'Bad care and bad experiences': Appalachian hospital merger draws scrutiny at FTC meeting

Clarification:  A panelist at the FTC workshop said Ballad Health was responsible shuttering 10 outpatient surgical rooms. Ballad Health officials have since disputed that statement, saying some of the outpatient rooms were operated by Ballad in partnership with physician groups. One outpatient surgery center has since been reopened.

The Federal Trade Commission on Tuesday heard concerns about a controversial merger of two competing hospital systems in northeast Tennessee.

The launch of Ballad Health last year came despite the opposition of FTC officials, who have the power to block mergers on the grounds that reduced competition limits patient choices and can lead to service cuts, price hikes and poorer outcomes.

Tennessee lawmakers, however, passed legislation allowing for a legal mechanism called a "certificate of public advantage" to bypass FTC regulation. The COPA law gave the state the power to grant permission for the merger of the former Mountain States Health Alliance and Wellmont Health Systems to form Ballad. 

Ballad is now the only hospital option for many of the 1.2 million people in a service area that includes northeast Tennessee and parts of Virginia, Kentucky and North Carolina.

Dr. Scott Fowler, president and CEO of Holston Medical Group in Kingsport, Tennessee, said patients are already being negatively impacted by the merger.

Ballad shuttered ten outpatient surgical rooms, Fowler said. Those procedures are now performed inside Ballad-owned hospitals where the costs are higher, according to Fowler. Fowler said Ballad then blocked efforts by Fowler's physician group to buy an outpatient surgical center to serve patients.

"It created bad care and bad experiences," he said. 

"This type of behavior is perhaps predictable but it is not the kind of behavior you expect from people who are trying to do the right thing."

Fowler also questioned Ballad's plans to downgrade a neonatal intensive care center and trauma center in Kingsport, which will require the sickest babies and adults to be diverted to another Ballad Hospital 20 miles away.

John Syer Jr., a vice president of Anthem Blue Cross and Blue Shield in Virginia, said Ballad's emergency physicians in Virginia are the only emergency physician group that does not participate in its health insurance plan, leaving its insurees without coverage to pay for emergency room care.

"Consumer choice, which is so important, that really doesn't exist in this geography," he said.

An attorney for Ballad said the dynamics are not unique to the company. The hospital system is under strict oversight by state officials in Virginia and Tennessee as a condition of its COPA. No violations have been found by state officials, he said.

"That's happening in every city in America," said Richard Cowart, the attorney. The changes have "nothing to do with the COPA."

As part of its agreement with the state, Ballad promised to not close any of its 21 hospitals within the next five years. It also pledged to invest $308 million into community health and other initiatives to improve the overall health in a region that has high rates of poverty, chronic illness and opioid addiction. 

Ballad is measured on those outcomes by the Tennessee Department of Health and the state attorney general. 

Janet Kleinfelter, a deputy attorney general, said that while the state is actively supervising Ballad, the "real test" of its success or failure cannot be determined in the 16 months since Ballad was formed. That will take another four or five years, she said. 

SUPPORT LOCAL JOURNALISM:  The Tennessean provides the in-depth reporting that shapes the region. A digital subscription gives you unlimited access to news that matters. Click here for a special offer. 

Reach Anita Wadhwani at awadhwani@tennessean.com; 615-259-8092 or follow her on Twitter @AnitaWadhwani