UNC Health Care and Atrium call off negotiations

The health care companies were negotiating for a joint operating company, but that drew strong criticism and concerns about market dominance.

UNC Women's and Children's Hospital at the University of North Carolina at Chapel Hill | William Yeung CC

RALEIGH — Charlotte-based Atrium Health, formerly known as Carolinas HealthCare, announced Friday that it has suspended discussions with UNC Health Care about forming a joint operating company. In August, Atrium Health released a letter of intent saying it was negotiating with UNC Health Care to create a joint venture, affecting more than 50 hospitals and nearly 100,000 employees across the state.

“After months of discussions and due diligence, UNC Health Care and Atrium Health have determined that we cannot satisfy our mutual organizational goals,” said William L. Roper, CEO of UNC Health Care System, and Dale Jenkins, chairman of the UNC Health Care Board of Directors, in a joint statement. “Though we will not form a joint operating company, UNC Health Care and Atrium Health will continue to partner on important issues such as improving rural health care and expanding medical education.”

Since the intent was announced, vocal critics said the potential merger would reduce competition and raise prices for health care services. Critics included lawmakers, Blue Cross Blue Shield, N.C. Attorney General Josh Stein and State Treasurer Dale Folwell.

Folwell has been talking publicly since taking office in 2016 about the state health plan’s $35 billion unfunded liability. Folwell told a meeting of the N.C. Press Association last week that the state’s pension fund is about 90 percent funded and recognized nationwide as one of the most well-run and secure government retirement plans. However, the state employee health plan is insolvent and looms as a growing crisis for the state budget. Folwell estimates that the state health plan will cost the state more than the UNC system and the N.C. Department of Public Safety combined in 2018.

“As keepers of the public purse, we have the responsibility of trying to solve these problems,” Folwell told reporters. “It’s not emotional, it’s not political — it’s mathematical.”

A certified public accountant and former state legislator, Folwell has taken steps to remind participants of the state health plan that their health care costs are self-funded by N.C. taxpayers, not Blue Cross Blue Shield as many believe. Folwell had the new state employees’ health plan card redesigned so it now reads, “Your state health plan, paid for by you and taxpayers like you.” He hopes the change will remind participants to seek out responsible spending on their health care.

Out of concern for the cost to the state through the state health plan if the merger went through, Folwell asked representatives of UNC Health Care in February to provide the state health plan with a $1 billion performance bond. The bond would provide leverage, guaranteeing that any merger with Atrium would not increase medical costs to the plan. UNC Health Care did not agree to provide the bond.

“It is obvious that many others agreed there was a lack of transparency surrounding the proposed UNC/Atrium merger,” said Folwell in a statement. Folwell also added, “I was also concerned that this proposal involving billions in state assets never came before the Council of State, whose primary function is to review the disposition of state property.”

Questions remain about why negotiations fell apart last week, but industry insiders speculate that the Federal Trade Commission was planning to look into any final deal. In addition to possible FTC scrutiny, a class-action lawsuit was filed last week by patients alleging that Atrium was unlawfully using its market dominance to establish pricing contracts that prevent insurers from providing affordable prices to consumers led to the decision.