Mountain States on the block?

Nathan Baker • Jul 21, 2014 at 8:38 AM

With its regional competitor poised to potentially become part of a much larger corporate system, Mountain States Health Alliance CEO Alan Levine said all options are on the table for the Johnson City based health system he leads, including a merger, but he wouldn’t say whether Mountain States is being included in Wellmont’s discussions to find a partner.

A federal overhaul of the nation’s health care delivery model and a signification portion of the states’ reluctance to accept the changes have drastically cut into hospitals’ revenues all over the U.S., and Mountain States facilities aren’t immune, Levine said, although the Tennessee-Virginia network of care centers has reported a promising uptick in patient volumes over the last eight months.

What that means for the 14 hospitals and dozens of Mountain States affiliated clinics is constant analysis of balance sheets and a nothing’s-off-the-table attitude when it comes to the future.

“We’re a community-based organization, and I think first and foremost, our board would like to remain that way,” Levine said Friday from the system’s hilltop corporate headquarters. “If we ever had to make a decision that we were going to do something with an outside system, I think that would be our last resort, but you never rule anything out, because the environment’s changing so dramatically.”

In a year and a half, many of the strategic decisions for Mountain States’ board of directors have been to cut costs, whether from the 650 positions shed across the system, a pause of benefits and managerial restructuring or implementing more efficient systems.

Wellmont, facing similar challenges, made the announcement in January that it would explore the viability of aligning with another health system to help cure some of the ailments contracted through health care reform.

Last month, the organization’s board announced six of nine potential partners remained in the field, with a final recommendation expected this fall.

When asked if Mountain States was involved in Wellmont’s partner search process, Levine declined to answer or comment on the competitor’s inner-workings.

He did say once the rival company finalizes its decision, MSHA’s board will analyze the implications to its own hospitals and take action if needed.

“The mission isn’t to be bigger than Wellmont, the mission isn’t to spend more money, the mission is to take good care of patients, and all of our decisions have to be based on what positions us best to do that,” Levine said. “So, if Wellmont should make a decision to partner with somebody, we’d have to evaluate how that affects our ability to do what we do, and I can’t speak for what our board might do at that point until I know what we’re dealing with.”

Levine did underscore the need for cooperation between Mountain States and other community resources, namely East Tennessee State University.

A solid partnership with ETSU for economic development and research is “of utmost importance,” he said.

“If you look at the relative size of our system, and the vision that Dr. Noland has for the university, I think they go hand in hand,” he said. “There are a number of long-term strategic things we can accomplish by being more collaborative and getting past the day-to-day who’s winning and who’s losing.”

With a slate of major capital building projects completed, excluding plans to build a new hospital in Unicoi County, Mountain States Chief Financial Officer Marvin Eichorn said the system expects to be able to begin retiring its debt in the coming year, and he expects the move to positively affect MSHA’s financial ratings.

“We should see a pretty substantial reduction of our debt going forward from here,” Eichorn said. “I think that, as you might imagine, ratings agencies are very positive about that direction for Mountain States.”

Now at BBB+ for nearly a decade, both officers expect the rating could increase into A-range within five years.

Along with its responsibility to maintain the physical health of the community’s members, Levine said Mountain States would also consider the impact a merger or affiliation would have on the health of the region’s economy.

“The three-legged stool here is making sure we provide high quality care, making sure we recognize the impact we have on the economy and third, trying to do everything we can reduce their cost of health care,” he said. “A company like Eastman, who has to go compete internationally with Chinese companies that don’t have to carry the burden of health care costs – it puts Eastman as a disadvantage. That’s not good for Eastman, and that’s not good for jobs in our region.”

If MSHA’s board begins searching for a partner, Levine said it likely wouldn’t begin the process until after Wellmont announces its decision, citing respect for its neighbor system.

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