Johnston Health, UNC Health Care in partnership negotiations

Apr. 01, 2013 @ 07:37 PM

Johnston Health is entering negotiations for a partnership with UNC Health Care in which the Chapel Hill-based, state-owned health system would own part of the Johnston County system.

The Smithfield-based system, which includes a 199-bed nonprofit hospital as well an outpatient campus in Clayton, is facing “tough challenges” as it looks to adapt to changes in the health care industry, according to emailed remarks attributed to Chuck Elliott, CEO and president of Johnston Health.

“As health care reform takes hold, we will need greater economies of scale to weather rising costs,” Elliott said. “Because of changes in how hospitals are getting paid for care, we will need to work more closely with physicians and other providers to improve quality and efficiency.”

Johnston Health started looking for a partner in November 2011. UNC Health Care was in the final three in the running for the partnership, along with WakeMed Health & Hospitals and Vidant Health, Suzette Rodriguez, community relations specialist for Johnston Health, said in an email.

More details about the partnership are expected to be determined during a due diligence period, according to a news release from Johnston Health. A final agreement is expected to be completed this summer.

David Strong, UNC Health Care’s chief operating officer of system affiliations and the president of Rex Healthcare in Raleigh, said UNC Health Care will buy a portion of the system based on a valuation of its operations, and will make a capital investment. But he said he doesn’t know how much, and what the dollar amount will be.

The partnership is an opportunity to add specialty services in Johnston County, it’s a chance for academic teaching and research benefits for UNC and it’s expected to help create greater economies of scale, he said.

“As we get bigger as a system, we have greater leverage, and so we’re not buying the box, we’re buying by the truck load,” he said.  “And so essentially, you get the Costco or the Sam’s discount, even greater,” he said.

This would be one of several partnerships for UNC Health Care, a system that includes UNC Hospitals, the UNC School of Medicine, community practices and home health and hospice services in seven central North Carolina counties.

In addition, the system includes Rex Healthcare and Chatham Hospital in Siler City. In November, the board of directors of Caldwell Memorial Hospital in Lenoir announced plans for exclusive negotiations with UNC Health Care. And Monday, a merger with High Point Regional Health System was slated to take effect. UNC Health Care manages Pardee Hospital in Hendersonville.

 “As you probably know, health care, in general, is consolidating, so you see hospitals and physicians coming together, you see hospitals coming together to really add scale,” Strong said. “Because that scale adds value and (it’s) what we think the future world of health care is going to be.”

According to Elliott’s emailed remarks, Johnston Health officials see UNC Health Care as a “particularly good fit” because the partnership would connect its patients to sub-specialized care, clinical research and trials.

“We think that UNC Health Care will enhance our capabilities by leveraging scale and depth to provide management resources and to advance clinical service lines,” he said.

Rodriguez said Johnston Health employs about 1,400 people including part-time, contract and as-needed employees. She said its total operating revenues were $158 million for the fiscal year ended Sept. 30, while its total operating expenses were $151 million.