By Jeff Keeling
Leaders of the region’s second-largest hospital system surprised few people Thursday when they announced they would seek to merge with their larger counterpart after years of often-fierce competition.
But an early comment in a packed news conference at Kingsport’s Meadowview Convention Center indicated how unlikely a marriage with Mountain States Health Alliance seemed when Wellmont Health System began its “strategic options process” more than a year ago.
Leading off a panel of seven speakers, Wellmont’s board chairman Roger Leonard said the proposed “health improvement organization” unveiled Thursday was, “an exciting opportunity not imagined by any of us at the beginning of this process.”
The merger, which envisions a major role for East Tennessee State University, was agreed in principle with the signing of a term sheet between the two systems’ leaders. They said they hope for regulatory approval by the state of Tennessee and Commonwealth of Virginia by the end of 2015 for an arrangement that, while it would essentially eliminate competition in the regional market, would benefit patients and payers.
Mountain States chair Barbara Allen said the new system – a name has not been selected – not only will be, “among the best health systems in the nation.” In addition, Allen said, rather than proving a detriment to consumers and patients, the elimination of competition will help unleash better quality and allow for more favorable cost structures.
“We will be known as a high-value system, committed to not only decreasing the growth in cost of health care, but in becoming a system that consistently performs as one of America’s most highly reliable, high quality health care systems,” she added.
Proposed to lead that system at the highest management level are Mountain States CEO Alan Levine as executive chairman and president; Wellmont interim CEO Bart Hove as CEO; Mountain States Chief Operating Officer Marvin Eichorn as COO; and Wellmont Chief Financial Officer Alice Pope as CFO.
ETSU President Dr. Brian Noland would serve as an ex officio member of the new board, which would include six representatives selected by each of the two current boards, and two additional at-large community members.
An “integration council” that includes significant physician representation will work toward a “definitive agreement” of merger. ETSU will lead a health assessment this summer and fall that will help define the system’s goals and structure.
Levine said “getting ahead of” the region’s manifold health problems at the community level will be a major strategy as health care reform continues to shift payment models in a way that discourages overreliance on hospitalization.
In the end, the proposal will go to the states, with the systems seeking two “certificates of public advantage” based on the states’ determination that the benefits of the plan outweigh disadvantages presented by lack of competition. The COPAs would be regulated for compliance, and would also prevent federal anti-trust action unless either state was to reverse course at any time.
One of the three main bond ratings agencies, Standard & Poor’s, released a short statement on the merger proposal Thursday night. It refrained from much in the way of opinion, nor took any rating actions (both systems are rated BBB plus) but did offer this: “We believe it is likely the two systems will successfully reach a final agreement to merge and that any regulatory issues will be addressed.”
For more on the proposal and its ramifications, see pages 6 and 7, and visit our sister publication’s website, bjournal.com for even more extensive coverage.