CHARLOTTE, N.C. (WBTV) - A top executive with Atrium Health said the hospital could look to move its business operations elsewhere as state financial regulators express skepticism at the hospital’s request to re-finance hundreds-of-millions of dollars of debt from a hospital it bought in Georgia last year.
Atrium Health, which is the name by which the Mecklenburg County Hospital Authority does business, finalized its merger with a hospital system in rural Georgia, Navicent Health, in January.
Because Atrium, as a county hospital authority, is a government agency, it issues debt through the North Carolina Local Government Commission. Because debt issued through the commission is ultimately backed by the taxpayers of North Carolina, local governments with otherwise good credit ratings can obtain more favorable terms on debt.
At the LGC’s June meeting, Atrium requested the commission’s approval to refinance $300 million in debt from Navicent Health. The request was made under a state law that allows hospital authorities in the state to incur new debt with the commission’s approval.
Although Navicent’s refinanced debt would be issued through the local hospital system in Georgia, the debt would be back by Atrium. In order to issue the new debt in a way in which Atrium ultimately guaranteed the refinanced debt, the hospital would create one entity to issue and service the debt, meaning the health system and its affiliated entities would be responsible for paying the debt..
In its presentation to the LGC, Atrium said it would save $29 million in reduced debt service costs.
The request was denied in an unanimous vote by the commission, whose members were uncomfortable with the prospect of using North Carolina resources to support a hospital in Georgia.
“It had everything to do with the long term implications," LGC member Mike Philbeck said of the proposal for the North Carolina-based hospital system to incur new debt for a hospital it recently bought in Georgia. “To what degree are we making the citizens of North Carolina the ultimate backers of it?”
During the meeting, North Carolina State Auditor Beth Wood--who, as Auditor, is on the commission’s executive committee--voiced her skepticism at the idea, according to multiple people present for the meeting, all of whom spoke with WBTV on the condition they not be named.
In response to Wood’s skepticism, the sources said, Atrium’s Executive Vice President and Chief Financial Officer, Anthony DeFurio, said the hospital could look at moving its business operations if it was unable to secure the commission’s approval.
Several of the sources who relayed the exchange to WBTV said DeFurio prefaced his ultimatum by saying he was not attempting to threaten the commission.
WBTV first requested comment for this story early Friday afternoon. A spokeswoman for Atrium refused multiple times to offer an explanation for DeFurio’s comments and referred a reporter, instead, to the hospital’s third-party bond counsel.
The spokeswoman did issue the following statement in response to a request for comment for this story:
"Charlotte, North Carolina is the home of Atrium Health. Since our humble beginnings nearly 80 years ago, we’ve been deeply rooted in this community and remain committed to serving the residents of this state – as well as those throughout this region – with some of the highest quality care in the world. This commitment was most recently demonstrated by our $10 million commitment to help address the Charlotte community’s affordable housing initiatives.
The denial by the Local Government Commission means that at the current time, Navicent Health, a part of Atrium Health since January 1, 2019, will not be able to refinance its existing debt through Atrium Health, which would have allowed some savings on interest costs to occur. We are constantly looking for ways to lower the cost of healthcare and approval would have allowed Navicent Health to reinvest the savings as a non-profit into the community it serves, as well as further strengthen the Atrium Health credit group.
While we were hoping to receive approval for this debt refinancing, we will continue looking for the best ways to continue making positive impacts on the health of the communities we are privileged to serve and delivering on our mission to improve health, elevate hope and advance healing - for all."
Editor’s note: This story has been updated to change a sentence about who guarantees specific debt instruments issued by Atrium Health. The hospital system, not the State of North Carolina, provides a guaranty for debt issued by Atrium Health.