Carolinas HealthCare System, already the second largest public hospital system in the country, is expanding again.
Officials announced Tuesday that theyve signed a 10-year management services agreement with Greensboro-based Cone Health, which has five hospitals and more than $1 billion in annual revenue.
When the agreement takes effect Oct. 1, Carolinas HealthCare will own or manage nearly 40 hospitals and have $8 billion in annual revenue. Financial terms of the agreement were not disclosed.
Its the first time Carolinas HealthCare, which now oversees more than 30 hospitals across the Carolinas, has affiliated with a health care institution in the Triad area that includes Greensboro, Winston-Salem and High Point.
It puts us in the Triad in a very meaningful way, said Joe Piemont, chief operating officer of Carolinas HealthCare. Its an incredibly strategic opportunity for both ourselves and Cone Health.
In a separate announcement Tuesday, Piemont said Carolinas HealthCare is entering the north Georgia market for the first time through a pending affiliation between one of the systems current management partners, AnMed Health of Anderson, S.C., and a smaller hospital in Elberton, Ga.
We manage AnMed, and AnMed will manage Elberton, Piemont said.
For impact, the agreement between Carolinas HealthCare and Cone Health is most significant.
It links the Charlotte-based health care giant to another large and profitable hospital system. Moses Cone Memorial Hospital, the largest hospital within Cone Health, had a total profit margin of 13.1 percent in the fiscal year that ended in September 2010, according to the American Hospital Directory.
By comparison, Carolinas HealthCares primary enterprise, which includes hospitals in Mecklenburg, Cabarrus, and Lincoln counties, had a total profit margin of 8.4 percent in 2010.
With the new agreement, Carolinas HealthCare continues a pattern of rapid growth. Its total annual revenues have grown nearly fivefold since 2000.
A recent Observer investigation showed that, by consolidating into large systems, hospitals have become part of the reason for rising health care costs. As systems get larger, they are able to use their market power to negotiate higher reimbursements from insurance companies.
Dr. Kevin Schulman, a health policy researcher at Duke University, said Tuesday that further consolidation of hospitals in North Carolina will lead to higher prices, higher insurance premiums and increased administrative costs.
Its time to take an objective look at this practice and see if we are achieving a benefit for the public.
A really good thing
Under its agreement with Carolinas HealthCare, Cone Health will remain independently owned and governed by its board. Employees will continue to be employed by Cone Health except for the five top executives, who will become employees of Carolinas HealthCare but remain based in Greensboro.
They are CEO Tim Rice; Terry Akin, president and chief operating officer; chief financial officer Ken Boggs; chief quality officer Dr. Mary Jo Cagle, and chief nursing officer Theresa Brodrick.
Rice said he has known Carolinas HealthCare administrators for years and was familiar with their history of managing hospitals from the North Carolina mountains to the South Carolina coast. He said the Cone Health board invited them to make a formal presentation about nine months ago.
We believe this is a really good thing for our patients and our community, Rice said. It allows us to access a broad range of services through the Carolinas HealthCare System and their network. It allows us to share best practices from here to there and from there to here.
Carolinas HealthCare CEO Michael Tarwater said the two organizations share a mission of providing care to all who need it. We are honored to have been chosen to work with Cone Health.
Affiliation not a merger
Rice emphasized the affiliation is not a merger, and Cone Health will not change its name or identity.
Patients and employees of Cone Health shouldnt notice any difference, he said. Doctors wont be required to refer patients to Charlotte, but will continue traditional referral patterns to Winston-Salem, Duke University or UNC Chapel Hill. No changes in staffing are expected, Rice said.
Most of the changes will be behind the scenes, he added.
For example, Cone Health will save money by joining Carolinas HealthCare for group purchasing of everything from MRI scanners to heart valves to latex gloves, Rice said. Instead of hiring consultants to prepare for accreditation inspections, Cone Health will be able to use in-house experts at Carolinas HealthCare, he said.
During a conference call with news reporters, Rice was asked if Cone Health will follow the Carolinas HealthCare policy of filing lawsuits against patients who have not paid their bills. More than half of the 40,000 hospital bill-collection lawsuits in North Carolina in the five years ending in 2010 were filed by Carolinas HealthCare or Wilkes Regional Medical Center, a hospital managed by Carolinas HealthCare.
Rice said Cone Health will not be dictated to, but will follow its existing financial assistance policies.
Cone Health is about one-sixth the size of Carolinas HealthCare and one of the largest systems to sign a management contract with CHS, Piemont said.
Cone Health employs about 8,600 people who work in Guilford, Rockingham, Forsyth, Randolph and Alamance counties. The systems hospitals, with a total of 1,035 beds, are Moses Cone and Wesley Long Hospital in Greensboro, Womens Hospital of Greensboro, Annie Penn Hospital in Reidsville and Cone Health Behavioral Health Hospital in Greensboro. A merger is pending with Alamance Regional Medical Center in Burlington.
Other major hospital groups in the Triad are High Point Regional Health System and Winston-Salem-based Novant Health. Novant was created in 1997 with the merger of Presbyterian Healthcare, which owns four hospitals in the Charlotte area, and Carolina Medicorp of Winston-Salem.
When asked for comment about CHS moving into Novants home territory, Novant spokeswoman Sharon Harmon said: Carolinas Healthcare System and Cone Health are two systems with strong traditions that are doing what they believe is best for their organizations.
Staff writer Ames Alexander contributed.