WakeMed says proposed merger will be a ‘marriage.’ Documents suggest otherwise
AI-generated summary reviewed by our newsroom.
- Atrium would directly appoint six of 14 WakeMed board members and hold removal powers.
- Atrium could remove its appointees at will and remove county appointees for cause.
- WakeMed assets could revert to Atrium if it ceased to exist.
WakeMed and Atrium Health’s top executives have been adamant that their proposed merger is just that — a merger and not a sale.
The hospital system will remain a private nonprofit governed by a board with a majority still approved by the county, Donald Gintzig, president and CEO of WakeMed, said in a press conference last week.
Atrium Health and its parent company Advocate Health propose to inject $2 billion into WakeMed, and the health companies say the merger will add 3,300 new healthcare jobs in Wake County over five years.
WakeMed officials say that despite the $2 billion investment, Atrium is not buying Wake County’s largest health system.
When WakeMed asked Wake County to approve changes to the company’s articles of incorporation as a first step in the merger on Monday, it was billed as a first, incremental step.
It was placed on the consent agenda of the Wake County Board of Commissioners May 4 meeting. The consent agenda is where noncontroversial items are placed, and discussion is not expected. The entire consent agenda, which usually has multiple items, is approved by commissioners in a single vote.
The commissioners ultimately took it off the agenda and decided to delay voting on the proposal for 90 days to allow for public input. The county does not plan to host its own meetings to gather public input, but WakeMed is, with the first at 6 p.m. Monday at The Andrews Center on WakeMed’s New Bern Avenue campus in Raleigh.
After that board meeting, commissioners chair Don Mial was asked why the WakeMed item had been placed on the consent agenda.
“Because of the nature of it, we did not feel that our involvement was crucial,” Mial said.
But the decision the commissioners had in front of them would have ceded significant authority over WakeMed to Atrium, pending approval of the merger by state and federal officials.
“This deal is being touted as WakeMed still having control, but the devil is in the details here,” said Richard Saver, a law professor at UNC-Chapel Hill and expert in corporate law.
WakeMed did not respond to an email asking if the merger could move forward without the changes the nonprofit was asking Wake County to approve.
Why is Wake County government involved at all?
WakeMed’s origins lie in public dollars spent by Wake County.
The county funded the construction of what was then the first racially integrated public hospital in Wake County with a $5 million bond in 1955.
When the hospital, now the WakeMed Raleigh Campus, opened in 1961, it was operated by the Wake County Hospital Authority. The authority was under the direct control of the county.
In 1965, the county gave control of the hospital to a nonprofit, which would later change its name to WakeMed.
As part of that decision, Wake County got the ability to appoint a majority of WakeMed’s board of directors.
In 1997, the county granted WakeMed ownership of the hospital buildings and property.
But as part of that transfer, Wake County required two more things from the nonprofit: that it would spend at least 4.8% of its revenue on indigent care and that the hospital property would revert to the county in the event of WakeMed closing.
As part of the merger, WakeMed was asking for changes to those obligations, which meant that the county commissioners had to give their approval.
Why is the commissioners’ decision important?
The revised articles of incorporation that WakeMed asked the county to approve last week would have changed how members of WakeMed’s governing board are appointed.
The board makes a lot of key decisions about WakeMed’s future, Saver said, including things like hiring and firing a CEO or approving any future mergers.
Wake County currently appoints eight of 14 WakeMed board members.
The new articles of incorporation proposed by WakeMed wouldn’t change that number, but would change how board members are appointed and removed. Atrium would directly appoint the remaining six board members.
All of Wake County’s appointments would need approval by a two-thirds vote of the entire board of directors — 10 of 14. So if Atrium’s six appointees disagree with an appointment, Wake County could not make it.
Atrium’s appointments would not require approval, and Atrium would be allowed to remove its own appointees at will.
The county’s appointments would also have to meet a list of requirements that Atrium’s appointees would not, according to the proposed articles of incorporation, including:
- Living in Wake County.
- Maintaining strict confidentiality about the nonprofit’s business.
- “Possess[ing] independence of judgment and a clear understanding of Director fiduciary duties, including the duty of care, the duty of loyalty, and the duty of good faith to the corporation and its mission.”
- Not having any conflicts of interest with the nonprofit including any that would create “a material risk of harm to the reputation of, or liability for, the corporation.”
- Meeting any additional competency requirements established by Atrium.
Atrium could remove Wake County’s appointees at any time with “cause,” according to the articles. Cause could be not meeting any one of the appointment requirements.
It could also be as simple as engaging in conduct that could be “detrimental to the reputation, mission or operations of” WakeMed or Atrium. Atrium also has cause to remove board members if they fail to work “respectfully or collegially” with other board members or are disruptive to corporate operations.
The causes for removal are defined “rather broadly,” Saver said.
Wake County’s board appointees could also be removed without cause with a two-thirds vote of the Wake County-appointed portion of the board.
“The main point is that [Atrium] cannot unilaterally remove a Community Director without cause,” wrote WakeMed spokesperson Kristin Kelly in an email to The News & Observer.
Property would go to Atrium
Also under the proposal, Atrium would be considered the sole “member” of WakeMed. Saver said mostly this means that WakeMed’s assets, like its buildings and properties, would revert to Atrium if WakeMed ceased to exist.
Wake County’s agreement with WakeMed prevents the hospital from selling or transferring around 30 acres of WakeMed’s Raleigh Campus without the commissioners’ approval. That property was transferred in the county’s 1996 agreement with WakeMed.
WakeMed is asking commissioners to lift some restrictions on that property. The new agreement would allow WakeMed to lease that property. It would also allow WakeMed to take liens or borrow against the value of those properties.
And, assuming that Wake County at any point approved a sale of some portion of those approximately 30 acres, the sold property would no longer have restrictions on it.
