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UPDATED: Virginia OKs Wellmont-Mountain States merger

Zach Vance • Updated Oct 31, 2017 at 8:19 AM

In Northeast Tennessee and Southwest Virginia’s health care marketplaces, competition has been ousted in favor of regulation.

In the eyes of state officials, the region’s free-market health care economy failed to provide “meaningful, visible benefits,” and therefore a private, public partnership was forged with the ultimate goal of reshaping and improving health care in the region.

On Monday, Virginia Department of Health Commissioner Marissa Levine officially approved a cooperative agreement permitting a years-long effort to merge Mountain States Health Alliance and Wellmont Health System into Ballad Health. But Levine’s approval came with the stipulation the conglomerate will have to abide by specific terms in the Commonwealth.

On Sept. 19, Tennessee Department of Health Commissioner John Dreyzehner followed a similar path and approved a Certificate of Public Advantage application allowing the region’s two largest health care systems to merge in Tennessee.

Although most of Mountain States and Wellmont’s assets are based in Tennessee, the two systems operate eight total hospitals in Southwest Virginia.

“Despite the presence of strong competition between Mountain States and Wellmont, the people of Southwest Virginia continue to struggle with issues pertaining to access to primary and specialty care, and with pervasive challenges to population health improvement,” a Virginia Department of Health staff report stated about the merger.

One example of this failure, the staff noted, is the “success” of the Remote Area Medical and Missions of Mercy clinics, which provide episodic health care to low-income people.

The Virginia health officials also noted Wellmont and Mountain States’ business models, mainly focused on fee-for-service, provided little incentive for investing in improving the region’s population health, improving its quality and its efficiency.

“However, the applicants have both expressed a desire and intent to adopt new business models that emphasize risk-based and value-based contracting,” the staff letter read.

Levine provided 14 reasons, describing how the benefits of the merger outweigh the elimination of competition, in her letter to Mountain States CEO Alan Levine (no relation) and Wellmont CEO Bart Hove.

Many of those reasons were based on commitments made by Ballad Health officials, such as keeping all Virginia facilities open as clinical and health care institutions for at least five years following the deal’s closure. Ballad has also committed to capping its inflation rate.

In total, Ballad Health has committed $308 million over 10 years to expanding health care access, research and graduate medical eduction, population health improvements and a regional health information exchange.

“We are grateful for the diligence demonstrated by the Commissioner and her staff, and the staff of the Virginia Attorney General's office. The Commissioner personally took the time to evaluate our proposed merger and to understand the reasons why the benefits of the proposed merger outweigh the other options. We believe the Commissioner is committed to ensuring that the people of Southwest Virginia will be well served,” a joint statement from Wellmont and Mountain States said.

“We also applaud the Southwest Virginia Health Authority and its highly qualified consultants for their role in evaluating the benefits of the proposed merger as well as the improvements that were made to our commitments based on the Authority’s input. We look forward to working with the commonwealth and the Authority to address the health care challenges of our region.”

Although the Southwest Virginia Authority recently criticized the Tennessee’s Certificate of Public Advantage as being “more restrictive” and a “bureaucratic framework,” the Virginia Department of Health’s approval consisted of 49 conditions Ballad will have to abide by.

Those conditions range from pricing governance, financial commitments, participation in a regional information exchange, employment policies and facility operations, among many others.

Mountain States and Wellmont will now begin a closing process, which is expected to last a few months, as it begins transitioning and integrating into one health care system.

Email Zach Vance at zvance@johnsoncitypress.com. Follow Zach Vance on Twitter at @ZachVanceJCP. Like him on Facebook at Facebook.com/ZachVanceJCP.

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