Editor’s Note: As 2022 comes to a close, Asheville Watchdog staffers take you back and inside their most memorable stories and news events of the year.
The document behind this story in March, that the North Carolina Attorney General’s Office had “great concerns” that the Mission-HCA deal was “rigged from the beginning,” was buried in an avalanche of more than 17,000 files Asheville Watchdog obtained under a public records request.
But getting that memo wasn’t easy.
It took more than a year to obtain that one document, a year punctuated with repeated warnings to Attorney General Josh Stein from our friends at Duke University School of Law’s First Amendment Clinic, that Asheville Watchdog would sue him if the documents were not forthcoming.
Here’s the background: In 2018 the board of directors of nonprofit Mission Health System stunned nearly everyone, including city and county leaders, by announcing that Asheville’s flagship hospital, five satellite hospitals in western North Carolina, and dozens of health clinics would be sold to the giant for-profit hospital chain HCA Healthcare, for $1.5 billion.
Under North Carolina law, the Attorney General is required to investigate the sale of a nonprofit corporation to a for-profit company to make sure that the public’s large investment in the nonprofit is preserved.
The investigation lasted months and in the end Stein, after demanding some changes to the sale agreement, said he would not block the deal.
Why did the Mission board decide to sell? Mission was by all appearances financially solid, with a strong reputation as one of the top 15 hospital systems in America. It also operated as a state-sanctioned monopoly, deemed so important to the people of western North Carolina that it was allowed to operate exempt from antitrust laws.
Nashville-based HCA, meanwhile, had a reputation for relentless cost-cutting, putting the interests of shareholders over the needs of patients, and leaving a trail of lawsuits and Medicare fraud settlements in its wake.
Perpetual Nondisclosure Agreements
No one involved in the deal — not the 20 members of the board, not Dr. Ronald Paulus, Mission’s CEO, or other the top leaders of the Mission system, not even the top officers of the Dogwood Health Trust that received the $1.5 billion sale proceeds — would answer questions from Asheville Watchdog.
A few who responded said they were prohibited from speaking by nondisclosure agreements that Mission’s lawyers drafted and they signed. And, they added, the NDAs were effective “in perpetuity.”
In short, there were details of the sale that the principals of Mission, HCA, and Dogwood Health wanted to keep secret forever.
A Mission spokesperson at the time flatly said the public — which for generations had supported Mission with tax dollars, donations, and countless volunteer hours — had no right to participate in, or even question, the decision.
As a former business reporter and editor at The New York Times and Fortune magazine, I had a pretty good idea of how a billion-dollar business transaction normally unfolds. There was a lot that was abnormal about the Mission-HCA deal.
Who else bid for Mission besides HCA? No one would say.
Were there even any other bidders? If so, who? Again, “that’s confidential.”
But the real impetus for the story came when I asked the Attorney General’s office some questions about its investigation.
“Much of what you ask is confidential,” one of Gen. Stein’s staffers told me.
Under North Carolina public records law General Statute 132, any person has the right to inspect, examine and get copies of documents or materials made or received by a government agency in North Carolina while conducting public business. There are exceptions, of course, but it’s up to the public agency to cite why a record is being withheld.
It was then, and still is, Asheville Watchdog’s contention that the Attorney General’s investigation into the Mission-HCA sale was public business, and thus subject to the public records law.
Surely in the course of its investigation, prior to his green-lighting of the sale, the AG would have determined if there was a competitive bidding process, which other hospital systems were invited to bid, and whether the citizens of Asheville and western North Carolina got the best possible deal. What’s so confidential about that?
Duke Law to the Rescue
The Duke Law First Amendment Clinic provides law students the opportunity to work directly with clients like Asheville Watchdog who 1) have First Amendment-related concerns or claims and 2) cannot afford the assistance of lawyers with specialized First Amendment expertise.
In what I assume was something like “Bring Your Grandparents to School Day,” the first- and second-year law students adopted the mostly retired Watchdogs and embraced our cause. Make that plural. They also meticulously steered us through Sally Kestin’s complex, year-long Equity Erased series.
When the Clinic’s informal entreaties to the AG’s office on our behalf yielded no action, Duke’s lawyers set a deadline. If the records weren’t sent by then, a lawsuit would be filed.
The first tranche of documents, some 7,000 of them, arrived in my email inbox shortly thereafter. It was followed a few weeks later by several thousand more. And then again, another batch.
I was about midway through the mostly mundane and sometimes heavily redacted documents and emails — setting meeting schedules, telling colleagues of travel plans, and occasional discussions about public records requests from other media — when I came upon an unsigned memo.
“We have great concerns about how HCA was selected to be the entity that purchased Mission,” the memo read.
“In the end,” the document stated, “an outside observer could conclude that HCA rose to the top among a limited number of bidders because the deck had been stacked in its favor from the beginning by Dr. Paulus and Mr. [Philip] Green.” Green, Paulus’s longtime friend and advisor, had an undisclosed prior business relationship with HCA, the memo revealed.
By cross-referencing with other documents, I determined that the memo was written by Special Deputy Attorney General Jennifer T. Harrod, who led the North Carolina Department of Justice investigation. The AG’s office confirmed it.
The memo revealed that the Mission board had given Paulus and Green the authority to identify and contact potential bidders, a critical role typically given by the board to an independent investment banker in deals of this size to ensure the best possible return.
In the end, only two companies were invited to make a presentation to the Mission board: HCA, and nonprofit Novant. Novant’s bid was rejected immediately. (As we reported, Novant went on to buy a smaller hospital in eastern North Carolina for $5 billion. We also reported later that Mission’s former Chief Financial Officer said Novant’s offer was at least as good as HCA’s.)
I had already discovered in earlier reporting that Paulus and Green solicited an offer from HCA long before asking permission from the board to begin a search for possible partners.
Paulus collected a multimillion-dollar payout from Mission and joined HCA as a strategic advisor a few days after the deal closed. He has not responded to repeated requests to be interviewed by The Watchdog.
Now three years into its takeover of the Mission system, HCA is being sued for alleged anticompetitive practices and overcharging by the City of Asheville, Buncombe County, the City of Brevard, and six Asheville area residents. North Carolina Treasurer Dale Folwell has joined the Asheville-Buncombe lawsuit as well. Even Attorney General Stein, who said he had no power to stop the deal, weighed in against HCA in its bid to expand in Buncombe County.
The members of the Mission Health board that unanimously approved the sale, and the former Mission board members who now run the Dogwood Health Trust, all still refuse to speak with Asheville Watchdog, citing confidentiality.
And the Attorney General’s office still hasn’t provided all the public records we requested two years ago. Stay tuned. Maybe there’s another document out there that will turn into my favorite story of 2023.
Asheville Watchdog is a nonprofit news team producing stories that matter to Asheville and Buncombe County. Peter H. Lewis is a former senior writer, editor, and columnist at The New York Times. Contact him at email@example.com