FTC has “significant concerns” about Wellmont and Mountain States merger

TRI-CITIES, TN/VA (WJHL)- The Federal Trade Commission has asked Southwest Virginia Health Authority and Virginia’s Health Commissioner to deny the application for our regions’ two largest health systems to merge.

After a year-long investigation in to this merger, at a public meeting Monday night Mark Seidman with the FTC expressed his concerns. “Our investigation has led us to have significant concerns about the negative effects this merger of vigorous competitors is likely to have on hospital pricing and quality of care for residents in Southwest Virginia,” Seidman said.

FTC staff recently submitted a letter to the Southwest Virginia Health Authority and Virginia’s Health Commissioner, two entities that will help determine if this merger goes through.

The letter said in part, “The proposed merger presents substantial risk of serious competitive and consumer harm in the form of higher healthcare costs, lower quality, reduced innovation, and reduced access to care.”

Virginia Delegate Terry Kilgore, the chairman of the Southwest Virginia Health Authority, said this would be one of the biggest health care systems in the nation, and he knows the FTC is concerned.

“They’re concerned but I think with that brings some opportunities with the fact that you know with us they’re agreeing to be competitive on their price, on their prices and also actually look at some of the research and development that we can do and the creation of jobs,” Kilgore said.

Kilgore said he doesn’t think the FTC is considering the unique needs of this area.

“The fact that you know we have hospitals, only one hospital in these rural counties and if that hospital closes, for example if an outside entity bought that hospital and it closed, what would those individuals do for access to lifesaving healthcare,” Kilgore said.

We also requested an interview with Mountain States and Wellmonts CEOs Tuesday but instead got a joint statement saying in part: “The FTC staff has never communicated with us about the details of their views. …Without any communication with us whatsoever, we find it impossible to understand how they could have reached their conclusions. Simply put, their letter is full of opinions and speculation.”

The health systems CEOs said they will be submitting a written response to the FTC’s comments to the Southwest Virginia Health Authority by October 10th.

“Our proposal falls squarely within the law and is modeled after successful similar actions that have proven effective for the communities where they have been implemented.  We sincerely appreciate the comments by the FTC, and we have fashioned our proposal to take their concerns into consideration,” Mountain States and Wellmont said in their joint statement Tuesday.

Kilgore said after another meeting with the FTC, in late October the authority will make their decision on what to recommend to the Virginia Health Commissioner regarding the merger.

Click here for the letter the FTC submitted with their concerns.

Click here for the full text of Seidman’s remarks at the public meeting Monday night.

Here is the full, joint statement from Wellmont and Mountain States:

The FTC staff has never communicated with us about the details of their views.  Had they, we could have pointed out several errors and omissions, which are relevant.  We will be submitting a written response to the FTC’s comments to the SW Virginia Health Authority by October 10th, and will explicitly address the shortcomings in their letter.  Without any communication with us whatsoever, we find it impossible to understand how they could have reached their conclusions.  Simply put, their letter is full of opinions and speculation.

We do appreciate the FTC’s respect for the long-held doctrine of State Action Immunity, even if the FTC staff’s views are significantly out of step with virtually every business leader in our region, many of whom have provided public support for this merger upon their own considered study of the merger and its implications as well as the alternatives.  There have been several examples where arrangements similar to what we have proposed have resulted in lower costs to consumers, and high quality.  Because of this evidence, we know states have a demonstrated capacity for regulating healthcare within their borders.  While the FTC has no formal role in the States’ decision on granting approval of the merger under state action immunity, the Staff of the FTC has been providing written and public comment throughout this process expressing their views and advocacy that Mountain States and Wellmont should pursue other options, such as an out-of-market merger with systems based elsewhere.  They hold this view in spite of documented evidence demonstrating that out of market mergers like the type the FTC is advocating often lead to higher pricing and would not be good for our region.

Further, we also know that out of market acquisitions of hospitals like ours result in millions of dollars in synergies – synergies which would benefit the acquiring system at the expense of our local communities.  This is a fact the FTC agrees with.  Contrary to their opinion that millions of dollars of local money should flow to health systems based elsewhere, we believe it is better for our local merger to reinvest synergies in our region.  We have proposed to invest hundreds of millions of dollars on new research, population health, improved access to mental health and addiction recovery and creation of a common platform for information technology.

The doctrine of State Action Immunity is long held law upheld by the Supreme Court of the United States.  Our proposal falls squarely within the law and is modeled after successful similar actions that have proven effective for the communities where they have been implemented.   We sincerely appreciate the comments by the FTC, and we have fashioned our proposal to take their concerns into consideration.

 

Copyright 2016 WJHL. All Rights Reserved.

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