Mergers, COPAs, and Healthcare, Oh My!
I've been thinking a lot about health-care mergers and acquisitions lately, and I must confess, it's making me dizzy. All of this head-spinning thought was prompted primarily by the creation of Ballad Health Care, now the sole hospital system for my entire region of the country.
Ballad was established about a year ago through the merger of two existing hospital systems in the region of the country where I live – Mountain States Health Alliance and Wellmont Health System. The merger included 21 not-for-profit hospitals spread over 21 counties in Tennessee and Virginia. It is now the only hospital system in a region of south-central Appalachia where there are several small cities and large rural areas. If I want to go to a hospital not owned by Ballad, I must travel well over an hour from where I live, past multiple Ballad facilities. When I began practice as a family physician in this region some 35 years ago, every city and many smaller communities had their own community-owned and operated hospitals. Since then, consolidation of these hospitals has steadily diminished the competitive marketplace, culminating last year in the creation of Ballad, with its 100 percent market share of hospital services in the region.
Before getting to the question of whether such monopolies are a good thing, I need to address the question of how it could be allowed. After all, private monopolies are almost always considered to be counter to the public interest; anti-trust regulations exist to prevent such market consolidations. However, both Tennessee and Virginia have established processes for issuing Certificates of Public Advantage (COPAs). According to a recent report from The Milbank Memorial Fund, a COPA is a "cooperative agreement, under which the state approves a health care merger and shields it from antitrust enforcement in exchange for state oversight and supervision of the merged entities' conduct." The purpose of such COPAs is to give states "a tool to exercise oversight over the merging parties' health care prices, secure commitments for investments in population health, promote beneficial health care integration, and maintain access to rural health care providers." Meanwhile, the Federal Trade Commission has very little jurisdiction in the approval process. While there may be some benefit in having a process that (theoretically, at least) puts an emphasis on community health and access, especially in rural communities, there are obvious potential downsides. One big question is whether individual states have the resources necessary to adequately monitor and oversee such matters as price increases and quality of care.
The Ballad merger was controversial when it was first proposed and throughout the two-year approval process. Public perception of the advisability of the merger was sharply divided, as were the opinions of health-care professionals, business leaders and government officials. Not surprisingly, the controversy hasn't gone away since the merger took effect last year. Ballad recently announced plans to limit Level 1 trauma services (the highest level) to a single facility in the region. This will be done by reducing current emergency department services from Level 1 to Level 3 at one other regional hospital, and from Level 2 to Level 3 at another. In addition, it announced plans to consolidate two existing neonatal intensive care units (NICUs) by eliminating one. Changes have reportedly had negative impacts on inpatient hospice services in Bristol, the first inpatient hospice facility in the region. Clinical staff at some hospitals have seen promised wage increases withheld.
Despite support for these consolidations from area chambers of commerce, much of the public and many area health-care professionals are not happy. A recent (Tennessee) state-mandated hearing to solicit input from the public, hosted by the state-appointed COPA Local Advisory Council, lasted almost three hours and was attended by several hundred people. As reported in the Johnson City Press, "Support for Ballad Health was nonexistent at Thursday's public hearing at Northeast State Community College as more than 35 people — including former and current Ballad employees, emergency medical technicians and former patients — expressed dissatisfaction and concern about the hospital system, post-merger." Complaints ranged from concern about the consolidation of critical services to longer wait times, higher charges, poor communication and worsening work conditions.
Input from this hearing will be included in Tennessee's annual review of the merger, to be conducted by a "COPA Monitor." This independent consultant, retained by the Tennessee Department of Health (TDH), is tasked with evaluating the health system's performance, assessing its compliance with the terms of the COPA and making recommendations to the department. It will then be up to the TDH to take any actions deemed appropriate to enforce the COPA agreement. Virginia will conduct a similar annual evaluation, although theirs will be done entirely in-house by Virginia Department of Health staff.
The unique situation in northeast Tennessee and southwest Virginia raises numerous questions that are more broadly relevant. Is consolidation of health-care services necessarily bad? Aren't there good reasons to consolidate and integrate services to improve efficiency? Won't consolidation of services result to some extent in rationing of care? What about similar consolidation in the health insurance and pharmacy benefits management industries? Do states have the necessary resources to monitor compliance and enforce penalties? Lastly, how prone to political pressure in making tough decisions are state health departments?
These are difficult but important and questions, and I plan to delve into these and other related questions over the next few months. Stay tuned.