Hospital systems submit revised plan of separation

Revised Plan of Separation between
Wellmont Health System and
Mountain States Health Alliance

Pursuant to Grant of Certificate of Public Advantage By the Tennessee Commissioner of Health

This Revised Plan of Separation (“the Revised Plan”) is prepared as part of the application for Certificate of Public Advantage (“COPA”) submitted jointly by Wellmont Health System and Mountain States Health Alliance (collectively “the Parties”) to the Tennessee Department of Health (“the Department”). The Revised Plan is intended to set out the process by which the Parties would effect an orderly separation of the new, integrated health system to be created under the COPA (the “New Health System”) in the event that the Department determines that it is necessary to terminate the COPA previously granted to the Parties, as set forth in T.C.A. section 68-11-1303(g).

1. Overview. The purpose of this outline is to comply with Tenn. Comp. Rules & Regulations 1200-38-01-.02(2)(a)(17). The Revised Plan will be described in two scenarios: the “Short-Term Period” (0 to 18 months) and the “Long-Term Period” (after 18 months).
2. Short-Term Period Plan of Separation. (0 to 18 months post-closing)
   1. Overview. Re-establish a competitive dynamic by returning assets and operations to the control of the contributing party.
   2. Assets Held Separate. Mountain States and Wellmont will not, during the Short- Term Period, transfer to the other, or to the New Health System, any Material Operating Assets held by either Mountain States or Wellmont prior to the affiliation. For purposes of this commitment, “Material Operating Assets” shall mean those assets that exceed 10% of the New Health System’s total assets or roughly $300 million. Assets used in providing support services to Mountain States and Wellmont may be transferred as appropriate to effect the integration and achieve cost savings and performance improvement.
   3. The Process. Upon written notice from the Department that the COPA has been terminated, the following would occur:

(1) Preservation of Business. The New Health System will take all actions necessary to maintain the independent viability and competitiveness of Mountain States and Wellmont pending separation.

(2) Governance. The New Health System’s Board of Directors will oversee the plan of separation to insure that the plan is successfully implemented, minimizing to the extent possible disputes between the separating entities and disruptions in operations. Upon implementation of the plan of separation, the New Health System will be removed as member of Mountain States and Wellmont. Mountain States and Wellmont will return as the parent corporations of the pre-combination entities:

• a)  Mountain States. Mountain States directors will resign from the Wellmont Board and the New Health System Board. Mountain States directors will appoint additional directors to the Mountain States Board.
• b)  Wellmont. Wellmont directors will resign from the Mountain States Board and the New Health System Board. Wellmont directors will appoint additional directors to the Wellmont Board.

• (3)  Management.
  • a)  The Executive Chair/President of the New Health System will be named the Chief Executive Officer of Mountain States.
  • b)  The Chief Executive Officer of the New Health System will be named the Chief Executive Officer of Wellmont.
  • c)  Mountain States and Wellmont will appoint other executive officers of the respective corporations pursuant to established corporate procedures.
  • d)  Clinical Managers will be assigned to the Mountain States/Wellmont Clinical Site that is the Manager’s principal place of service.
• (4)  Financial. Mountain States and Wellmont will become separate financial enterprises.
  • a)  Debt. Any debt issued by the New Health System will be allocated to Mountain States and Wellmont based upon the proportion of pre- merger debt that each brought to the merger, except that if the proceeds of any debt issued by the New Health System have been used to benefit a facility or facilities (e.g, debt proceeds used to expand physical plant), such debt will be allocated to the entity which receives that facility in the separation.
  • b)  Reserves. The cash and marketable securities of the New Health System will be separated between Mountain States and Wellmont in proportion to the original contribution at closing.
• (5)  Employees. The New Health System employees will be assigned to their principal place of business. Clinical employees will be assigned to the Mountain States/Wellmont site that is the employee’s principal place of service.

• (6)  Employee Benefits. To the extent employee benefit plans have been combined, a plan of separation addressing employee benefits will be submitted. Each of Mountain States and Wellmont will be free to change or modify plans under separation. Mountain States and Wellmont will provide all legacy employees with credit for their New Health System service.
• (7)  Clinical Services. During the Short-Term Period, the New Health System expects the consolidation of any significant clinical services to be limited. To the extent clinical services are combined, a plan of separation addressing clinical services, including a transition services agreement, will be submitted to the Tennessee Department of Health for information prior to such combination.
• (8)  Information Technology. During the Short-Term Period, the New Health System will develop a combined approach to information technology. While planning and implementation are expected to begin, it is not anticipated that the Common Clinical IT Platform will be fully implemented in the Short-Term Period. Mountain States/Wellmont will each establish separate information technology services as part of the plan of separation. Transition services agreements will be utilized to assure no interruption in operations for Mountain States or Wellmont post- separation.
• (9)  Payers. During the Short-Term Period, the New Health System expects to negotiate payer agreements consistent with the terms and provisions of the COPA. In the event of any separation of the New Health System during the Short-Term Period, both Mountain States and Wellmont will honor the provisions of the New Health System payer agreements for the balance of any base term (without renewals). If any payer wishes to modify or replace its New Health System payer agreement, Mountain States and Wellmont will negotiate in good faith to reach a mutually acceptable modified or new agreement. All future payer agreements will be negotiated separately by Mountain States and Wellmont.
• (10)  Physicians. During the Short-Term Period, the New Health System expects to plan, but not execute, a combination of its physician enterprises. To the extent any physician services are combined, a plan of separation addressing physician services, including actions to return physician and other clinic employees to the Mountain States or Wellmont entity that was his or her employer at the closing, will be submitted to the Tennessee Department of Health for information prior to action. Hospital-based physician contracts, such as radiology, pathology, anesthesia, hospitalists, and emergency medicine shall be assigned to the site of service. Mountain States and Wellmont shall honor the physician contracts for the remainder of the base terms (without renewals).

(11) Dissolution. Once Mountain States and Wellmont no longer require support services from the New Health System, the Board of Directors of the New Health System will follow the procedures for voluntary dissolution of the New Health System as provided by Tennessee law.

3. Long-Term Period Plan of Separation. (after 18 months post-closing)

1. Overview. The Long-Term Period plan of separation would be implemented if the Department terminates the COPA after determining that the benefits of the merger no longer outweigh the disadvantages by clear and convincing evidence. Due to the difficulty of predicting the health care environment in the long term, the Long-Term Period plan of separation of necessity is a description of a process for deciding how to separate the assets and operations of the New Health System.
2. The Process:
   • (1)  Upon receipt of written notice from the Department that the COPA has been terminated, the New Health System will retain a qualified consultant (“the Consultant”).
   • (2)  The Consultant will assist the New Health System in complying with the written notice that the COPA has been terminated by analyzing competitive conditions in the markets subject to the Department’s written notice and identifying the specific steps necessary to return the subject markets to a competitive state.
   • (3)  The New Health System will submit a plan of separation to the Department (the “Proposed Plan). The Proposed Plan will address each of the substantive elements required of a Short-Term Period plan of separation and will be accompanied by a written report from the Consultant concerning the suitability of the Proposed Plan in addressing the competitive deficiencies that resulted in the termination of the COPA.
   • (4)  The Proposed Plan shall be submitted within 180 days of receipt of written notice from the Department that the COPA has been terminated. The Proposed Plan shall include a timetable for action which shall be approved by the Department.
3. Upon the Department’s approval of the Proposed Plan (or of any plan that contains revisions thereto) (the “Final Plan”), the New Health System will implement the Final Plan within the timetable prescribed in the Final Plan.
4. The Final Plan will provide that the Department may require that an independent third-party health care expert serve as a monitor (“the Monitor”) to oversee the process of implementing the Final Plan. The New Health System will pay the fees and expenses of the Monitor.

1. Non-Exclusive Plan. To the extent the Parties or the New Health System reasonably determines (based upon the current facts and circumstances) that a competitive dynamic may be restored in another, more efficient or effective means, the Parties or the New Health System may submit a new plan of separation different from the pre-submitted plan. In such event, the amended plan of separation must receive the Department’s approval prior to its implementation.
2. Annual Update. Department regulations provide that the plan of separation be updated annually. The annual update will address each of the following elements as appropriate and possible in light of the then existing facts and circumstances: (a) Governance, (b) Management, (c) Financial Separation, (d) Employees, (e) Employee Benefits, (f) Clinical Services, (g) Information Technology, (h) Payers, and (i) Physicians.