Medical monopoly: An unusual hospital merger in rural Appalachia leaves residents with few options

Clarification: Dr. Lisa Piercey, Commissioner of the Tennessee Department of Health, approved changes to a neonatal intensive care unit. A previous version of this story attributed approval to her predecessor. 

KINGSPORT, Tenn. – Molly Worley is an angry grandma.

For weeks she has stubbornly occupied a folding lawn chair on a grassy median outside Holston Valley Medical Center, sheltered from sweltering Appalachian summer sun by a thin tarp and flanked by a rotating crew staging a round-the-clock protest since May 1.

Behind them is the state-of-the-art neonatal intensive care unit where Worley's newborn grandson spent his first weeks of life treated for opioid exposure. 

In the same building is a Level I trauma center to respond to the most critical emergencies. 

Both facilities will downgraded in the coming months, diverting the sickest babies and adults elsewhere.

The cuts are the latest fallout from an unusual and controversial merger between two former rival hospital systems headquartered in northeast Tennessee.

The newly formed company, Ballad Health, is now the sole hospital provider for a region the size of New Jersey. For nearly 1.2 million people people living in a largely rural stretch of 29 counties in northeast Tennessee and nearby parts of Virginia, North Carolina and Kentucky, Ballad hospitals are the only inpatient option.

Mergers involving hospitals that compete for same patients face opposition from the Federal Trade Commission, which can block mergers on the grounds the combined company can limit patient choices, cut services, raise prices and diminish quality.

Ballad officials found a way to bypass FTC rules. They turned to Tennessee state Sen. Rusty Crowe, R-Johnson City, who successfully carried legislation making the merger possible. Crowe is a longtime paid consultant with Ballad hospitals. 

Only a handful of other states have exempted similar hospital mergers from FTC anti-monopoly rules. Ballad’s is the largest.

CEO Alan Levine said the merger lets the hospital system save money and keep rural hospitals afloat in a state that is already No. 2 in the nation for closures.

Eliminating overlapping staff and services, including the trauma center and NICU, will free funds to invest in other public health initiatives. Ballad pledged to keep open all of its rural hospitals for five years and to invest $308 million in public health, medical education and other initiatives.

"Every decision we make starts and ends with how can we best serve the community and what does the evidence show will lead to the best possible outcome," Levine said. 

"You don't want a trauma center on every corner and you don't want a NICU on every corner because it dilutes volume and hurts quality," he said.

No rural hospitals owned by Ballad have been closed. 

Some residents, doctors, nurses, EMS workers and public officials say the changes by Ballad expose the dangers of a single system imposing decisions on health care services on a captive audience that has no other options. More than 23,000 people have signed a petition opposing Ballad’s proposed changes.

"Never ever have I been this outspoken about anything," said Worley, 60. "This NICU saved my grandson's life. With Ballad we have no other choice. They have a monopoly at every level of health care."

As hospital systems across the country struggle to stay afloat, particularly in rural areas, Ballad's plan is being closely watched by other states weighing whether to allow other hospitals to take a similar approach.

A hospital looks for a buyer; a 'Hole in the Wall Gang' steps in

In 2015, the nonprofit Wellmont Health System, based in Johnson City with hospitals in northeast Tennessee, Virginia, North Carolina and Kentucky, was losing money and seeking a "strategic partner."  

The announcement worried business and community leaders in the region. They didn't want an outside buyer coming in that might cut staff and services to increase profit margins.

That's when Levine, then CEO of Mountain States Health Alliance — Wellmont's competitor — floated the concept of a COPA, or Certificate of Public Advantage. COPAs were a little-used legal mechanism designed to create state oversight of mergers that result in a monopoly.

Tennessee's laws at the time allowed for cooperation between competing health care organizations, but not a merger.

Levine sold the concept to Bill Greene, chairman of the board of Kingsport-based BankTenn Corp., which owns Bank of Tennessee, while the pair played golf. Greene enlisted about 15 prominent business and community leaders to embark on a public campaign to win over community support. The group — which consisted of the largest employers in the area — called themselves the "Hole in the Wall Gang."

Crowe, a longtime state legislator and a paid consultant to Mountain States Health Alliance, agreed to introduce a bill.  A non-medical professional, Crowe advised physicians on hyperbaric and wound care protocols. He remains a paid consultant to Ballad Health.

Crowe then introduced additional legislation to keep most records related to the COPA out of public view.

More than 60 complaints were filed with the Senate Ethics Committee questioning whether Crowe had a conflict of interest.

The work of the ethics committee is kept confidential. Crowe provided The Tennessean an advisory opinion he sought from the committee after receiving public criticism. The letter said Crowe had complied with all ethics disclosure rules by disclosing his financial relationship to the hospital.

Crowe defended his role, saying it was “something the community as a whole asked us to do.”

The COPA law was passed in 2015. Virginia lawmakers passed a similar law allowing the COPA to extend to Ballad-owned hospitals in that state.

After community pushback, Crowe introduced a scaled-back version of the bill shielding records related to the merger, which passed in 2018.

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NICU and trauma center downgrades

In December, Ballad submitted a letter to the Tennessee Department of Health outlining the proposed changes to the NICU in Kingsport.

Under the terms of the COPA, Ballad must submit proposals to cut or alter services to the Department of Health for approval.

The NICU would be downgraded from a Level III — equipped to care for the sickest of babies — to a Level I nursery. A neonatal intensive care unit 25 miles away in Johnson City would be upgraded to function as the region's only Level III NICU. (Level III denotes the highest level of care for a NICU, while Level I is the highest trauma center designation.)

The trauma center in Kingsport would likewise be downgraded, making the Johnson City Medical Center the region's main trauma destination. 

The distance could add another 30 minutes of transport time to patients coming from rural Tennessee and western Virginia counties.

Dr. Ken Smith, a neurosurgeon who practices in the Kingsport trauma center, said the change could be catastrophic for some patients.

“It’s different from a place like Nashville,” he said. “The corridors are from more rural areas.”

The move means the emergency travel time for adults, pregnant mothers and babies in the westernmost corners of Ballad's coverage area — Hawkins County, Tennessee, and small towns nestled in the mountains of Virginia — will increase from 30 minutes to nearly an hour. 

Dr. Mickey Spivey, a former emergency physician at the hospital, called the change in trauma care “too drastic” for the region.

“The risk of death increases by 25 percent if a person isn’t receiving definitive care in a Level I trauma center in the first 60 minutes,” he said. “That’s the ‘Golden Hour.’ Rural trauma accounts for some 60 percent of all trauma deaths. Because of this, access to definitive care is absolutely crucial.”

Kris Hill, an EMS transporter with the fire and rescue department in Duffield, Virginia, said the winding roads and hollers make air rescues impossible for many in the small communities near the Tennessee border who rely on the Kingsport hospital. 

“Southwest Virginia has no trauma center,” she said. “Virginia EMS protocols don’t recognize Level III trauma centers. Our roads are narrow, curvy and often not paved. From Duffield to Johnson City is 55 minutes. That’s if the weather is good.

“A lot of people will die depending on their injuries,” she said.

Hundreds of residents have packed a series of community meetings to voice concerns about what the changes could mean for the region. 

Dani Cook, a grandmother of a baby girl who spent her early months in the NICU, has been the primary public face of local opposition, taking to Facebook multiple times each day to urge residents to speak out.

"If these are the very first moves Ballad is taking, what is it that we are in for next?" she asked. 

Levine, the Ballad CEO, dismissed many of the criticisms as alarmist.

“If somebody stood up and said everybody who gets vaccinated is going to get autism, people like us in health care would speak up and say that’s not correct,” he said.

“When people say babies are going to die, it’s just not true. To say bad things are going to happen if there are not trauma centers within 20 miles of each other is not factually correct. Scaring people about their public health is not reasonable when they are using facts that are not true.”

Nevertheless, criticism has continued. The board of supervisors in Sullivan County, Tennessee, and Scott County, Virginia, have each passed resolutions saying they are "very concerned" about the changes.

The scope of the criticism against Ballad is difficult to entirely quantify. The COPA rules allow for public complaints to be filed with a state-appointed monitor.

Those complaints remain confidential under the legislation brought by Sen. Crowe.

In an annual report by the monitor, Ballad was criticized for "poor communication."

The Department of Health closely questioned Ballad about the timing of its announcement of the NICU changes.

Eight months before Ballad formally notified the Department of Health about its plans, the company detailed the NICU downgrade in an SEC filing. 

Dr. John Dreyzehner, then the commissioner of the state Department of Health, questioned why Ballad Health waited until Nov. 12 to notify the state, since the NICU consolidation decision was made in April 2018.

Ultimately Dreyzehner gave the green light to Ballad’s plans to downgrade the trauma center. His successor, Dr. Lisa Piercey, approved the NICU plans. 

Bigger bills, aggressive collections

In Greene County, Ballad’s merger has had an unlikely impact on one corner of local government: the courts.

Christopher Shepard, the circuit court clerk in Greene County in northeast Tennessee, said he will ask for an increase in his postage budget to keep up with a ballooning number of civil lawsuits filed against patients by Ballad.

“They’re just flooding us with these civil lawsuits,” Shepard said.

Ballad attributed increased collection activities to a national trend in high-deductible plans that have had a particularly hard impact on rural areas. 

Patients say they are being hit with higher medical bills.

Ballad has agreed to cap costs as part of its COPA terms with the state, but has shifted some of its medical care from freestanding clinics to hospitals. The move allows Ballad to bill "facility fees" for the same care. Those fees have left patients like Amanda Hales, 33, scrambling to pay her bills. 

Hales is recovering from non-invasive ovarian cancer, which requires her to get regular  drug infusions. In March, after Ballad moved its infusion center to a local hospital, Hales' was charged an extra $241 facility fee. Her insurance will cover a portion of the fee, but that leaves Hales with out-of-pocket charges.

"That's $400 I didn't have to pay before," she said. "I love my doctor and I have no complaints about my medical care. I'm getting the same care as I did before. It's just become a lot more expensive." 

So far, the merger has succeeded in helping Ballad's bottom line. For the nine months ended Dec. 31, 2018, its operating cash flow increased more than 12%.

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