FTC recommends rejecting Virginia hospital merger

Virginia regulators should deny the proposed merger of Mountain States Health Alliance and Wellmont Health System, according to testimony from the Federal Trade Commission (FTC).

Mark Seidman, deputy assistant director for the FTC’s Mergers IV Division, spoke at the Oct. 3 meeting of the Southwest Virginia Health Authority. He said the commission has spent more than a year analyzing the proposed merger and have determined it would lead to the consolidated systems dominating inpatient services in 21 Virginia counties, along with controlling “a significant market share” in several outpatient and specialty service lines.

As the FTC has argued in opposing other hospital mergers, Seidman questioned promises that consolidation would lead to savings rather than helping hospitals to increase prices on insurers and patients.

“The hospitals have proposed commitments they claim would control and mitigate any anticompetitive effects, but these commitments are insufficient and unlikely to achieve this result,” Seidman said in his testimony. “In particular, the price commitments described in the application are ambiguous and appear to leave the hospitals with the opportunity and incentive to obtain higher prices from health insurers. And even if prices were successfully constrained, it would do nothing to prevent harm to quality of care, and in fact would make that harm more likely.”

Seidman also argued Mountain and Wellmont haven’t explained why the merger is necessary to create these efficiencies, describing both as “large, integrated health systems with sufficient scale, capability, and resources to achieve many of the claimed benefits on their own.”

Mountain currently operates 13 hospitals in Kentucky, North Carolina, Tennessee and Virginia, while Wellmont controls six hospitals in Tennessee and Virginia. If they’re allowed to merge, a FTC report released in September said the new system will control 71 percent of the geographic area which they both currently serve.

For those reasons, Seidman recommended the authority deny the systems’ cooperative agreement application.

Mountain and Wellmont—which in September said the merged system would be known as Ballad Health—is due to respond to the FTC report by Oct. 10.

The FTC has been highly critical and litigious in the past year on hospital mergers, though it did suffer a string of losses in court when judges ruled against moves to block consolidation in Illinois and Pennsylvania. The losing streak was recently reversed when the FTC was granted a temporary injunction on the Penn State Hershey Medical Center-Pinnacle Health System merger by an appeals court.