Regional News/South: House work

The tide that swung the U.S. House of Representatives into Republican hands after the 2010 election had an even stronger effect in North Carolina, where both houses of the state Legislature swung from the Democrats to the Republicans. Like their federal counterparts, the North Carolina Republicans are focusing some of their recently gained power on healthcare matters.

The state House of Representatives has set up two select committees that are taking a look at matters of importance to hospitals in the state. One is a select committee on state-owned assets that is studying, among other things, the offer that WakeMed Health & Hospitals made to buy its Raleigh rival, 431-bed Rex Healthcare, from UNC Health Care, Chapel Hill. WakeMed's unsolicited offer is worth more than $875 million, including $750 million in cash and about $127.1 million in debt that WakeMed offered to assume (May 16, p. 16). UNC Health Care rejected the offer in August.

At a committee hearing, Dr. William Roper, UNC Health Care's CEO, testified as to the benefits of having Rex as part of the UNC system, including the economies of scale that the system reaps in purchasing and contracting, said Karen McCall, a spokeswoman for UNC Health Care. The committee is scheduled to meet Oct. 25, but the focus is on other state-owned assets, although UNC may provide the committee with answers to questions that members had about Roper's presentation, McCall said.

Bill Atkinson, president and CEO of WakeMed, said it was logical to start with the question of Rex because there is an offer on the table already. WakeMed has not been asked to testify by the committee, but would if asked, Atkinson said.

The other select committee is studying issues that affect hospitals across the state: the certificate-of-need and certificate-of-public-advantage programs. The committee is focusing on exemptions that academic medical centers have from some parts of the CON law and the interactions of public hospitals with providers that have a COPA, according to a news release from one of its co-chairs, Republican state Rep. John Torbett.

Short of a total repeal, “everything is on the table,” said Bart Walker, a healthcare lawyer in the Charlotte office of McGuire Woods. “I don't think anybody loves the current CON system,” he said. “There are enough people, even if they are on opposite sides of whether we should have CON at all, that see enough problems with the system that they may have critical mass to update or improve the system.”

Nancy Lane, president of PDA, a Raleigh-based consulting firm that works a lot on CON cases, also said there is a lot of support to keep the CON process, regardless of qualms that many have with it. “People would rather have it than not have it,” Lane said. “Depending on the audience that you talk to, some favor loosening it up a little bit, but I don't sense general consensus on what to loosen.” The law applies to projects that cost $2 million or more, a threshold that hasn't been raised in many years, and that might be one possible change, she said.

The CON select committee has conducted three hearings already, including one last week in Fletcher, a town in the western part of the state that is dominated by Mission Health System, Asheville. The committee doesn't seem to be targeting Mission Health, which was formed by a joint operating agreement in 1995 under a COPA, Walker said, but its growing reach across the state does lead some to question its status.

Mission Health executives were too busy preparing for the hearing to comment by deadline, according to a spokeswoman.

At a previous hearing, the North Carolina Hospital Association tried to point out how healthcare economics differs from most industries because the consumers of the services typically don't pay directly for them, said Don Dalton, a spokesman for the hospital association. CON helps hospitals secure the handful of service lines that provide the margin to offset money-losing but vital services such as trauma and obstetrics, he said.

WakeMed's Atkinson said the CON law has served the state well, especially in maintaining services in rural areas. The process has become more contentious in urban areas as the transformation of the healthcare business has led to larger systems that are butting heads more often, Atkinson said. “In all fairness to the regulators, it's a tough job,” he said. “It's hard to tell who's on first sometimes.”