It’s official now: The state of Tennessee and Commonwealth of Virginia will decide whether Mountain States Health Alliance and Wellmont Health System’s proposed merger will benefit the public. And for those interested in voicing opinions on whether or not a Certificate of Public Advantage (COPA), and thus a merger, should be approved in Tennessee, June 7 is a date worth circling on the calendar.
The systems submitted voluminous applications for permission to merge to the two states Feb. 15. The next afternoon, their respective CEOs, MSHA’s Alan Levine and Wellmont’s Bart Hove, discussed the application – which includes projected extra, efficiency-derived margins of $130 million in the four fiscal years starting next July 1– and the pending review process with reporters.
The two also continued making their case for the merger by outlining its purported benefits, saying it will both protect consumers with respect to pricing and ultimately lead to a healthier population less reliant on expensive acute care. A portion of the extra margins – projected to reach $92 million in the year ending June 30, 2020 (see related story below) – would largely be used to invest in efforts to try and make the community healthier and attract research dollars.
Ultimately, a consultants’ study commissioned by the systems found, annual savings from three “efficiency” sources – non-labor, labor, and clinical – could total approximately $121 million compared to the separate systems’ total costs if they didn’t merge.
The systems’ Virginia application for a “Cooperative Agreement” references potential non-labor savings of, “approximately $70 million annually that would not be possible but for the merger.” Another $25 million in estimated savings would come from eventual labor reductions, though the CEOs took pains to note that the new population health and research endeavors a merger could yield should create new jobs.
Clinical efficiencies are expected to bring another $26 million a year in savings.
The session didn’t plow a lot of new ground, though Levine and Hove elaborated on some of the primary issues about which the public and media have had questions. Significant portions of the questions and answers can be found at jcnewsandneighbor.com/feb16.
The next step in the process involves the states’ departments of health reviewing the identical applications for completeness. The laws allowing for a merger that diminishes competition – passed last year in both states – set forth specific requirements for the applications for a COPA in Tennessee and a “Cooperative Agreement” in Virginia. Those statutes also require “active states supervision” of any approved COPA to insure that advantages of the merger continue to outweigh disadvantages caused by decreased competition.
Once an application is deemed complete, the full review process can last for up to 120 days in Tennessee, and 150 business days in Virginia. By the end of last week, the Tennessee Department of Health (DOH) already had moved forward on a couple of important aspects of the application.
First, DOH quickly released information about various ways the public will be able to weigh in on whether the proposed COPA should be issued – including through email (TN.email@example.com), in writing, and in person at a June 7 DOH public hearing at Northeast State Community College’s Regional Performing Arts Center (PAC).
Then on Friday, DOH released information about the process it will use to develop a “COPA Index” and named the 16 members of a “COPA Index Advisory Group.” The index will include specific goals for population health in the region, which could run the gamut from children’s health and smoking-related illnesses to diabetes-related statistics, prescription drug abuse rates and peoples’ levels of physical activity. The index also will encompass access to health services and economic factors, and according to DOH the results of the index will be publicly reported on a regular basis if a COPA is issued and the systems merge.
The advisory group’s members represent a wide swath of interest groups, including a large independent physicians group and BlueCross BlueShield of Tennessee’s associate general counsel – two constituencies that have already expressed some concerns about the COPA. Sullivan County Health Department Director Gary Mayes is chairman.
The group will hold a series of “listening sessions” that kick off at 5:30 p.m. March 22 at the Carter County Health Department (open to the general public). Meetings for external stakeholders, such as competing healthcare providers, non-profits and government agencies, is at 5:30 p.m. April 19 at Northeast State’s PAC. Another public meeting is April 5 in Rogersville, while a final meeting that includes presentation of the proposed index and receipt of final comments is at Northeast State’s PAC May 17. The May 17 meeting is open to the public and all stakeholders.
Wellmont’s Hove said he believes the states are interested in the merger’s potential to move the region further in population health. “We’ve mentioned time and time again that Southwest Virginia and Northeast Tennessee rank very low in our states and nationwide as it relates to obesity, diabetes, heart disease, stroke, cancer,” Hove said.
Levine added that the systems plan to deploy a “logic model” widely used in public health to attack the persistent problems that are thought to contribute to the area’s poor population health, with goals that in many cases mirror those of the states.
“What we’re providing with this merger is a vehicle to help the state actualize those goals in a coordinated way,” Levine said.
As for the main reason the systems are going to such expense and time – the anticompetitive effects that draw the scrutiny of the Federal Trade Commission and thus the states – Levine said he welcomed strict review. The COPA application promises annual price increase caps of 0.25 percent below the national health care inflation index, and a mid-contract price reduction for payors once the merger is complete.
“No one can predict what the FTC will or won’t do, and we certainly would respect their prerogatives as they see it,” Levine said. “That’s why we’ve been following the law very closely. We looked at case law, we’ve looked at Supreme Court rulings. Before we endeavored to do this, we did our homework to make sure we stayed within the appropriate space, and we believe that we’ve done that.
“We think the state has a role here, both Tennessee and the Commonwealth. They seem to be taking their role seriously, and we fully expect that we’re going to go through a robust negotiation (with them). I think if we do that – we comply with what we believe are the rules, or what the rules say – we’re well within a safe space.
“The FTC has spoken at a couple of public forums, they’ve offered their expertise to the state. I suspect the state will take them up on it.”