The new, unnamed entity to be created by the merger of Wellmont Health System and Mountain States Health Alliance will be led by executives from both organizations. In other news, the FTC has issued the latest, and perhaps the final, shot in a three-year legal battle between itself and Phoebe Putney Health System.
Wellmont Health System and Mountain States Health Alliance announced plans to merge and create an integrated, locally governed healthcare network targeting health issues affecting people living in a four-state slice of Appalachia.
The boards of directors for both health systems last week unanimously approved an exclusive agreement to explore the merger. The decision caps more than a year of merger discussions by the two health systems, both of which are headquartered in Upper East Tennessee.
"Northeast Tennessee and Southwest Virginia disproportionately suffer from serious health issues—cardiovascular disease, diabetes, addiction, and access to mental health services, to name a few—and they must be addressed," said Alan Levine, president and CEO of Mountain States, who would become executive chairman and president of the combined system.
"The cost of this poor health is not sustainable," Levine said in prepared remarks. "By integrating, we can refocus our efforts from being measured based on how many patients we can admit to the hospital and how many ways we can duplicate these efforts, to how we measurably improve the health of our region while eliminating unnecessary costs and making healthcare more affordable. The people of this region deserve nothing less. We intend to demonstrate the merger's substantial specific potential in these areas."
Under the proposal, a new board would be created, have equal representation from both systems, and an additional two independent, jointly appointed members. The board will include a lead independent director who will be a Wellmont board appointee tasked with coordinating work with the executive chairman.
The president of East Tennessee State University will be a non-voting member of the board. ETSU will collaborate with the new system and focus on expanding opportunities to compete for research investment in the region, and bolster physician and allied health training.
The new board would direct the health system, which will get a new name, which has yet to be determined. One leadership team, composed of current executives from both organizations, would lead the combined system. The CEOs of both organizations would share leadership responsibilities.
"Together, we'll work alongside our employed and independent physicians to shape the future of healthcare by modeling effective clinical collaboration, building new community health solutions and becoming a national model for rural healthcare delivery," said Bart Hove, president and CEO of Wellmont, who would be CEO of the new system.
"As one system, our physicians would share best practices, collaborate to benchmark our outcomes against the nation's best, and develop new high-level services closer to home."
With the negotiating agreement signed, the two systems will now work to clear regulatory hurdles in Virginia and Tennessee, a process that is expected to be completed by the end of the year.
Based in Kingsport, TN, Wellmont Health System operates in Northeast Tennessee and Southwest Virginia.
Mountain States provides care in Northeast Tennessee, Southwest Virginia, Southeastern Kentucky and Western North Carolina. The not-for-profit system is based in Johnson City, TN, operates 13 hospitals serving a 29-county region.
FTC, Phoebe Putney Finalize Antitrust Settlement
The Federal Trade Commission has reached a settlement in its longstanding and complex dispute with Phoebe Putney Health System, Inc. that will allow the Albany, GA-based provider to keep Palmyra Park Hospital, even though the deal creates a hospital monopoly in the region.
"While we continue to have reason to believe that Phoebe Putney's acquisition of Palmyra violated Section 7 of the Clayton Act and Section 5 of the FTC Act, any relief attempting to restore the competition lost as a result of the merger is precluded by Georgia's strict Certificate of Need requirements," the Commission wrote in a statement.
This week's announcement represents the latest, and perhaps the final, shot in a three-year legal battle between the FTC and Phoebe Putney that went all the way to the U.S. Supreme Court.
The FTC alleged that Phoebe Putney constructed an elaborate scheme that used the Hospital Authority of Albany-Dougherty County, GA as a "straw man" to "cloak private, anticompetitive activity in governmental guise in the hopes that it would exempt the acquisition from federal antitrust law" in the purchase of Palmyra Park Hospital from HCA.
In 2011 a federal district judge ruled that the PPHS was immune from federal antitrust liability under the FTC Act and the Clayton Act. The FTC appealed the ruling to the 11th Circuit Court of Appeals but lost again.
In 2013, however, the U.S. Supreme Court ruled that the appeals court had "loosely" interpreted a state law cited by Phoebe Putney to justify a merger that would give the consolidated health system control of about 85% of the market in the region. The high court reversed the appeals court ruling and sent the case back to federal district court.
Under the consent agreement with the FTC, Phoebe Putney and the Hospital Authority must notify the FTC in advance of acquiring any part of a hospital or a controlling interest in other healthcare providers in the Albany, Georgia area for the next 10 years, and will be prohibited from objecting to regulatory applications made by potential new hospital providers in the same area for up to five years.
Jay L. Levine, a Washington, DC-based antitrust lawyer with Porter Wright Morris & Arthur LLP, says the FTC agreement this month "Is effectively the same agreement they put out before for public comment."
"They never gave final approval previously because they received word that the Georgia CON laws may not preclude a divestiture," Levine said by email.
"Recently, though, it became clear that the CON laws would preclude a divestiture and hence they moved forward with the agreement. It prohibits Phoebe Putney from objecting to others' CONs, from acquiring assets without giving notice to the FTC and it requires the parties to stipulate that the transaction was anticompetitive, which has implications should consumers of healthcare in that area decide to sue, claiming their healthcare costs were larger than they would have been absent the merger."
Robinson Health System Joins UH
Ravenna, OH-based Robinson Health System will join University Hospitals, the two Northeastern Ohio health systems announced jointly.
"Without question the agreement with University Hospitals will further strengthen Robinson and help us fulfill our mission to provide high-quality patient-centered health care to our patients and the communities that we serve," Robinson Health President and CEO Stephen Colecchi said in prepared remarks.
Robinson Health to Pay $10M to Settle Kickback Allegations
"UH also has an outstanding record of employee and medical staff engagement," Colecchi said. "We are confident that becoming part of UH will be a dynamic and important change for Robinson and is in the best interests of our patients, the Portage County community, our employees and medical staff. UH is consistently recognized as one of the leading health systems in the country and we are very proud and excited to become part of the UH system."
The financial details were not immediately disclosed, but the deal is expected to be finalized this year.
Thomas F. Zenty III, CEO of Cleveland-based UH, said the acquisition of Robinson Health "affirms our shared conviction that together we will best serve the residents of Portage County and surrounding communities."
Robinson Health System includes the flagship 117-bed Robinson Memorial Hospital, with nearly 400 physicians on staff covering more than 40 specialties. Robinson also operates an urgent care center, imaging facilities, a network of physician practices, and outpatient centers and medical facilities throughout Portage County.
UH employs 25,000 Ohio residents and is the second-largest employer in Northeast Ohio. The health system is an integrated network of 15 hospitals, including its relationships with Southwest General Health Center and St. John Medical Center, and 29 outpatient health centers located in 15 counties throughout the Northeast Ohio region.
News of the acquisition came on the heels of an announcement that Robinson had agreed to pay $10 million to the federal government to resolve self-disclosed claims that it paid illegal kickbacks to physicians referring Medicare patients.
John Commins is the news editor for HealthLeaders.