Proposed hospital merger passes first major test

Board members Susan Copeland and Debbie Ward listen during Monday’s meeting.

Board members Susan Copeland and Debbie Ward listen during Monday’s meeting.

By Jeff Keeling

ABINGDON, Va. – For the people of Southwest Virginia, the likely benefits of a highly regulated merger of Mountain States Health Alliance (MSHA) and Wellmont Health System will outweigh the likely disadvantages caused by decreased market competition – at least according to a decision rendered Monday by the Southwest Virginia Health Authority (SVHA).

In a unanimous vote, SVHA board members recommended that the Virginia Department of Health (VDH) approve the systems’ application for a “cooperative agreement” that would govern the proposed merger. VDH now has 45 days to review the revised application and make its own decision, which should come around the time the Tennessee Department of Health is due to make a decision on a Certificate of Public Advantage (COPA) that would regulate the merger in Tennessee.

The details of the Virginia agreement have undergone significant revision, the result of lengthy negotiations between SVHA board members advised by three expert staff members and the hospital systems themselves. A revised “scoring system” for the Commonwealth of Virginia to use in gauging a new system’s effectiveness in meeting its commitments was also approved. (See details of the process under the “cooperative agreement” tab at or see the current commitments list at

The SVHA process included months of study, negotiation, public input and expert advice following the initial cooperative agreement application’s submission Feb. 16. Still, Monday’s recommendation runs counter to the advice of the Federal Trade Commission (FTC), staff members of which have said in writing and face-to-face with SVHA that the merger is a bad idea that will negatively impact consumers, likely increasing healthcare cost and decreasing quality and access.

Board member Donna Henry. Photos by Jeff Keeling

Board member Donna Henry. Photos by Jeff Keeling

Conversely, a broad array of business and community leaders have supported the systems’ contention that a merger is Southwest Virginia’s best shot at effectively addressing a raft of health care and economic challenges. MSHA, particularly, says it has been subsidizing a handful of Southwest Virginia hospitals from its other hospitals margins – a situation it says is unsustainable due to healthcare trends including decreasing inpatient hospitalizations.

Serving patients’ needs in the region’s more rural areas can best be achieved through the merger, despite its anticompetitive nature, the systems say, adding that robust state regulation of pricing and other factors will more than mitigate any adverse effects the near-monopoly will create.

“You added a number of provisions to those commitments and made them stronger,” SVHA legal counsel Jeff Mitchell told board members Monday. “On the accountability, you also have rejected what they (MSHA and Wellmont) proposed for their accountability and scoring.”

Mitchell said the new scoring proposal breaks out three categories – protection, conduct and investment – with the greatest emphasis placed on protection, “specifically designed to mitigate negative effects in the reduction of competition,” Mitchell said. Those are “very black and white,” Mitchell said. “They’re either meeting them or they’re not.” Presumably, should the application be approved, VDH and the state attorney general’s office would demand improvements.

It was upon those revised commitments that SVHA board members hung their hats Monday. Again and again, members and their advisers made it clear that what initially came to them from the hospital systems was insufficient in its detail and enforceability, at least when it came to their objective – improving the health care of Southwest Virginians.

What they came up with together, though, was something that in their best estimate would do a better job of ensuring quality, accessible, affordable health care and a path toward better overall health for the region’s people. That started, SVHA Chairman Terry Kilgore said Monday, with five “working groups” that studied the application starting in April from the angles of cost, quality, competition, population health and access.

“Your all’s work on the committees, on the working groups, made the application better as far as it relates to commitments, as far as it relates to having a better scoring system, better board representation,” Kilgore said. “I think all in all it’s been a good process.”

Among the concessions gained through negotiations were specifics on types of healthcare services a new system would maintain in the Southwest Virginia communities where MSHA and Wellmont have hospitals today. Investments in mental health and substance abuse treatment, oral health and services to families and children also were revised and strengthened. Open access for providers was guaranteed as well.

Most importantly, at least as far as the scoring system goes, commitments to keep costs to consumers lower than healthcare costs are growing as a whole were made more specific and enforceable.

“Many of these commitments were aggressively negotiated,” Mitchell said. “It would be inaccurate to say that the systems do not know what they have committed to, and it would be inaccurate to say that the chairman did not look them in the eye to garner their true commitment to these.”

Wellmont CEO Bart Hove didn’t disagree when he spoke following the meeting. “It was a challenging negotiation, but for the right reasons, and that’s why we’re very pleased with the outcome today,” Hove said. “I think the unanimous vote indicates that.”

If health commissioner Dr. Marissa Levine requests supplemental information from the systems, she’ll have 15 additional days beyond the 45 allotted, following receipt of that supplemental information, to render a decision.

The SVHA procured the services of three healthcare experts – an attorney, a business professor and a physician – to help the volunteer board members navigate the complexities of their task.

Multiple meetings of the working groups yielded a list of 68 questions to which the systems submitted a lengthy, point-by-point response in mid-July. Following some additional back and forth with the systems, the SVHA board voted unanimously Aug. 26 to deem the application complete.

Public hearings and a comment period followed, as did additional dialogue with the systems that resulted in further modification of the “enforceable commitments” that will form the cooperative agreement’s backbone, should it be approved. A new, merged system’s performance in meeting the commitments would be tracked by VDH – the “active state supervision” required in exchange for giving the system near-monopoly power.

“Having sat in those meetings, I’m quite confident that they (MSHA and Wellmont) understand the commitments that they’re making,” Mitchell told board members. “And I think the statute (creating the cooperative agreement process) gives the commissioner and the office of the attorney general the ability to step in and help them adhere to those commitments if that’s necessary.”


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