070919 Randolph Health
July 9, 2019
Closed Special Joint Session with the City of Asheboro City Council
The Randolph County Board of Commissioners met in a special meeting at 7:00 p.m. in the
Randolph County Emergency Services building located at 760 New Century Drive, Asheboro,
North Carolina, for the purpose of discussing competitive healthcare activities by or on behalf of
Randolph Health. Chairman Darrell Frye, Vice-Chairman David Allen, and Commissioners Kenny
Kidd, Maxton McDowell, and Hope Haywood were present. Also present were County Manager
Hal Johnson, Finance Officer Will Massie, Associate County Attorney Aimee Scotton, Chief of
Emergency Services Donovan Davis, and Clerk to the Board Dana Crisco.
In attendance with the City of Asheboro were Mayor David Smith and the following members
of the Asheboro City Council: Clark Bell, Edward Burks, Linda Carter, Walker Moffitt, Jane
Redding, Katie Snuggs, and Charles Swiers. City staff members present were City Manager John
Ogburn III, Finance Director Deborah Reaves, Deputy City Clerk Tammy Williams, and City
Attorney Jeffrey Sugg.
At 7:01 p.m., Chairman Frye opened the meeting for the County.
Closed Session
At 7:03 p.m., on motion of McDowell, seconded by Kidd, the Board voted unanimously to go
into closed session pursuant to North Carolina General Statutes Section 143-318.11 for the
purpose of discussing competitive healthcare activities by or on behalf of Randolph Health, which
discussion is privileged and confidential pursuant to North Carolina General Statutes Section
131E-97.3, as is permitted by North Carolina General Statutes Section 143-318.11(a)(4).
Ms. Angela Orth, Chief Executive Officer for Randolph Health, initially reminded the
governing boards of the vital health care and economic roles played by Randolph Health (the
“Hospital”). Ms. Orth emphasized that the Hospital board and management team is asking the
units of government to help preserve high quality health care in Randolph County, not to preserve
the Hospital as it currently exists.
The Hospital is confronting daunting financial challenges, even with a seven million dollar
operating margin improvement over the past twelve months. However, this progress is not
sufficient.
In its current configuration, the Hospital cannot overcome the problems associated with
operating an aging, oversized, and inefficient physical plant while carrying a debt load between
twenty-four million and thirty million dollars in size. The situation is not sustainable.
Ms. Orth and Mr. Terry Akin, who is Chief Executive Officer for Cone Health, described a
transition that is underway in the conceptualization of how to provide high quality health care.
Rather than focusing on the brick and mortar acute care hospital, the focus is directed toward
proactive measures that reach out to individuals with the aim of fostering wellness. This proactive
approach is referred to as the “population health model of care.”
With the population health model of care as an end goal, Ms. Orth discussed the Hospital’s
proposal for maintaining high quality health care in Randolph County. This path forward, which
was referred to as a third-party-sponsored transition concept, includes the use of bankruptcy as an
essential tool.
The Hospital has a term loan that expires on October 15, 2019. Bankruptcy proceedings will
have to be used to resolve this debt.
The target date for filing a bankruptcy petition is October 4, 2019. A bankruptcy plan must be
developed to detail how the Hospital will emerge from bankruptcy and support a successor
operator with a right-sized hospital facility that embraces the population health model of care.
Out of the bankruptcy, a successor operator would purchase the components of the existing
Hospital that are sustainable (e.g., Randolph Health Medical Group, Randolph Health MRI, and
the Randolph Cancer Center). Cone Health is the contemplated purchaser of these assets.
The Hospital would emerge from bankruptcy as a new non-profit North Carolina corporation
(for ease of reference, “RH 2.0”) that would take title to the assets that are unattractive to other
potential purchasers. RH 2.0 would own the Hospital’s outdated physical plant and equipment.
The third-party-sponsored transition concept envisions RH 2.0 operating for approximately 36
months in order to resolve the debt that is not shaved off during the bankruptcy proceeding. At
the end of this 36-month period, RH 2.0 would wind down as a solvent entity, and the successor
operator (potentially a Cone Health entity) would fully implement the population health model of
care.
During the time period that RH 2.0 operates, the fiscal difficulties and disruptions inherent with
the contemplated process would inevitably lead to financial losses that cannot be sustained without
funding from third parties. The units of government are the source from which the Hospital’s
current board and management team hope to secure funding to overcome RH 2.0’s losses.
The concept put forward by the Hospital anticipates a need for deficiency funding in the amount
of approximately four million dollars for each year that RH 2.0 operates. During this 36-month
period, the successor operator would use the time to construct a new facility and engage in
physician recruitment efforts with a focus on population health planning.
As a means of obtaining the needed deficiency funding, Ms. Orth discussed the Rural Health
Stabilization Act that was introduced by Senators Berger and Tillman as Senate Bill 681. This
legislation would provide a pathway for local governments to access low interest loans for
financially distressed health care systems with outdated medical facilities.
UNC Health Care would manage applications for funding and make funding recommendations.
A funding recommendation from UNC Health Care would be forwarded to the Local Government
Commission for final evaluation.
The bill has passed the North Carolina Senate and, as of the date of this joint meeting, is under
consideration in the North Carolina House of Representatives. If the legislation is enacted, the
Hospital would be a good candidate for the receipt of funding. Such funding could be used by the
local governments to support the implementation of the third-party-sponsored transition concept.
The members of both governing boards expressed their desire to secure on-going high quality
health care for Randolph County. However, these same officials also expressed their serious
concerns about the viability of the proposal/concept discussed by the Hospital’s management.
Even if the Rural Health Stabilization Act is enacted, Governor Cooper’s veto of the state budget
and the debate about a possible veto override have called into question whether and when funding
for the program outlined in the legislation will be available. Beyond these legislative concerns,
and in light of the commission’s past aversion to local government financing of operational
expenses as opposed to capital investments, the prospects of the Local Government Commission
approving local government borrowing as proposed by the Hospital are uncertain, if not doubtful.
Another fundamental concern for members of both governing boards was the lack of certainty
about the issue of whether, at the end of the proposed transition period, a health care facility to
provide acute care will be physically located in Randolph County. Under the concept shared by
the Hospital at this meeting, the issue appears to be a matter for future negotiation.
Neither governing board was in a position to take action at the conclusion of this special joint
meeting. A consensus emerged that both boards wanted more information.
The management team members for both units of government, in close consultation with
Chairman Frye and Vice-Chairman Allen as well as Mayor and Mayor Pro Tempore of the City
of Asheboro, will continue to monitor the situation and conduct research as needed. If and when
there is sufficient information to warrant further discussion and potential action, another special
joint meeting will be called by the authorized elected officials.
Regular Session Resumed
At 8:55 p.m., on motion of Kidd, seconded by Allen, the Board voted unanimously to return to
regular session.
Adjournment
At 8:55 p.m., on motion of Kidd, seconded by Allen, the Board voted unanimously to adjourn.
________________________________ ________________________________
Darrell Frye, Chairman David Allen
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Kenny Kidd Maxton McDowell
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Hope Haywood Dana Crisco, Clerk to the Board
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