The Federal Trade Commission and a cadre of prominent health economists are urging Tennessee officials to reject a potential merger between Mountain States Health Alliance and Wellmont Health System.
The move comes a little more than a month after the FTC made a similar plea to Virginia regulators.
Mountain States and Wellmont, both headquartered in Tennessee, have been trying to combine their competing hospital systems for the past 18 months. The two not-for-profit organizations own 19 hospitals in Virginia and Tennessee. A merged system would have about $2 billion of revenue.
Mountain States and Wellmont have submitted applications for a certificate of public advantage (COPA) in Tennessee and Virginia, which would essentially allow them to skirt federal antitrust scrutiny in favor of state oversight. Government officials, and now many health economists, say a merger would result in reduced competition and higher prices for patients.
“Mountain States and Wellmont are each other's closest, most-intense competitor and together they would hold a near-monopoly over inpatient services in the area,” the FTC wrote to Tennessee regulators last week.
Forty-six health economists—led by Leemore Dafny, a former healthcare antitrust official at the FTC who is now a professor at Harvard Business School—piled on to the FTC's complaint. Their letter states the merger would inflate prices thanks to enhanced market power over insurers and employers. The letter also says cost savings from healthcare mergers are often mythical.
“There is no longer any meaningful debate in the academic community about whether competition among hospitals and other healthcare service providers is beneficial to consumers,” the academics wrote. “Decades of empirical evidence on hospital and health system mergers cast serious doubt on the applicants' assertions that the proposed combination would yield substantial efficiencies.”
Executives at Mountain States and Wellmont have said their proposed transaction will allow them to improve the health problems that have hit their rural communities and will save millions of dollars annually in labor costs. The hospital systems hired FTI Consulting to calculate their savings projections.