UNC Health Care opposes the sale of Rex Healthcare to WakeMed

The latest row between WakeMed Health and Hospitals and UNC Health Care has placed the UNC system and looming state budget cuts at the center of the fray.

In a letter to UNC-system President Thomas Ross last week, WakeMed officials offered to purchase Rex Healthcare, a subsidiary of UNC Health Care, for $750 million. Officials said the sale could alleviate the state’s economic troubles and proposed cuts to higher education.

“This influx of cash will significantly positively impact the state and in return the university system and UNC Health Care,” the letter said.

The story so far

WakeMed Health and Hospitals has had a thorny history with UNC Health Care:

April 2000: Rex Healthcare accepts a buyout offer of about $290 million from UNC Health Care after previous talks with WakeMed about a possible merger.

Fall 2010: UNC Hospitals reports that it expects to lose about $300 million in charity care expenses, one-fifth of the hospital’s total operating expenses.

Nov. 29, 2010: WakeMed submits a formal request for financial information and other public records from UNC Hospitals.

May 12, 2011: WakeMed officials send a letter to UNC-system President Thomas Ross offering to buy Rex for $750 million. Officials say the sale could benefit the state and the system during a time of economic troubles and budget cuts.

WakeMed, a private, not-for-profit health care system based in Raleigh, has clashed with UNC Health Care in the past. WakeMed has accused UNC Health Care of engaging in “predatory behavior” and using its state resources to limit competition and partner with profitable private physicians’ practices and hospitals like Rex.

William Atkinson, president and chief executive of WakeMed, said in an interview that WakeMed’s principal motivation is to improve the efficiency of health care services in Wake County by consolidating with Rex.

“Our rationale for this isn’t about the budget or politics,” he said.

But he added that UNC-system administrators and state legislators should consider the sale as a viable source of revenue during tough economic times.

“Seven hundred fifty million — whether it’s short term or long term — is not an amount of money people should blow off,” he said.

Both system administrators and Rex officials have expressed opposition to the move. Dale Jenkins, chairman of Rex Healthcare, said at a press conference that Rex benefits from a “vibrant” partnership with UNC Health Care.

“Rex is not for sale and has not been for sale,” he said.

Ross said in a statement that Rex joined UNC Heath Care to extend its mission of improving the quality of medical care, research and physician education across the state. UNC Health Care’s board of directors will consider the offer in “due diligence,” he said.

“I do not believe that divesting UNC Health Care of Rex in order to generate one-time revenue for the state is in the long-term best interests of the people of North Carolina,” he said.

The proposed sale might also face opposition at the state legislature. Lawmakers have urged caution about any short-term fix to gain revenue for the state or offset budget cuts to the UNC system.

Rep. Norman Sanderson, R-Craven and vice chairman of the N.C. House of Representatives appropriations subcommittee on education, said selling state entities might not benefit the system for the long term.

“We as a state don’t need to take real drastic measures to have enough to bail somebody out,” he said.

Hannah Gage, chairwoman of the Board of Governors — which oversees the UNC system — said in an email that WakeMed’s offer will be discussed at the board’s June meeting along with a briefing about UNC Health Care.

The feud between WakeMed and UNC Health Care originated in 2000 when Rex opted to accept a buyout offer of about $290 million from UNC Health Care after previous talks with WakeMed about a possible merger.

Tensions flared again last year when UNC Hospitals reported it would lose $300 million in charity care expenses. WakeMed submitted a formal request for financial information and other public records in November, challenging the financial record of the state-supported hospitals.

Contact the State & National Editor at state@dailytarheel.com.

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