Tennessee extends deadline to close Mountain States, Wellmont merger deal

Zach Vance • Updated Dec 30, 2017 at 9:05 AM

The Tennessee Department of Health and state Attorney General’s Office have extended the deadline for closing the Mountain States Health Alliance and Wellmont Health System merger deal, according to documents retrieved by the Johnson City Press. 

Instead of a Jan. 1 deadline, Mountain States and Wellmont executives now have until Jan. 31 to finalize the hospital system merger, which has to occur before the state will officially grant the merged company, Ballad Health, its Certificate of Public Advantage. 

In to a Dec. 8 letter to Tennessee Health Commissioner Dr. John Dreyzehner, the health systems gave two reason for seeking the extension.

The first was to allow Virginia’s Technical Advisory Panel more time to construct a quantitative index to measure the merger’s impact on public health in Southwest Virginia. 

Those measures have to be established before the Virginia Department of Health can issue its Cooperative Agreement certificate. 

“The Technical Advisory Panel has met twice but has not yet finalized its recommendations to the commissioner,” the letter read. 

“While the Virginia Technical Advisory Panel is working diligently to complete its task, the recommendations may not be finalized before January 1, 2018, and even if the Technical Advisory Panel finalized its recommendations and the Virginia commissioner adopted them in late December, there would not be sufficient time for the applicants or the Department to complete the necessary preparations for a closing by January 1, 2018.” 

According to a statement from Mountain States and Wellmont, Tennessee’s terms of certification anticipated that Virginia might take additional time so a mechanism was included in the agreement for extending the closing date.

The other reason for the delay was Congress’ recently passed tax reform legislation, specifically how it would prohibit tax-exempt financing for certain nonprofit organizations, like hospitals. 

“In order to preserve as much flexibility as possible with both entities’ financing options, both applicants are planning to restructure their bank-held tax-exempt bonds by year end. This restructuring is a significant undertaking that will benefit both entities, and it is advisable for both applicants to be able to devote staff resources this month toward completing these refinancings,” the letter stated. 

Additionally, the state also granted the health systems an extension for establishing baseline spending amounts related to their spending commitments. That date was changed from Dec. 18, 2017, to Jan. 18, 2017. 

Tennessee officially approved Mountain States and Wellmont’s Certificate of Public Advantage application in September. A month later, on Oct. 30, Virginia Department of Health Commissioner Marissa Levine approved the health systems’ Cooperative Agreement application. 





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