UNC Offered WakeMed $5 Billion, More Than Double Atrium’s Bid

UNC Health offered to invest $5 billion in WakeMed as part of a proposed merger, according to documents about the unsolicited proposal The Assembly has obtained. 

That’s $3 billion more than Atrium Health offered. But it was not enough to sway WakeMed’s board of directors, which quickly (albeit politely) declined UNC’s proposal. 

Though WakeMed says it isn’t for sale, UNC’s bid could throw a wrench into what’s already set up to be an angsty public debate about the future of WakeMed, Raleigh’s largest health care system. UNC Health owns Rex Hospital, WakeMed’s biggest rival in Wake County. 

On May 1, WakeMed announced it planned to merge with Charlotte-based Atrium Health. Atrium has promised a $2 billion investment over 10 years in exchange for gaining effective control of all of WakeMed’s assets. 

Under that proposed deal, which WakeMed’s board approved unanimously last month after a private two-year exploration process, Wake County would continue to appoint a majority of seats to a new hospital board. But Atrium would gain effective veto power over those appointments. 

As envisioned, the deal can’t move forward without Wake County commissioners signing off on legal changes. In 1997, the county transferred its hospital ownership rights to WakeMed, an independent nonprofit, but maintains some real estate reversion rights. 

News of a planned Atrium-WakeMed merger ricocheted in the Triangle, prompting fierce criticism from lawmakers and the public alike. Instead of voting to approve the legal changes at a May 4 meeting, county commissioners instead approved a 90-day pause to gather feedback through a series of listening sessions. 

In a May 5 letter, Greg Wessling and Tracy Leinbach, the respective chair and vice-chair of the UNC Health Board of Directors, urged WakeMed to consider their alternative vision. 

The UNC leaders emphasized the benefits of merging with a publicly owned system: increased governance accountability, a faster acquisition, and long-range mission alignment. 

UNC’s bid left many details about how a deal might be structured open-ended. UNC Health requested convening a confidential board working session to hammer out specific details and priorities. 

The broad strokes include UNC’s commitment to spending $5 billion “in and around Wake County” over the next 10 years, with a minimum of $2.5 billion “tied directly to WakeMed priorities and codified through a jointly developed Wake County-focused strategic and capital plan.” 

It’s unclear if that was a reference to a conversion foundation, which is a philanthropic entity formed as a result of large hospital acquisitions. UNC Health spokesperson Alan Wolf said Tuesday this “detail would need to be determined.”

Notable recent conversion foundations in North Carolina include the Dogwood Health Trust, created by the 2019  sale of Mission Health in Asheville to HCA Healthcare for $1.5 billion, and the New Hanover Community Endowment, formed from Novant Health’s $1.5-billion purchase of New Hanover Regional Medical Center in 2021.

In their letter, the UNC Health leaders highlighted backlash over the HCA Healthcare acquisition in Asheville as an example of “asymmetric risk that can arise when control moves away from local stewardship.” Atrium Health is owned by Advocate Health, a multi-state enterprise with hospitals in Georgia, Illinois, South Carolina, North Carolina, Alabama, Michigan, Indiana, and Wisconsin.

A fast-tracked regulatory approval process could be another boon, UNC suggested. As a publicly owned hospital system, UNC Health is exempt from certain regulatory oversight functions of the Federal Trade Commission and U.S. Department of Justice. Compare that to the scrutiny Atrium Health has endured in recent years, and UNC said it offers a less-risky and quicker-to-close alternative.

“Prolonged uncertainty can affect workforce retention, physician alignment, vendor negotiations, capital planning, patient satisfaction, operating performance, and market behavior well before any promised investments can be realized,” the letter states.

State Attorney General Jeff Jackson’s office has said it will review the proposed transaction with Atrium. The FTC previously declined to comment.

The UNC offer does not make specific governance proposals, but would preserve WakeMed’s brand and executive leadership. It also matches Atrium’s offer to continue WakeMed’s commitment to indigent care at 4.8% of revenue.

On May 11, WakeMed Board of Directors Chair Thad L. McDonald wrote back to acknowledge and decline the offer. 

Though McDonald said the board would give it thoughtful consideration, he said it continued to stand by its previous decision to partner with Atrium. 

Under a partnership with UNC, competition in the county would reduce from three health care giants to two and control 80% of the market, WakeMed has argued.

“Although you note that a partnership with UNC Health, as a state agency and political subdivision, could reduce certain ‘transaction friction,’ we remain sensitive to broader concerns about further consolidation and its potential impact on healthcare choice in Wake County,” he wrote. 

WakeMed’s path forward, he wrote, lies with Atrium. In a statement last week, Wolf said UNC Health remains “ready and willing to be a partner” to WakeMed.