Despite favorable financial years again, MSHA, Wellmont say merger still “critical”

TRI-CITIES, TN/VA – For yet another year, both Wellmont Health System and Mountain States Health Alliance have continued to see financial growth, according to recent tax filings and audits, but executives and leaders from both organizations say that doesn’t change the fact the two systems need to merge.

MSHA Chief Financial Officer Lynn Krutak says despite the organization’s “stable” financial situation, there are concerns long-term.

“We’re facing reduction in population, declining utilization and aging population, inflation and expense increases with no reimbursement to offset those,” Krutak said, “There’s only so much fixed cost you can take out of the system…We are (managing under the current circumstances), but as we look out across the five-year period and continue to see the declines, really, that’s where the issue is.”

Wellmont Chief Financial Officer Todd Dougan says the system’s operating margin has improved for the third consecutive year and is on pace to perform about the same this year compared to Fiscal Year 2016.

“We’ve had challenges, but we’ve overcome those challenges,” Dougan said. “We are doing okay…The impetus for the merger is to thrive, thrive meaning financially and taking care of a broad realm of the population than we currently do.”

While revenues increased for both systems in FY 2016, so did expenses, according to the organizations’ audits.

Both systems say eventually, the changing healthcare landscape will force them to be more efficient by working together.

“We are extremely focused on expense management,” Krutak said. “We’ve reduced our expenses, we’re very focused on running a lean organization, making sure that we don’t have unnecessary expenses.”

Dougan said there’s a movement to pay healthcare providers to do more to make sure patients don’t need to be readmitted or need additional services. He says those one-time payments will put more emphasis on preventative rather than reactive care. Although that model will incentivize better healthcare, he says reimbursements will continue to decline.

“Nationally, there’s a movement to paying healthcare providers, not on what we do on a daily basis to or for the patients, but paying us to take care of a segment of the population,” Dougan said.

The chairs of both boards say the merger is not just about finances.

“We wanted to skate where the puck is going, not to where it’s been,” Wellmont Chairman Roger Leonard said. “We’re taking the long view and we’re concerned of the health of this region.”

They say the merger is about trying to do more to care for the people of the region and their chronic health issues. MSHA Chairwoman Barbara Allen says the only way to address those issues, along with concerns about mental health and substance abuse, is to do it as one efficient organization, not two competing health systems.

“There were many more underlying issues that are becoming more and more important,” Allen said of the reasoning for the merger. “I would probably say that the urgency for managing the health of the population is getting to be even more critical.”

Although both Allen and Leonard both say the complex merger process has taken longer than they ever expected, both say the extra time has made the final product better.

“Even though we didn’t expect it to take this long, I think we are very pleased, because we have been able to improve the structure of the merger, improve how we’re going to move forward. We’ve gotten to know each other a lot better,” Leonard said. “I think there’s been a lot of trust built.”

Leonard and Allen both say they’re not concerned the merger won’t be approved.

“It’s one of those situations in life that it’s going to take the time it takes to get it right and so hopefully, when we are complete, we will have the best possible product to serve the people of the region,” Allen said. “If it takes three years, it takes three years…I know that the amount of time that the process has taken can wear people down and I understand that, but I still today as the chairman, and I think at this point I’m speaking on behalf of the board, it is still as critical to see this go forward as it was when it was conceived three years ago. I do think it will happen.”

“We believe that the merger is going to conclude in October and we feel very confident that we’re going to get a positive outcome and we feel even more confident that we’re going to be able to positively impact healthcare in our region in the long-term,” Leonard said.

Copyright WJHL 2017. All rights reserved.

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