Regulators claim the deal presents "substantial risk" of higher healthcare costs, lower quality, and reduced access to care.
If consummated, the proposed merger of Wellmont Health System and Mountain States Health Alliance would lead to significantly less competition for healthcare services in southwest Virginia and northeast Tennessee, the Federal Trade Commission declared.
In a comment to the Tennessee Department of Health, FTC staff expressed concerns that the deal would "eliminate this beneficial competition" that now exists between the two neighboring health systems.
"It is clear that the new health system would have a dominant share of the market, making it a near-monopoly and allowing it to exercise significant market power," FTC staff said, adding that any state oversight likely would not mitigate the harm created by the merger.
In September, FTC regulators expressed similar concerns in comments submitted to the Southwest Virginia Health Authority, which is reviewing a cooperative agreement request.
Earlier this month, Alexis Gilman, assistant director for the Mergers IV Division of the FTC, spoke at a public hearing before the Tennessee Department of Health in Johnson City, TN, and recommended the Certificate of Public Advantage (COPA) be denied.
Wellmont, Mountain States Merger Proposal Vows Cost Containment
"The hospitals have not sufficiently justified why this highly anticompetitive merger is necessary and the only way to achieve their claimed benefits," Gilman said.
If the merger is approved by Virginia and Tennessee, the deal is exempt from FTC antitrust challenges.
"It's in the state's hands and all FTC can do is try to persuade them to see things the way they do and not issue the COPA," says Jay L. Levine, a disinterested observer and anti-trust litigator with PorterWright.
"If the COPA isn't issued, then the merger may be DOA unless the hospitals want to try and beat the FTC in court, which may be doubtful."
Leaders from Mountain States Health Alliance and Wellmont Health System have said their proposed merger would invest nearly $500 million in regional health initiatives over the next decade while holding healthcare cost growth below national averages in their two-state service area.
The proposed merger would place limits on negotiated rates with insurers, and tie healthcare cost growth for their operations in Tennessee and Virginia to the previous year's growth as measured by the federal Hospital Consumer Price Index and Medical Consumer Price Index.
In his public remarks, Gilman said the proposed rate caps may not fully control prices. "Even if they did fully control prices, the rate caps would do nothing at all to prevent harm to quality of care, and would in fact make that quality harm more likely," he said.
"Ultimately, the commitments being offered will be difficult to construct in a way that prevents the likely harm to consumers, will be difficult to monitor, and will be difficult to enforce."
In a joint response sent to HealthLeaders Media News last week, Mountain States Health Alliance and Wellmont Health System stated the proposed merger "represents the best opportunity to sustain access to high quality care while also investing in research, physician training, and new, needed services."
"The FTC has made similar arguments against other mergers, and their arguments were rejected. For example, in a recent such case in West Virginia, the FTC's arguments were rejected by the West Virginia Health Authority and the Attorney General of West Virginia."
Further, the Southwest Virginia Health Authority unanimously voted to recommend the proposed merger of Mountain States and Wellmont after considering the FTC's testimony and comments, according to the statement.
The merged system will be subject to a cap on rate increases to reduce the pace of healthcare cost growth and other commitments to protect payers and physicians. "The new system will be actively supervised by state officials to ensure these conditions are met," the statement claimed.