UNC Hospitals, WakeMed debate money transfer, seek to re-solidify relationship

A neighboring health care system is questioning UNC Hospitals’ use of public funds following the hospital’s financial contribution to the UNC system.

WakeMed Health and Hospitals President and CEO Bill Atkinson criticized the $20 million that UNC Hospitals allocated to UNC from its budget, after it received $18 million in state appropriations from the N.C. General Assembly.

“How is public money being used?” Atkinson said. “They say one thing Monday and do another Tuesday.”

But for a hospital with net operating revenues of close to $2 billion for 2010, $20 million might be a reasonable price to pay to promote the quality of the partnering medical school.

UNC Hospitals spokeswoman Jennifer James said this transfer is natural because the UNC School of Medicine does not make a profit.

“In our budget we frequently transfer funding to the School of Medicine to help offset some of the cuts,” she said.

The contribution is meant to offset the 18 percent budget cuts to the UNC-CH campus and maintain the competitiveness of the UNC School of Medicine, James said.

UNC Hospitals ended fiscal year 2011 on June 30 with a 5 to 6 percent profit margin, allowing the hospital to make the contribution, she said.

“We greatly benefit from the research and teaching methods of the University,” she said.

James said the hospital has an enterprise fund — created in 2005 — that regularly contributes funding to the School of Medicine to maintain the quality of the school. For instance, the fund might be used for bonuses to retain competitive faculty.

Atkinson said he is concerned about the state government’s expansion into the health care industry across the state through UNC Hospitals.

The state appropriation to UNC Hospitals was cut in half in the past year, from $36 million to $18 million. But since the appropriation is only a small part of the hospital’s operating cost, the cut does not set the hospital back significantly, James said.

“Transactions are audited,” said UNC Hospitals spokeswoman Karen McCall.

The criticism of the use of state funds continues on the coattails of the UNC Hospitals Board of Directors voting last Friday to reject WakeMed’s proposal to purchase Rex Healthcare for $750 million. Rex is an affiliate of UNC Hospitals. Both Rex and WakeMed are situated in Raleigh.

In a time of state budget cuts, selling Rex would have created a significant cash infusion for UNC, Atkinson said.

“Our offer is still on the table,” he said.

Atkinson said WakeMed feels UNC did not give due diligence to considering the proposal, because the two parties did not meet for discussion during the decision-making process.

“There was a foregone conclusion,” he said.

But James wrote in an email that UNC offered WakeMed an opportunity to meet with the special committee created to consider the proposal, and the offer was not accepted.

WakeMed requested records about the relationship between UNC Hospitals and Rex at the end of last year. There was some criticism that Rex created profit for UNC Hospitals, while leaving WakeMed to pick up the indigent care and other less profitable patients in Wake County.

UNC has sent hundreds of thousands of pages of records to WakeMed, James said.

UNC Hospitals is looking toward the next several months to resolidify its relationship with WakeMed, requesting the two hospitals meet to discuss issues such as UNC medical residents and physicians practicing at WakeMed.

Both hospitals have benefited from the relationship in the past, James said.

WakeMed must respond to the request by Sept. 10.

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