The Federal Trade Commission has recommended Virginia regulators reject the proposed merger of two large regional systems in the state.
At a public hearing Monday, FTC official Mark Seidman told the Southwest Virginia Health Authority and the Virginia Department of Health that it should deny the application by Mountain States Health Alliance and Wellmont Health System to merge. He said the deal will cause an anticompetitive healthcare climate in the state, leading to higher prices and lower quality of care for patients.
FTC staff also submitted on Sept. 30 a report outlining their opposition to the merger.
The state agencies requested the FTC investigate the proposed merger before deciding whether to approve the deal. Virginia has the authority to approve the merger despite a recommendation from the FTC to oppose it.
The Virginia Department of Health said in a prepared statement that the state health commissioner is waiting for a recommendation from the Southwest Virginia Health Authority before deciding. The agency will also again review the merger application and all related documents before it decides whether or not to authorize the merger.
The Southwest Virginia Health Authority, a state organization of legislators and others that regulate the state's healthcare industry, did not respond to a request for comment.
Mountain States and Wellmont will submit a written response on the FTC's opinion to the Southwest Virginia Health Authority by Oct. 10, and will “explicitly address the shortcomings in their letter,” the systems said in a joint statement.
The systems announced plans to pursue a merger in April 2015.
Mountain States and Wellmont Health are both large systems with locations in multiple states. Johnson City, Tenn.-based Mountain States is a 13-hospital system that serves Kentucky, North Carolina, Tennessee and Virginia. Kingsport, Tenn.-based Wellmont is a six-hospital system that serves Tennessee and Virginia.
The systems' leaders have said the alliance will result in lower costs and higher quality of care.
But Seidman said healthcare costs would “significantly” increase because the systems “would have a dominant market share of inpatient services and a significant market share in several outpatient and physician-specialty service lines in the 21-county area they propose to serve.”
The FTC staff report found Mountain States and Wellmont would control 71% of the geographic area they both serve.
In a statement, the systems opposed the FTC's opinion that the merger would result in higher prices. They said, “There have been several examples where arrangements similar to what we have proposed have resulted in lower costs to consumers, and high quality.”
The FTC's Seidman also said Mountain States and Wellmont have “failed to provide sufficient detail to evaluate” whether the cost savings and quality benefits touted would be achieved. He also cast doubt on whether the merger was necessary, adding that both of the systems have the scale and capability to achieve many of the claimed benefits on their own.
As part of the regulatory approval process, the systems have submitted reports to Virginia and Tennessee agencies. In January, Mountain States and Wellmont pledged up to $450 million in community benefits if the merger is approved.
The areas of investment include improving community health, enhancing healthcare services, investing in health research and education, and attracting and retaining a strong workforce.
The merger could also lead to possible job cuts at the systems that would save $25 million per year in labor costs. But the two systems added that other potential partnerships out of state or out of region would also lead to potential job losses.
The systems also took the unusual step in June 2015 of requesting public input on the merger in order to identify gaps in care.
