NC state employees could suffer under UNC Health Care deal, say state leaders

North Carolina Treasurer Dale Folwell said talks between UNC Health Care and Atrium Health seem to have made little progress in six months.
North Carolina Treasurer Dale Folwell said talks between UNC Health Care and Atrium Health seem to have made little progress in six months.

Officials who represent about 800,000 state retirees and employees say they are worried those workers could end up paying more for medical services if UNC Health Care joins forces with Atrium Health, the Charlotte company that last week rebranded itself from Carolinas HealthCare.

NC Treasurer Dale Folwell and Robert Broome, executive director of the State Employees Association of North Carolina, met with UNC Health Care CEO William Roper and his executive team last week. Folwell oversees the State Health Plan, which provides health benefits to 750,000 state employees, retirees and teachers.

Folwell said he has a constitutional and fiduciary duty to bring down the health plan’s annual costs, hence his keen interest in any clues UNC Health Care offers about how their partnership with Atrium would work. The State Health Plan is administered by Blue Cross and Blue Shield of North Carolina which has come out against the deal, saying it would lead to higher health care costs.

Folwell said last week’s meeting gave him few answers.

“I don’t know whether to take their subdued demeanor as a rope-a-dope, or if they’re concerned and frustrated about where they are,” Folwell said. “When we kept asking questions, they said those details hadn’t been worked out. And, you know, when you say that often enough, I guess you start thinking about where you are.”

The two health care organizations announced in August that they would combine to form a joint organization of 60 hospitals and 90,000 employees to manage rising costs and improve medical services. Roper would be executive chairman of the board that would oversee the company; Eugene Woods, CEO of Carolinas, now Atrium, would be CEO.

In the past six months, UNC Health Care has spent more than $5.6 million on legal and consulting fees related to the negotiations with Atrium. The two hospital networks have provided scant details of how their negotiations are going. As the talks drag on, Atrium complicated the situation last week by announcing plans to combine with Navicent Health, a five-hospital network in Georgia, that would add another 4,500-plus employees to Atrium.

The two North Carolina hospital systems are conducting talks in strict confidentiality and have agreed to share detailed updates with only one outside organization: a special committee created by the 17-campus UNC system’s Board of Governors. UNC’s primary concern is the protection of state-owned assets, chief among them UNC’s prestigious medical school.

The special committee has not received sufficient information to vet the new joint operating company, which would have a new name, would be controlled by an independent board and would not answer directly to the Board of Governors. Special committee member Leo Daughtry, a Smithfield lawyer, said Atrium’s planned combination with Navicent lengthens the list of unanswered questions by raising a host of new concerns.

Daughtry rattled off a number of questions that will need to be answered: “If it’s going to be a trend. Whether there’s going to be a continuation of affiliations. And how big they’re planning to go – like Georgia or Tennessee or what? And how would that affect us?”

Daughtry said the talks appeared to be mired in unforeseen complications: “I suspect it indicates the negotiations are not as simple as they initially thought.”

Roper declined a request for an interview, but UNC spokesman Alan Wolf said the Navicent announcement is unrelated to UNC’s discussions with Atrium. UNC and Atrium, then called Carolinas HealthCare, announced their plans last August to begin negotiations and initially expected to have a deal worked out by the end of 2018.

Wolf said UNC Health Care now expects to make a yes or no decision on combining with Atrium by March 31. The two organizations insist their partnership will not be a merger because it won’t involve transferring or consolidating assets.

“Last week’s announcements have no bearing on our decisions,” Wolf said by email. “This won’t push back a decision. Discussions between UNC Health Care and Atrium Health are ongoing.”

Broome, who as leader of SEANC, is responsible for its 50,000 state employee members, said UNC officials offered assurances that state employees would maintain their status and positions under the Atrium deal.

“While it was great to get those verbal assurances, there are key provisions of decision-making authority of the joint operating company that still are not spelled out yet,” Broome said. “I would have thought by now they would be able to articulate the details of how the joint operating committee would operate.”

Broome said during the meeting, Roper and his deputies assured him and Folwell that UNC Health Care would maintain its identity, assets and staff. Broome said that of UNC Health Care’s 30,000 employees, about 14,000 are state employees, and his concern is how these state employees will fare under the new joint operating committee.

Folwell said UNC Health Care owes about $2.5 billion in tax-exempt bonds and other debt, and the institutional investors who lent the money will demand updates about the status of their loans.

“We have endorsed this debt with the full faith and credit of the state,” Folwell said. “And if somebody else is going to be responsible for this debt – New Co., or whatever you’re calling this thing – then we need to know how it impacts the things we gave our thumbs up to.”

Health care cost increases also trouble Folwell. He said the State Health Plan is UNC’s single biggest customer, and health care costs have been rising for years. Despite promises that the deal will benefit North Carolina, Folwell remains unconvinced that a UNC partnership with Atrium will drive down costs.

“These entities are already of the size that they’re not going to get increased economies of scale on sheets, sutures, syringes or anything else that starts with a S, or A through Z,” Folwell said. “I know what they’ve said, but the fact is this is not a situation where I can rely on what somebody tells me as being more important than what they sign their name to.”

Charlotte Observer staff writer Deon Roberts contributed.

John Murawski: 919-829-8932, @johnmurawski