Rex Hospital taking over cancer care center in east Raleigh

UNC Rex Health Care said Friday it has acquired a private cancer treatment center in east Raleigh, furthering a regional trend in which expansion-minded hospital systems take over independent cardiology, surgery and oncology practices.

But more than gaining a new location, the acquisition hands Rex Hospital a coveted prize: the right to operate two radiation machines. These machines, which cost several million dollars, are strictly limited by state regulation and currently frozen in Wake County, so that a hospital system can expand its fleet only by buying a cancer clinic that comes with a radiation license.

UNC Rex Cancer Care of East Raleigh came under Rex ownership on Friday and will begin treating patients Monday, after Rex officials swap out signage and install their own computers and phone systems over the weekend. The practice will have one oncologist and a staff numbering about a dozen.

“This is an opportunity to expand our presence and our service offering to patients,” said Tom Grates, executive director of UNC Rex Cancer Care. “My sense is they’ve been very busy and successful.”

Raleigh-based Rex and UNC, Rex’s Chapel Hill-based parent, have been frustrated in seeking new radiation machines, also known as linear accelerators. By acquiring Carolina Specialty Oncology, Rex comes into possession of one linear accelerator, along with a state permit to install a second such machine.

The move will expand Rex’s fleet of linear accelerators from six – four in Wake County and two in Johnston County – to seven overnight and, eventually eight. And it will help solidify Rex’s dominance in radiation treatment in Wake County, which has a total of nine radiation machines approved by state health officials.

Rex’s neighboring rival, Duke Medicine, used a similar strategy in 2014 to expand its radiation machines from one machine in Raleigh to four machines in Wake County. That year Duke acquired assets from Cancer Centers of North Carolina, formerly the largest private cancer clinic in the state, gaining two linear accelerators plus a permit to add another radiation machine, which has since been installed.

Grates declined to disclose Rex’s acquisition price for the cancer treatment practice. Rex was approached by the owner, Cary urologist Kevin Khoudary, and spent months negotiating a deal, he said.

UNC Rex Cancer Care expects to inherit patients that are currently using the facility, and will also refer existing Rex patients there who previously used other clinics in the UNC network.

Radiation machines are difficult to win approvals for from state officials when a permit becomes available. However, at this time, regulators say there is currently no demonstrated need for additional machines, so acquisitions are the only viable means of expanding. The last such permit issued in the Triangle involved multiple applicants fighting for the right to add a single machine.

Carolina Specialty Oncology won the radiation machine permit – known as a certificate of need – in January 2015, beating out UNC Hospitals. Duke Raleigh Hospital also applied for the permit but later bowed out.

Certificates of need are designed to control health care costs by preventing the overbuilding of health care facilities and oversupply of services that aren’t fully utilized.

UNC’s application for the radiation machine said Rex planned to install a machine in Holy Springs in a $4.4 million project. Carolina Specialty Oncology, applying as Parkway Urology, submitted a $3.8 million application to install a second machine at the 117 Sunnybrook Road location that Rex has just acquired.

The N.C. Division of Health Service Regulation ruled for Parkway Urology for a number of reasons. For starters, UNC’s was not the least-cost or most effective option, agency officials said.

The division also said that in 2014 Rex’s four linear accelerators in Wake County treated an average of 169 patients, below the 250 required annually to qualify for more machines. UNC future projections also fell below 250 a year.

Parkway Urology proposed plans to focus on treating prostate cancer, particularly in African-American men, later expanding to provide radiation treatments for lung, ear, nose, throat, breast and colorectal cancer.

Grates, the Rex cancer care director, said Rex will conduct a review on the timing and location of adding an eighth radiation machine. Grates said that expanding from prostate to other cancers is also part of Rex’s long-term strategy.

This story was originally published April 29, 2016 at 1:07 PM with the headline "Rex Hospital taking over cancer care center in east Raleigh."