WakeMed, Atrium execs make merger case to Wake County officials

WakeMed has been exploring a merger with Atrium Health for several years, and the prospect of greater competition in the Triangle — and the deep pockets of its proposed partner — was worth bypassing a competing offer and leaving $3 billion on the table, executives told Wake County officials Monday.

WakeMed and Atrium executives met with the Wake County Board of Commissioners in a work session to answer questions about the two systems’ proposed merger. The deal — which has drawn considerable scrutiny and criticism from state officials since it was announced last month — requires the blessing of commissioners. WakeMed, a private nonprofit, started as a county hospital. Commissioners still appoint members to its board and oversee aspects of the system’s real estate.

Wake County commissioners won't decide on the proposed deal between WakeMed and Atrium Health until at least August.

"You could tell that the CEOs, those guys have been working together, they’ve been talking, they’ve been communicating and that was important," Wake County Board Chair Don Mial said.

WakeMed and Atrium executive said they've discussed some form of partnership since 2022.

Dr. Thad McDonald, chair of the WakeMed Board of Directors, spoke before Wake County commissioners on Monday.

"Folks are so uncertain because WakeMed really means something to them as it does to us," McDonald said.

WakeMed leaders said Monday the organization is is wrestling with higher costs, a reduced workforce and an aging population. Executives speaking before Wake County commissioners on Monday built a case that Atrium Health's deep pockets could help combat those challenges.

"Looking at the future of health care and especially the challenges facing hospitals like ours, we felt it would be irresponsible not to give it vigorous due diligence," McDonald said.

Watch: Wake County leaders discuss WakeMed-Atrium deal

Ahead of Monday’s meeting, commissioners sent a list of more than 100 questions to WakeMed executives. Officials questioned executives on governance of the combined company, and what role the county would play in it. They also asked how the Atrium transaction would affect competition, access to care, local jobs, community investment, commitments to underserved communities, among other topics. 

WakeMed is one of the smallest hospital networks in the state. Atrium is one of the biggest in the nation. The proposed merger would put Atrium in charge of WakeMed. Under the deal, Atrium Health would take control of the nonprofit entity that operates WakeMed. In return, Atrium has promised to invest at least $2 billion in WakeMed’s expansion plans throughout the county. The deal would enable Atrium to enter the fast-growing Triangle market and compete with other networks such as UNC Health and Duke Health. 

WakeMed’s board approved the transaction in April. Four days after the deal was made public, UNC Health made an unsolicited bid that promised $5 billion in investment, according to WakeMed, which declined the offer. By partnering with Atrium, WakeMed executives said in presentation slides, “a three-system competitive market will remain and gives people [the] choice they need.”

“WakeMed is in a strong financial position today, and we enter this strategic combination from a position of strength — bringing a solid balance sheet and favorable financial ratings — the very qualities that make us an attractive partner and give us the flexibility to pursue this agreement on our own terms,” executives said in the presentation slides.

Executives say a merger with UNC Health — whose flagship Rex Hospital competes with WakeMed in Raleigh — would have resulted in one entity controlling at least 80% of the inpatient market share in Wake County, reducing choice for patients. The $5 billion offer included about $2.5 billion earmarked for WakeMed and another $2.5 billion invested in the county, according to the hospital system, which described the terms of the investment as “vague.”

“We remain ready and willing to be a partner in whatever best serves the long-term health of Wake County residents and all North Carolinians,” UNC Health spokesman Alan Wolf said in a statement.

Wolf pointed to collaboration between UNC and WakeMed in training medical students and residents in Level 1 trauma, OB-GYN, emergency medicine, pediatrics and other specialties, as a starting point for further collaboration.

“We have been assured that this medical training partnership is important to WakeMed,” Wolf said. “We are confident that collaboration will continue uninterrupted into the future as we advance forward on our mutually aligned mission of public service to the citizens of our community. It is because of this success that we believe that even greater things can be accomplished together for our citizens. That’s precisely why we have expressed interest in furthering our relationship with WakeMed.” 

After spending years evaluating potential partners, WakeMed’s board “determined that a strategic combination with Atrium Health is in the best interest of WakeMed and the communities we serve,” Debbie Laughery, a WakeMed spokesperson, said in a statement. 

“We have reviewed UNC Health’s proposal, and we will continue engaging with the community regarding our path forward,” Laughery said. “At this time, however, that path lies with Atrium Health.”

‘Will not result in any layoffs’

WakeMed executives say they were looking for a partner with a similar mission. They were looking for a cultural match with financial means to fund ongoing expansion plans, and they were bent on retaining local governance “rather than becoming part of another system,” the presentation said, adding that there was a question as to where control would be with a UNC Health merger — in Wake County or in Chapel Hill, where UNC Health is based. 

A merger with Charlotte-based Atrium poses similar questions. But WakeMed executives have been adamant that decisions would be made locally, even though WakeMed would be giving up full governance autonomy. Under the deal, Wake County would retain control of eight of WakeMed’s 14 board seats. Atrium, which would control six, would become the sole corporate member of the nonprofit entity that runs WakeMed. WakeMed would remain a nonprofit charitable organization. 

Atrium points to its combination with Wake Forest Baptist Hospital as an example of how the WakeMed deal could play out. Since 2020, that deal has improved the Winston-Salem hospital’s credit rating, created 8,200 jobs and expanded access to care through new and expanded medical centers and specialists, the organizations say. 

WakeMed says the $2 billion offered by Atrium over 10 years would enable or accelerate the renovation and expansion of its Raleigh campus, the expansion of hospitals in Cary and North Raleigh, further development of its Garner campus and build two additional health complexes in the county. They say the investment would lead to 3,300 jobs in the county. They also say the closing of the translation “will not result in any layoffs.”

"We're proud of our independence, but that pride in no way supersedes the mission in caring for all in the community," said WakeMed CEO and President Donald Gintzig.

State and local officials have been skeptical of some of those claims. WakeMed is already one of the largest employers in the state and that growth might have happened without a transaction, critics say, and mergers frequently result in layoffs.

Atrium is part of Advocate Health — one of the biggest hospital chains in the nation. By joining that network, WakeMed says, it would be able to increase access to care. It also says it would benefit from scale, helping reduce costs for supplies, medicines, equipment and more though increased purchasing power. It would also reduce risks facing smaller, stand-alone independent health systems. 

Executives also said WakeMed doesn’t have sufficient cash on hand, nor the debt capacity it needs to grow to meet community needs while dealing with rising supply, labor and pharmaceutical costs.

“Industry trends and broader forces – both longstanding and emerging – are making it increasingly difficult for smaller independent health systems like WakeMed to sustain long-term success,” WakeMed said in its presentation slides. 

State and federal scrutiny?

County commissioners were poised to vote on a measure early last month that would have paved the way for the transaction to proceed, but the vote was postponed after State Treasurer Brad Briner and other state officials raised questions about the deal. 

Briner is chairman of the State Health Plan, which provides insurance to 750,000 state employees, retirees and their family members. The State Health Plan has already been raising premiums and out-of-pocket costs to help close a massive deficit. Plan executives say the proposed merger could lead to more increases if WakeMed were to charge the same prices Atrium charges. 

Briner wants the Federal Trade Commission to examine the transaction. State Auditor Dave Boliek and other state and local elected officials have also called for a closer look at the deal before county officials sign off on changes to WakeMed’s articles of incorporation. State Attorney General Jeff Jackson is expected to review the deal as well. 

“We have heard from numerous stakeholders, including the state treasurer, that maintaining robust competition is important for our rapidly growing region,” Laughery, the WakeMed spokesperson, said in a statement. “Competition also lowers costs.”

In the meantime, as the deal continues to be scrutinized, WakeMed is moving ahead with expansion plans in the county. 

In October, WakeMed received approval to build a health complex in northeastern Wake County. The 32,000-square-foot Rolesville development is expected to be WakeMed’s sixth health complex and tenth full-service emergency department. WakeMed paid $6.2 million for 31 acres at the intersection of Burlington Mills Road and Walls Cove Lane in Rolesville, according to a deed filed last month in Wake County. The facility is expected to open next year. 

In November, WakeMed broke ground on a 150-bed mental health hospital connected to a 45-bed acute care hospital in Garner. Construction is expected to wrap up in 2028.

WRAL State Government Editor Jack Hagel contributed to this report.