By Jeff Keeling
While discussions regarding Wellmont Health System’s strategic options have remained quiet recently, at least one bit of legislative action – in Virginia – appears to have helped clear the path should the hospital group opt for a merger with Mountain States Health Alliance.
House Bill 2316, sponsored by Scott County Republican Terry Kilgore and co-sponsored by Abingdon Republican Israel O’Quinn and Saltville Republican Jeffrey Campbell, passed last month. It says that if hospital systems create a merger plan that better serves patients, improves health, controls costs and improves access compared to the current competitive environment, the Southwest Virginia Health Authority can recommend approval to the Virginia Commissioner of Health. The Commissioner’s office would regulate and monitor any such agreement, and could revoke it if those benefits no longer outweigh the disadvantages created by lack of competition.
When advocates for such a merger began a public campaign last August, they noted that Virginia, unlike Tennessee, does not have a “Certificate of Public Advantage” (COPA) law. COPA laws make it easier for competing hospital systems to merge, provided the likely benefits to population health, health care costs and other factors outweigh any expected anti-competitive disadvantages.
Without some type of legislation similar to Tennessee’s, Wellmont and Mountain States may have run into insurmountable troubles attempting to include their Virginia hospitals in a merger.
HB 2316 alters the mandate of the Southwest Virginia Health Authority, creating a mechanism for the Authority to essentially review and approve hospital system mergers. If recommended by the Authority, the proposal would go to Virginia’s State Health Commissioner. Its litmus test for approval by the Authority is similar to that laid out in Tennessee’s COPA law, as the bill’s summary indicates: “The Authority shall approve a cooperative agreement if it determines that the parties to the cooperative agreement have demonstrated by a preponderance of the evidence that the benefits likely to result from the agreement outweigh the disadvantages likely to result from a reduction in competition from the agreement.”
The bill, which Gov. Terry McAuliffe has until Sunday to sign into law, also gets any such arrangement out from under the scrutiny of laws meant to maintain competition, according to its summary. The activities of a merged system as the result of a cooperative agreement approved by the authority and supervised by the state, “are immunized from challenge or scrutiny under the Commonwealth’s antitrust laws.”
Wellmont’s Virginia hospitals include Lonesome Pine Hospital in Big Stone Gap and Mountain View Regional Medical Center in Norton. Mountain States’ Virginia hospitals include Johnston Memorial in Abingdon, Dickenson Community Hospital in Clintwood, Russell County Medical Center in Lebanon, Smyth County Community Hospital in Marion and Norton Community Hospital (Norton).
The bill’s fiscal implications, as prepared for voting delegates, anticipate the creation of at least one position supervising the cooperative agreements. The bill anticipated this supervisor’s responsibilities would include verifying annually published information related to the agreement, as well as, “promoting technological advancement, enhancing academic engagement in regional health, and strengthening the workforce for health-related careers.”
The bill itself runs to more than 5,000 words, and states early on that Southwest Virginia’s rural communities, “confront unique challenges in the effort to improve health care outcomes and access to quality health care. It is important to facilitate the provision of quality, cost-efficient medical care to rural patients.”
The bill dictates that Virginia’s policy related to participating localities is, in part, “to supplant competition with a regulatory program to permit cooperative agreements that are beneficial to citizens served by the authority,” and also, “to facilitate the provision of quality, cost-efficient medical care to rural patients.”
Any applicant must show methods for improving population health, improving access and quality, cost efficiencies, and ensuring affordability of care. While some proprietary information may be redacted, any application will be available for public comment.
Benefits sought include, among others, enhancing hospital-related care; keeping hospital facilities geographically close to the communities they serve; improving utilization of equipment and resources, and avoiding duplication.
The law also aims to protect payors such as insurance companies, as evaluation of a proposal must include “the extent of any likely adverse impact” on payors, “to negotiate reasonable payment and service arrangements with hospitals, physicians, allied health care professionals, or other health care providers.”
The Authority also would be asked to consider any potential arrangements, “that are less restrictive to competition and achieve the same benefits…”
The law also allows the state to investigate whether a system is complying with its agreement, based on annual reports, “on the extent of benefits realized and compliance with other terms and conditions of the approval.” The state may also investigate on its own to insure compliance, including onsite inspections, and may require modifications or revoke an agreement entirely for non-compliance or if the agreement’s benefits, “no longer outweigh any disadvantages attributable to a potential reduction in competition resulting from the agreement.”
Parties to an agreement would have to include in their annual reports, “information relating to price, cost, quality, access to care, and population health improvement.”
Wellmont has said recently it hopes to make a decision on a possible strategic alignment with another system, “in the coming weeks.” A link to the entire text of HB2316 can be found here: Virginia House Bill 2316.