State questions merger of Northeast TN hospital chains

The state Department of Health is questioning plans for the merger of Mountain States Health Alliance and Wellmont Health System in Northeast Tennessee, reports the Johnson City Press.

The department is asking the systems for more information about such issues as finances, public impact, competition and workforce consequences. In a letter dated March 28 and posted Thursday on the department’s website, Commissioner John J. Dreyzehner cited several deficiencies in the joint COPA (certificate of public advantage) application, including the lack of a separation plan in the event of failure.

“The department’s requirement for a plan of separation is to specifically ensure that if a COPA is issued and the New Health System (as defined in the application) fails to live up to the promised commitments and understanding reached by the department and the parties, the department may terminate the COPA and require a clear plan of action to return the parties to a pre-consolidation state,” Dreyzehner wrote. “The minimal framework presented in the application does not provide the level of detail necessary to meet the department’s requirement to outline a clear, actionable plan to separate a merged entity.”

On Feb. 16, the leaders of the nonprofit health organizations submitted thousands of pages of documents to state regulators asking for a COPA from Tennessee and a letter authorizing a cooperative agreement from Virginia. The applications kicked off a review process in both states — at least 120 days in Tennessee and 150 in Virginia — giving the health officials time to ponder the proposals before making final determinations, which the systems hope will be made in their favor this fall.

Asked for comment regarding the COPA letter, Mountain States and Wellmont issued a joint statement saying ongoing dialogue with both Virginia and Tennessee is an expected and welcome part of the application review process.

…Should regulatory approval be granted, the merged system would operate 19 hospitals, dominating the inpatient care system locally, and is expected to to reach $2 billion in annual revenues in two years, according to a budget included in the applications.