by Jeff Keeling
A large physician practice group has won state permission to build a $10 million ambulatory surgery center (ASC) in Kingsport. Meadowview Surgery Center will compete directly with Ballad Health, which is sharply limited in its ability to oppose such endeavors. A new company representing Holston Medical Group received a certificate of need (CON) Oct. 24 for the center, in which it expects to conduct more than 5,000 surgical cases per year starting in late 2019.
The application from Meadowview ASC LLC, cites what it claims is control by Ballad Health over the other 11 ASC’s serving Sullivan County. It suggests that even for ASCs over which it isn’t majority owner, “(Ballad) has reserved powers giving it de facto control over insurance contracting and other important matters.”
While Meadowview Surgery Center’s would-be owners expect to profit from its operation – projected 2020 net income is $1,054,665 – the CON application claims the center will benefit patients and physicians in what has become a Ballad-dominated healthcare landscape. The application notes that Meadowview’s investing doctors have entered numerous value-based arrangements with managed care organizations. “Under these arrangements, physicians and surgeons aim to meet high quality standards while at the same time reducing overall costs,” the application says. “It is the intent and goal of Meadowview ASC to bring more of these value-based arrangements to the ambulatory surgery market.”
Meadowview’s projected average net charge of $1,030 is significantly lower than the $1,835 average for the five multispecialty ASCs with which it would compete. Those figures do not account for the mix of case types, however.
“While physician and hospital jointly-owned ASTCs are a very common and attractive model, there is a need for a physician controlled ASTC in the service area,” the application says.The CON is the first approved for an area provider that will directly compete with Ballad, which, unlike its predecessor systems Mountain States Health Alliance and Wellmont Health System, is highly restricted in its ability to oppose CONs. The Terms and Conditions of the Tennessee Certificate of Public Advantage (COPA) that allowed Mountain States and Wellmont to merge attempt to mitigate that merger’s anticompetitive disadvantages in numerous ways.
When it comes to CONs – which both legacy systems often opposed in order to try, sometimes successfully, to ward off competition – the terms and conditions say the following:
“The New Health System shall not oppose the award of a certificate of need … unless such applicant for the certificate of need does not consistently accept inpatient Medicaid patients or uninsured patients.”
In its application, HMG verifies its intent to contract with at least one TennCare (Medicaid) managed care organization. “Meadowview ASC will be accessible to all consumers regardless of socio-economic status,” the application reads. It projects a first-year payor mix of 69 percent commercial insurance, 19 percent Medicare and 7.5 percent TennCare.
HMG’s application includes a letter of interest to invest in the center signed by 18 surgeons and it projects profitability even in the first year of operation. While hospital inpatient admissions and revenues have been flat to declining in the area, the new ASC will compete in a growing area. Sullivan County’s ASCs, with a total of 39 operating or procedure rooms, saw a 30 percent utilization increase from 2015 to 2017 with a total of 48,560 surgical cases in 2017.
The investing surgeons referenced in the application include four general surgeons, five orthopedic surgeons, four OB/GYN surgeons, two gastroenterologists, an otolaryngologist, a pediatric surgeon and a pulmonary surgeon. Access will be open for non-investing surgeons as well. Usage projections show gastrointestinal procedures accounting for more than 60 percent of the first two years’ total.
Dr. Scott Fowler, HMG’s president, is the initial sole member of Meadowview ASC LLC. The surgeons and proceduralists who have signed the letter of interest, which notes that a physician-controlled ASC “has been an internal objective for some time.” Reasons cited include “to provide a patient-focused environment consistent with our practice in a large multi-specialty group, to enable contracting that will meet the needs of our value-based arrangements with managed care organizations, and to give us more direct input and control over the center.”