UNC Health Care is expanding its network of hospitals to include High Point Regional Health System, a money-losing hospital that it expects to turn around.
Under the agreement announced Thursday, UNC has committed $150 million over five years for capital improvements at High Point Regional. It’s also allocating $50 million to establish a new community health fund that will award grants supporting health, wellness and prevention.
After the deal closes, which is expected to happen early in 2013, High Point Regional will become part of UNC Health Care but will retain the High Point Regional name and its status as a private nonprofit. High Point Regional has 351 patient beds and a network of 19 physicians’ offices.
David Strong, chief operating officer of system affiliations for UNC as well as president of Rex Healthcare, said that adding High Point Regional will boost UNC’s economies of scale.
A bigger organization can negotiate larger discounts because it’s purchasing more, he said.
UNC also anticipates adding services not currently offered at High Point Regional, which would boost revenue, Strong said.
Today the UNC system includes UNC Hospitals in Chapel Hill, Rex Healthcare in Raleigh and Chatham Hospital in Siler City. It also manages Pardee Hospital in Hendersonville.
“We think this is a natural step and a step that 100 percent of the board endorsed,” said Jeffrey Miller, president of High Point Regional. “We feel very good about this. … It is exciting to be joining such a fine organization.”
Rising medical costs and the federal government’s overhaul of health care has spurred a wave of consolidation as community hospitals seek to team up with larger partners. Duke LifePoint HealthCare, a joint venture between Duke University Health System and a for-profit hospital corporation, has announced a succession of deals since it was formed at the beginning of 2011.
UNC’s goal is to return High Point Regional to profitability. It lost money the last two years, including an $8 million loss in 2011, said Miller. The hospital’s financial situation triggered its announcement in February that it was seeking a “strategic partner.”
Miller said the hospital fielded eight offers, some of which were more lucrative than UNC’s but which surrendered total control of the hospital.
Still, High Point is ceding substantial control to UNC.
The UNC deal would keep intact the hospital’s local 21-person board of trustees, but UNC would have the authority to approve new board members when the terms of current trustees expire. UNC also would have the final say on budgets and strategic plans submitted by High Point Regional.
“The relationship is very similar to the relationship that Rex has with UNC,” Strong said. “I’ll tell you, with Rex, there has never been anything in my eight years being at Rex that the Rex board approved that the UNC board didn’t.”
UNC plans to retain the current High Point Regional management team and all of its 2,300 employees.
High Point Regional already has $72 million in capital-improvement projects that have been approved by the state.
“We have obviously delayed that (work) because we didn’t have the capital to do the projects without spending down our reserves, which we did not want to do,” Miller said.