A Review of Filed by Mountain States Health Alliance Wellmont Health System

A Review of The Commonwealth of Virginia Application for a Letter Authorizing a Cooperative Agreement

Filed by Mountain States Health Alliance

and Wellmont Health System

December 22, 2016 The Southwest Virginia Health Authority

Preface

The health care policy of the Commonwealth of Virginia related to Southwest Virginia dramatically changed during the 2015 session of the Virginia General Assembly with the adoption of a series of amendments to the authorizing legislation of the Southwest Virginia Health Authority. These legislative actions signed into law by the Governor of the Commonwealth of Virginia on April 15, 2015 created a process to enable the approval of a cooperative agreement to facilitate the provision of quality, costefficient medical care to rural patients even in other anticompetitive situations. The legislative policy applies solely to health care in the jurisdictions of the Southwest Virginia Health Authority.

On February 16, 2016, Mountain States Health Alliance and Wellmont Health System delivered an application for the approval of a cooperative agreement to the Authority for consideration. "A Review of the Commonwealth of Virginia Application for a Letter Authorizing a Cooperative Agreement filed by Mountain States Health Alliance and Wellmont Health System" presents both a brief overview of the material submitted by the Applicants for authorization to enter into a cooperative agreement in Southwest Virginia and highlights of the input provided by many stakeholders as well as a record of the process the Authority undertook to reach its decision.

Our report provides background on the Southwest Virginia Health Authority and a record of the actions we took on the application submitted by the Mountain States Health Alliance and Wellmont Health System.

This report is not intended to be a fully comprehensive representation of all of the information considered and reviewed by the Authority or a complete documentation of every issue researched, discussed or debated. The volume of the information prevents such a detailed report.

The Authority hopes this report informs the reader of the mission of our Authority, the unique challenges our region confronts, the actions undertaken by the Authority in review of the application for approval of a cooperative agreement in Southwest Virginia, and the decision we reached.

For more information, please visit the Authority's website at .

Acknowledgements

The Southwest Virginia Health Authority wishes to acknowledge the contributions of Dennis Barry, Esq., and Richard Brownlee, Ph.D., and Tom Massaro, M.D. for their insight, guidance and assistance in the review of the Application, Ms. Delilah McFadden for her ongoing support of the Authority, and to Ashley Russell, for her assistance throughout our consideration of the Application.

We express our gratitude to the FTC staff for their engagement in our process. As noted several times, they are all bright, intelligent, engaging people.

We acknowledge the contributions of the insurance community and their associations, including the information made available to us, during our deliberations. We appreciate their participation in our review.

Finally, we offer our sincere appreciation to the people of Southwest Virginia and the health care providers who endeavor every day to provide their care. You inspire us.

Table of Contents

The Southwest Virginia Health Authority ...................................................................................................................................1 Organization and Membership..................................................................................................................................................2 The 2009 Report: A Regional Blueprint For Health Improvement and Health Prosperity..................................3 2011 Blueprint Progress Report ................................................................................................................................................4

Southwest Virginia: A Unique Region and Challenge............................................................................................................9 Cooperative Agreements in Southwest Virginia ................................................................................................................... 11

The Virginia Process for Cooperative Agreements ......................................................................................................... 13 The Role of the Southwest Virginia Health Authority ........................................................................................... 13 The Role of the Virginia Commissioner of Health .................................................................................................. 15

The Federal Trade Commission ................................................................................................................................................... 17 The Pre-Submission Report........................................................................................................................................................... 18 The Application For A Cooperative Agreement .................................................................................................................... 22

The Wellmont Health System Strategic Process .............................................................................................................. 23 The Applicants Propose a Unique Solution For Southwest Virginia. ....................................................................... 24

The Proposed Primary Service Area ............................................................................................................................. 25 The Applicant Assessment of Benefits and Advantages. ..................................................................................... 26 The Applicant Commitments .......................................................................................................................................... 27 Potential Disadvantages of the Cooperative Agreement .................................................................................... 27 Alternatives to the Cooperative Agreement ............................................................................................................. 28 The Projected Effects of the Cooperative Agreement on Volume, Price and Revenue........................... 28 Measuring Achievement of Commitments. .............................................................................................................. 28 Governance of the New Health System...................................................................................................................... 28 Separating the Parties........................................................................................................................................................ 29 Our Review of the Application ..................................................................................................................................................... 30 Delivery of the Application ....................................................................................................................................................... 30 Board Member Conflicts............................................................................................................................................................ 32 The Authority Working Groups............................................................................................................................................... 33 Health Care Quality Working Group............................................................................................................................ 36

Population Health Working Group............................................................................................................................... 38 Health Care Access Working Group............................................................................................................................. 38 Health Care Cost Working Group ................................................................................................................................. 40 Competition Working Group .......................................................................................................................................... 40 Working Group Questions ............................................................................................................................................... 40 Engagement of Staff ................................................................................................................................................................... 43 Active Promotion of Authority Activity................................................................................................................................ 44 America's Health Insurance Plans ................................................................................................................................. 44 Lee County Hospital. .......................................................................................................................................................... 44 Virginia Association of Health Plans ............................................................................................................................ 45 Presentation by The Applicants ..................................................................................................................................... 46 The Completeness Determination .............................................................................................................................................. 46 Virginia Association of Health Plans Objections to Application Status .................................................................. 49 Staff Recommendation on Completeness.......................................................................................................................... 50 Public Comment ................................................................................................................................................................................ 50 A Summary of Written Public Comment............................................................................................................................. 50 Community Written Public Comment ......................................................................................................................... 50 Written Public Comment from the Federal Trade Commission ........................................................................ 51 Response of the Applicants to the Staff Written Comments ............................................................................. 55 Written Public Comment From the Payer Community ......................................................................................... 56 Anthem Health Plans of Virginia, Inc. .......................................................................................................................... 56 Virginia Association of Health Plans ............................................................................................................................ 57 America's Health Insurance Plans ................................................................................................................................. 57 Applicant Response to Written Public Comment ............................................................................................................ 58 The Public Hearing............................................................................................................................................................................ 59 Final Review of the Application ................................................................................................................................................... 67 The Federal Trade Commission Meeting ............................................................................................................................ 67 Preliminary Comments of the Staff of the FTC ........................................................................................................ 67 A Review of Competition by the FTC Staff ................................................................................................................ 69

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