Hospitals agree to bury hatchet

Two sparring health-care systems are playing the odds that demand and an economic rebound will create the need for up to 125 hospital beds in the western Triad.

Novant Health Inc. and Wake Forest University Baptist Medical Center agreed yesterday to a settlement that could result in community hospitals being built in Advance, Clemmons and Mocksville in phases through 2017.

The health systems said they reached "a mutually satisfying solution" -- approved yesterday by state regulators -- to end their often-heated 27-month competition to build a $100 million, 50-bed hospital -- Novant in Clemmons and Wake Forest Baptist in Advance.

The Mocksville piece of the puzzle was the surprising development from the settlement. Wake Forest Baptist said it plans to file a certificate-of-need application for a critical-access hospital with up to 25 beds as part of its strategy for replacing an aging Davie County Hospital.

Both hospitals got a conditional certificate-of-need approval last year. Both appealed the decision favoring their rival, with Novant ending its pursuit in March and Baptist dropping its appeal as part of the settlement.

"There were times when emotions ran high and some people thought litigation would be the only way to get to the finish line," said Greg Beier, the president of acute-care services for Novant.

But the realities of legal expenses of more than $1 million a year, and the prospects of seven to 10 years of litigation and appeals, persuaded the systems to reach a compromise.

Donny Lambeth, the president of Wake Forest Baptist Hospital, said that its officials eventually determined that there was a slim chance of its appeal of the Clemmons hospital being approved.

Beier said, "As we started the steps of litigation, we realized we were wasting resources that could be used to focus on the health-care needs of the communities."

The systems expect to begin site preparations in 2010, construction in 2011 and outpatient surgery, imaging and related services and physician practices in 2013. However, the systems hedged their plans by agreeing not to offer inpatient beds before 2017.

"This phased approach gives us time to determine the feasibility of constructing acute-care beds at the medical complex," Lambeth said.

Both Beier and Lambeth acknowledge that some residents will be disappointed that they will have to wait three to seven years for hospital services in their community, as well as a major economic driver. Each hospital is expected to have several hundred employees.

Beier said he believes that local residents understand how the recession has affected expansion plans in most industries. He said that their patience will be rewarded when they receive convenient, quality health care for several decades from the hospitals.

David Meyer, a senior partner with Keystone Planning Group of Durham, said that growing suburban markets are "attractive to health-care providers, so it is not surprising that they targeted this area with their development plans."

Meyer said he has doubts whether the communities could currently support up to 125 hospital beds. "But six years in the future, that may be different," he said.

The Mocksville hospital plan drew criticism from some residents in both Davie and Forsyth.

"I don't believe the extra 25 beds are needed," said Randy McDaniel, who lives near Mocksville. "What I'm concerned about is that Baptist eventually will determine that they don't need all 50 beds in Advance and the community will be shortchanged at that hospital."

Beier and Lambeth are convinced there will be enough demand to require all three hospitals, based on their own analysis and regulators' approval of their applications. A key state regulation is that a proposed hospital cannot represent an unnecessary duplication of services.

However, since the inpatient stipulation would mean seven more years before Wake Forest Baptist could fully replace the Davie hospital -- with an annual subsidy cost of about $1 million -- Lambeth asked Novant if it would be willing to not oppose a critical-access hospital in Mocksville.

Beier said that Novant agreed, pending its review of Wake Forest Baptist's plans.

Lambeth said that Wake Forest Baptist expects to file the CON application by early March after studying its options, which could include a partner with experience in running critical-access hospitals. Those hospitals meet a federal designation for small, rural hospitals that allows for higher government reimbursements with a limit of 25 beds.

"We need the flexibility to meet the needs of the entire county," Lambeth said. He said it is possible that the Mocksville hospital could open in 2013.

The Advance hospital will not include a birthing center. Wake Forest Baptist's request was turned down twice by state regulators. Novant performs the majority of births in the region at Forsyth Medical Center in Winston-Salem.

Ken White, a Davie County commissioner, said that having to wait another seven years, and doing without a birthing center, will make the settlement "a bittersweet compromise" for some residents.

"We've known for some time this is not a sprint, but a marathon," White said. "We have to have faith at some point in the CON process and that the need for all these beds is realistic.

"At least the biggest hurdle before us has been removed for good."

rcraver@wsjournal.com

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Timeline on hospital proposals

Key dates in the battle to build new community hospitals in the western part of Forsyth and eastern part of Davie counties:

• SEPT. 17, 2007: Novant Health Inc. and Wake Forest University Baptist Medical Center announced plans to build community hospitals -- Novant, the parent of Forsyth Medical Center, in Clemmons and Wake Forest Baptist in Advance. Announcements begin certificate-of-need process with N.C. Division of Health Service Regulation.

• NOV. 16, 2007: First of three public hearings on hospital applications held by state officials.

• FEB. 27, 2008: State officials reject applications by both hospitals.

• MARCH 25, 2008: Wake Forest Baptist withdraws one of two new applications after a week, proceeds with application without a birthing center.

• JULY 16, 2008: Novant submits second application; Wake Forest Baptist submits fourth application that includes birthing center.

• AUG. 28, 2008: Wake Forest Baptist receives conditional approval of its application without birthing center. Novant appeals that decision on Sept. 5, 2008.

• DEC. 9, 2008: Both hospitals lose first round of appeals with administrative law judge.

• DEC. 23, 2008: Novant receives conditional approval of its second application, while Wake Forest Baptist's application with birthing center is denied. Wake Forest Baptist appeals that decision on Jan. 20, 2009.

• MARCH 26, 2009: Novant drops appeal of Wake Forest Baptist application without birthing center.

• APRIL 22, 2009: Wake Forest Baptist says it plans to build Davie hospital in phases, but doesn't say when it will start.

• DEC. 2, 2009: Hospitals reach agreement that will allow Novant to build in Clemmons and Wake Forest Baptist allowed to build in Advance, but neither hospital to offer in-patient beds before 2017; the deal also allows Wake Forest Baptist to build a new 25-bed critical-access hospital in Mocksville.

Source: Journal research