NC’s attorney general reviewing Carolinas HealthCare, UNC Health deal

This 2012 file photo shows the main entrance to Carolinas HealthCare System’s Carolinas Medical Center in Charlotte.
This 2012 file photo shows the main entrance to Carolinas HealthCare System’s Carolinas Medical Center in Charlotte.

North Carolina’s attorney general has begun examining whether a proposed megadeal involving Charlotte’s Carolinas HealthCare System and Chapel Hill’s UNC Health Care will harm health care competition in the state, the AG’s office said.

Josh Stein’s office told the Observer the review also involves other aspects of the transaction, including if it might affect the operations of UNC Health Care, an entity created by state legislation almost 20 years ago.

It’s the first glimpse at how the pending deal is being scrutinized by the attorney general since the hospital systems in late August announced plans to form a joint operating company.

The two hospital groups said they will create one of the leading nonprofit health care systems in the U.S., allowing them to work together in myriad ways – from building new hospitals to negotiating with insurance companies. They also said they would push to improve access to care in rural areas, which suffer from a shortage of doctors and services.

The transaction does not require approval from the state attorney general. But Stein, a Democrat, can sue to block the deal if he believes it will hurt consumers or competition.

“One of the roles of the attorney general is to protect the consuming public,” said Gerry Cohen, the principal drafter of the 1998 statute that formed UNC Health Care. The 12-hospital system, owned by the state, is under the UNC system’s board of governors, whose members are appointed by the legislature.

Stein’s office declined to disclose whether it might take any action or how long the examination could take. The Democrat took office in January, filling the seat most recently held by Gov. Roy Cooper.

In a joint statement, the two systems said they “look forward to working with various stakeholders, including the Attorney General’s office, as we continue to define details of our proposed new Joint Operating Company.”

Combinations within the health care sector are a practice that has continued for decades.

Supporters say consolidation can result in significant costs savings from economies of scale and an expansion in services for patients.

Critics argue such deals can limit price competition and reduce benefits.

In the past both the U.S. Department of Justice and the Federal Trade Commission have challenged some hospital mergers. The FTC, though, has typically challenged more of those deals, a reflection of the fact that it reviews almost all hospital mergers, said a government official who was not authorized to speak publicly.

Both agencies told the Observer they don’t confirm the existence of investigations or reviews.

In a statement, Stein said his office is “reviewing this deal to make sure patients are protected and competition is not threatened.”

The review comes as a federal antitrust case, filed last year by Cooper’s office and the U.S. Justice Department against Carolinas HealthCare, continues winding through court.

The governments’ case alleges that Carolinas HealthCare uses its market power to negotiate “unlawful contract restrictions” that prevent consumers from taking advantage of lower prices at other hospitals.

Carolinas HealthCare has said that it follows the law, is committed to fair competition and dedicated to making health care more affordable.

Carolinas HealthCare and UNC Health – both nonprofits – would come together to create a public, nonprofit corporation.

The combination would mark a major development for Carolinas HealthCare, Charlotte’s largest employer. The new system would run more than 50 hospitals and employ more than 90,000 people, making it one of the nation’s largest hospital chains.

The systems have already begun marketing the new company, including with a website. But the transaction is not a done deal.

The systems said they must enter into a final agreement, which they have a goal of completing by the end of this year. Plans are for the joint operating company to be running sometime next year.

Deon Roberts: 704-358-5248, @DeonERoberts