One year later: hospital merger continues, FTC closely watching

JOHNSON CITY, TN (WJHL)  -One year after announcing they planned to merge into one new company, Mountain States Health Alliance and Wellmont Health System are waiting for approval from the states of Tennessee and Virginia.

The deal is being closely watched by the Federal Trade Commission which is on record opposing regional hospital mergers in other states, News Channel 11 has learned.

On April 2, 2015, the long-time business rivals went public with their plans saying joining forces would be better than the inevitable alternative of getting purchased by companies outside the region.

Since then, Mountain States and Wellmont developed a  merger plan promising improved local health care with caps on health care costs.  And they rallied the states of Tennessee and Virginia to update their laws allowing for approval and regulatory oversight at the states level.

CLICK HERE to read the MSHA Wellmont application for a Certificate of Public Advantage

Last year, News Channel 11 reported the Federal Trade Commission is keeping tabs on the Tri-Cities hospital merger even though the health systems say they have not filed official notification with the FTC about the planned merger.

In a recent interview with News Channel 11, executives with both health systems said the FTC isn’t the appropriate agency to approve and oversee mergers like the one planned by MSHA and Wellmont.

“Healthcare has evolved from a point it can’t be regulated from Washington DC,” Alan Levine, Mountain States Health Alliance CEO, said. “Healthcare consolidation has happened at a rate the FTC hasn’t been able to deal with.”

After announcing the merger last year, the companies asked Tennessee and Virginia lawmakers to create a mechanism for approval and oversight at the state level with built-in protections for the people of the Tri-Cities.

In Tennessee, the General Assembly approved legislation establishing a Certificate of Public Advantage. In Virginia, lawmakers established a cooperative agreement. In both states, the approval process would be largely public unlike merger approvals overseen by the Federal Trade Commission.

And the companies say their plan includes built-in safeguards designed to protect the public from the dangers of monopolies.   “What we’ve put on the table is a model enforcably committed to reducing costs,” Levine said.

CLICK HERE to read the MSHA Wellmont statement on why they didn’t file with the FTC

But while the merger plan bypasses the Federal Trade Commission, public records show the man in charge of one of the departments that ultimately will decide if the deal gets approved asked the FTC for advice about the merger last year.

In June, Tennessee Commissioner of Health John Dreyzehner asked the FTC whether it would intervene if the merged companies later were sold to another company.

Public records reveal the FTC responded in December saying they can’t comment on hypotheticals. But the agency did say it’s concerned about hospital mergers that limit competition because “there’s is a strong presumption that mergers resulting in a firm with a very high market share in a geographic area are likely to harm consumers.”

That echoed what the Federal Trade Commission told the State of Tennessee last September. The FTC wrote the Tennessee Department of Health saying legislation creating state oversight of hospital mergers is “unnecessary” and “likely to harm Tennessee health care consumers, no matter how rigorous or well-intentioned the regulatory scheme may be.”

Commissioner Dreyzehner’s staff said he’s not able to answer questions about the merger proposal at this point.  A spokesman for the Tennessee Department of Health said the state is sending information about the MSHA/Wellmont merger to the FTC for review.

Mountain States and Wellmont say the FTC’s comments don’t apply to their plan because theirs requires on-going government oversight with built-in consumer protections, cost reductions and promises of improved care.

The FTC has not commented specifically on the Mountain States-Wellmont merger deal.

The health systems say they welcome FTC input if that’s helpful to the states in deciding on the merger.

“The FTC has every right to do what the FTC wants to do,” Levine said.  “We make the case we understand the concerns the FTC has and we think we’ve provided a pathway that actually helps reduce costs, reduce capacity, and improves quality.  And I hope they will give us a chance to demonstrate that.”

MSHA and Wellmont hope to complete the merger in late summer.

Copyright 2016 WJHL.  All rights reserved.

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