UNC Health Care rejects WakeMed bid for Rex, calls for truce
Posted August 26, 2011
Raleigh, N.C. — The Board of Directors of UNC Health Care voted unanimously Friday to reject WakeMed's $750 million offer to acquire Rex Healthcare.
The chairman of UNC Health Care's board also called for a truce in the war between WakeMed and Rex for physicians and patients.
WakeMed made the offer for its crosstown Raleigh rival in May, saying the combination of the two health systems would improve access and lower costs by eliminating duplication of services.
UNC Health Care has operated Rex Hospital and its affiliated operations since 2000. Although the board initially stated that it didn't believe a sale would be in the best interests of UNC, Wake County residents and the state, a special committee was set up to evaluate the offer.
“After a thorough review, the board has concluded that WakeMed’s proposal, if accepted, would harm the quality of North Carolina’s patient care, increase cost to patients in the Wake County region and compromise the financial stability of UNC Health Care and the UNC School of Medicine, increasing the system’s reliance on state appropriation,” board Chairman Richard Krasno said in a statement. “Any value derived from a one-time cash infusion from a sale, however distributed, would be overwhelmed by the diminished capabilities of UNC Health Care."
WakeMed Chief Executive Bill Atkinson said UNC's decision was made without any input from WakeMed.
"We have no way of knowing what they considered or didn't consider," Atkinson said. "They may have made up their minds before they started."
The offer remains on the table, he said, adding that he hopes state lawmakers consider it next year.
WakeMed has facilities in Apex, Cary, Fuquay-Varina, Raleigh, Wendell, Zebulon and Clayton, while Rex provides medical services in Apex, Cary, Garner, Knightdale and Raleigh.
The two health systems compete fiercely for patients and affiliated physicians and specialists, and Krasno said in a letter to WakeMed Chairman Thomas Oxholm that he would like to tone down the competition so WakeMed and Rex could cooperate more.
"My earnest hope is that you share my desire to renew our long-standing ties and calm the tensions of the recent past," Krasno wrote. "Until recent history, our collaborative efforts co-existed with our competitive ones."
According to Krasno, WakeMed earns about $20 million annually by using UNC faculty members and residents in its hospitals and clinics, and a partnership with UNC allows WakeMed to be classified as a Level 1 trauma center.
He proposed a truce, saying Rex and WakeMed shouldn't try to poach each other's physician practices or contest any non-competitive efforts to expand for three years. He also asked that WakeMed stop trying to disparage Rex's operations in its advertising and stop lobbying for a change to UNC Health Care's structure.
"In stabilizing and expanding upon our partnership, I need to be assured and believe that WakeMed will abandon its antagonistic posture toward UNC Health Care," Krasno wrote. "I assure you that UNC Health Care and its members pledge to abide by the same standards of cordiality and business manners."
Atkinson, who charged in May that Rex doesn't provide a fair share of charity care while calling WakeMed one of the state's top providers of care to low-income and uninsured patients, said Friday UNC's stance doesn't address the issue of whether Rex has a competitive advantage because it is state-run.
"We have great respect for what UNC does," he said, "but we've asked some tough questions, specifically about Rex, and those questions remain."