NC raids rural health fund for children’s hospital, setting up debate over future healthcare dollars

For months, as Republican lawmakers in the North Carolina General Assembly found themselves at loggerheads over a new budget deal, one key sticking point was funding for a children’s hospital project.

Legislative leaders said this week they have come to an agreement that boosts the state’s commitment to the project by about $105 million, for a total of about $425 million. But the deal resolves a tense back-and-forth over a key initiative aimed at improving care for kids. But it’s prompting new debate over where future healthcare dollars should be spent — especially since the new money was taken from a rural healthcare initiative. 

As part of the 2023 state budget, the legislature promised nearly $320 million to the children’s hospital. The $3 billion hospital, to be built in Apex through a partnership between UNC Health and Duke Health, is expected to create 8,000 jobs and conduct cutting-edge treatments and research into rare or hard-to-treat pediatric disorders.

But last year, a new speaker of the state House of Representatives took office. And he began questioning whether the money could be better spent. House Speaker Destin Hall sought to claw back the children’s hospital funding as part of the 2025 budget debate that has now spilled over into 2026. Hall has questioned the wisdom of spending so much money when pediatric care already exists in the Triangle and while hospitals in areas far less wealthy are struggling to keep their doors open.

The children’s hospital is a top priority for state Senate leader Phil Berger. As part of their dueling 2025 budget plans, the Senate proposed adding more than half a billion dollars on top of what had already been promised in 2023. The House, on the other hand, proposed taking back more than $100 million in already-approved money from the children’s hospital project.

This week, Hall and Berger announced they had finally reached a deal: Hall would stop trying to cut funding for the hospital, and the legislature would also find another $105 million for the project, bringing the total state commitment to about $425 million.

“We are grateful to our state leaders for their continued support of North Carolina Children’s and our shared goal of creating a brighter, healthier future for our children,” hospital officials said in a joint statement Thursday. 

Berger and Hall announced the hospital deal, as well as deals on state employee pay raises and new tax cuts, on Tuesday. But no documents have yet been made public, and both sides say negotiations continue on other smaller parts of the budget — as well as whether to put additional money into the children’s hospital. 

The $105 million represents less than one-third of a percent of state’s total budget. But inflation, population growth and tax cuts are putting increased pressure on lawmakers to budget efficiently. Berger revealed Wednesday that the new money for the children’s hospital is being taken from a separate initiative lawmakers also authorized in 2023 — for rural healthcare.

The NC Care project was supposed to have been a partnership between the UNC and ECU health systems, bolstering healthcare availability in rural North Carolina. The 2023 budget included hundreds of millions of dollars for that partnership, including $105 million to build a rural health center in Wilson and two more in western North Carolina.

A dozen rural hospitals have shut down across North Carolina in the past 20 years, according to the Sheps Center, a UNC research group that tracks rural healthcare nationwide. Shrinking populations — and a growing share of rural residents who are uninsured or on Medicaid — have contributed to the financial pressures.

In addition to the NC Care idea partnering UNC and ECU to boost rural health access, the legislature also originally proposed eliminating antitrust regulations for them — a proposal that received swift pushback from local and national experts.

The Federal Trade Commission weighed in critically at the time, saying it smacked of a plan to pave the way for a merger between UNC and ECU that would result in higher prices and worse services — similar to arguments that have been made more recently against a proposed deal to combine Raleigh-based WakeMed with Charlotte-based Atrium.

The antitrust exemptions didn’t wind up in the final version of the budget that lawmakers passed in 2023, following the outcry. Berger said Wednesday that the NC Care program never really got off the ground, so it made sense to shift some of the money elsewhere.

“The NC Care effort was an effort to have UNC Health and ECU health work together on some strategies,” Berger said. “That has not really gotten to a point where there was an organization, or an agreement as to how to allocate those dollars."

Spokespeople for ECU Health didn’t respond to a request for comment. A UNC Health spokesperson declined a request for an interview about the NC Care program. The children’s hospital program, the UNC Health spokesman added, remains on track for a 2027 groundbreaking at its site in the Veridea development in Apex.

Berger said he planned to push for more money for the project as he and Hall hash out the details of the upcoming state budget. But Hall said lawmakers should consider other priorities. 

Hall told reporters Tuesday that it’s still worth asking whether the state could get a better bang for its buck by spending money propping up struggling rural hospitals, and keeping them from shutting their doors, than sending more money to build a new hospital in Wake County. He also pointed to existing pediatric units connected to big hospitals throughout the state. 

“I think about Martin County — who has, basically, a hospital that shut down for all intents and purposes — and trying to make sure that we're taking care of those folks, where it frankly doesn't cost us a whole lot of money to be able to help them,” Hall said. “And the Children's Hospital obviously is a lot of money, by comparison.”

Martin General Hospital shut down in 2023 but ECU Health is pushing to reopen it. A separate part of the NC Care program, that wasn’t raided for the children’s hospital, sets aside $150 million for hospital projects, including in Martin County.

Berger said just because the children’s hospital is located in Apex doesn’t mean it won’t help people living anywhere in the state.

Supporters of the children’s hospital say that while there are already hospitals and doctors that treat children in North Carolina, none rise to the level of elite institutions in other states that can handle the most confounding or delicate of cases. 

The hospital partners say the state needs more pediatric specialists and a new standalone children’s hospital would help attract pediatric specialists and help grow the talent in the state.  As it stands, families often have to go to children’s hospitals in other states for specialized pediatric care.

“It’s a project that will benefit all of North Carolina,” Berger said. “Both rural North Carolina and urban North Carolina.”