Public has say on hospital merger; application still incomplete

Malaka Watson

Malaka Watson

By Jeff Keeling

The people have spoken about the proposed merger between Mountain States Health Alliance (MSHA) and Wellmont Health System, and they’ll get at least one chance to do so again in Tennessee.

Nearly three dozen people spoke at Northeast State Community College’s performing arts center June 7, sharing their thoughts on the relative advantages or disadvantages the regulated monopoly would provide the area. Their audience included Tennessee Commissioner of Health Dr. John Dreyzehner, two Department of Health (DOH) lawyers and a health planning official.

“This is a new and in some ways precedent-setting and historic process, and we appreciate the cooperation of the applicants and the many other stakeholders in our mutual obligations to the integrity of the process under Tennessee law,” Dreyzehner said prior to the comment period.

The meeting, Dreyzehner said, provided the opportunity for DOH to hear “the perspectives of the public and other stakeholders regarding the advantages and disadvantages of the agreement.

“We do believe by your presence here tonight that that is a terrific reflection of your commitment to the health and prosperity of this region and the state of Tennessee,” he said.

Since the systems announced their intention to merge in April 2015, Dreyzehner noted, DOH has worked “with all speed” to develop a framework for a “Certificate of Public Advantage” (COPA) that would govern the cooperative agreement the systems submitted for approval Feb. 16 of this year.

In essence, a COPA – a never-used tool in Tennessee – would set the regulatory structure by which the state would oversee a merged system. The COPA law is designed to provide any merging systems “state action immunity” from standard federal antitrust scrutiny and enforcement.

The law makes it state policy,  “in certain instances, to displace competition among hospitals with regulation…” If the state determines that “the likely benefits resulting from the agreement outweigh any disadvantages attributable to a reduction in competition,” DOH will

John Dreyzehner

John Dreyzehner

provide ongoing, “active supervision” of the new system.

The review process has taken more time than anticipated, Dreyzehner said, and another public hearing will be scheduled. On March 28 and April 22, DOH sent the systems letters requesting more information, and continues to wait on answers before deeming the COPA application “complete.” Once that is done, a 120-day review process also involving the state attorney general’s office will commence.

Views touch on broad range of topics, largely supportive

Views expressed June 7 were largely favorable to the proposal. Speakers who did express concerns – with the exception of a Federal Trade Commission (FTC) official – were generally willing to acknowledge, with caveats, that a merger could benefit the region.

Most speakers touted the advantages the systems have said a merger will create, driven by millions of dollars in savings gained each year through efficiencies brought on by a reduction in unnecessary duplication of services. A few of those are increased research opportunities in collaboration with East Tennessee State University, better behavioral health coverage, more effective physician recruitment and a stronger focus on overall population health. Speakers also warned against the alternative of eventual sale to outside entities that would strip local control and move corporate jobs and decision making outside the area.

Cautionary notes were struck about a new system’s potential use of Certificate of Need laws to further suppress competition, with Appalachian Orthopaedics CEO Craig Turner urging the state to reevaluate its CON law and allow for less restrictions on establishment of competing healthcare services in the area.

Eastman Chemical Co. Assistant General Council David Woodmancy said the merger proposal could allow high quality health care to remain available and affordable in the region, thus allowing companies like Eastman to attract and retain talent. He said Eastman supports the plans detailed in the systems’ COPA application, but added that proper oversight is a must.

He referenced major changes under way in the healthcare sector, “driven by government policy changes as well as economic conditions, demographics, and competition facing our global economy.

Bill Greene

Bill Greene

“In order to remain competitive our healthcare system must proactively focus on managing costs, improving quality, and finding efficient and innovative ways to improve operations and services.”

Eastman, being self-insured, makes healthcare provider choices based on quality and value of services for its employees and families. The state will play an important role, Woodmancy said, in closely tracking expenditures and collective investments, “to insure improvements in the health care of our region.

“If the merger is approved and a new system is managed appropriately, we believe this will lead to higher quality for patients, better access, and more manageable cost for employers like Eastman, who want to ensure our employees have the care they need.”

What lies ahead in the review process

A question Dreyzehner answered after the hearing seemed to echo Woodmancy’s comments, as did a comment from First District Congressman Dr. Phil Roe in a Thursday interview with News & Neighbor.

Asked whether changes in the industry might justify a non-competitive situation such as that envisioned by the systems’ cooperative agreement, Dreyzehner said this:

“I think the one constant in health care has been change, both from a regulatory standpoint and from a knowledge standpoint. What we know now in terms of health and health care is substantially more than we knew a few years ago, and that will continue, so anyone who would argue that change is not a constant in the health sector, one of the largest industries in the United States, hasn’t been paying close attention to the health sector.”

Roe, who called himself “a free market guy,” said he initially was skeptical of the merger proposal. He added, though, that the healthcare system has become less and less governed by free market forces.

“What you have is a very regulated health care system where there is no negotiation with Medicare for the rates that are determined. There is no negotiation with Medicaid. So with the majority of your payors fixed, entities like Mountain States and Wellmont had to look for other solutions to try to cut cost.

“I see exactly why they’re doing what they’re doing, and being a free market person that’s not how I’d like to see it, but unfortunately health care’s not that way.”

Dreyzehner said he expects DOH to use the full 120 days to review all the information once the application is complete for what he called, “such an important decision.” First, the systems must answer the written questions posed by DOH.

The public should be able to see the systems’ answers to the additional DOH questions. DOH regularly posts all non-confidential COPA information on its website. Written comments also can be submitted online or in the mail regarding the merger proposal, for 60 days after the application is deemed complete. The main page for the COPA, which includes additional tabs on the left side, is at


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