Carolinas HealthCare, UNC Health plan merger

Note: This article originally appeared on HealthLeaders Media, August 31, 2017.

Two of the largest not-for-profit health systems in North Carolina are negotiating a merger that could be finalized by December.

“Carolinas HealthCare System and UNC Health Care have signed a Letter of Intent to join their clinical, medical education and research resources,” the two systems said last Thursday in a joint media release. “Under the LOI, the two organizations have agreed to start a period of exclusive negotiations, with the goal of entering into final agreements by the end of the year.”

The two health systems said that combining would allow them to focus on “healthcare’s most pressing challenges” in four strategic areas: increasing access and affordability, improving clinical care expertise, growing their academic model and contributing to the economy.

There are no plans to open new hospitals or close existing hospitals under the combined system, nor are layoffs anticipated, although both systems said “there will likely be some restructuring required to integrate operations, but we anticipate growth and development opportunities.”  

"Together with UNC Health Care, we believe that the opportunities to be a national model and to elevate health in North Carolina are nearly limitless," said Gene Woods, president/ CEO of Carolinas HealthCare and future CEO of the new entity.

“For example, since our organizations already serve almost 50% of all patients who visit rural hospitals in our state, we are perfectly positioned to participate in the reinvention of rural healthcare in partnership with others,” Woods said. “Ensuring there is great healthcare in rural counties is not only important to our patients’ physical wellbeing, but is also vital to the economic well-being of those communities as well.”

William Roper, MD, dean of the UNC School of Medicine and CEO of UNC Health Care, will serve as executive chairman of the combined health system.

“By integrating our organizations, we are combining the strengths of two great health systems, providing greater access to a full range of services and leading-edge treatments for patients, enabling better coordination of care and advancing research,” Roper said.

“Carolinas HealthCare System is one of the most innovative healthcare organizations in the nation, particularly in combining world-class clinical care with a community care model,” he said. “By combining our two extremely mission-focused organizations, we will offer an unparalleled array of services, expertise and experiences for our patients and communities – beyond what either of us could do independently.”

UNC Health operates six hospitals in North Carolina, five of which are located in Chapel Hill. The health system also has 1,700 faculty physicians.

Charlotte, NC-based Carolinas HealthCare has more than 900 care locations across North and South Carolina, including nearly 40 acute-care hospitals, and 60,000 employees.  

Jay L. Levine, an antitrust attorney with PorterWright, said the merger could draw the attention of state and federal anti-trust regulators.

“The issue will be whether there are other hospitals in the geographic markets served by these two that will compete with them for patients and managed care dollars,” Levine said. “If sufficient competition remains, then the merger should not raise prices.”

“If there are some other hospitals that compete with them, the next question will be are these two uniquely positioned as each other’s next best substitute – either because of location, quality, prestige, etc. – that MCOs need one of them in their network?” Levine said. “If that is the case, then there is a very steep hill to climb. It sounds like they are expecting a lot of positive efficiencies and synergies from the merger, but if there are clear anticompetitive effects arising from the merger, these efficiencies/synergies almost never overcome the concerns.”

Thursday’s announcement is the second large health system merger proposed in the Carolinas this summer. In mid-June, Palmetto Health and Greenville Health System announced plans to merge.

If that deal clears regulatory review, it would create the largest health system in South Carolina, and one of the 50 largest health systems in the nation, with 13 hospitals and hundreds of physician practices and ambulatory centers.  

Source: HealthLeaders Media