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What Will This Multimillion Dollar North Carolina Hospital Merger Mean for Rural Health Care?

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Highlands-Cashiers Hospital in Highlands, North Carolina. Photo: Taylor Sisk/100 Days in Appalachia

On December 13, a full page ad in the Highlands Newspaper, in Highlands, North Carolina, was headlined: “Bringing a new state-of-the-art Angel Medical Center. Investing in the future of healthcare in western North Carolina.”

The ad was purchased by Nashville, Tennessee-based HCA Healthcare, a for-profit hospital system that owns 178 hospitals in 20 states.

While heartened by the prospect of such an investment in health care services in Macon County – a rural county with a population of about 34,000 situated in the southwest corner of the state  – a discerning reader might have found this assertion a little premature. A multimillion dollar deal for HCA to buy a health care system that includes six hospitals in Western North Carolina, including Highlands-Cashiers Hospital in Highlands and Angel Medical Center in nearby Franklin, has yet to be approved by the state’s attorney general.

For communities in rural counties such as Macon, investment by a large hospital system could mean expanded access to next-generation health care. But some worry that given the pressures of the industry, that large corporation may see no future in providing services in their community, and pull out. They worry that decisions will be made without their input.

‘We built it’

It takes a good while to get anywhere from Highlands.

The town rests on a plateau within the Nantahala National Forest, and though the county seat of Franklin is just 20 miles away, the first leg of that journey is down a serpentine two-lane through the Cullasaja Gorge. Highlands is home to less than a thousand residents in the winter; quite a few more in the summer.

Highlands, North Carolina, Mayor Patrick Taylor. Photo: Taylor Sisk/100 Days in Appalachia

Ask Mayor Patrick Taylor what Highlands-Cashier Hospital means to his community. His reply: “Everything.”

The hospital opened in 1951, expanded in 1966, and expanded again and relocated in 1993, all with considerable community investment.

“It’s our hospital,” Taylor asserts. “We built it.”

Six years ago, succumbing to the pressures of a changing health care landscape in the U.S. – to rising costs and the push to consolidate – the hospital’s board elected to affiliate with Mission Health, an Asheville-based not-for-profit health care system – the only one managed in Western North Carolina. Mission administrators say the same pressures have pushed them to look for a larger health system to take over operations, most particularly the challenges of providing services in remote areas.

“I understand; we’re a small market,” Taylor says. “I understand the dynamics of what’s going on, the market forces.” He just doesn’t want to lose his hospital.

The Deal

It was announced in August that HCA had come to terms to purchase Mission Health, which owns and operates a large hospital in Asheville and five smaller ones throughout mostly rural Western North Carolina. But the deal must first be approved by North Carolina Attorney General Josh Stein.

The agreement calls for a $430 million commitment from HCA in capital expenditures.

Such investment comes as good news for Western North Carolinians, as does, at least in theory, the announcement of a $1.5 billion foundation called the Dogwood Health Trust that will manage the proceeds of the sale. The foundation will include a governing board made up of members appointed by Mission, with the goal to improve the health and well-being of the communities Mission Health now serves.

But a number of rural residents throughout the region are intent on seeing to it that the deal doesn’t shape up to be Asheville-centric. Asheville, with a population of 90,000, is the hub of Western North Carolina and home to Mission’s flagship medical center, Mission Hospital. None of the counties that are home to Mission’s regional hospitals have a town of more than 10,000.

Rural residents are asking that this deal be of benefit for years to come for the whole of the region – that health care services in their more remote communities don’t get lost in a megadollar transaction.

On its website, Mission offers this assurance: “Understanding the unique, special needs of our patients, particularly those in remote and rural areas, we look forward to the possibility of expanding access and accelerating improvements while gaining efficiencies.”

“I know my friends at Mission think I’m against this,” Taylor says. “I’m really not against it; I just want to be sure it’s done right. And as soon as this is approved, I will certainly want to support everything we can do to make sure it’s successful.”

“I just think it’s healthy for the public to have a discussion about these issues,” issues that include assurances for access to care in his community, Taylor says.

Attorney General Stein has assured Taylor and his neighbors that he has their best interests in mind. Before approving the deal, Stein told the Asheville Citizen-Times, “I want to clarify and strengthen HCA’s commitment in terms of its delivery of medical services and…keeping the rural hospitals open.”

The Pressures

Taylor’s concerns over access aren’t unfounded. These are tenuous times for health care services in rural America. In September, the U.S. Government Accountability Office reported that between 2013 and 2017, 64 rural hospitals closed, more than double the rate of the previous five years.

Making it as an independent is increasingly difficult. Researchers at the North Carolina Rural Health Research and Policy Analysis Center write that rural hospitals face Medicare reimbursement cuts if they’re unable to meet quality and technological standards, but often don’t have the capital to make the necessary improvements.

The researchers also point out that patients at small, rural hospitals tend to be relatively older, poorer and sicker, with a higher percentage covered by Medicare or Medicaid or who have no insurance at all.

Merging with a larger hospital or system is often the only alternative to closure.

Further, a recent study from the Colorado School of Public Health found that hospitals in states that haven’t expanded Medicaid, as allowed for under the Affordable Care Act, are six times more likely to close than those in states that have. The North Carolina Legislature has thus far elected not to expand Medicaid.

One more source of concern for Western North Carolina’s rural residents: The Government Accountability Office found that while only 11 percent of rural hospitals in the country are owned by for-profits, 36 percent of those that closed in that five-year period were for-profit owned.

HCA is a for-profit corporation.

The Potential

Rowena Buffett Timms, Mission’s senior vice president for government and community relations, is sensitive to these concerns, but says she firmly believes that HCA has no desire to come into the region and close rural hospitals. HCA, she says, is “very excited about this hub-and-spoke of a very healthy health system in Western North Carolina.”

Historically, HCA is “used to going in and buying hospitals that are very close to being closed.”

“This is a new business model for them,” Timms says. “To come in and dismantle would not really be supportive of what I believe they are trying to achieve in this very exciting new business model.”

HCA, she says, sees “the work that we do in quality, the outcomes, how we drive those concepts into rural communities…They see that potential.”

Taylor and others feel that Mission has a responsibility for how that potential unfolds.

Jay Nixon, a former governor and attorney general of Missouri, has been brought in as a consultant by citizen groups. Nixon previously challenged HCA in the courts, claiming the corporation did not live up to the terms of its contractual agreement to make capital improvements at hospitals the company purchased in the Kansas City area. Last year, the state won that lawsuit.  

“Mission is a nonprofit, and has built up a significant value, obviously, as laid out by the transaction that’s on the table now,” Nixon says. It has “an ongoing responsibility for health care in that region.”

That responsibility, he says, “has been vested in them through their nonprofit status with the state.”

“I just think these hospitals are extremely important in these smaller communities,” Nixon attests. “They are not only an employer, they are also an asset that makes it easier to attract and keep businesses and families. So, I get very concerned about transactions of this nature where you don’t have long-term ironclad guarantees that the facilities and services will remain open.”

The AG’s Concerns

Attorney General Stein has expressed three fundamental concerns with the agreement as it stands: Are there sufficient provisions to ensure the continuation of certain services, is the $1.5 billion price tag enough and will the board tasked with managing the money represent the diversity of the region?

“The people of Western North Carolina have been investing in these hospitals for decades and they should benefit from all the value that has been accrued over time,” Stein said.

Highlands Mayor Patrick Taylor traveled to Raleigh to meet with Stein’s office, and he’s confident that his neighbors’ concerns are being heard. One provision in particular that Taylor would like to see included in the final agreement is that if HCA should decide to close a hospital, the attorney general’s office must be informed, must be given a justification and would have oversight to review why HCA believes it’s necessary.

The town of Highlands passed a resolution in September asking that the agreement stipulate that if HCA should undertake to sell Highlands-Cashiers Hospital, the community would be given notice and a local entity would be offered the first opportunity to buy it back. Taylor and his colleagues recognize that they wouldn’t be able to make a go of it as an independent. They’d have to then find another partner.

“But if we don’t have that option,” he says, “we have a real clear danger of not having any health care access here after all that money and everything has been put into it.”

Taylor’s best-case scenario is that HCA “would come in and invest in services and be creative in remaking the hospital.” He notes that HCA has hospitals in Florida where they could provide reciprocal services for many of Highland’s seasonal residents.

That full-page ad in the Highlands Newspaper states that HCA plans to “invest region-wide to meet the future health needs of western North Carolina. Our promise: the best healthcare for your family – sooner and closer to home.”

Taylor hopes very much that this ideal scenario is realized, “and I hope that people will look at this old mayor…they’ll look at him and say, ‘What was he worried about? This turned out great.’

“I hope that’s the case.”

This is the first story  in a two-part series about the sale of North Carolina’s Mission Health to the national HCA Healthcare. Read the second part of the series here.