Officials say merger could result in job creation

Nathan Baker • Mar 13, 2016 at 8:00 PM

A merged health system will command most of the inpatient hospital beds in the region, but heath care leaders say competition will remain strong among providers of outpatient care — and leave room to grow.

Speaking Tuesday to the Johnson City Press editorial board, Wellmont Health System CEO Bart Hove and Alan Levine, of Mountain States Health Alliance, said changes in the structure of the country’s health care system have pushed the systems’ focuses away from inpatient care, provided in hospital beds and facilities, toward outpatient care, services rendered in physicians’ offices without hospital admissions.

According to documents filed with Tennessee and Virginia seeking regulatory approval for the proposed merger, Mountain States’ outpatient services include pharmacy, home health, hospice, durable medical equipment, diagnostics, skilled nursing/nursing home and rehabilitation. The documents also highlight the availability of outpatient services not linked to either system, of which the combined system would be in the minority.

“When you look at competition, the majority of our revenue comes from outpatient services,” Levine said. “In the area where the majority of our revenue comes from, even with the combined organization, we have surprisingly little market share. We’re still going to be in an extremely competitive environment, and we’re imposing restrictions on ourselves to sustain that environment.”

Should regulatory approval be granted by the states, the new system would be barred from using its controlling share of the hospitals in the area to force insurance companies to direct patients to affiliated outpatient services.

The systems’ figures attached to their applications claim that independent doctors provide 70 percent of the physician services in Northeast Tennessee and Southwest Virginia. Sixteen outpatient urgent care centers are operated by the systems and 16 are affiliated with other organizations.

The affiliated urgent care clinics will also get a second look after the merger and duplicated services will potentially be repurposed.

On Johnson City’s Med Tech Corridor, both systems currently operate urgent care clinics side-by-side. Levine said one could remain an urgent care clinic, while the other could be turned into a palliative care clinic, providing comfort for seriously ill patients nearing the end of their lives.

“Wouldn’t it make sense to make better use of the capacity to have urgent care that’s being optimally used, and use the other clinic for something that makes more sense?” he asked. “You’ll see some compression, but you’ll also see some expansion.”

The compression, in the form of eliminating redundant facilities and services, will likely come first, he said, then the savings will be reinvested into other areas that are needed or lacking.

One service Levine said had “terrible” availability locally is mental health and drug addiction treatment.

“Neither of us can afford to go and invest the capital to build a residential addiction treatment center, and then go and subsidize a number of people who are uninsured that need those services,” he said. “Where you have redundancy that’s not necessary, you can eliminate the unnecessary cost of that duplication and then reinvest those dollars and services into something that neither system can hardly afford to provide.”

Acknowledging a lawsuit filed to stop the building of an opioid treatment center on Mountain States’ claims of a deceptive land deal, Levine said the best way to treat addiction, and some forms of mental illness, was holistically.

“We got into a dust-up with this methadone clinic that’s trying to come into town, and of course, we filed suit to stop it, but that’s not treatment,” he said. “They sell themselves as, ‘we’re coming in, we’re going to provide this great service,’ sure, somebody that’s addicted, if they give them an alternative to Oxycontin or some other type of opioid that can keep them functional, true, that helps them near-term, but that doesn’t treat them. It doesn’t help them manage the addiction.”

In the applications to the states, the systems pledged $140 million over 10 years in part to create new capacity for residential addiction recovery services and develop community-based mental health resources.

Levine said reinvesting the savings from the merger is the only way to save more than 1,000 medical jobs.

“The way for us to create jobs — if we don’t do the merger, there will not be job creation, there will continue to be job destruction, because the status quo, static environment that we’re in cuts into our revenue; it’s not rocket science,” he said. “The only way you grow jobs is to find a way to be smarter with how you’re spending your money.”

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