Another hospital war brews as Rex Healthcare tries to block WakeMed’s Cary expansion

WakeMed’s $60 million plan to expand its Cary hospital could stall or never happen if crosstown rival UNC Rex Healthcare has its way.

Rex contends that WakeMed Health & Hospitals is not serious about expanding but instead is trying to abuse the system to hurt competition. WakeMed’s Cary expansion would likely have a lasting financial impact on Rex, which plans to open a 50-bed hospital in Holly Springs, 10 miles from WakeMed Cary.

In advance of a Dec. 14 public hearing, Rex is asking the N.C. Department of Health and Human Services to reject WakeMed’s proposal to add two floors and 52 hospital beds in Cary.

“WakeMed’s currently proposed project to develop additional acute care capacity should be viewed skeptically,” Rex said in its written comments to the state. “UNC Rex believes there are several issues with WakeMed’s application that indicate that the proposed project is not needed.”

WakeMed currently has state approval to expand its flagship hospital in Raleigh. But the organization wants to transfer that permit to Cary, where it’s proposing to expand from 156 beds to 208 beds. WakeMed officials say that since the Raleigh expansion was approved in 2014, Cary has experienced more growth.

WakeMed Cary’s primary service areas – including Cary, Apex, Morrisville, Fuquay-Varina and Holly Springs – have seen an 11.3 percent population increase from 2012 to 2016, according to the company. Hospital officials predict western Wake County will continue to grow substantially.

“We will continue to plan ahead for our patients and their families and advocate for projects that provide greater value, enhance community access to quality care and align with our mission,” Tom Gough, senior vice president and administrator for WakeMed Cary Hospital, said in an emailed statement.

“We are committed to bringing needed, accessible health care resources closer to home; resources that will benefit residents, growing families and a growing senior population for years to come.”

Even if WakeMed prevails, it could be years before Cary residents enjoy the benefits of an expansion. The state regulatory decision could end up before a judge as part of an ongoing regional hospital war for control over one of the fastest-growing sections of Wake County.

Rex’s planned $70 million Holly Springs hospital, at the corner of N.C. 55 and Avent Ferry Road, was approved in 2013, about a decade after it was initially proposed. The project was mired in legal challenges from Novant Health and from WakeMed. In the midst of that dispute, WakeMed had launched a hostile – and unsuccessful – takeover bid against Rex.

The Holly Springs hospital is now set to open in 2020, a year after the scheduled expansion at WakeMed.

In their filing to the state last week, Rex officials said WakeMed has a business strategy of banking state approvals without plans to proceed with the expansions. Such a strategy can allow a hospital to hoard state approvals to prevent the permits from being awarded to a competing hospital.

“One of the most concerning issues in WakeMed’s application is the indication that it is ‘holding’ approved acute care beds, without a plan for developing them as proposed,” Rex charged. “UNC Rex is now concerned that WakeMed apparently believes that it can hold the (permit) for these beds indefinitely.”

North Carolina sets an annual limit on new health care construction, and health care companies that receive permits are expected to proceed with construction and investment within a reasonable period of time. Under state law, health care expansions and major projects require a permit called a “certificate of need” to prevent over-building and over-saturating an area with unnecessary facilities that drive up health care costs.

Since WakeMed received a state permit three years ago to add 30 beds at its Raleigh hospital, it requested extensions on the plan. This summer, the Department of Health and Human Services told WakeMed that no more extensions would be granted. That forced WakeMed’s hand, and in October the hospital asked to transfer the 30 approved beds to Cary, where it already had a separate approval for 22 beds.

Rex leaders contend that a WakeMed official said in a 2012 deposition that the Holly Springs hospital should be denied in part because it would take a cut of WakeMed’s customers in Cary. The official, W. Stanley Taylor, also said that WakeMed applies for available expansion allotments as a general strategy, not because the expansion is needed.

“Regardless of whether something is needed, you always want it,” said Taylor, a former WakeMed vice president for corporate planning who has since left the system. “Just because they aren’t needed doesn’t mean we don’t want them.”

This story was originally published December 6, 2017 at 12:13 PM with the headline "Another hospital war brews as Rex Healthcare tries to block WakeMed’s Cary expansion."