Local News

WakeMed offers to buy rival Rex for $750M

Posted May 12, 2011 9:55 a.m. EDT
Updated May 17, 2011 12:52 p.m. EDT

— One of Wake County's largest health care providers, WakeMed Health & Hospitals, has offered to buy its cross-town rival, Rex Healthcare in Raleigh, for $750 million.

Wake Med Chief Executive Dr. Bill Atkinson made the announcement Thursday morning at a news conference, saying the health care system submitted a formal offer to Tom Ross, president of the University of North Carolina system, which has run Rex since it merged with UNC Health Care in 2000.

Atkinson said a merger would offer significant benefits to patients, doctors, taxpayers, the community and North Carolina, which is struggling to close a $2.4 billion gap in the state budget.

"We think that Rex is a part of government, so it is a viable idea to consider, even if this is something we're not eventually approved," Atkinson said. "To dismiss the idea of consideration, we think, is a mistake for anyone at this point."

Dale Jenkins, chairman of Rex's Board of Trustees, said the offer "came out of the blue" and that he views it as "hostile."

"Rex is not for sale and has not been for sale," said Jenkins, who was still reviewing details of the offer Thursday morning.

Ross, in a statement late Thursday afternoon, said the offer letter had few specifics and left many unanswered questions but that it would be carefully considered at a Board of Directors meeting next week.

"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. "It would damage our ability to fully carry out our (health care) mission."

"Given its fiduciary responsibility to the people of North Carolina, the UNC Health Care board will consider the offer carefully and conduct extensive due diligence," he added.

Rex spokeswoman Melody Hunter-Pillion said Rex is self-sustaining and doesn’t receive any money from UNC Health Care. Over the past two years, she said, it has also contributed $6 million to UNC's coffers.

A merger would likely add several facilities to the WakeMed system, which has facilities in Apex, Cary, Fuquay-Varina, Raleigh, Wendell, Zebulon and Clayton. Rex provides medical services in Apex, Cary, Garner, Knightdale, Raleigh and Wakefield.

Atkinson said he didn't anticipate any layoffs as a result of a merger, since health care is an expanding field.

"We strongly believe that the movement of Rex to the WakeMed system will greatly facilitate WakeMed's mission of service to the citizens of our area while also decreasing costs and providing efficiencies that would further support UNC's mission of providing academic-based patient care, research and teaching," he said.

Rex is willing to discuss collaborating with WakeMed in some areas, such as mental health care, Jenkins said, but UNC Health Care is "a better partner for Rex," adding that UNC is better equipped to help Rex develop innovative services in the future.

Although the decision rests with the UNC Health Care board, state lawmakers could also get involved by passing a bill that overrides any decision by the board.

The potential takeover raises debate about the role of government in health care and the impact on patients.

"For us, it's a very serious question about what is the purpose of government and what is its role," Atkinson said.

He and his lobbyist, Tom Fetzer, met with House Speaker Thom Tillis, R-Mecklenburg, late Thursday morning. Tillis said he has not analyzed the offer but believes it is worth looking at.

"It's always worthwhile to take a look at opportunities that – where a service can be provided to the citizens of North Carolina – may or may not need to involve the government," Tillis said.

Some state lawmakers have said that it's worth exploring whether Rex could be sold at an economic time when the state might need to sell some of its assets.

Rep. Joe Hackney, D-Orange, though, said the sale would be just a one-time shot in the arm.

"I don't think it's a fix for any budget problems. I think the proposed acquisition has a long way to go to get anywhere," he said.

Republican lawmakers, however, said the sale wouldn't fund recurring expenses.

Gov. Bev Perdue's office issued a statement saying she is reviewing the proposal and wants to be sure any decision is in the best interests of both Rex and WakeMed patients and that state's investments.

"She clearly understands the challenges faced by WakeMed and UNC in providing indigent care, as well as treatment for the state's prisoners and mental health patients," Perdue's office said. "The most important consideration is preserving access to quality health care regardless of whose name is on the office door."