Atrium Health expands outside the Carolinas
A top official of Atrium Health warned the state that North Carolina’s biggest health care system might leave if it failed to win approval to refinance $300 million in bonds, two state officials told the Observer.
Anthony DeFurio, Atrium’s chief financial officer, made the comment earlier this month in asking the state’s Local Government Commission to guarantee the outstanding debt of Navicent, the two officials said. Last year, Atrium closed on a deal to combine with that Georgia-based health care system.
“You can understand that a business as large as ours, if this fails, that we might have to reconsider or rethink being in North Carolina,” State Auditor Beth Wood said Monday, paraphrasing DeFurio.
Wood, a member of the commission, said she took his remarks as a “veiled threat.”
The commission rejected Atrium’s request. State Treasurer Dale Folwell, who chairs the commission, said the CFO’s comments were not the reason.
“The threat had nothing to do with the non-approval,” he said. “It just soiled the whole meeting…. No member present or on phone thought it was necessary.”
In a statement Tuesday, DeFurio said he was “attempting to explain how the support of our home state is so important to Atrium Health and our future.”
“While my choice of words could have been more thoughtful and were initially misinterpreted by Commission members, at no time during the meeting, or during my following conversation with the LGC when asked to clarify my comments, did I intend to insinuate or make any threat regarding Atrium Health’s future in North Carolina,” he said.
“Atrium Health will continue to look for ways to improve our patients’ access to essential health services and reduce the burden of the cost of health care on all of our citizens, and we have no intention of leaving North Carolina.”
The refinancing denial came as Atrium pushes to expand its footprint and become a larger system.
Last year, Atrium changed its name from Carolinas HealthCare System to reflect its growth from a single community hospital in Charlotte to a regional health care giant. The name change was made as Atrium was seeking to combine with Chapel Hill’s UNC Health Care. That deal fell apart last year over questions about control of the joined system.
This year, Atrium, Wake Forest Baptist Health and Wake Forest University announced plans to join in a deal that will bring a four-year medical school to Charlotte, which lacks such a campus. Negotiations continue on that deal, which was announced in April.
According to Atrium, it employs roughly 35,000 people in the Charlotte metro area and about 65,000 across the Carolinas and Georgia.
Created during the Depression, the nine-member Local Government Commission must approve debt issued by local governments. As a non-profit hospital authority created by the state, Atrium falls under the commission’s purview.
Atrium was trying to refinance $300 million in Navicent debt. Wood said that would have saved the hospital system $29 million in interest costs. Attorney Allen Robertson, who represented Atrium before the Local Government Commission, told Business North Carolina that it was the first time the LGC turned down a request by the hospital authority.
Wood said the commission didn’t want to jeopardize North Carolina’s AAA bond rating — from all three rating agencies — by essentially lending its credit to an out-of-state entity.
“Once you open the door and they start borrowing on the credit rating of North Carolina, they could do it all over the nation,” she told the Observer. “So how can anybody expect me to vote ‘yes’ on a precedent-setting refinancing that has the risk of being a cost to the citizens of North Carolina for a hospital outside North Carolina?”
In response, Atrium said its bond documents make it clear that the state would not be on the hook.
Bonds, the documents say, “are not secured by a pledge of the faith and credit of the State of North Carolina or any political subdivision of the State of North Carolina, including the City of Charlotte or Mecklenburg County.”
Allen Robertson, a bond attorney who represented Atrium at the June 4 meeting, said DeFurio later clarified his comments.
“While some of Anthony’s comments did not come across as he intended and initially struck the wrong chord with the commission members, (Folwell) subsequently gave him an opportunity during the meeting to clarify those comments. Anthony . . . specifically stated that Atrium Health is a North Carolina hospital authority that does not intend to move elsewhere.”
Wood said while she took DeFurio’s comments as a veiled threat, they weren’t said “menacingly or intimidatingly.”
Said Folwell: “I just thought it was odd that a non-profit that has three times as much in the bank as the state does . . . would start a sentence by saying, ‘Don’t take this as a threat,’ over a $300 million refinancing of a hospital in Georgia that we have nothing to do with.”