The news stunned Asheville and Western North Carolina, where Mission Health System Inc. was the area’s largest employer, its main healthcare provider, and a long-time source of civic pride. Seemingly out of the blue, Mission’s directors publicly announced on March 21, 2018, that they had voted to sell the 133-year-old nonprofit to HCA Healthcare, the nation’s largest for-profit hospital chain, for an estimated $1.5 billion.
“To say that [Mission’s] announcement … was a surprise would be an understatement,” the Asheville Citizen Times observed in an editorial. “There has not been the slightest hint anything was afoot until Mission announced that its board had approved the deal unanimously.”
Coming Thursday: A smaller, less-profitable nonprofit hospital system in North Carolina sells for $2 billion, plus $3.1 billion in additional commitments — more than double what Mission negotiated with HCA.
“The first I learned about the Mission sale was when it was publicly announced that it was under contract with HCA,” Esther Manheimer, Asheville’s mayor, told AVL Watchdog. “It was explained to me later that the negotiations were confidential.”
Confidential indeed. Nearly everyone, including doctors, nurses, and local and regional officials, had been shut out of the secret discussions that would lead to one of the biggest business deals in Western North Carolina history, one that Mission’s directors said would transform healthcare in the region for generations to come.
Today, two and a half years later, the story of how and why Mission’s leaders chose HCA remains opaque, cloaked in claims of confidentiality and bound by non-disclosure agreements that, they say, still restrict anyone involved in the sale from publicly discussing or criticizing the deal.
A head start for HCA
But four things are becoming clear, based on documents obtained by AVL Watchdog under public records requests:
One, a core group of Mission directors and executives, including board Chairman John Ball, President and CEO Ronald Paulus, and long-time external strategic advisor Philip D. Green received offers from HCA at least three months before the board formally authorized Paulus to start looking for potential partners. They gave HCA a head start, conferred with HCA executives before setting terms and conditions for other potential bidders, and planned all along to use HCA’s early offers as leverage against other candidates.
Two, although Mission’s board considered other partners — at one point even speculating about alliances with Google or Amazon — it invited only a select few companies to make proposals, quickly dismissed other suitors besides HCA, and invited only one other bidder to make a formal presentation, according to an investment advisor’s report to the Attorney General. The other bid was rejected quickly.
Three, based on “issues and concerns” that surfaced during pre-approval investigations by Attorney General Josh Stein, the Mission board held a special meeting Jan. 8, 2019, to discuss issues involving Green, Mission’s chief negotiator and a long-time friend and advisor to Paulus. Stein approved the sale just days after receiving legally binding assurances from Mission’s general counsel, the board, and Ball that they found no evidence Green “profited or benefitted directly or indirectly” in the negotiations or sale.
And four: Even today, former Mission directors and executives, HCA officials, and board members of the Dogwood Health Trust that was created with proceeds from the deal cite confidentiality and non-disclosure restrictions in refusing to discuss the negotiations except in broadly general terms. AVL Watchdog reached out to Paulus, Green, Ball, and others involved in the negotiations, all of whom either declined to answer questions or did not respond.
By continuing to prevent even superficial scrutiny of the documents and reports related to the agreement, or even answer basic questions, they make it hard for the public to trust that Mission, and the community it was created to serve, got the best possible deal.
Board explores partnering options
Leading up to the sale, board members later acknowledged, the Mission system was as strong financially as it had ever been, consistently profitable, dominant in the region, deeply respected, and recognized as one of the highest-quality healthcare systems in America.
Even so, the national trend to hospital consolidations was accelerating. Competition was growing. Reimbursements from Medicare and Medicaid were falling, and the North Carolina legislature was steadfast in refusing to expand Medicaid, leading to a rising number of uninsured patients.
Without a financially and operationally strong partner or buyer, board members and consultants said, Mission was doomed to a future of relentless cost-cutting that ultimately would degrade the quality, access, and affordability of care, and possibly even lead to the closure of hospitals.
According to a confidential analysis provided to the Attorney General’s office by Stout Risius Ross, an investment bank hired by the state — a redacted copy was provided to AVL Watchdog under a public records request — Mission’s active search for a partner or buyer intensified in July 2017. Ball created a seven-person working group to consider Mission’s partnering options that included himself, Paulus, Green, Mission’s General Counsel Ann Yaeger Young, and three board members: Dr. John Garrett, attorney Wyatt Stevens, and banker Robert Roberts.
HCA, the biggest for-profit hospital operator in America, with annual revenues of $50 billion, was at the top of their list. HCA had unmatched scale and a reputation for cost-cutting and back-office efficiency, strengths that Mission needed. HCA also had no existing presence in North Carolina, and thus could acquire Mission, effectively a regional monopoly, without being subject to antitrust concerns, an attractive option for the company.
Three months before the full board authorized Paulus to contact potential partners, “The working group directed Mr. Green to negotiate proposed term sheets with HCA for both a 50/50 joint venture model and a full asset acquisition model,” the Stout report said.
Visit to HCA headquarters
On Aug. 12, 2017, Green delivered HCA’s offers to buy or partner with Mission to Paulus, who passed them to Ball. Members of the working group later confirmed to Stout’s interviewers that their strategy all along was to use HCA’s offers as negotiating leverage against other possible bidders, the report said.
The following month, Sept. 17 and 18, “most of” the working group traveled to HCA’s headquarters in Nashville for meetings, the report said.
HCA Healthcare, formerly known as Hospital Corporation of America, had a history that included settling lawsuits ranging from Medicare and Medicaid fraud to breaking contractual promises. But Mission directors said after their Nashville visit that they were convinced HCA’s new management was scrupulously ethical.
Just six months earlier, in 2017, HCA paid more than $200 million to settle lawsuits related to its purchase of a nonprofit hospital system in Kansas City, a deal very similar to the one HCA was proposing with Mission.
And in 2003, in what was the largest health care fraud investigation in history, HCA paid the government more than $1.7 billion in restitution, fines and penalties to settle cases. In all cases, HCA denied wrongdoing.
There is no indication that HCA did anything wrong in pursuing or negotiating the deal with Mission.
Nancy Lindell, a spokesperson for Mission Health/North Carolina Division of HCA, did not respond to AVL Watchdog’s questions about HCA providing term sheets to Green in August 2017 or the meetings at HCA headquarters the next month.
Ball, Mission’s chairman, did not include the early offers from HCA or the meetings in Nashville in a timeline of the deal he provided to the Attorney General, according to records obtained by AVL Watchdog.
No RFPs: Board restricts bidders
Not until a board meeting on Oct. 26, 2017, more than five weeks after the meetings at HCA, did the full 20-member Mission board create a Strategic Planning Committee to officially begin exploring potential partnerships and authorize Paulus to begin sending formal letters of inquiry to potential bidders, records show. Green, a lawyer, was also tasked with being Mission’s lead negotiator.
Paulus told NC Health News after the deal with HCA was announced that he focused the bidding invitations on potential buyers who would have “enough value to bring that they should be considered.” Paulus said he identified “a good handful” of potential bidders and wrote formal letters to them to solicit their interest. Based on those responses, he said, the field was narrowed to two candidates besides HCA, then one.
The board’s decision to limit competitive bids also makes it difficult to determine if Mission got the best possible deal.
Other Potential Partners Dismissed Quickly
In the end, only one potential suitor besides HCA was invited to make a formal presentation to the board. Even today, neither HCA nor Mission will say who the other bidder was, except that it was a nonprofit, or how that company’s offer compared to the one from HCA that Mission already had.
Both HCA and the other company made their presentations on Feb. 12, 2018, and the Mission board — in the same meeting — voted unanimously to pursue a deal with HCA. The only question was whether to partner with HCA, thereby retaining some local control, or sell to HCA completely.
HCA has entered into joint partnerships with other not-for-profit hospital systems, including Austin and San Antonio.
At the next board meeting, March 8, 2018 — 19 weeks after the board formally authorized Paulus to initiate a search for potential partners — the board voted unanimously to sell Western North Carolina’s legacy healthcare system to HCA.
On March 21, 2018, Mission publicly announced that it had signed a letter of intent to be acquired by HCA. The letter allowed formal negotiations and due diligence to begin.
‘Issues and concerns’
By state law, the sale of a nonprofit company to a for-profit company must be reviewed by the Attorney General. The investigation led to a number of stipulations added to the proposed Asset Purchase Agreement, but also raised questions about how Mission’s leadership and outside advisors conducted the negotiations.
Green and Paulus were long-time friends from Pennsylvania. After Paulus joined Mission as CEO in 2010, Green and his consulting company, PDG Consulting of Arlington, Va., became a long-standing strategic advisor to Mission.
According to his biography on the business database Crunchbase, “Since 1976, Mr. Green has represented clients in a variety of fields, including health industry mergers and acquisitions, corporate planning and transactions, and litigation.”
Green did not respond to questions about whether he had other business dealings with HCA either before or during the Mission negotiations.
Records obtained by AVL Watchdog from the Attorney General indicate that the Mission board held a special meeting on Jan. 8, 2019 for “extensive deliberations regarding specific factual circumstances of interest to both the Board and the OAG (Office of the Attorney General).” Both Paulus and Green were excluded for at least a portion of the meeting.
The board heard a report from “outside legal counsel” about “various issues involving or related to officers of and/or advisors to Mission and the negotiation of the transaction.”
After the Jan. 8 meeting, Donald Esposito Jr., then Mission’s General Counsel, wrote to the Attorney General’s office to confirm that “neither Mission’s strategic advisor (PDG Consulting), its principals, nor any company with which they are affiliated will benefit directly or indirectly as a result of the transaction between HCA and Mission.”
The letter was requested by the Attorney General’s office, and Mission’s assurances were considered “legally binding,” Laura Brewer, communications director for Stein, told AVL Watchdog.
Ball also wrote to Stein, saying that the board had discussed “historical communications between Mission representatives and HCA,” communications with other potential partners, and “various issues involving or related to officers of and/or advisors to Mission and the negotiation of the transaction.”
“The Board has concluded,” Ball wrote to the Attorney General, “… that no member of Mission’s management or its outside advisors took any action, or failed to take any action, that was detrimental to Mission’s interest.”
“The Mission Health Board of Directors held the legal authority to govern that nonprofit corporation,” Brewer said. It had heard and discussed the Attorney General’s “issues and concerns” and decided, unanimously, to go ahead with the sale to HCA.
“The Attorney General’s Office determined that the Mission Board of Directors was fully informed as required by North Carolina law,” Brewer said. Stein traveled to Asheville January 16 to announce that he would not oppose the sale.
‘A fair deal’
Multiple experts in healthcare finance and mergers, including Mission’s investment banker, Cain Brothers, agreed that from a strictly financial perspective, HCA’s $1.468 billion offer to buy Mission was a fair deal.
They also noted that a fair deal is not necessarily the same as the best deal.
Today, after 20 months of HCA’s contentious management of the Mission system, and after a recent, eye-popping deal for a smaller, less profitable nonprofit hospital system on the other side of the state, it’s unclear if Mission even got the best possible deal.
Paulus joins HCA
The sale of Mission Health Care to HCA became official on Feb. 1, 2019. Just two weeks later, Paulus, who along with Green had championed the sale of Mission to HCA from the start, announced that he was resigning to take a new job, as strategic advisor to HCA.
Paulus is still on HCA’s payroll, the company confirmed.
Green declined to answer specific questions from AVL Watchdog, but wrote: “I hope you will take the opportunity in your article to give Mission’s Board of Trustees, as well as the Mission executive team, credit for the unbelievably successful transaction consummated with HCA; a transaction which was of enormous benefit to Mission and its employees, its patients and to the larger Western North Carolina community. While Mission’s outside advisors provided guidance, the Mission Board of Trustees made a fully informed and independent decision.”
Today, Green and Paulus remain close. PDG Consulting LLC and RAPMD Strategic Advisors LLC, their respective consulting firms, share the same executive assistant.
AVL Watchdog is a nonprofit news team producing stories that matter to Asheville and Buncombe County. Peter H. Lewis is a former senior writer and editor at The New York Times. Contact us at avlwatchdog@gmail.com.
Excellent story, and the most in-depth and well-researched so far. Grateful AVL Watchdog and Peter Lewis took on this task. I hope others recognize how tough getting the story has been, and how much we owe to The Dog for digging.
Good story. There’re some additional things I’d like to know. How did Josh Stein approve the deal when so many of the terms were under NDAs? It’s unfathomable how a regional hospital which all of us here are dependent on could make a deal like this with no public input and no requirements to keep rural facilities open or to provide adequate medical staffing. Was there no state process available for citizens to have a voice? Could Mr Stein or the governor have made one available? What campaign donations has HCA been making? Most importantly, what’s the remedy or recourse? As someone who’s had a family member in Mission, it was a terrifying and death-defying experience, from the terrible sanitary conditions in the rooms, to lack of nursing staff, to lack of CNAs for things like bathing or feeding a patient, to the shortages of even routine supplies, to the absence of skilled staff like phlebotomists. Meanwhile, some of Asheville’s best doctors are leaving because they don’t want their patients or reputations ruined by HCA. Can the state invest or incentivize in the expansion of Pardee or Advent? They owe us for this disaster.
Thank you for the note. We hear your frustration on the lack of transparency and public disclosure surrounding the sale of Mission Health System to HCA Healthcare.
A couple of quick points to address your questions:
1) Attorney General Stein and his North Carolina Department of Justice staff conducted an exhaustive investigation of the deal and had access, via request or subpoena, to hundreds if not thousands of documents. The NDAs were not a barrier in the AG’s investigation.
2) While it’s true the public was shut out of process of selling Mission to HCA, the independent monitor appointed by the Attorney General to oversee HCA’s compliance with the terms of the contract held a number of public hearings at which hundreds of local citizens shared their concerns and comments. Anyone can write to the Attorney General with comments or concerns.
3) The Attorney General made a number of changes in the final contract that strengthened protections for rural hospitals and healthcare.
Thanks for reading AVL Watchdog!
The AG had many calls and emails about this sell of MMH. Which he ignored All he had to do was check them out to see how they are with patient care and employee relations. Their agenda is greed. The AG says he wants to know any problems with HCA. Its a little late now, it seems to be a smoke screen in an election year.
Mr. Green intimates that us readers should give “…credit for the unbelievably successful transaction consummated with HCA; a transaction which was of enormous benefit to Mission and its employees, its patients and to the larger Western North Carolina community.”
I worked for Mission during this transition. I watched our resources slashed, our equipment and supplies transition to lesser and lesser quality and quantity, our providers get more and more frustrated and then throw up their hands and leave, our nurses successfully unionize despite an aggressive and disrespectful attempt at union busting by HCA. All of this occurred while the clinical staff banded together to face the greatest public health threat in the last century. Mind you, no one was offered hazardous duty pay and none were guaranteed that they would be taken care if they contracted the COVID virus. HCA did offer full pay if we required quarantine and then I personally watched staff come to work with COVID symptoms, told by management it probably wasn’t COVID, and that they were needed at work. Despite this tomfoolery the staff went, and continue to go, above and beyond for their patients because it was the right thing to do DESPITE HCA spouting 100% support and producing very little. To rub salt in the wound the President of HCA, in the middle of the the height of the first wave of COVID, thought it appropriate to send a blanket email to all employees that no one would be receiving even cost of living raises in 2021 due to the financial strain of the virus on HCA. Yes, the tone deafness of HCA leadership knows no bounds. Another round of salt came when HCA then reported a glowing first quarter profit report in which they exceeded expectations. Shockingly, no comments on raises were offered then or after.
The final straw was HCA issuing a Mission wide email offering raises to all but the nursing staff the morning of the successful nursing unionization process.
Ladies and gentlemen of the community, the facts as I see them: HCA has public record of a shady past in terms of ethical business dealings. A record that appears to be continuing. HCA is beholden to share-holders, thus ensuring that the financial health of the company will ALWAYS trump the health of our staff, our patients, or our community.
Mission is the only game in town and it is being run into the ground. Someone with enough business and/or political clout needs to step in before it is to late to salvage such a needed resource for quality healthcare in our region.
This all played out while I was in process of moving to AVL from Chicago. As a retired consultant with some awareness of corporate issues in the context of healthcare, I was instantly concerned when I heard of this deal. It reeked of a smoke-filled-room deal, with a bunch of good-old-boys lining each other’s pockets. The whole thing needs to see the light of day. No NDA ever written will hold up under a corruption investigation – just the fact that NDAs are in place is a red flag to me. Thank you for what you are doing to dig into this fiasco. Healthcare for profit is criminal. #HealthcareForProfitIsCriminal
Thank you for this in depth reporting on the Mission-HCA “deal.” I hope you’re able to continue your investigation and to find ways to access the information unavailable at this time or to encourage those with “nondisclosure” problems to disclose. And, I hope you are able to continue the story, especially, in the words of Mr. Green, on just how this transaction has been of “enormous benefit to the employees, patients and larger WNC community.” There is a large number of employees and patients who would strongly disagree.
Paulus delivered Mission on a platter, and was paid off handsomely. He and his henchmen are long gone, but the residents of WNC will be paying for this fiasco for years and years to come.
The preponderance of blame, however, lies with the Mission Board, spineless fools who willingly took their place in Paulus’ back pocket. Right after the sale was announced, one of the board members told me that “Mission was bleeding to death and the HCA sale was the only possible way to stop it.” Just a slight contradiction to the paragraph in the above report stating, “… board members later acknowledged, the Mission system was as strong financially as it had ever been, consistently profitable, dominant in the region, deeply respected, and recognized as one of the highest-quality healthcare systems in America. “
Agreed. Can’t believe that the fact that Paulus took a job with HCA so quickly afterwards wasn’t a tremendous red flag for the Attorney General. I can smell the cigar smoke from here!
The problem here is that lifesaving care is considered a commodity. When health care is for-profit, people take a back seat, and people die from lack of access to care. I know this to be true, having lost a son to our broken system 12 years ago.
But what led to the necessity of selling our successful system to a bunch of profit-mongers was the steadfast refusal of our state’s General Assembly to take billions of dollars in federal money — money that was paid in federal taxes by the people of this state — and expand Medicaid, allowing people who live in poverty, 70 percent of whom work, to access the care they need.
Before the Affordable Care Act passed, federal money helped pay for the care of people who couldn’t pay. That money was channeled into the expansion of Medicaid, so states that didn’t expand Medicaid didn’t get any money to reimburse them for indigent care. This is why hospitals across this state, and the 11 other states that have yet to expand Medicaid, are struggling and closing.
In North Carolina, if your annual income is below poverty level, you get nothing, unless you qualify for Medicaid — something few adults do. As a Navigator, I had to comfort a weeping mother whose son didn’t qualify for anything through the Marketplace or the state.
She just kept repeating, “My son is going to die. Do you have any idea how that feels?”
I had to tell her I do.
HCA is just one of many, many villains in this story. Thank you for investigating this. Keep up the good work.
Well done. This is a well-researched and documented story.
It peels back some of the layers of institutional secrecy and insider deals, and therefore is a huge service to our community. I’m certain there is more to this story, and I am hopeful you will continue to learn and share more.
Please keep up the great work. We are so glad you’re here and stepping up.
AVL Watchdog is a gift to Asheville and Western North Carolina.
HCA promptly got rid of outpatient Alzheimer’s care. Not profitable!
How is this helpful in a community with a large retirement population?
Someone needs to get to the bottom of this absolutely stinking deal!
Congratulations to the nurses for taking a stand!
Many thanks to AVL Watchdog for an important investigation. However, I hope there are followups as we’ve only begun to scratch the surface of the sale of a key community resource. Some questions below:
1) Were any Mission Board members interviewed for this article? Was there no push back from any local Asheville leader? How could the Mayor of Asheville not be consulted about a public resource sell-off.
2) Where was the NC Attorney General in protecting the public? Is his only role to make sure the paperwork is clean? Does he not have an obligation to consult with NC HHS or another health related state agency considering how health services could be changed.
3) The public health consequences of the sale need to be investigated. A couple of young doctors that we met last year at a UNCA Farmers Market booth were trying to attract patients to a new office they were setting up. They’d heard about what was happening at HCA/Mission and wanted no part of it. The above comments of nurses confirms a disturbing picture of corporate health care. Serve Wall Street and share holder first. Stakeholders, i.e. patients are farther back in the line.
4) The HCA takeover seems to have been a smooth, well orchestrated affair. How long had they had their eye on Mission and when did they start putting the pieces in place. Did HCA have a lobbying effort in Raleigh preparing the ground for the takeover?
5) The political implications of the sale should not be overlooked. The sale of Mission and the like IS the Republican health care plan. Let the of the market rule. Soon Obamacare could be declared unconstitutional and the Republican plan can really take off.
Finally, if we want to slow further sell-offs of health resources, vote for someone like Moe Davis who is familiar with how things work in places like Washington rather than a rank novice who considers health care access akin to buying a pizza.