UNC Health Care growth, funding criticized

The UNC Health Care System has undergone a rapid expansion during the past decade and created a footprint that extends well beyond Chapel Hill — but a conservative think tank is now criticizing that expansion.

The N.C. General Assembly appropriated $18 million to UNC Hospitals for this year, but Duke Cheston — a writer for the John William Pope Center for Higher Education Policy — said the state should not be giving the hospitals any money at all.

Cheston said the state should not support the UNC Health Care System because its growth crowds the health care market and harms private competitors.

“The UNC Health Care System acts like a private business, and I don’t think that’s a legitimate function of the state,” he said.

Five years ago, UNC Health Care’s operating revenues were $1.3 billion. That number increased to $1.9 billion by fiscal year 2010.
North Carolina Memorial Hospital opened in 1952 in Chapel Hill and has gradually evolved into a region-wide network of hospitals and clinics, known as UNC Health Care.

The system bought Rex Healthcare, based in Raleigh, in 2000 and Chatham Hospital in Siler City in 2008. A branch campus for UNC Hospitals in Hillsborough is expected to be completed by 2015.
The expansion is necessary to serve an increasingly populated region, said Jennifer James, spokeswoman for UNC Health Care.

“The state of North Carolina, particularly the Triangle area, is growing,” James said. “Our growth is similar to other health care systems’ growth.”

But a local competitor has questioned the system’s motive.

Raleigh-based WakeMed Health and Hospitals’ $750 million bid to buy Rex Healthcare was rejected by the system’s Board of Governors in August, raising questions regarding the value of Rex to the system.
The General Assembly is now considering selling Rex without the system’s consent.

Adam Searing, director of the Health Access Coalition at the liberal N.C. Justice Center, said the expansion of the system is part of a larger market trend due to rising health care costs.

“All heath care systems are building up and consolidating,” Searing said.

UNC Heath Care’s expansion has contributed to a $101.7 million net operating margin in fiscal year 2010.

The system’s margin adds to its cash reserves, which maintain its bond rating, pay for capital expansions and serve as a safety net account to continue operations, James said. The system’s reserves currently total $722 million.

“Any non-profit that brings in money wants to have a margin,” she said.

But Cheston said the system’s margin is excessive, especially in light of its state appropriation.

“Clearly they’ve got tons and tons of money,” he said. “They don’t need that extra $18 million from the state.”

The $18 million partially offsets the costs of UNC Health Care’s charity care costs, which totaled $300 million last year, James said.

“Our role and responsibility as a state-owned hospital is to see and treat everybody, regardless of their ability to pay,” she said.
For this reason, the state appropriation for UNC Hospitals should increase, said Rep. Verla Insko, D-Orange.

UNC Health Care’s sizeable annual margin saves the state money, and the state should continue to support the system, she said.

“Historically UNC Hospitals and the UNC Health Care System have funded a great deal of their own capital expansion,” she said.

“They do pour the money back into the system and that saves the state a lot of money.”

Contact the State & National Editor at state@dailytarheel.com.