NC could use Atrium-WakeMed deal to strike a better hospital tax bargain | Opinion

North Carolina’s public hospitals were created under a fairly simple bargain.

As Charlotte and Raleigh grew into modern metro areas, local leaders wanted hospitals big enough to serve the public but independent enough to stay out of day-to-day politics. These institutions would care for the community, especially the sick and the poor. In return, they received public support, special legal status and room to move quickly.

That bargain worked. Maybe too well.

Charlotte Memorial Hospital became Atrium Health, which now sits inside a sprawling $38 billion-a-year system among the largest in the country. Wake Memorial Hospital became WakeMed, still fairly local but no small county clinic. It is a $2.5 billion-a-year nonprofit with nearly 12,000 employees.

From the beginning, that arrangement raised hard questions. Who pays when patients cannot? Who oversees institutions built with public trust? What does a hospital owe the community that made it possible?

Those questions were never fully settled. Atrium’s proposed merger with WakeMed finally brings them to a head.

There is no going back. Atrium is not becoming Charlotte Memorial again.

But North Carolina can use this moment to strike a new hospital bargain, if there is enough political will to do it.

What the old bargain built

In the late 1930s, Charlotte church leaders believed the city needed better care for the sick and the poor and launched a campaign to create Charlotte Memorial Hospital. The cause became everybody’s business. Mayor Ben Douglas took out an ad in The Observer asking residents to chip in, turning a hospital campaign into a test of civic duty.

But once Charlotte Memorial opened, the city quickly ran into a problem. Even in 1940, a modern hospital was complicated. It needed doctors, equipment, bonds, buildings and decisions that did not fit neatly into ordinary politics.

That helped produce the Hospital Authorities Act of 1943 in the N.C. General Assembly.

The model was a deliberate hybrid. Hospitals received public advantages, including broad tax exemptions, bond authority and even eminent domain power. They were also expected to care for the poor, though without specific requirements for how much. Charlotte Memorial moved under a new hospital authority, and Atrium is still technically there.

Wake County later used that same framework. In 1955, Wake voters approved $5 million in bonds to build a county hospital system. Wake Memorial opened six years later on New Bern Avenue, with the promise that a growing capital county would have modern hospital care for all its citizens.

Over time, Charlotte Memorial grew into Carolinas HealthCare System, Atrium Health and finally Advocate Health, expanding its reach and financial power along the way. Wake leaders loosened direct government control, too. In 1997, WakeMed fully moved into the nonprofit model so it could compete more freely while remaining tied to its public mission.

All along, the old questions never disappeared. They only got bigger.

A tipping point

The sudden Atrium-WakeMed announcement looks like a tipping point.

Under the proposal, WakeMed would remain a separate nonprofit but come under Atrium Health’s control. Atrium has promised major investments, expanded financial assistance and more services. WakeMed leaders say they need scale to compete long term with Duke and UNC.

Maybe they are right. I do not have a grand answer for the health care industry, and I do not pretend to understand every pressure hospitals face.

But if the state is going to allow public-rooted hospitals to grow and consolidate like major corporations, it should stop pretending the old bargain can stay untouched.

Former State Treasurer Dale Folwell spent his tenure warning about the power large health care systems have amassed. When I talked to him this week, he stuck by his point that multibillion-dollar health care corporations benefit from tax advantages and public protections ordinary taxpayers do not receive.

“All the executives in this proposed transaction will laugh all the way to the bank,” Folwell told me. “This could all be corrected in one afternoon with the courage of elected officials.”

Perhaps that time is coming.

In March, a House committee reviewed draft legislation cutting the property tax exemption for nonprofit hospitals from 100% to 50% of appraised value. The proposal looked dead by late April after hospitals pushed back hard.

“I think somebody told me I probably shouldn’t say this, but we were all bombarded with calls from lobbyists,” said Rep. Julia Howard, a Davie County Republican co-chairing the committee, according to N.C. Health News. “We need to do what’s right, not what is politically favorable.”

Now, after the Atrium-WakeMed announcement, there is renewed hope among supporters of reform that some version of the tax-exemption debate could return. It should.

So here is the deal North Carolina should make: Let Atrium and WakeMed combine, but revisit both ends of the bargain.

That means reducing property tax exemptions for large hospital systems, especially on assets not directly tied to essential care. It also means requiring specific, measurable charity-care commitments, not vague promises about community benefit.

If hospitals want the flexibility of private enterprise, the public can ask why they still receive public privileges. If they want special legal treatment, the public can demand clearer obligations in return.

The old hospital bargain helped build strong institutions. But it cannot stay frozen in 1943 or 1997 while those institutions grow into multibillion-dollar systems.

An Atrium-WakeMed merger is the moment to write a new one.

Contributing columnist Andrew Dunn is the publisher of the Longleaf Politics newsletter, which offers thoughtful analysis of North Carolina politics and policy from a conservative perspective. He can be reached at andrew@longleafpol.com.