State Treasurer warns Novant hospital purchases will erode health care quality  

Novant Presbyterian Hospital is shown in this file photo.

RALEIGH — In his monthly call with reporters, State Treasurer Dale Folwell warned that Novant Health’s recent bids to acquire two medical centers may erode health care quality in the state. 

On Feb. 28, Novant Health announced it had signed a “definitive agreement” to buy Lake Norman Regional Medical Center and Davis Regional Medical Center. The acquisition includes the related businesses for those entities, including physician clinic operations and outpatient services from subsidiaries of Community Health Systems, Inc., which is based in Franklin, Tennessee. 

The Lake Norman Regional Medical Center is a 124-bed hospital serving acute care patients in the Iredell region. Davis Regional, serving Statesville, is a general acute care hospital with 144 beds. Davis Regional’s website says the hospital is moving toward becoming an inpatient behavioral health center. 

The transaction, worth $320 million, still must obtain regulatory approvals, and Novant says the deal is expected to close later this year. In the early 2000s, Novant spent an 18-month stretch co-owning the entities it now seeks to acquire. 

North State Journal asked the treasurer if he expected Attorney General Josh Stein to enter into the equation on the impending Novant purchases. 

“Well, I would expect as what we’ve seen in the past that the attorney general would put his fingerprint and seal of approval on this transaction as he has done in every other transaction,” replied Folwell. 

Folwell went on to say that five years ago he had discussed what was happening with health care in the state with Stein and that “at every turn, we’ve seen consolidation of health care” has had negative results. 

“We all know what’s happening west of Hickory, with ACH’s takeover of Mission Health,” said Folwell. “We’re seeing story after story about sellers’ remorse in Wilmington and Brunswick … Pender and surrounding counties with Novant taking over New Hanover Regional. The evidence is right in front of us of what we should expect — lower quality, lower access, higher cost. 

“I don’t see any evidence of where we are actually going back and looking at previous transactions that were approved,” Folwell said concerning action on consolidation of health care systems. “I have filed an amicus brief on the HCA Mission Health transaction, and I had to file that as an individual citizen, so that should tell you something about the attorney general’s office’s willingness to advocate.” 

Folwell added that Stein’s office “would not represent me as the state treasurer of North Carolina, they would not represent me as the chair of the state health plan, which is the largest purchaser of health care in North Carolina, and they refuse to give us permission to get outside counsel for me to be a co-filer with the mayor of Brevard, which happens to be a Democrat, on that transaction.” 

Novant is a nonprofit system that already has 15 hospitals and 800 provider locations. Novant purchased New Hanover Regional in 2021 for $1.5 billion. The treasurer’s office said Novant was hit with a federal report in 2022 that cited problems found at its New Hanover Regional Medical Center that nearly resulted in Novant losing its Medicare contract. 

According to 2018 data analyzed by Yale professor Zack Cooper, one of the leading researchers in the country on hospital consolidation, Novant’s Brunswick Medical Center had a perfect monopoly score of 10,000 on the Herfindahl–Hirschman index (HHI), which measures hospital concentration.  

The HMI range is zero to 10,000. Zero represents perfect competition and 10,000 represents a monopoly. The HHI score is calculated using bed counts for hospitals in a given market. The market area is defined as all hospitals located within a 30-minute drive. 

The hospitals Novant is trying to buy, Davis Regional and Lake Norman Regional, already had elevated scores of 4,581 and 5,071 respectively, according to Cooper’s data. 

Cooper’s data also shows 59 out of the 99 hospitals and systems in North Carolina have a score of 10,000, including large systems like Vidant and Atrium. The majority of the scores were over 5,000, with Iredell Health Systems earning the most competitive (lowest score) with 3,155.  

According to the Health Cost Institute, 125 metros of the 186 studied (67%) in 2020 had hospital markets that were deemed high or very highly concentrated based on their HHI score.  

In a co-published white paper that was revised in January of this year, Cooper and his colleagues found that “receiving care from expensive hospitals in concentrated markets increases spending but has no detectable effect on mortality.” 

The Novant acquisition is the latest consolidation move seen in the health care field across North Carolina and other regions of the country. 

Atrium Health is the largest health care system in the Charlotte area, and Novant is the second largest. Both companies have been buying up health care entities and hospitals across North Carolina over the last three to four years.  

Late last year, Atrium finalized a deal to merge with Advocate Aurora Health. The combining of the two entities included 67 hospitals spanning six states and is now the fifth largest nonprofit health care system in the U.S. 

Stein signed off on the Atrium-Advocate deal, stating that “my office has conducted a thorough review into this transaction and concluded that there is no legal basis to prevent it. Therefore, the state will take no further action.” 

Another major merger between HCA Healthcare and Mission Health was finalized in 2019. The $1.5 billion purchase expanded the giant HCA organization that already had a portfolio of 185 hospitals and some 1,800 care operations in 21 states as well as some in the United Kingdom. HCA picked up six hospitals in western North Carolina by buying Mission Health. 

About A.P. Dillon 897 Articles
A.P. Dillon is a North State Journal reporter located near Raleigh, North Carolina. Find her on Twitter: @APDillon_