Some North Carolinians fear out-of-state takeover with Sentara-Cone merger

Some North Carolinians fear out-of-state takeover with Sentara-Cone merger

Public comments on the pending merger between Cone Health and Sentara Healthcare show a stark divide, with some viewing it as an out-of-state takeover that will raise prices and others as a welcome infusion of resources.

North Carolina Attorney General Josh Stein collected the comments and will consider them as he decides whether to green light the transaction, which would form a 17-hospital system. Slightly over half of the more than 40 comments submitted were against the deal, announced in August 2020 with plans to close by mid-2021. A handful of commenters supporting it were Cone board members.

While billed as a merger, the resulting system’s headquarters would be in Norfolk, Va., where the larger, 12-hospital Sentara is currently based. Sentara CEO, Howard Kern is set to become CEO of the new system, while Cone’s CEO is going to find another job.

Several commenters in North Carolina worried the deal would strip away local services and send resources to Virginia. Cone is based in Greensboro, N.C.

“Of course there are economies of scale, but I am concerned Sentara will drain our community of its prized health system to prop up its own financial needs,” wrote Dr. Kurt Lauenstein, a family physician who works at Cone in Greensboro.

Dr. Su Wooi Teoh, an otolaryngologist who runs a solo private practice in Greensboro, expressed a similar sentiment, writing that it’s more of an acquisition in practice. He predicted the cost of care would rise if the deal goes through because big systems can negotiate higher rates from insurers, who pass the costs onto patients.

Some locals wondered why Cone couldn’t merge with a North Carolina outfit, like Wake Forest Baptist Health or Duke Health.

An attorney representing a cancer center in Asheboro, N.C., sent a letter informing Stein’s office that claims the deal can’t proceed without written approval from his client, Randolph Health. That’s because Cone owns a 40% stake in the facility and the operating agreement holds that neither party can transfer its interest unless both parties agree in writing. Robert Wilson, Jr.’s letter went on to say that Cone has neither sought nor obtained such approval from Randolph.

“Randolph has only learned of this merger through published reports and is unable to make an informed decision regarding approving the transfer of membership interest,” Wilson wrote.

The deal’s supporters include North Carolina state Rep. Jon Hardister, who said combining with Sentara will increase Cone’s ability to expand digital access. Former Cone CEO Tim Rice also extended his support, as did Greensboro Mayor Nancy Vaughan.

Unsurprisingly, several Cone board members commented that the deal will bolster Cone financially and create economies of scale, the rallying cry of all hospital mergers.

Cone and Sentara also needed approval from North Carolina’s insurance commissioner, Mike Causey, who approved the deal on May 6. The green light allows Sentara to oversee Cone’s Health Team Advantage health plan. The Federal Trade Commission will also review the proposed combination.

For its part, Stein’s office hasn’t disclosed its timeline for reaching a decision. Spokesperson Laura Brewer wrote in an email simply that the review is ongoing.

“It’s always a challenge to estimate timing for a such a review—it’ll take as long as it takes to conduct a thorough review,” she said.

Back in 2019, Stein gave for-profit hospital giant HCA Healthcare the go-ahead to buy not-for-profit Mission Health, based in Asheville, for $1.5 billion. Stein added a number of enforcement measures that allow his office to pursue legal action if HCA breaks its commitments, which include providing services at local hospitals for at least 10 years.

Roughly a year after that deal was approved, dozens of Mission Health patients complained to Stein about rising bills and diminished quality after the HCA takeover.

Sentara drew $6.8 billion in revenue in 2019, compared with Cone’s $2.2 billion that year.

Cone’s fiscal 2020 filing shows $2.3 billion in revenue and a 2.7% operating margin. The system also recorded $52 million in stimulus grants during the fiscal year, accounting for most of its operating income.

Cone would have lost money in the six months ended March 31 if not for the almost $27 million in federal stimulus grants the system recorded during that period. Including the grants, Cone posted a 2% operating margin in the six months ended March 31, having generated $25.5 million in operating income on $1.3 billion in revenue. Outpatient visits were down 13% in the 2021 period year-over-year, and emergency department visits were down almost 20%.

Sentara, by contrast, posted a strong 8% operating margin in the quarter ended March 31, with $197 million in operating income on $2.5 billion in revenue. The system did not disclose whether it recorded stimulus grants.

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Marie Maynes
Marie Maynes is a Sports enthusiast and writes for the Sports section of ANH.