul the UNC Health Care system’s governance structure, giving the politically appointed UNC Board of Governors the power to select the membership. The current board is appointed by the health care entity and lawmakers are concerned it is too stacked in UNC’s favor and doesn’t allow for divergent viewpoints. Apodaca acknowledged the new structure would inject politics into the management of the health care system but called it a needed reform.

“We all felt like there should be more oversight of the hospital from the board,” he said.

An expensive feud

The two hospital systems’ protracted battle left the health care market in the Triangle unsettled for months. Both sides spent hundreds of thousands of dollars on lobbyists, lawyers and public relations experts to help them through the disagreement.

The dispute highlighted the tensions in health care that are pushing systems to get bigger and doctor practices to affiliate with hospitals for more security and leverage with private insurers.

In October 2010, WakeMed lost the allegiance of a lucrative cardiology practice to Rex, prompting WakeMed leaders to complain that Rex Hospital, a nonprofit bought by UNC in 2000, used its public status to unfairly compete for doctors and funds.

On Tuesday, though, Roper and Atkinson said they would continue to compete over hearts and many other aspects of their operations.

“I have to believe we can be friendly and competitive,” Roper said after the press conference.

Both Atkinson and Roper credited legislators for their agreement. Apodaca and Rep. Harold Brubaker, R-Asheboro, called both men and urged compromise.

“We said, ’Sit down and resolve it. If you can’t we will,’ ” Brubaker said.

Teams for both institutions, including UNC President Tom Ross, met for marathon meetings at the General Assembly. Lobbyists, lawyers and financial experts hammered out the details. Andrew Tripp, attorney for the Senate Rules Committee, mediated and urged the groups along.

The talks were testy at times, and the two sides at one point took a week to cool off, lawmakers said. But the possibility that the legislature would act on its own served as a stick to prod UNC and WakeMed to the negotiating table.

“There was the implication that they would bring some order to this if we couldn’t,” Roper said.

The 10-page agreement, approved by each hospital’s board a day earlier, protects both hospital systems should relations sour in the coming years. If either side believes the other broke the agreement, a mediator can intervene. If the mediator agrees that the agreement has been violated, the deal can be severed.

For now, though, the hospitals and their leaders vow to play nicely.

Roper and Atkinson spoke on the telephone Monday night and talking about the potential of their work together.

Locke: 919-829-8927

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