By Brian Miller and Ardis Watkins
With Congress focusing its attention this spring on high hospital costs at a recent Ways and Means hearing, hospital executives in North Carolina are charging on ahead with one of the few measures proven time and time again to raise prices: mergers. Three days after the hearing, on a Friday afternoon, seemingly unaware, executives at AdvocateHealth, which owns North Carolina’s largest hospital system AtriumHealth, proposed a combination with WakeMed.
As far as corporate strategy, mergers are a valid tool to grow an enterprise. A quick look under the hood of recent history of Advocate shows a string of pearls: In 2017 Advocate Health Care and Aurora Health Care merged. In 2020, AtriumHealth merged with WakeForest Baptist Health, subsuming one of North Carolina’s medical schools, with prices in Winston-Salem growing 5% above the national median in 2021 according to the Health Care Cost Institute. In 2022, AtriumHealth merged with Advocate Aurora Health.
Now Atrium proposes to gain control of WakeMed, a well-managed health system. WakeMed has a Fitch A+ bond rating with 41% inpatient market share in its core service area of wealthy, suburban Wake County, resulting in accumulation of nearly a billion dollars in cash and investments in the tax-exempt hospital’s accounts. Patient volume is up, as are projected margins of 9%, with these healthy margins and tax-exempt bonds supporting an admirable planned $400 million two-hospital campus expansion including a much needed 150-bed behavioral health hospital.
With decades of economic evidence demonstrating that hospital consolidation raises prices and does not systematically improve quality, this transaction is about market power, as Atrium looks to construct a stronger statewide network. WakeMed has worked hard to execute organic growth and operational improvements, while Atrium has pursued mergers to increase its market power over insurers.
Atrium has a history of leveraging its market power and not for the benefit of consumers. In 2016, the Department of Justice Antitrust Division alleged that Atrium used its market power to contractually prohibit steering provisions in the health system’s insurance contracts. Network tiering and steering allow health insurers to preference low-cost, high-quality doctors and hospitals and then direct consumers to these facilities through financial incentives. At its core, tiering and steering uses market forces to drive competition amongst doctors and hospitals and reward cost-effective care with patient volume.
While Atrium settled in 2018 with no admission of wrongdoing, the settlement agreement included a 10-year prohibition on Atrium seeking contract terms prohibiting steering or requiring that it be included in the most-preferred network tier in a health plan’s network in the Charlotte market.
The pro-competition insurance strategy that Atrium opposed is exactly the strategy that the North Carolina State Health Plan, which covers over 750,000 workers, dependents, and retirees, has chosen to pursue. In 2025, staring down a deficit of over $500 million on $4.5 billion in annual spending, the plan modernized its benefit design and began to construct a preferred provider network to drive price competition for the benefit of its members: custodians, teachers, and law enforcement. The North Carolina State Treasurer introduced a zero-cost general surgical benefit for preferred providers, with members incurring zero out-of-pocket cost for using preferred surgeons, a significant incentive when 53% of members make less than $65,000 annually.
Several states have recognized the importance of tiering and steering in driving healthy competition and the need to address hospital industry anti-competitive behavior. In 2023, Texas banned so-called anti-tiering and steering provisions in managed care contracts. As North Carolina has no such law on the books and Atrium would gain increased state-wide market power, the WakeMed merger with Atrium will raise hospital prices and health insurance premiums for thousands of state employees and their families along with local taxpayers.
Recognizing the widespread unpopularity of resultant higher prices from the acquisition of statewide market power, Atrium announced the merger after the close of business on a Friday and attempted to push through an amendment to WakeMed’s corporate charter permitting through a routine county commission meeting the following Monday. Public outcry resulted in a 90-day delay to gather input.
The facts are simple. Healthy competition benefits consumers through lower prices and improved quality. With North Carolina’s hospital markets already highly concentrated, officials should regard further mergers with suspicion, especially those hurried through under the cloak of darkness.
