Business NC takes look at expansion efforts by Duke University

(Business NC, David Mildenberg) — It hasn’t attracted attention like Blue Devil basketball phenom Cooper Flagg, but the pace of change at Duke University’s healthcare operation has accelerated dramatically.

In December, Duke Health said it would invest $280 million to buy Lake Norman Regional Medical Center and related businesses in Mooresville in Iredell County. It marks the Durham-based system’s first entry into the Charlotte metropolitan area, pending regulatory approval.

In January, Duke Health said it would partner with UNC Health to build a proposed $2 billion pediatric hospital on an undisclosed site in the Triangle. The state-owned, Chapel Hill-based system announced the freestanding 500-bed children’s hospital in September 2023. Beyond its globally respected medical pedigree, Duke is providing fundraising muscle needed to execute the project, a first of its type in the state.

In March, Duke Health announced a partnership with Novant Health to develop locations across the state to improve health outcomes. No specific projects or financial details were provided by the state’s second-largest hospital operator (Novant had about $10 billion in annual revenue last year) and third-biggest (Duke had $6.8 billion of revenue in fiscal 2024.)

The organizations said construction of the first sites would begin this summer, with the facilities opening about 18 months later.

Duke Health officials decline to discuss what is sparking the ambitious moves. But consolidation is a major trend in the healthcare industry because of increasing costs of remaining competitive and perceived advantages from economies of scale. Hospital system executives say they need to achieve a significant size to better negotiate contracts with insurance companies and invest in talent, technology and real estate.

Novant Health, which owns hospitals in the Charlotte, Winston-Salem and Wilmington areas, has said it wants to triple its annual revenue to the $30 billion range over the next few years.

That followed a similarly aggressive expansion effort at Atrium Health sparked after the 2016 hiring of CEO Eugene Woods. The Charlotte-based institution now dwarfs its North Carolina peers, with annual revenue topping $32 billion and operations in six states.

Duke Health’s moves follow a restructuring of leadership after the June 2023 retirement of Eugene Washington as the university’s chancellor for health affairs. He had held the post since 2015.

Upon Washington’s departure, Duke Health created two positions. Dr. Craig Albanese became CEO, overseeing the clinical enterprise, and Dr. Mary Klotman was named executive vice president for health affairs. The dean of Duke School of Medicine since 2017, she would “oversee Duke Health’s academic mission,” university President Vincent Price said in a June 2023 release.

Albanese came to Duke in January 2022 from New York-Presbyterian Hospital, where he had been group senior vice president and chief medical officer of the $9.2 billion, 10-hospital academic health system. He is a surgeon who previously had senior leadership jobs at Stanford University and its healthcare business.

Money won’t be a problem at Duke. The university reported an endowment of $11.9 billion last year and has an alumni roster that includes billionaires such as Apple CEO Tim Cook and Carlyle Group co-founder David Rubenstein.

In December, an anonymous donor gave $50 million to the proton beam therapy center, which is scheduled to open in 2029. It is expected to provide fewer side effects than traditional radiation therapy.

“Hospital affiliations are the new merger,” says Barak Richman, a law professor at George Washington University, referring to the Novant agreement. He is an expert on N.C. healthcare after previously working at Duke. “The idea is you secure patient flows, and you lock up different parts of the market. And, sometimes, that requires less regulatory scrutiny or oversight.”

Duke operates its internationally recognized flagship hospital and a smaller regional one in Durham, plus a third hospital in Raleigh that was acquired in 1998. Since 2011, it has been a partner with Brentwood, Tennessee-based LifePoint Health in the ownership of smaller community hospitals, including nine in North Carolina.

“We recognize the healthcare landscape is changing,” Albanese said about the Iredell County expansion. “While we continue to expand access to care within the communities we serve, it’s also time to do more and deliver care to more people — in more communities.”