As lawmakers work to negotiate a final state budget by the end of the month, the ongoing conflict between Vidant Health and the UNC System  continues to unfold through public jabs and in private mediation.
In the balance:
Tens of millions in Medicaid reimbursements to one of eastern North Carolina’s most vital hospital systems.
Vidant Medical Center’s status as East Carolina University’s teaching hospital.
And the direction — and independence — of the governing board of the hospital.
Tensions between UNC and the Greenville-based health system exploded last month after Vidant’s board moved to strip the UNC Board of Governors of its ability to appoint members to the board of Vidant Medical Center. The UNC system sued to prevent the move and a judge granted a temporary restraining order, directing the two sides into mediation to resolve the conflict.
UNC System Interim President Bill Roper declined to answer questions on the matter last week as he visited the General Assembly, where $35 million in Medicaid reimbursement money for Vidant’s hospital in Greenville was left out of the recently passed Senate budget. Republican legislative leaders have also publicly floated the idea of building a new hospital in Greenville, which would free ECU from its dependence on Vidant Medical Center as its teaching hospital.
Gov. Roy Cooper criticized the Medicaid reimbursement cut in the proposed budget last week, saying the conflict seems like “a political vendetta” that threatens the well-being of eastern North Carolina.
The Board of Governors has appointed members to the hospital’s board since the 1970s, when what is now Vidant Medical Center became the teaching hospital for ECU’s Brody School of Medicine. Under the most recent agreement, in place since 2013, the board of governors appoints nine of the board’s 20 members and the Pitt County Board of Commissioners appoints the other 11.
But amid mounting political tensions between ECU, the Greenville business community and the board of governors, Vidant’s board – and its CEO, Michael Waldrum – came to believe the hospital was best served by more independence.
“Having a group that lives in other parts of the state kind of dictating to us who our board members are doesn’t make sense if you think about it,” Waldrum said in a local radio interview  late last month. “That’s really the underlying premise.”
In order to make changes to board appointments, they needed the consent of the Pitt County Board of Commissioners and the Vidant Medical Center Board itself, Waldrum said. Members of both bodies were in unanimous agreement about a “self-perpetuating model,” free of appointments from the UNC Board of Governors, Waldrum said. That includes the members of the hospital board appointed by the UNC Board of Governors, he said.
Most of the principles in the dispute, including leaders at UNC and Vidant Health, either declined to speak on the record for this story or did not respond to interview requests.
Policy Watch spoke to a number of sources in the Greenville and ECU communities this week, including two members of the Pitt County Board of Commissioners who did not want to be publicly identified because they believed it would compromise ongoing mediation talks. They described the hospital’s desire for independence as long brewing. But it became more urgent as hospital leaders watched the UNC Board of Governors’ myriad controversies.
The board of governors’ ouster of ECU’s then-Chancellor Cecil Staton  in March may have been the final straw, multiple sources said.
Waldrum was one of more than 120 ECU leaders, alumni and Greenville business luminaries who signed an open letter in support of Staton. 
At the center of the conflict was Harry Smith, the powerful and combative chair of the board. An ECU alumnus and Greenville resident, Smith has taken a direct and outsized interest in the university. After Smith’s role in an ECU housing deal came under scrutiny, he pledged to recuse himself from communications involving the campus and avoid having a presence on campus . He later changed his mind and resumed what some called micro-managing, others called it bullying .
Conflict between Smith and Staton was barely veiled and emails from Smith to lawmakers disparaging the chancellor led to speculation his ouster was personal. Staton was asked to resign without a publicly stated reason. Smith and Roper, UNC’s interim president, refused to answer questions about the matter.
That, several sources close to the conversations said, was when members of Vidant’s board and the Pitt County Commissioners began to believe the hospital board’s independence was imperative.
Adding to the sense of urgency: rumors – later confirmed by leaked confidential documents  – that the UNC system was exploring a takeover of Vidant by UNC Health Care.
“It is part of a coordinated effort by outside interests and Raleigh politicians to ‘take dominant position in governance, deal terms, etc.’ in eastern North Carolina,” Vidant said in a fiery statement after the release of the leaked documents.
UNC responded with a statement denying it had any plan – secret or otherwise – to take over the system.
“Even if there were plans, secrecy would be impossible,” the system said in a statement. “A combination of UNC Health Care and Vidant Health would require the approval of multiple public entities and boards. It would also require a public bidding process under State law.”
“Like all hospital systems, the UNC Health Care System is keenly aware of the rapid consolidation occurring across the country,” the statement read. “All systems look frequently to consider potential partners. The leaked document was prepared by a consulting firm hired by the UNC Board of Governors to illustrate and educate them on what the consolidating health care market might look like in the future. It was not prepared to evaluate partners or to pursue new partners.”
On Monday Dan Gerlach, the interim chancellor of ECU appointed by the board of governors after Staton’s ouster, released a statement  with Dr. Mark Stacy, Dean of the Brody School of Medicine. The statement accused Vidant and the Pitt County Board of Commissioners of conspiring to change board appointments unilaterally and laying the potential for lost Medicaid dollars in the state budget process entirely at their door.
“The plain fact is that Vidant Health and Pitt County acted behind closed doors to change how appointments are made to the Vidant Medical Center Board,” the statement read. “No one at ECU/Brody was consulted or agreed to this change. This action violated the affiliation agreement that ECU and Brody have with Vidant and Pitt County. Their action broke an agreement that has been in place, in some form, for decades. We at ECU made the decision to protect our interests and engaged legal counsel to defend the agreement.”
While the two sides are now in mediation, there has been little in the way of visible progress.
Last week, the Pitt County Commissioners put forward a new proposal to resolve the dispute. Under the proposal, the UNC Board of Governors would appoint four members to the hospital’s board rather than the nine it appointed under the original agreement. Pitt County would retain its 11 appointments (at least one a physician from Pitt County) and the Vidant board would itself appoint two members (both physicians from ECU nominated by a committee at the university). The dean of ECU’s medical school would also hold a seat on the board.
UNC flatly rejected the proposal in a statement, insisting that the 2013 agreement be honored as written.
“We continue to believe that the best path forward for Vidant, Pitt County and East Carolina University would be to honor the long-standing partnership that has served eastern North Carolina well for more than 40 years and to fully restore the governance structure all parties had agreed to in the affiliation agreement,” the UNC System statement read. “We welcome future dialogue with Vidant leadership and look forward to hearing their concerns, as well as resolving problems that have arisen in the relationship with Vidant and its support of the Brody School of Medicine.”
In his recent local radio interview, Waldrum rejected the idea that Vidant was in any way abandoning its relationship with ECU and its Brody School of Medicine.
“There are so many false narratives out there and it’s unfortunate that’s the case,” he said.
“We know this in Greenville: we need ECU and Vidant working together,” he said.