Virginia approves Ballad cooperative agreement
Photo above: Mountain States President and CEO Alan Levine addresses the Southwest Virginia Health Authority, Oct. 14.
By Scott Robertson
Just after 3 p.m., Oct. 30, 2017, Mountain States Health Alliance and Wellmont Health System and the general public received formal notification that Virginia had approved the cooperative agreement under which the merger of the two systems may take place in the Commonwealth.
The order came in the form of an email and an update to the Virginia Department of Health website, vdh.virginia.gov. In the email, Virginia Health Commissioner Dr. Marissa Levine said, “I find that by a preponderance of the evidence that if the applicants meet and comply with the conditions…the benefits likely to result from the proposed cooperative agreement outweigh the disadvantages likely to result from a reduction in competition from the proposed cooperative agreement.”
Dr. Levine committed to establishing measures to evaluate the benefits of the agreement by January 31, 2018. She also included a list of 49 conditions under which the merged entity, to be named Ballad Health, must operate.
• The two systems may not close, repurpose, merge facilities or terminate employees (except for cause) from now until the effective date of the merger.
• Ballad may not contractually require that it be the exclusive provider to any health plan.
• Ballad must coordinate in good faith with independent physicians groups to develop a single, region-wide clinical services network, including the sharing of data.
• Ballad must fully honor existing employee benefits including full accrual of sick time and vacation.
• During the first 24 months, no Virginia employee may be terminated, except for cause, or moved more than 30 miles from his or her current location of employment. After 24 months, if Ballad wishes to terminate more than 50 employees during a 90-day period, it must give the state at least 60 days advance notice.
• Ballad must spend at least $85 million on health research and graduate medical education, $85 million on behavioral health services, $75 million on population health improvement, $28 million on rural health services, and $27 million on children’s health services in the 10-year period starting in 2018.
• All Virginia hospitals must remain open as clinical and healthcare institutions for at least five years.
• Three members of the 11-member Ballad board must be Virginia residents.
Much of the Virginia cooperative agreement mirrors the Tennessee Certificate of Public Advantage (COPA) granted a month before, though there are differences. The two documents are required in order to avoid the Federal Trade Commission stepping in to disallow the merger on grounds it would create a monopoly harmful to the region’s healthcare consumers. The COPA and the cooperative agreement are intended by the states to keep the new system from exercising inordinate market power.
“The most important thing is that the elimination of competition doesn’t result in harm,” Mountain State CEO Alan Levine (no relation to the Virginia commissioner), who is slated to be the chairman of Ballad said after the release of the Virginia order. “We all agree on that.”
But with two different state governments regulating one merged entity that will negotiate with payors and independent physician groups, among others, there’s still some confusion among the outside parties. “We really are having a difficult time understanding how it’s going to be enforced in context,” said Scott Fowler, president of Holston Medical Group. “The regulation is significant and there are still a lot of questions left.”
Alan Levine said the enforcement plan, while perhaps not entirely simple, is certainly capable of serving its purpose. “The Ballad board will have an audit compliance committee. There will be a COPA compliance officer who will report to that committee and to me. If there are issues related to employees or doctors, they can call an anonymous hotline and say why they think we’re out of compliance.
“The COPA compliance officer would then conduct an independent review. If they find we are not in compliance, they would tell management and suggest corrective action. If management does not agree, it would come to me, in which case the board will become a compliance committee and evaluate it. If we determine there is not a compliance problem, that will be our position. If we believe there is a problem, we will direct management to correct it. And of course, we have to report all this to the COPA monitor, which is another level of review. I don’t think though that a COPA monitor will want to reinvestigate everything the compliance officer does.
“My sense is the state doesn’t want the COPA law to be invasive. That’s why they wanted an internal compliance officer. I don’t think we want to have a COPA monitor living inside the system and running the system, and I don’t think that’s either state’s intent.
“As chair, I will be committed to making sure the compliance process is resourced properly, that the compliance officer is properly independent and that they have the right skill set to do investigations, then to do a thoughtful summary of what they found and how they recommend we correct it if we’re not in compliance. I think when the state sees that working well, they will rely heavily on that process.”
State of Franklin Healthcare Associates CEO Rich Panek sees no problem with that system of enforcement. The potential rub, in his estimation, is the new system’s appetite to work cooperatively with other players, including independent physician groups. “With the monitor and compliance committee in place, the structure is such that it will be more than adequately monitored,” Panek said. “The success will hinge on the ability and desire of the system to engage all the stakeholders of the community.”
For his part, Levine, who sat down with Panek within 48 hours of the Virginia order’s release, sees a structure for such relationships already in place. “We’re going to establish what the priorities are in population health,” Levine said. “We’re going to go with the doctors to the payors and we’re going to say, ‘Can we agree to align all of our incentives to these metrics?’ From there the only things to decide are what role the physicians play, what role we play, and what things we will invest in to provide help to the physicians?”
The other concerned constituency is comprised of consumers and payors, ably represented during the COPA application process by the FTC. Said Bart Hove, Wellmont CEO who will maintain that role in Ballad, “All along, one of the FTC’s big concerns has been pricing. We went into the application with a proposed pricing mechanism that would in our minds satisfy the FTC that we were going to hold pricing down so our consumers would not be harmed by the merger. That pricing commitment has, over however long it has taken us to get to this point, been registered in every document the FTC has put forth.
“My thought going in was, ‘We’ll lay that pricing on the table and that will satisfy that question about pricing and commitment to the consumers and we’ll be done. We’ll take our price cut and it will multiply year after year and that should satisfy everybody,’” Hove said, before admitting he may have been naïve in that view.
Naturally, the two states disagree on what the deadline for closing the merger should be, so Levine and Hove don’t know whether to plan for Tennessee’s 60 days or Virginia’s 90. Prudence demands they prepare for 60. Should the closing occur on day 60, it would be just over 1,000 days since the systems announced their plans to merge, April 2, 2015.
It’s the next 1,000 days that Levine and Hove are focused on however, not the last. “What we’ll be working on over the next 60 days,” Levine said, “is making sure that we begin to move toward a Ballad culture and away from a Mountain States and a Wellmont culture. From the day we close, there will be no more Mountain States and no more Wellmont. There is only Ballad.”
With the finish line in sight, Hove is eager to cross it. “I am convinced moreso today than ever that this is the right thing for our community,” he said. “It is different. It is out of the ordinary. It has not been done on this scale anywhere else in the country, but from what I understand, and from what I know about where health care is going, it is definintely the right approach to be able to achieve all the commitments outlined in the documents from both states.”
For more on the “Prelude to Ballard” please click here and refer to page 12.