'What does not kill me only makes me stronger'.

• Position: Health Care

The health-care industry in North Carolina is like the patient who gets his blood pressure down only to have his angina flare up.

Employers and employees are reeling from higher premiums as insurers push to make money. Most large hospitals are again operating profitably, but rural hospitals are struggling. Nurses remain in short supply throughout the state, with hospitals such as WakeMed in Raleigh offering up to $10,000 in signing bonuses. HMO ranks continue to shrink, but those that remain increasingly let patients decide where they're treated.

Attrition among North Carolina HMOs started in the middle '90s and continues. In late 2000, Carolinas HealthCare System shut down its HMO, The Wellness Plan, which had 55,000 members. In 2001, Chapel Hill-based Blue Cross & Blue Shield of North Carolina bought Partners National Health Plans of North Carolina, making it the largest HMO in the state -- it was already the largest health insurer. Bethesda, Md.-based Coventry Health Care wrapped up its buyout of WellPath Select, which had been announced a year earlier. All of this is part of a nationwide move toward fewer, but larger, managed-care companies.

The biggest story in Tar Heel health care began in 2001 and will likely play out this year. In December, non-profit Blue Cross said it intends to convert to for-profit status, a process that could be completed as early as May.

Bob Greczyn, president and chief executive, says the change would allow the insurer to raise money for expansion by selling stock or bonds. Blue Cross could then do more acquisitions, as converted Blues else-where have done. Under a North Carolina law passed in 1998, an independent foundation will be created to receive 100% of the market value of Blue Cross. Greczyn says the foundation will receive the new company's stock and could sell it to raise money for its charitable mission of promoting health in North Carolina.

If Blue Cross doesn't convert, it will likely be bought, says David Garbrick, health-care analyst with the Charlotte office of the Towers Perrin consultancy. Big insurers are scooping up competitors to create economies of scale and cut costs.

Meanwhile, rural hospitals are in critical condition. A third are losing money, and 11 will likely exhaust cash reserves by the end of 2002, says a Deloitte & Touche study commissioned by the North Carolina Hospital Association. "Smaller hospitals have a much higher percentage of Medicare and Medicaid patients and a much...