Charlotte-based Atrium Health targets WakeMed in proposed combination - North Carolina Health News

Atrium Health, the state’s largest hospital system, is seeking to combine with Raleigh-based WakeMed Health & Hospitals, an independent nonprofit with five hospitals and roughly 350 physicians, according to a press release and a document published on the Wake County board of commissioners website Friday afternoon.  With the move, Atrium would continue a recent expansion that is reshaping the state’s health care market and raising questions about costs, competition and oversight.  WakeMed, founded in 1961, has three acute care hospitals, a rehab facility and a mental health hospital, along with four standalone emergency departments and outpatient offices across the region. The hospitals say the deal will create 3,300 new health care jobs and bring at least $2 billion in new investment to Wake County. “For more than 65 years, WakeMed has been a beacon of hope and healing for the Wake County area and beyond. This combination represents a significant next step in building upon this legacy, expanding our impact and ensuring a thriving nonprofit health care future for all we serve,” said Donald Gintzig, president and CEO of WakeMed, in a release. “WakeMed and Atrium Health are united in a shared commitment to serving our communities, and by building upon our complementary strengths, we can have an even greater impact on the health and well-being of Wake County and the entire state.” On Monday, the Wake County Board of Commissioners will vote on an amendment to its transfer agreement with WakeMed, the release said. Hospitals increasingly see growth as their best bet to cope with rapidly rising health care costs, expensive technologies and lower payments from health insurance companies. A larger footprint gives hospitals more bargaining power when it negotiates prices with insurers.  A system like WakeMed could find it advantageous to partner with a large system such as Atrium to cope with increasing market competition from neighboring rivals Duke Health and UNC Health, which have both steadily encroached on the Raleigh market.  Economists have long noted that with heavily regulated industries with high capital costs, the trend is towards consolidation. Meanwhile, research shows that hospital consolidation tends to raise prices for patients while doing little to improve quality. North Carolina Treasurer Brad Briner on Friday expressed concerns about the deal’s impact on consumers. He called on North Carolina Attorney General Jeff Jackson and the Federal Trade Commission to carefully scrutinize the proposal.  “There is a simple business principle that when suppliers consolidate and competition is reduced, it is the consumers who suffer,” Briner said in a statement. “This has been proven to be true time and again in the healthcare landscape, where prices continue to rise and patients are left with mounting medical debt. … If history is any guide, this merger will not benefit the public.” A message left Friday at the Attorney General’s office was not immediately returned. Gain unparalleled insights into N.C. with our essential statewide newsletter, delivered to your inbox twice a week — free. For small- to mid-sized hospitals and hospital systems, their survival is increasingly dependent on seeking shelter under the umbrella of larger neighbors, particularly in the wake of the One Big Beautiful Bill Act (also known as H.R. 1), the federal budget passed last year. That new law slashes Medicaid reimbursement by close to a trillion dollars over the coming decade, a change that will likely have a greater impact on a smaller system like WakeMed, which had $885 million in assets according to its tax documents for the 2023 fiscal year (which ended on Sept. 30, 2024), but only had a surplus of $11.5 million during that same timeframe. Merging with a larger, more powerful system can improve a hospital’s efficiencies when buying everything from drugs to bandages in bulk where they can get discounts by being part of a larger entity. Part of the appeal for smaller systems to merge also lies in countering competition from larger hospital systems and to have a better negotiating position for reimbursement from increasingly large insurance companies and pharmacy benefits managers.  Even for well-run hospital systems, the current fiscal climate is a challenging one. The effects of H.R. 1 will only exacerbate these challenges, something lawmakers in Raleigh recently heard from hospital leaders during an oversight meeting.  “We’re operating to our maximum efficiency, and that’s how we’re able to maintain a margin, although slim,” said Autumn McFann, chief financial officer for FirstHealth of the Carolinas after she testified to the Joint Legislative Oversight Committee on Health and Human Services committee in April. McFann said the six-hospital system located in the Sandhills had been operating with about a 3 percent margin for years, but with the effects of H.R. 1, they expect their margins to crash by 2032.  “H.R. 1 doesn’t just affect our finances, but it affects what services that are going to remain locally,” she told lawmakers. “Starting in fiscal year ‘28… it continues to trend downward from there. And by 2032 we will actually be at an operating loss, so we’ll be in the red at that point.  “This forecast is solely based on the impacts of H.R. 1 so it does not factor in any other reimbursement loss or policy changes that may occur in that time frame,” McFann said.