UNC Board of Governors squares off over new healthcare partnership

By: - January 26, 2018 7:13 am

A proposed partnership between Charlotte-based Carolinas HealthCare System and UNC Health Care is further dividing an already fractured UNC Board of Governors.

When the board meets Friday morning, it will be amid cross-accusations of illegal and unethical behavior over the proposal, which would create one of the country’s largest healthcare systems.

At issue: a potential consolidation that would create a new UNC Health Care/Carolinas HealthCare joint operation that would include more than 50 hospitals and employ more than 90,000 people.

The new venture, first proposed in August and expected to be finalized early this year, would be overseen by an independent board. But in their role overseeing UNC’s medical school, the board of governors have hotly debated the deal and whether they can block it if they find it not in the system’s best interest.

On Thursday, a special committee met in closed session to debate the deal and the board of governors’ proper place in it. In another closed session Friday, the full board will continue the conversation.

But one member of the board made an already complicated issue even more fraught last week.

Tom Fetzer, a former Raleigh mayor and one-time head of the North Carolina GOP, joined the board last year. Since then, he and a group of the board’s most conservative members have repeatedly locked horns with UNC System President Margaret Spellings and with board chairman Louis Bissette, Jr.

As a lobbyist for Blue Cross and Blue Shield and WakeMed Health & Hospitals, Fetzer has had to recuse himself from the board’s discussion of a UNC Health Care/Carolinas HealthCare partnership. Blue Cross and Blue Shield, as the state’s largest healthcare insurer, would likely have to pay higher fees under the proposed partnership, which would compete with WakeMed Health & Hospitals.

Tom, Fetzer

But that conflict did not stop Fetzer from e-mailing Spellings and Bissette late last week to say UNC Health Care may have broken the law by not bringing the board of governors into discussions of a partnership until just before the proposal was made public.

Fetzer singled out Spellings in his letter, saying that as an employee of the board and a board member of UNC Health Care, she should have informed the board earlier.

Fetzer’s letter prompted sharp rebukes from several members of the board and a letter from Bissette and vice-chairman Harry Smith saying they were bringing the State Ethics Commission into the question of whether Fetzer should continue to engage in the debate despite having recused himself.

Bissette and Smith wrote:

Given the potential seriousness and consequences to you of the ethics issue here, we request that you refrain from engaging in further action related to the UNC Health Care matter until we are able to receive advice from the State Ethics Commission staff or the Commission concerning the nature, scope, and consequences of the conflict that has led you to recuse yourself from official action until now.”

Fetzer has since remained quiet on the issue, but his client, Blue Cross and Blue Shield, said earlier this week it will not support the proposed hospital partnership.

“Blue Cross NC cannot support your proposed combination,” Blue Cross CEO Patrick Conway wrote in a letter to the CEOs of UNC Health Care and Carolinas HealthCare. “However, we are open to continued dialogue if you can demonstrate how this combination will lower costs and improve quality over the long-term.”

Citing independent studies, Conway said such healthcare consolidations drive up costs for consumers.

It isn’t yet clear whether Blue Cross, which employs 5,000 people and insures 3.8 million, will appeal to regulators or the North Carolina General Assembly to prevent the deal.

In a statement, UNC Health Care said Blue Cross and Blue Shield had “drawn premature and unfounded conclusions” about the proposed partnership.

“This partnership will position UNC Health Care even better to reduce costs, improve patient outcomes and increase access to high quality care – especially in rural North Carolina,” the UNC Health Care statement said.

System President Margaret Spellings and Chairman Louis Bissette, Jr.

Bissette and Spellings have also defended the deal and UNC Health Care’s communication with the board.

In a letter to all board members who have not recused themselves, Bissette, Smith, Spellings and board members Doyle Parrish and Temple Sloan wrote that UNC Health Care acted appropriately.

“[I]t is clear that UNC Health Care has been providing information about the proposed joint venture, which is still under negotiation, for at least five (5) months,” the letter read. “The proposed transaction remains under negotiation, and cannot and will not move forward unless and until such time as the parties (UNC Health Care and Carolinas) reach full agreement on all terms to be reflected in a definitive agreement. The UNC Health Care Board of Directors has therefore met the requirements of the North Carolina statute that requires the board of directors to keep the Board of Governors fully informed about health care policy.”

The letter also defended Spellings against Fetzer’s assertion she had a special responsibility to represent and inform the board of governors regarding the proposal.

“The president of the University of North Carolina serves, by statute, as a voting member of the UNC Health Care System Board of Directors,” the letter read. “The board of directors has 24 members in total, 12 of which are appointed by the Board of Governors. Nothing in the statute distinguishes the president’s responsibilities as a director from any of the other directors’ responsibilities.”

“Mr. Fetzer’s statement that the president serves as a member of the board of directors, ‘ostensibly to represent and reflect the interests of the BOG,’ and to keep the BOG informed is not supported by the language of the statute,” the letter read. “In fact, the statute makes clear that the obligation to inform the Board of Governors belongs to the UNC Health Care Board of Directors, which the Board of Directors has done.”

Friday’s board discussion on the issue will be conducted in closed-session, but it is expected that Spellings and board members will address the controversy during press availability after the meeting.

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Joe Killian
Joe Killian

Investigative Reporter Joe Killian's work examines government, politics and policy, with a special emphasis on higher education, LGBTQ issues and extremism.