Yes, Virginia, Richmond still has merger questions


By Jeff Keeling

If leaders at Mountain States Health Alliance and Wellmont Health System thought they’d largely be through answering questions about their proposed merger on the Virginia side of the state line once their “cooperative agreement” application was deemed complete, as “The Office” character Dwight Shrute might say: “False.”

To be frank, those leaders probably didn’t imagine for a moment they’d face no further questions after the Southwest Virginia Health Authority determined it had enough information to send the application to Richmond, which it did determine Aug. 26. By that time, a “request for additional information” (the systems are getting used to these things) from the Virginia Department of Health’s Erik Bodin had been in the systems’ hands for more than two weeks.

While that fact may elicit weary sighs as the hospital folks head back to their data yet again and watch the merger-related legal fees rise some more, it should comfort the region’s healthcare consumers. As the merger application process has unfolded, nothing has changed my opinion that if a merger is approved, it should follow an exhaustive review process. Should that review find the benefits of a merger outweigh its anti-competitive effects (still a big ‘if’ in my book), both Virginia and Tennessee should have the framework for a robustly regulated cooperative agreement (Virginia) and Certificate of Public Advantage (Tennessee).

The hospital systems’ leaders have argued since they submitted their applications in February that they had crafted a top-notch framework for a regulated monopoly – one that would benefit the region in health, economics and quality of life. Time and again since then, those tasked with judging the application have probed with questions and comments. Those inquiries, I believe, have been designed to help create a final product that leaves the states confident that consumers and others affected – including independent healthcare practices and third-party payers – gain more than they lose from such a massive change.

The questions sent by Bodin (you can read them at uphold the pattern. They are often Virginia-centric, with questions such as, “Why are there no plans for locating tertiary services in a Virginia hospital or other facility within the merged system?” There is also this one: “If there is any intention to remove or consolidate services over the five-year forecast period at any Virginia facility, please detail and justify those intentions.”

Those concerns are accompanied by pointed questions about pricing, and an interesting section that suggests concern about prior use by MSHA of certificate of need laws to prevent competition: “Provide all documents relating to the opposition mounted by MSHA to prevent (Wellmont) from constructing a new hospital facility and emergency room in Washington County where MSHA operates its Johnson City hospital.”

Another great question asks how the systems plan to use the “labor efficiencies” that a merger will produce, “so that the merged system has a vibrant, well-trained and committed workforce that is satisfied with pay rates and benefits?”

The regulators have been asking a lot of good questions. I don’t question the hospital system leadership’s good intentions, but with the stakes as high as they are – and recognizing that without strong governors in place, a large, powerful entity is almost certain to sometimes act in its own best interest even when the good of the whole would suggest a different course of action – putting that proposal to the test is critical.

A question on page 11 of Bodin’s Aug. 9 document kind of sums it up: “How will the merged system provide information to governmental oversight officials and programs in both states so that the model of merger allows a complete portrayal of operations so sufficient oversight is maintained and federal antitrust laws will not be the basis of a legal challenge?”

I suspect we’ll all know how well such questions have been answered by the time major league baseball spring training is over next year.


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