“When it suited them, they could be a private nonprofit……….When it didn’t suit them, they could jump back into being a government entity — although there was no government involved.”
By Michelle Crouch
To an outsider, Atrium Health might look no different than its Charlotte competitor Novant Health. Like other nonprofit hospital chains nationwide, both have gobbled up community hospitals, specialty clinics and physician practices in their quest to grow.
But Atrium has a key advantage: It is a “unit of local government.”
Although the signs on its hospitals say “Atrium Health,” the hospital system is legally a public body known as the Charlotte-Mecklenburg Hospital Authority. Its status as a government entity allows it to enjoy:
- Tax breaks: Atrium avoids millions of dollars in state and federal taxes, and the property Atrium owns is automatically exempt from property taxes, even if it’s not being used for medical purposes.
- Antitrust immunity: As a unit of government, Atrium is not subject to various federal regulations, including antitrust damages. That has helped pave the way for its explosive growth.
- Power of eminent domain: Atrium can force property owners to sell — or threaten to do so — to make room for hospital projects. (Atrium did not reply to a question about whether it has ever used that power.)
Over the past five decades, those benefits have helped the authority transform itself from a small community hospital called Charlotte Memorial into a powerful, multi-state hospital chain, with hospital executives that make millions. The hospital system tied to the authority reported $9 billion in annual revenue in 2022. And the company has an additional $19 billion in revenue under its combinations with Wake Forest Baptist and Advocate Aurora Health.
Yet while Atrium enjoys all the benefits of being public, it operates very much like a private corporation. The hospital system receives no direct state or local subsidy, and its board of commissioners isn’t elected.
Hospital board meetings are nothing like those of other local government bodies. You can’t attend their committee meetings, where all of the substantive discussion happens. You can’t get the agenda in advance. There’s no way for a member of the public to address the hospital board.
And if you reach out directly to a commissioner with a question, you will likely be routed to the hospital’s public relations department.
Former Novant Health CEO Paul Wiles told The Ledger/NC Health News that the public status of Atrium (previously Carolinas HealthCare), “always struck us as unfair.”
“When it suited them, they could be a private nonprofit,” said Wiles, who served as Novant CEO from 1997 to 2011. “When it didn’t suit them, they could jump back into being a government entity — although there was no government involved. We said, ‘This is a sham. It’s not government.’ It has none of the checks and balances of government.”
In response to questions about the authority’s status as a public entity and what some perceive as its lack of openness, Atrium emailed only the following statement:
The Charlotte-Mecklenburg Hospital Authority and its governing Board of Commissioners conducts its business in compliance with the North Carolina General Statutes. The CMHA has a long and proud history of service to the community it serves, creating jobs, battling health inequities and improving the quality of life. It is truly fulfilling the Atrium Health mission of improving health, elevating hope and advancing healing for all.
Last November, the hospital said it provided $2.8 billion in community benefits in 2022. That includes charity care, community health spending and other investments.
In two recent court cases, lawyers argued that Atrium should not qualify as an arm of government. In both, the courts ruled that the hospital system is indeed a government entity — largely because N.C. statutes say they are.
Board nominees rarely rejected
The N.C. statute that allowed counties to create hospital authorities was written in 1943 at the request of Charlotte hospital leaders. They wanted to keep politics out of the hospital business, according to A Great, Public Compassion, a book by Jerry Shinn chronicling the health system’s history.
The statute calls for the county to appoint the initial members of a new hospital authority board. Since then, the board’s only link to local government has been that the chair of the board of county commissioners must approve board nominees.
In 2012, The Charlotte Observer reported that only one nominee to the Charlotte-Mecklenburg Hospital Authority board had been rejected in 30 years.
Current commissioners chair George Dunlap told The Ledger/NC Health News he sent the list back once after he became chair in 2018 “because it wasn’t as diversified as it could be in terms of women and minorities.”
Atrium CEO Gene Woods then made a commitment to diversify the board, Dunlap said, adding that he has been satisfied with the nominations ever since.
The current 20-member hospital board is a diverse mix that includes many well-known community leaders. Members include William C. Cannon Jr., whose family founded former textile giant Cannon Mills; Marshall Carlson, president of Hendrick Motorsports; and former Carolina Panthers player Michael D. Rucker.
Three members of the Charlotte-Mecklenburg Hospital Authority board appear to be residents of Georgia.
When asked if he was aware that he had approved members from Georgia, Dunlap recalled a conversation about it with the hospital. He said he didn’t remember the details, but he thought County Manager Dena Diorio had raised the question with Atrium.
He said he didn’t think there was a prohibition on board members from outside the state, and added that the authority “doesn’t just cover the hospitals in Charlotte but has hospitals throughout.”
Atrium combined with two Georgia-based health systems, Navicent Health and Floyd Health, in 2019 and 2020.
Diorio did not respond to an email from The Ledger/NC Health News sent on Sunday.
Deliberating behind closed doors
In a 2021 court case in which Atrium sought to preserve its antitrust exemptions, the hospital emphasized in court filings that as a governmental unit, it “must comply with North Carolina’s public records and open meetings laws.” The law says public bodies are not just supposed to conduct their actions and votes publicly, but also their deliberations.
Although the hospital board’s quarterly authority meetings are open to the public, no “deliberating” happened at recent meetings attended by The Ledger/NC Health News. Instead, the meetings were highly scripted, with executives or board members running through PowerPoint presentations. Every vote was unanimous, with little to no discussion.
Meanwhile, the presenters referenced “robust” and “thorough” discussions that took place in closed committee meetings.
Although the law says committees of public bodies should be open, when a reporter asked to attend, the hospital said in an email that authority committee meetings are not “official meetings” that must be open to the public.
Open meetings experts told The Ledger/NC Health News that the hospital interprets the statute in a way that gives it an exception to the law. However, the experts said the statute is unclear on that point.
Brooks Fuller, an attorney specializing in media law and government accountability and director of the North Carolina Open Government Coalition, said, “I understand their argument, but unless a court says that’s the case, I don’t agree with their interpretation.”
Committee meetings need to be open so public officials “can’t do public business in small group committees and craft a giant loophole in the open meetings law,” Fuller said. “Obviously, these laws aren’t meant to give public bodies the tools to evade the spirit of the law.”
Atrium did not directly respond to a question about why the board chooses to close its committee meetings rather than open them in the interest of transparency.
Public can’t speak or get agenda in advance
Chris Lakin, a retired Atrium physician, reached out to the hospital in December and asked to speak at its next board meeting. He wanted to urge the board to consider working with a charity called RIP Medical Debt that buys medical debt from hospitals and forgives it.
He was surprised to learn that Atrium doesn’t set aside time for public comment at its meetings, and the law doesn’t require it. He said he sent written comments through a board liaison but didn’t receive a response from board members.
Atrium didn’t reply to a question from The Ledger/NC Health News about why it doesn’t voluntarily allow the public to speak at public meetings.
Lakin is hoping the hospital board will discuss RIP Medical Debt at its meeting Feb. 6 (this Tuesday afternoon) at 1:15 p.m. at Harris Conference Center, 3216 CPCC Campus Drive in Charlotte.
Lakin won’t know for sure until the start of the meeting, because the hospital board won’t release its agenda in advance. In response to previous requests from The Ledger/NC Health News, hospital spokesman Dan Fogleman has said the agenda isn’t finalized until the start of the meeting.
According to an open government guide published by the N.C. Attorney General’s Office, “The public has a right to see a meeting agenda and accompanying handouts (except exempted materials, such as attorney-client communications, etc.) as soon as they are created. Government officials cannot delay release of meeting materials until after they are sent to members of the public body or some other more convenient or advantageous time.”
A different approach at CarolinaEast
In eastern North Carolina, if someone wants to address the board of the CarolinaEast Hospital Authority in Craven County, they just have to ask, said Cindy Turco, the hospital’s attorney.
And its committee meetings are open to the public.
“We do our best to try and follow what the law says,” Turco said.
Craven County commissioner Dennis “Denny” Bucher told The Ledger/NC Health News that when there are openings on the hospital board, all of the commissioners discuss the hospital’s slate of candidates.
“We may say, ‘We like these two people, but we’re not fond of the third one,’” he said. “It’s a back-and-forth between the boards. On a regular basis, people’s names have been turned down.”
Antitrust immunity helped Atrium grow
When hospitals grow and merge, it’s generally not good for patients: A large body of research shows it increases the cost of health care and may reduce the quality of care.
Hospitals say, however, it’s a way to increase access to care and achieve economies of scale.
Wiles, the former Novant CEO, explained that Atrium’s size and market power gave the hospital more leverage in negotiations with insurance companies, so they could demand higher reimbursement rates.
Wiles also said he thinks Atrium’s biggest advantage as a government unit is lower levels of federal antitrust scrutiny, because that makes it easier for Atrium to merge and combine with other hospitals.
“The antitrust issues always bugged us, starting back with the purchase of Mercy Hospital (in 1995),” Wiles said. “Then they got the Cabarrus hospital, which we thought was really egregious. Then all around the state, as they just sucked up others.”
If antitrust regulators “dug in” and investigated Atrium’s growth, they would have found it to be “much worse than Novant buying two rural hospitals,” Wiles said, referring to the Federal Trade Commission’s action last month to block Novant’s purchase of two Lake Norman-area hospitals.
Atrium “should not have been allowed to have gotten as big and concentrated as they did,” he said.
Atrium’s growth has continued in recent years. Its 2020 combination with Wake Forest Baptist Health will bring Charlotte its first four-year medical school this fall. The deal boosted the number of Atrium hospitals to more than 40, including facilities in Georgia, South Carolina and Alabama.
Then, in late 2022, the hospital system doubled in size when it combined with Midwest-based Advocate Aurora Health to become the country’s third-largest nonprofit health care system, with $27 billion in annual revenue.
N.C. law limits a hospital authority from expanding more than 10 miles past the border of the county in which it was created. That may be part of the reason why Atrium typically “combines” rather than “merges” with other health systems — at times creating new legal entities.
The proliferation of partnerships, combinations and enterprises with different names makes it even more difficult for the public to get information and understand who is making decisions about the hospitals in their communities, Fuller said.
In the hands of the legislature?
In a court case filed against Atrium in 2018, attorney Karen Handorf argued that Atrium was not a government entity. She said the hospital should not be able to use its public status to avoid federal regulations related to its employee health and retirement plans.
She told The Ledger/NC Health News she knew it was a challenging case because N.C. statutes recognize hospital authorities as local government units.
Her side lost their case, as Judge Thomas Schroeder ruled that “the court finds that the [Charlotte-Mecklenburg Hospital] Authority is a ‘political subdivision.’”
“It just seems to me like the intent of Congress was not to exempt organizations that are just big huge corporations that operate in multiple states,” Handorf said. “But you would have had to have a court willing to go outside the box, and that court wasn’t.”
“It’s baffling that North Carolina hasn’t done anything about this,” Handorf added.
In a similar 2021 case that went before a federal appeals court, a judge wrote that the argument that Atrium was no longer a local government unit “had some initial appeal” because the health system operates in multiple states. But he said lawmakers, not courts, have to make that determination.
Barak Richman, a Duke University law professor who studies health care financing, said he and other experts co-authored a brief asking the U.S. Supreme Court to reverse that decision, but the court declined to hear the case. They argued that Atrium’s preferential treatment as a government entity is bad policy and inconsistent with current law.
“The courts got it wrong, but the N.C. legislature can fix it,” he said.
Mecklenburg county commissioners chair Dunlap also pointed to state lawmakers when The Ledger/NC Health News asked if he thought the hospital authority meetings should be more open and set aside time for citizens to speak.
“Well, I think the legislature decides whether they should or not,” he said.
If people don’t like the way the authority operates, Dunlap said, instead of calling their county commissioners, they should call state lawmakers. “But frankly,” he said, “I think it’s an issue the legislature doesn’t even want to touch.”
Atrium Health spent $334,452 to hire four Raleigh lobbyists to influence state policymakers in 2022, according to filings with the North Carolina Secretary of State’s office. Filings for 2023 are not due until the end of the first quarter
This article is part of a partnership between The Charlotte Ledger and North Carolina Health News to produce original health care reporting focused on the Charlotte area. For more information, or to support this effort with a tax-free gift, click here.
Atrium Health: A unit of ‘local government’ like no other – North Carolina Health News
