Mountain States Health Alliance and Wellmont Health System are seeking to merge after years of being adversaries in the Appalachian Mountains in Virginia and Tennessee. The merger would create a healthcare monopoly in a 13-county region that is one of the least healthy in the U.S.
The two companies say the current situation of them working separately is wasting money and merging the two companies would provide savings that could be spent on improving public health services.
In order to avoid a potential court case with the Federal Trade Commission (FTC), which may oppose the merger, the two companies are using a different legal avenue called a Certificate of Public Agreement. This move allows Virginia and Tennessee to decide whether the merger is in the public’s interest. If approved, the two companies would need to “use money saved from the merger to offer mental health and addiction treatment services and attack public health concerns, such as obesity and smoking.”
Mergers and acquisitions have become the norm in healthcare. A month doesn't seem to go past without at least a handful of M&A activity.
A major reason for the increase is health systems looking for ways to contain costs. The American Hospital Association (AHA) reported earlier this year that hospital mergers between 2009 and 2014 led to cost savings and quality improvements. The AHA said mergers also increased efficiencies and allowed hospitals to expand its services.
What sets this merger apart is how it's trying to sidestep FTC oversight. The FTC has recently gotten involved in other proposed mergers, including Sanford Health’s merger with Mid Dakota Clinic. In that case, the FTC and North Dakota Attorney General Wayne Stenehjem asked a federal district court for a temporary restraining order and preliminary injunction to stop a proposed merger “until the FTC has completed an administrative hearing that will determine the legality of the transaction and any appropriate remedies.”
The FTC also helped reject a potential merger of Advocate Health Care and Northshore University Health System earlier this year, which would have created the largest nonprofit health system in Illinois.
The FTC’s Bureau of Competition had a new acting director after Markus H. Meier replaced Abbott (Tad) Lipsky recently. Meier served as acting deputy director of the Bureau of Competition since November 2015 and led the Health Care division within the bureau since 2006. He is now back in that division.
Federal government officials like the Bureau of Competition have taken a greater interest in the healthcare industry as hospitals and health systems look to merge, purchase or even divest facilities.
Health systems will watch the Appalachian case closely to see what the two states decide. If the two health systems are successful in their merger, expect other health systems, especially ones in rural areas, to explore the option in their states.