Can Ballad pull it off?

Hank Hayes • Nov 20, 2017 at 8:30 AM

The Tennessee and Virginia paper trail approving the merger of Wellmont Health System and Mountain States Health Alliance looks like a gauntlet.

Tennessee’s Certificate of Public Advantage (COPA) and Virginia’s Cooperative Agreement lay out the hoops that Ballad Health – the merged system – will have to jump through to stay in business as one health care provider.

The biggest financial hoop: A commitment to spend $308 million over a 10-year period on expanded access to health care services, health research and graduate medical education, population health improvement, and a region-wide health information exchange.

“We will make these investments through efficiencies created by the merger,” Wellmont spokesman Jim Wozniak said in an email when asked how Ballad will pay for the commitment. He added the combined debt of the merged system will be $1.36 billion.

That population health improvement will be up against 31 health measures, like smoking, youth tobacco use and obesity.

In particular, the Virginia Cooperative Agreement noted smoking is more common in the Southwest Virginia service area compared to the state as a whole, and that 100 percent of the Virginia service area has a higher percentage of adults who are obese.

Virginia Department of Health Commissioner Marissa Levine found that if the merged system meets the conditions, “the benefits likely to result from the proposed cooperative agreement outweigh the disadvantages likely to result from a reduction in competition.”

She stated 13 other reasons for approving the cooperative agreement, with the number one reason being: “Southwest Virginia experiences significant challenges with respect to delivery of health care services and population health status.” Levine also suggested the “strong competition” between Wellmont and Mountain States has failed to provide “meaningful, visible benefits” to Southwest Virginia in terms of access to care and improvements in health status.

Levine also cited Ballad Health’s commitment to keep all of its Virginia hospitals open for at least five years and not terminate an employee of any hospital in Virginia, except for cause, until 24 months from the anticipated 2018 closing of the merger.

In Tennessee, on the frontlines of the COPA’s oversight will be a compliance officer who will “be qualified to perform investigatory functions,” according to the COPA.

The COPA compliance officer will be employed by Ballad Health but his/her employment can only be terminated with the written approval of the commissioner of the Tennessee Department of Health.

The State of Tennessee also will retain a COPA monitor – an independent firm – who will be responsible for evaluating the “continued public advantage” of the COPA.

The Virginia Cooperative agreement acknowledged Ballad Health would be “the overwhelmingly dominant health system” in the region with 70 percent of the hospitals and other health care delivery assets across the service area.

“Although job losses and increased travel time to some services could result from the merger if certain hospitals are repurposed as clinical and health care facilities, the applicants estimate that efficiencies gained by the merger would eventually generate approximately $121 million in savings over a 10-year period – $70 million in non-labor savings, $25 million in ‘labor efficiencies’ and $26 million in ‘clinical efficiencies,’” the agreement stated.

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