ake Medical Center (Raleigh, North Carolina), a 725-bed hospital, was formerly a county-owned facility opened in 1961 and managed since 1965 by the non-profit Wake County Hospital System (WCHS). In 1997, the Wake County Board of Commissioners (Wake Board) transferred ownership of WMC to WCHS. WCHS paid $160 million in county debt, must retain general hospital services, continue indigent care at historical levels and meet financial stability goals. The Wake Board directly appoints part of the WCHS Board but no longer must fund indigent care. WMC could revert to the county if terms are violated.

Conversion Process

Motivation. The Wake Board's motivation for the transfer was to ensure the continuation of indigent care without county subsidies. WCHS expected a transfer to increase chances for survival by eliminating restrictions that impaired its competitive ability. Transfer to WCHS allowed Wake County to guarantee continued indigent care without funding it. WMC now can avoid public bidding rules, disclosure requirements that hampered sensitive negotiations and a prohibition on out-of-county partnerships. Though Tenet made a financially attractive bid, the Wake Board agreed that sale to an out-of-state for-profit firm would not be desirable.

Public Oversight. The transfer was extensively publicized through the media and open discussions in numerous meetings. The public became aware of the possibility of a conversion nearly two years prior to the final agreement. The Wake Board and WCHS in 1996 hired the Hunter Group, which studied nine options and recommended transfer. All Wake Board discussions were in open meetings. WCHS extensively publicized the transfer in meetings with medical staff, key community leaders and the public. The full text of the agreement was released prior to closing. Although newspaper editorial opinion was negative, media coverage was balanced. The Attorney General had no substantive involvement in the conversion. State law allowed a transfer of assets to a citizen-controlled board. WCHS voluntarily alerted the Attorney General early in the process, but he convened no public hearings nor issued an opinion. The transfer posed no antitrust issues.

Fair Value. Assets of the hospital may have been transferred somewhat below market value. Using Coopers & Lybrand financial projections, hospital and county negotiators in 1996 got Aback-of-the-envelope@ estimates of WMC's value ($250 to $400 million). A bank also provided valuation opinion to the Wake Board. The Board later rejected a Tenet offer to pay $280-$320 million in lease payments over 20 years, including $50 million paid up front and a guaranteed open door policy. Bids were not solicited (none were legally required).

Community Control

The community retains control of WMC through appointments to an expanded Acitizen-controlled hospital Board. The Wake Board formerly approved all hospital Board nominations. Under the new arrangement, the Commissioners appoint eight Board members directly and the Board appoints the remaining six. All Board meetings must be open to the public. Thus, the county has more control over Board composition than before. There were initial concerns about whether politicization of the Board might impair its effectiveness, but mixed views about whether this actually has occurred.

Community Health Impact

Hospital Survival. The conversion likely will improve the hospital's long-term survival prospects. The transfer will permit WMC to compete more effectively through out-of-county partnerships, greater earnings on reserves and less red tape in personnel and purchasing decisions. The agreement makes it harder to sell or lease WMC than before.

Access. There is mixed evidence whether the transfer increased access barriers for uninsured or Medicaid patients. WCHS must maintain historical