With the planned opening of the $235 million Heart & Vascular Hospital next year, UNC Rex Healthcare will have completed its long and costly transformation from a local community hospital to a major regional medical center.
The eight-story cardiology center, well under construction in Raleigh, is the most dramatic of ongoing strategic moves by Rex, and its parent UNC Health Care System, to consolidate into a regional health care network.
In addition to hiring hundreds of Triangle doctors in recent years, UNC in January added its 10th hospital through an affiliation with Wayne Memorial Hospital in Goldsboro, and next year plans to start construction on a $70 million hospital in Holly Springs. Today the system extends from Wayne and Nash counties in eastern North Carolina to Henderson and Caldwell counties in the western part of the state.
Beyond staving off competition from rival Duke University Health System, the goal of UNC and Rex is to build a patient base of at least one million people, UNC Rex Healthcare president Steve Burriss said in an interview. That’s the critical mass needed to one day effectively manage patient health care in the evolving health care model, rather than merely reacting to illness after it happens and charging by the procedure.
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“You need to be big enough to control a population of at least one million people,” Burriss said. “Everyone’s building toward that.”
Burriss, who was named Rex president nearly 12 months ago, on Thursday described Rex’s strategy in a rapidly changing health care sector. He said the trend of consolidation and expansion is going to continue for other reasons as well, including the purchasing of technology, equipment and services.
The pros and cons of health care consolidation are hotly debated. As hospitals gain market dominance and consumer options dwindle, giant hospital chains gain more pricing leverage. But they can also use that bargaining power to win discounts on bulk purchases and to hold down insurance rates when negotiating price with health insurers.
Rex’s next area of focus of expansion will be northwestern Raleigh, where the system owns about 20 vacant acres between Brier Creek and Apex, near Panther Creek High School. Future development there will include outpatient services, radiology and doctors offices, Burriss said.
Additionally, once 114 beds are transferred from Rex’s main hospital to the new heart and vascular center next year, the original hospital, constructed in 1980, will begin a two-decade period of renovation.
The growth has not been painless. Rex froze employee pensions last year in a bid to control costs. Wall Street credit rating firms last year downgraded Rex and UNC as the Triangle partners invested heavily in technology and expansion, moves that could eventually encumber Rex with an estimated $315 million in debt, according to Standard & Poor’s.
Burriss said the investments are already reaping dividends. For example, he said the 10 UNC hospitals now bid jointly for lab services, resulting in an annual savings of $700,000 a year.
For now, the Heart & Vascular Hospital remains the focus of Rex’s growth. Burriss noted the facility is on time and on budget and scheduled to open in the first half of 2017.
On Wednesday, Rex lawyers and doctors petitioned the State Health Coordinating Council for permission to add a fifth catheterization lab. It’s Rex’s third attempt in three years to add the cath lab at Rex’s main campus in Raleigh, against opposition from Raleigh’s WakeMed Health & Hospitals.