FTC Staff Supplemental Submission to the Tennessee Department of Health Regarding the Certificate of Public Advantage Application of Mountain States Health Alliance and Wellmont Health System

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Bureau of Competition
Bureau of Economics
Office of Policy Planning
January 5, 2017
VIA ELECTRONIC MAIL
John J. Dreyzehner, M.D., MPH, FACOEM
Commissioner
Tennessee Department of Health
710 James Robertson Parkway
Nashville, TN 37243
TN.Health@tn.gov
Honorable Herbert H. Slatery III
Attorney General
State of Tennessee
500 Charlotte Avenue
Nashville, TN 37202
Herbert.Slatery@ag.tn.gov
Re: Certificate of Public Advantage Application of Mountain States Health Alliance and Wellmont
Health System
Dear Dr. Dreyzehner and General Slatery:
On behalf of the staffs of the FTC’s Bureau of Competition, Bureau of Economics, and Office of Policy
Planning, and pursuant to the Tennessee rules implemented at Chapter 1200-38-01, we are providing the
attached supplemental written public comment in reply to the December 19, 2016 Response to Public Comments
submitted by Mountain States Health Alliance and Wellmont Health System to the Tennessee Department of
Health, as well as a chart regarding the proposed Certificate of Public Advantage Commitments put forward in
the Southwest Virginia Health Authority’s December 22, 2016 Review of the Virginia Cooperative Agreement
Application. We can provide copies of any documents referenced in these comments, upon request.
Please direct questions concerning this submission to Goldie V. Walker, Attorney, Bureau of
Competition, 202-326-2919, gwalker@ftc.gov; and Stephanie A. Wilkinson, Attorney Advisor, Office of Policy
Planning, 202-326-2084, swilkinson@ftc.gov.
Respectfully submitted,
Markus H. Meier, Acting Deputy Director
Bureau of Competition
Ginger Z. Jin, Director
Bureau of Economics
Tara Isa Koslov, Acting Director
Office of Policy Planning
Enclosures

Federal Trade Commission Staff Supplemental Submission
to the Tennessee Department of Health
Regarding the Certificate of Public Advantage Application of
Mountain States Health Alliance
and Wellmont Health System
Pursuant to Tennessee Code § 68-11-1301 et seq.
and the rules implemented thereunder at Chapter 1200-38-01
January 5, 2017
Bureau of Competition
Bureau of Economics
Office of Policy Planning

FTC Staff Supplemental Submission - January 5, 2017
1
I. 	INTRODUCTION1
On December 19, 2016, Mountain States Health Alliance (“Mountain States”) and
Wellmont Health System (“Wellmont”) (collectively “the parties” or “the applicants”) submitted
responses to the public written comments filed in opposition to their application for a Certificate
of Public Advantage (“COPA”) with the Tennessee Department of Health (“TDH”).2 This
included responding to the public written comment that Federal Trade Commission staff (“FTC
staff”) submitted on November 21, 2016. FTC staff submits this supplemental comment to
address some of the parties’ most critical errors and misrepresentations. Importantly, we do not
attempt to address each and every error or misrepresentation in the parties’ response. Moreover,
our initial submission fully addresses most of the issues raised in the parties’ response, therefore
they need not be repeated here.
We have also attached to this supplemental comment a chart containing FTC staff’s
analysis, questions, and concerns regarding the parties’ proposed COPA commitments. As set
forth in the chart, those proposed commitments have significant shortcomings, gaps, and
ambiguities. Consequently, the parties’ commitments do not remedy the competitive harm likely
to result from the merger, and the parties do not come close to carrying their burden to show by
clear and convincing evidence that the likely benefits of the COPA exceed the harm.
FTC staff has conducted a detailed investigation into the proposed merger of Mountain
States and Wellmont in which we collected and reviewed a voluminous amount of confidential
documents, data, and information from the parties and other market participants.3 As with our
previous written comment, however, this supplement and the attached chart rely on public
information only.
II. 	THE APPLICANTS BEAR THE BURDEN OF PROOF BY CLEAR AND
CONVINCING EVIDENCE
Apart from the numerous mischaracterizations in the parties’ response, one glaring
shortcoming undermines their entire submission: the parties bear the burden of proving by clear
and convincing evidence that the benefits of the COPA outweigh the harm from the lost
competition, not FTC staff or any other commenter.4 From the outset, the parties suggest that
1 These comments express the views of the FTC’s Bureau of Competition, Bureau of Economics, and Office of
Policy Planning. These comments do not necessarily represent the views of the Commission or of any individual
Commissioner. The Commission has, however, voted to authorize staff to submit these comments.
2 Mountain States Health Alliance & Wellmont Health System, Response by Applicants to Submissions of Federal
Trade Commission Staff, Amerigroup Tennessee Inc., Professors and Academic Economists, Kenneth Kizer, M.D.,
MPH, and Holston Medical Group to the Tennessee Department of Health Regarding Certificate of Public
Advantage Application (Dec. 19, 2016),
https://www.tn.gov/assets/entities/health/attachments/Response_to_Public_Comments_Submitted_to_TN_DOH_wit
h_TOC2_.pdf [hereinafter Mountain States-Wellmont Response].
3 The evidence collected by FTC staff was available to its quality of care expert retained in this matter, Dr. Kenneth
Kizer, in order for him to prepare his independent assessment of the parties’ quality of care, population health
management, and related claims.
4 “After consultation with and agreement from the attorney general and reporter, the department shall issue a
certificate of public advantage for a cooperative agreement, if it determines that the applicants have demonstrated by

FTC Staff Supplemental Submission - January 5, 2017
2
FTC staff’s conclusions lack substantiation or supporting evidence.5 FTC staff’s comment,
however, included detailed references to sources, data, and analyses supporting our conclusions.
Nevertheless, the parties’ criticisms miss the point – it is the parties that bear the burden of
presenting to the TDH evidence that meets the statute’s clear and convincing standard.6
The parties’ discussion of the alternative arrangements statutory factor is but one of many
examples of how they mischaracterize the framework through which the TDH must evaluate
their COPA application under relevant Tennessee law. Under the Tennessee Hospital
Cooperation Act, it is a statutory disadvantage if there are “availab[le] [ ] arrangements that are
less restrictive to competition and [that] achieve the same benefits or a more favorable balance of
benefits over disadvantages attributable to any reduction in competition likely to result from the
agreement.”7 The parties failed to provide any analysis of available alternative arrangements,
whether through collaborations with each other short of a merger, joint ventures or affiliations, or
mergers with other hospitals. Rather than meet their burden, the parties attempt to shift the
burden by claiming that FTC staff “have provided literally no evidence” about alternative
arrangements available to and considered by the parties.8 Although the COPA application
publicly notes that Wellmont received eight alternative acquisition offers, the parties never
compare the details and potential benefits of those offers with the claimed benefits of this
merger. Nor do they discuss in any meaningful detail any other affiliations or other
arrangements that might provide comparable benefits with the same, less, or even no competitive
harm. It is not incumbent on FTC staff to show the superiority of an alternative option; rather,
the parties must demonstrate to TDH that other options either are inferior to this one or are not
available. They have failed to do so.9
If the parties truly believe this merger is the best option for residents of Northeast
Tennessee and Southwest Virginia, their reticence to discuss alternative arrangements is a
clear and convincing evidence that the likely benefits resulting from the agreement outweigh any disadvantages
attributable to a reduction in competition that may result from the agreement.” Tennessee Hospital Cooperation Act
of 1993, Tenn. Code Ann. § 68-11-1301(e)(1) (emphasis added) [hereinafter Tennessee Hospital Cooperation Act].
5 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-7, Section III – Page III-13.
6 “Clear and convincing evidence eliminates any serious or substantial doubt concerning the correctness of the
conclusions to be drawn from the evidence. O’Daniel v. Messier, 905 S.W.2d 182 (Tenn. App. 1995). It should
produce in the fact finder’s mind a firm belief or conviction with regard to the truth of the claims sought to be
established. Walton v. Young, 950 S.W.2d 956 (Tenn. 1997).” T.P.I.—CIVIL2.41Burden of Proof—Clear and
Convincing Evidence, 8 Tenn. Prac. Pattern Jury Instr. T.P.I.-Civil 2.41 (2016 ed.).
7 Tennessee Hospital Cooperation Act, supra note 4, § 68-11-1303 (e)(3)(D).
8 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-7.
9 The parties claim that none of these eight other bidders “remain as active proposals for consideration today,” but
that carefully crafted language fails to address whether certain bidders are today still interested in acquiring
Wellmont if the transaction with Mountain States does not proceed. The Southwest Virginia Health Authority, 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 (Dec. 22, 2016) at 154, n. 190 (citing Letter from
Gary Miller to J. Mitchell, Nov. 4, 2016), https://swvahealthauthority.files.wordpress.com/2016/12/cooperative-
agreement-report-december-22-2016.zip [hereinafter Southwest Virginia Health Authority Review]. In order to
avoid revealing whether any of those alternative bids involved better terms than Mountain States is committing to,
including greater financial investments and a commitment to main local control of hospitals, the parties also claim
that they are not at liberty to share the proposals with the public due to confidentiality restrictions, yet the parties do
not appear to have made any effort to seek waivers to share such information with the public.

FTC Staff Supplemental Submission - January 5, 2017
3
surprising and critical omission. Further, because COPA applicants bear the burden of
demonstrating that they could not achieve the benefits they claim would result from this COPA
through a less restrictive alternative, it is the parties’ burden to undertake a reasonable
investigation and provide an explanation of the available alternatives. Instead, the parties expect
TDH to accept at face value their unsubstantiated claims about the dangers of “out-of-market”
mergers10 and the infeasibility of alternative collaborations.11
The parties’ discussion of the relevance of the Certificate of Need (“CON”) process to
their claims of “unnecessary duplication” provides another example of their misplaced burden of
proof.12 In response to the parties’ generalized claims that the proposed merger would eliminate
“unnecessary duplication,” FTC staff pointed out that both Tennessee and Virginia are CON
states, so the states had already made a determination that their communities needed each of the
services Mountain States and Wellmont provide. While the parties correctly note that demand
conditions may have changed since the grant of any given CON, they present no specific analysis
to demonstrate changed conditions or indicate that Tennessee or Virginia would not grant a CON
today. The CON process creates a presumption that their services are not unnecessarily
duplicative; thus, the parties have the burden to show evidence that the conditions have changed
for particular services.
III. 	THE FACTORS CONSIDERED UNDER THE TENNESSEE HOSPITAL
COOPERATION ACT AND THE MERGER GUIDELINES ARE SIMILAR
The parties attempt to dismiss FTC staff’s entire comment by arguing that we applied a
Horizontal Merger Guidelines (“Merger Guidelines”) analysis instead of the analysis prescribed
by the Tennessee Hospital Cooperation Act. This criticism is not only wrong – it is misleading.
The structure of FTC staff’s comment tracks the factors laid out in the Tennessee Hospital
Cooperation Act. FTC staff’s comment also discusses the similarities between the framework
laid out in the Tennessee Hospital Cooperation Act and the analysis described in the Merger
Guidelines, illustrating why our public comment is wholly consistent with the analysis required
under the state statute. In response, the parties again try to distract from the substantive issues by
arguing that TDH should disregard FTC staff’s analysis, stating that “State Policy, Not Antitrust
Law, Governs Cooperative Agreements,”13 which we do not contest. The parties simply ignore
the fact that FTC staff conducted its analysis under the state policy laid out in the Tennessee
Hospital Cooperation Act, which, again, is remarkably similar to the Merger Guidelines
framework. At their core, both the Hospital Cooperation Act and the Merger Guidelines seek to
weigh the harms from a merger against the potential benefits, an exercise that FTC staff has
significant experience with. Notably, the parties do not point to any statutory factor ignored by
FTC staff’s comment.
10 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-8.
11 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-7.
12 Mountain States-Wellmont Response, supra note 2, at n.82.
13 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-2.

FTC Staff Supplemental Submission - January 5, 2017
4
IV. 	THE LEGISLATURE INTENDED TO DISPLACE COMPETITION ONLY
WHEN APPLICANTS PROVED BY CLEAR AND CONVINCING EVIDENCE
THAT THE BENEFITS OUTWEIGH THE HARM; THE APPLICANTS ASK
TDH TO IGNORE THIS
Despite the parties’ claims to the contrary, an analysis of a COPA application under the
Tennessee Hospital Cooperation Act requires an in-depth analysis of the competitive harm. The
applicants must demonstrate by clear and convincing evidence that “the likely benefits resulting
from the agreements outweigh any disadvantages attributable to a reduction in competition that
may result from the agreements.”14 It is not possible to conduct the balancing test required by
the statute without a full analysis of the competitive harm. The parties have either failed to do
that part of the analysis, or have done so but simply failed to address it because it is so
unfavorable to their COPA application.
By contrast, consistent with the COPA law framework, FTC staff’s analysis (1) evaluated
the competitive impact of the merger and (2) examined whether that harm would be outweighed
by the potential benefits or mitigated by the proposed commitments. By encouraging TDH to
ignore FTC staff’s and other commenters’ discussion of the market structure, diversion statistics,
and predicted price increases, the parties are refusing to engage in half of the analysis required
by Tennessee law. The tools FTC staff used to determine the competitive impact of the merger
are well established and standard in economics and merger law. Tellingly, the parties baldly
assert that these analyses are “not informative,”15 but present no alternative methodology or
analysis. TDH can only evaluate the sufficiency of the commitments and the benefits if it also
analyzes and weighs the competitive impact of the merger, which the parties ask TDH to ignore.
Given the overwhelming evidence that the competitive harm from this transaction would
be substantial, the parties must prove that their claimed benefits and commitments outweigh this
substantial harm – and do so by clear and convincing evidence. As described in our initial
comment and the attached chart, they have done neither.
A. 	The Commitments Proposed by the Parties Do Not Sufficiently Mitigate the
Proposed Merger’s Enormous Competitive Harm
In addition to establishing the degree of competitive harm likely to result from the
merger, TDH must assess whether the parties have demonstrated by clear and convincing
evidence that their commitments meaningfully mitigate and counter that harm. As an initial
matter, the parties make clear in their response that their proposed investment commitments are
entirely contingent on achieving the cost savings they project.16 Should the hospitals fail to
achieve their projections, these investments likely would not occur or would be materially
smaller. According to a significant body of literature, efficiency predictions made in advance of
14 Tennessee Hospital Cooperation Act, supra note 4, § 68-11-1303(b).
15 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-14 to Section III – Page III-16.
16 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-14 (“funds are available only through
synergies generated by the merger”); Section III – Page III-42 (“The monetary commitments are possible solely
based on savings to be realized from merger efficiencies, and cannot be made without the merger.”).

FTC Staff Supplemental Submission - January 5, 2017
5
mergers often prove to be inaccurate and are not achieved.17 Consequently, TDH should be
wary of approving this COPA based on the conditional promise of these investments.
The COPA regulations also require that “[p]rior to granting the COPA, the parties and
Department will agree upon the terms of certification and specific conditions that assure Public
Advantage.”18 The parties’ proposed commitments are far from being specific conditions. For
example, numerous commitments offer little more than a timetable to submit a plan or make a
vague commitment to improve and report on unspecified quality metrics. For this reason alone,
TDH should deny the COPA. The discussion below identifies four of the most significant gaps
in the parties’ proposed commitments; the attached chart provides a more comprehensive critique
of each commitment they have proposed.19
17 See H EALTH C ARE A DVISORY B OARD, M&A - To What End? Five Characteristics of Intentional Corporate
Strategy (2014), https://www.advisory.com/-/media/Advisory-com/Research/HCAB
/Research-Study/2013/MA-To-What-End/HCAB-MA-To-What-End.pdf at 4 (“[E]xecutives ought to view deals that
promise significant cost savings, immediately or even over the long haul, with an abundance of skepticism”), id. at 5
(“Few [health system] networks even attempt to pursue full range of cost savings”); Melanie Evans, Merger
Indigestion: Big Hospital Mergers Failing To Deliver Promised Results, M ODERN H EALTHCARE (Apr. 23, 2016),
http://www.modernhealthcare.com/article/20160423/MAGAZINE/304239980 (finding that some of the biggest
hospital mergers in recent years have failed to achieve operating efficiencies that would make them more cost-
competitive); David Muhlestein, Robert Saunders & Mark McClellan, Medical Accountable Care Organization
Result for 2015: The Journey to Better Quality and Lower Costs Continues, H EALTH A FFAIRS B LOG (Sept. 9, 2016),
http://healthaffairs.org/blog/2016/09/09/medicare-accountable-care-organization-results-for-2015-the-journey-to-
better-quality-and-lower-costs-continues/ (“[C]onsolidation [among health systems] and larger size do not
necessarily lead to the functional integration and efficiency needed to succeed under alternative payment models.”);
Anil Kaul, K.R. Prabha & Suman Katragadda, Size Should Matter: Five Ways to Help Healthcare Systems Realize
the Benefits of Scale, P WC STRATEGY & (2016), http://www.strategyand.pwc.com/reports/size-should-matter
(finding that greater size has not led to lower costs or better quality outcomes for consolidated health systems);
Marissa J. Noles, Kristin L. Reiter, Jonathan Boortz-Marx & George Pink, Rural Hospital Mergers and
Acquisitions: Which Hospitals Are Being Acquired and How Are They Performing Afterward?, 60 J. HEALTHCARE
M ANAGEMENT 395 (2015), http://www.whartonwrds.com/wp-content/uploads/2016/05/Levin-research-paper.pdf at
403 (“If rural hospitals solicit merger or acquisition [sic] because they are expecting a rapid influx of capital, a relief
of debt burden, or an improvement in bottom-line profitability, evidence from this study suggests that these results
may not materialize, at least not in the short term. Our results suggest that profitability may actually decline after the
transaction.”); Sanjay B. Saxena, Anu Sharma & Anne Wong, Succeeding in Hospital & Health Systems M&A: Why
So Many Deals Have Failed and How To Succeed in the Future, P WC STRATEGY & (originally published by Booz &
Company, 2013), http://www.strategyand.pwc.com/media/file/Strategyand_Succeeding-in-Hospital-and-Health-
Systems-MA.pdf at 4 (finding that the majority of recent hospital and health system mergers have been financially
unsuccessful, and that “only 41 percent of hospitals acquired between 1998 and 2008 outperformed their market
peer group”).
18 Tennessee Rules Implementing Laws Relative to Cooperative Agreements and the Granting of Certificates of
Public Advantage Pursuant to the Hospital Cooperation Act of 1993, T.C.A §§ 68-11-1301 through 68-11-1309,
Chapter 1200-38-01-.05 (2) (filed Jul. 14, 2015), http://share.tn.gov/sos/rules_filings/07-13-15.pdf (emphasis
added) [hereinafter Tennessee Rules].
19 The attached chart contains and analyzes the most recent commitments made by the parties, which are reflected in
the Southwest Virginia Health Authority’s December 22, 2016 review. Southwest Virginia Health Authority
Review, supra note 9, at 117-51. Although we are not aware of the parties having updated their proposed
commitments to Tennessee, the newer commitments proposed in Virginia are similar enough to those currently
proposed in Tennessee that we have chosen to analyze the most recent commitments accepted by the Southwest
Virginia Health Authority. FTC staff also bases this on the assumption that these newer commitments may
ultimately be offered in Tennessee.

FTC Staff Supplemental Submission - January 5, 2017
6
1. 	Rural Hospitals Are Not Protected
The parties have repeatedly touted the preservation of rural hospitals as a central benefit
and motivation for the COPA. They present little evidence, however, to show that any of their
rural facilities would be closed without the COPA or that any other potential merger partner had
plans to close any hospitals. Instead, the parties rely almost entirely on generalized studies about
the challenges rural hospitals face across the country,20 and on a narrow description of the
financial state of their current facilities that overlooks the important role those hospitals play in
their larger systems.
The parties argue that, “[a]s operating margins in the larger Mountain States and
Wellmont facilities continue to face downward pressure due to declining inpatient use rates, it is
becoming more challenging to continue carrying these losses” and that they cannot continue to
subsidize their rural hospitals absent the merger.21 The parties’ financial reports do not support
these general statements. At the system level, both Mountain States and Wellmont have reported
financial results that contradict the dire picture painted by the parties.22 In fiscal year 2015,
Mountain States generated approximately $1 billion in total revenue and $55 million in net
revenue,23 and Wellmont generated approximately $813 million in total revenue and $16 million
in net revenue.24 The parties also frequently reference their combined debt of nearly $1.5 billion,
yet fail to mention that at the end of fiscal year 2015, they had a combined $3.3 billion of total
assets, resulting in combined net assets of approximately $1.33 billion.25 The parties also
20 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-31.
21 Id. at Section I – Page I-4.
22 Wellmont Health Systems, Financial Report, http://www.wellmont.org/Our-Mission/Community-
Benefit/Financial-Report/; Tammy Childress, Mountain States Health Alliance Posts Audited Year-
End Results, BRISTOL HERALD COURIER (Nov. 5, 2015),
http://www.heraldcourier.com/workittricities/business_news/mountain-states-health-alliance-posts-audited-yearend-
results/article_e1a9b05c-8316-11e5-a8d4-5f3b2b601935.html (reporting that for fiscal year 2015, Mountain
States substantially reduced its debt as a result of strong volume growth and cost discipline); Nate Morobito,
Wellmont Health System, Executives Benefit from Good Financial Year, WJHL (May 18, 2016),
http://wjhl.com/2016/05/18/wellmont-health-system-executives-benefit-from-good-financial-year/ (“Overall,
Wellmont Health System is coming off a solid year financially.”); Hank Hayes, Wellmont's Filing Discloses
Compensation, Shows Better Operating Margins, KINGSPORT TIMES-NEWS (May 17, 2016),
http://www.timesnews.net/Business/2016/05/17/Wellmont-s-filing-discloses-old-salaries-and-shows-better-
operating-margins.
23 Mountain States refers to this as “excess of revenue, gains and support over expenses and losses.” Mountain
States Health Alliance & Wellmont Health System, Responses to Questions Submitted April 22, 2016
by Tennessee Department of Health in Connection with Application for A Certificate of Public Advantage, Exhibit
23 at 5 (Audited Financial Statement on MSHA as of June 30, 2015) (July 13, 2016),
http://tn.gov/assets/entities/health/attachments/WHS-MSHA_April_22,_2016_DOH_Response_1.pdf [hereinafter
Responses to Department Questions].
24 Wellmont refers to this as “revenue, gains and support in excess of expenses and losses.” Mountain States Health
Alliance & Wellmont Health System, Application for a Certificate of Public Advantage for State of Tennessee (Feb.
16, 2016), Exhibit 11.5, Attachment B, at 4, http://tn.gov/assets/entities/health/attachments/COPA_application.pdf
[hereinafter Tennessee COPA Application].
25 Mountain States had over $2.1 billion in total assets and net assets of approximately $787 million at the end of
fiscal year 2015. Responses to Department Questions, supra note 23, Exhibit 23 at 4. Wellmont had total assets of
approximately $1.2 billion and net assets of approximately $546 million at the end of fiscal year 2015. Tennessee
COPA Application, supra note 24, Exhibit 11.5, Attachment B, at 3.

FTC Staff Supplemental Submission - January 5, 2017
7
repeatedly mention the $19.5 million of purported operating losses in their small rural
community hospitals, but do not deny that their rural hospitals contribute to the overall
profitability of each system by serving as feeder hospitals for admission to the parties’ large
tertiary hospitals. In short, Mountain States and Wellmont are not financially struggling health
systems.
More importantly, even if the parties’ rural hospitals were in jeopardy of closing, their
commitments do little to improve the status quo. The parties commit only to maintain the
existing hospital facilities as “clinical and health care institutions,” but make no commitment to
maintain these facilities as hospitals. While the parties have revised the commitment to agree to
maintain certain services at these facilities, the commitment is ambiguous, leaves room for the
elimination of many services, and makes no commitment with respect to physician or nurse
staffing levels or anything else. Moreover, the parties make this ambiguous commitment for
only five years. This commitment should be of little comfort to the residents of rural
communities served by Mountain States and Wellmont today, particularly when there may be an
alternative purchaser that would be willing to make a stronger commitment to maintain these
rural hospitals as hospitals.
Finally, the parties also pledge to “continue to provide access to health care services” to
these rural communities if the communities can “demonstrate[] need.”26 This portion of the
commitment is even more equivocal than the five-year commitment described above. The
parties provide no details on what they mean by “provide access,” nor do they explain what these
communities will have to show to persuade the New Health System that there is a “demonstrated
need.” With no other meaningful hospital option available following the merger, access to
healthcare in these communities will be subject to the discretion of the New Health System, and
the COPA does not appear to provide a mechanism for the State to require the New Health
System to maintain any facility or particular service.
2. 	The Rate Caps Do Not Clearly Apply to Value-Based or Risk-Based
Contracts
While the parties take issue with FTC staff’s criticism that their proposed rate caps will
not apply to new and evolving models of value- and risk-based contracting, their response does
virtually nothing to alleviate the concern.27 The parties do not describe how their current rate
cap commitments would apply to these important new models of contracting. Instead, they only
suggest that “most” of these types of contracts “commence with fee-for-service pricing.” Rather
than explain how they envision the rate cap applying in these circumstances (especially in
instances when the contract is not based on fee-for-service), the parties avoid addressing this
issue, saying that these “new models … can be developed in a form that can be reviewed by the
Department[.]”28 Although the parties assert that TDH “retains the authority” to modify the
COPA to account for new types of contracting, it is unclear how such a modification would be
developed and implemented, or whether the parties would have to consent to any new
26 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-31.
27 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-21 to Section III – Page III-22.
28 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-22.

FTC Staff Supplemental Submission - January 5, 2017
8
contracting provisions.29 The parties all but admit in their response that these rate caps could be
inapplicable and ineffectual for new modes of contracting, leaving the parties free to exercise
their substantial market power even as the evolution towards value- and risk-based contracting
continues. And, as detailed in our public comment, the proposed rate caps leave numerous
questions and loopholes even for traditional fee-for-service contracts.
3. 	The Definition of “Principal Payer” Unjustifiably Excludes a
Significant Number of Payers
The parties defend their exclusion of payers that account for less than two percent of the
New Health System’s total net revenue from their rate cap commitment as “appropriate,” but
concede that this exclusion would cut out 200 payers.30 They attempt to explain the exclusion
by citing the potential for “net losses” to the New Health System without any detailed
explanation of how such losses would occur. Presumably, however, the parties’ current contracts
and contract rates with these payers already reflect the risk of losses, so it is unclear why
applying the rate caps should impose any more risk on the parties. Nor do the parties propose
any alternative commitment that would limit the impact of their newfound market power on
these small payers. Consequently, these 200 payers and their insured members in Tennessee and
Virginia are likely to face significant price increases by the New Health System, which will be
unrestrained by any COPA commitment or meaningful competition.
The best the parties can offer is a suggestion that the payers will police the New Health
System’s adherence to the commitments and alert TDH to any infractions. It is far from clear,
however, that payers will be willing to complain. A payer may decide that complaining to TDH
would risk its relationship with the New Health System – which would be the payer’s only
meaningful contracting option for hospital services in the region – and face possible retaliation.
Or the payer may conclude that it will be able to pass along higher prices to its members in the
form of higher premiums and co-pays. TDH should not rely on payers to report on the New
Health System; the responsibility for monitoring and enforcing the commitments falls to TDH
under the COPA statute.
29 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-22. Unfortunately, even the COPA
statute and regulations are ambiguous and potentially contradictory on whether the parties must consent to any
modification of the COPA commitments. The parties appear to take the position in their commitments proposal that
their consent would be required. If there is not even clarity at the outset about whether the Department could
unilaterally modify the commitments or would require the New Health System’s consent, that could seriously limit
TDH’s ability to enforce the commitments, address flaws in the commitments, and could lead to serious disputes and
litigation during the term of any approved COPA. That issue should be determined conclusively before any COPA
is approved. Relatedly, the parties have the unilateral right to voluntarily withdraw from the COPA. To the extent
there are any concerns about the ability to implement a Plan of Separation, this right gives the New Health System
significant bargaining leverage to resist any attempts to modify the COPA commitments, lest they threaten to simply
withdraw from it.
30 Mountain States-Wellmont Response, supra note 2, at Section III – Page III-22 to Section III – Page III-23.

FTC Staff Supplemental Submission - January 5, 2017
9
4. 	The Plan of Separation Is Unlikely To Serve as an Effective Backstop
If the COPA Regime Fails to Yield Benefits for the Community
FTC staff’s comment extensively discussed the deficiencies of the parties’ Plan of
Separation, as well as the challenges of prying apart an integrated system of 19 hospitals.31 The
parties lodge two objections to FTC staff’s criticisms, but neither has merit. First, the parties
claim that FTC staff ignored the “ongoing supervision” of the COPA, but they fail to explain
how this supervision will facilitate the disentanglement of the New Health System after years of
integration. Second, the parties assert that FTC staff’s standard for a successful separation – that
it “restore pre-merger competition” – somehow misstates the standard in the Tennessee
regulations, which calls for a Plan of Separation that would return the parties to a “pre-
consolidation state.”32 The parties are drawing a distinction without a difference. Currently,
Mountain States and Wellmont compete vigorously against each other in a pre-consolidation
state, and this is precisely what any successful Plan of Separation would need to restore. The
Tennessee regulations clearly recognize this and that is what our criticism of their Plan of
Separation addressed.
Indeed, the parties’ response indirectly admits FTC staff’s point. They suggest that the
Plan of Separation will be developed in the future “based on the current reality of the market and
the merged system” at that time.33 As detailed in our comment, FTC staff’s experience
demonstrates that the future “current reality” of the New Health System is likely to prevent any
meaningful ability to return Mountain States and Wellmont to their pre-consolidation state. The
harm from the loss of competition in Tennessee and Virginia will have materialized, but TDH
likely would have no meaningful way to rectify it.
V. 	CONCLUSION
FTC staff’s initial comment contains substantial information and evidence to rebut the
parties’ claims in their response. This supplemental submission highlights only a few of these
points. It is telling that the parties seem more focused on encouraging TDH to ignore the
comments from FTC staff and others that cast doubt on their claims than addressing the issues
that the comments raise. The proposed merger would create a behemoth hospital system in
Northeast Tennessee and Southwest Virginia that would have tremendous market power at its
disposal. Furthermore, the New Health System would have opportunities and strong financial
incentives to evade the proffered regulatory commitments. The Tennessee Hospital Cooperation
Act places a heavy burden on the parties to overcome this competitive harm by demonstrating
significant, measurable benefits and clear and enforceable commitments. Having failed to meet
their burden by a wide margin – much less through clear and convincing evidence – we
respectfully submit that the Tennessee Hospital Cooperation Act compels the Tennessee
Department of Health to deny Mountain States and Wellmont’s COPA application.
31 The number of hospitals would increase to 21 if the announced transactions for Laughlin Memorial Hospital and
Takoma Regional Hospital proceed as planned.
32 Tennessee Rules, supra note 18, at Chapter 1200-3801-.01.14 (“‘Plan of Separation’ means the written proposal
submitted with an Application to return the parties to a Cooperative Agreement to a pre-consolidation state . . . .”).
33 Mountain States-Wellmont Response, supra note 2, Section III – Page III-46.

FEDERAL TRADE COMMISSION STAFF COMMENTS
ON THE MOUNTAIN STATES-WELLMONT COPA COMMITMENTS
(AS AMENDED FOR THE SOUTHWEST VIRGINIA HEALTH AUTHORITY1)
Commitment 1 – Reduction of Fixed Rate Increase 	FTC Staff Comment
In order to ensure pricing is not increased as a result of
the elimination of inpatient competition for the
majority of consumers covered by third party
commercial insurance, pricing will increase by less with
the merger than if the merger were not to occur. For all
Principal Payers 1, the New Health System will reduce
existing commercial contracting for fixed rate increases
by 50% for the second full fiscal year commencing after
the closing date of the New Health System. Fixed rate
increases are defined as provisions in commercial
contracts that specify the rate of increase between one
year and the next which include annual inflators tied to
external indices or contractually-specified rates of
increase in reimbursement. Applicants represent that
the fiscal year for the New Health System will end on
June 30, and that the fiscal year will not change until
after the second full year commencing after the closing
date of the New Health System.2
Timing: First full fiscal year following the first contract
year after the formation of the New Health System.
Amount: The estimated annual savings to consumers
for the combination of Commitments 1 and 2 are $10
million in lower health care costs annually. 3
1 For purposes of this Application, “Principal Payers” are defined as
those commercial payers and governmental payers with negotiated
rates who provide more than two percent (2%) of the New Health
System’s total net revenue. (All of a payer’s revenue shall be
considered in calculating the revenue percentage even if the payer
has more than one contract with the New Health System.) .) The
proposed commitments would not apply to traditional Medicare or
Generally:
1. 	Price commitments are unlikely to replicate the benefits
of competition or what pricing would have been with
ongoing competition between Mountain States and
Wellmont.
2. 	Price commitments are difficult to construct, monitor,
and enforce.
3. 	Pricing commitments do not remedy the harm to non-
price competition – such as competition to improve
quality, access, and invest in healthcare services,
facilities, and equipment. In fact, price regulation makes
harm to quality even more likely, according to economic
literature.
Specifically with respect to Commitment 1:
4. 	The commitment appears to apply only to a relatively
small portion of the parties’ contracts when two
conditions are met: (1) contracts with fixed rate
increases, which the parties have indicated represents a
small portion of their contracts, and (2) contracts with
Principal Payers. We understand that less than 6% of
Mountain States’ insurance contracts with all payers (not
just Principal Payers) have fixed rate increases as written,
and 16% of Wellmont’s insurance contracts with all
payers (not just Principal Payers) have fixed rate
increases as written.2
5. 	Even under the revised definition of “Principal Payers,”
the price commitments provides no price protection to
payers that represent 2% or less of the combined
system’s net revenue. The parties admit that this
definition will exclude 200 payers from the price cap,3
1 The first column of this chart contains the most recent public version of the commitments made by the parties, as reflected in the
Southwest Virginia Health Authority’s December 22, 2016 Review of The Commonwealth of Virginia Application for a Letter Authorizing
a Cooperative Agreement, http://www.vdh.virginia.gov/content/uploads/sites/96/2016/11/SWHA-Cooperative-Agreement-Report-
December-22-2016.pdf, at 117-51 [hereinafter Southwest Virginia Health Authority Report], and the second column contains FTC staff’s
analysis and comments on those commitments. Although FTC staff is not aware of the parties having updated their proposed
commitments to Tennessee, the newer commitments proposed in Virginia are similar enough to those currently proposed in Tennessee
that we have chosen to analyze the most recent commitments as accepted by the Southwest Virginia Health Authority. FTC staff also
bases this on the assumption that these newer commitments may ultimately be offered in Tennessee.
2 Mountain States Health Alliance & Wellmont Health System, Responses to Questions Submitted April 22, 2016 by Tennessee
Department of Health in Connection with Application for A Certificate of Public Advantage (July 13, 2016) at 6,
http://tn.gov/assets/entities/health/attachments/WHS-MSHA_April_22,_2016_DOH_Response_1.pdf [hereinafter Response to TDH
Questions, July 13, 2016].
3 Mountain States Health Alliance & Wellmont Health System, Response by Applicants to Submissions of Federal Trade Commission
Staff, Amerigroup Tennessee Inc., Professors and Academic Economists, Kenneth Kizer, M.D., MPH, and Holston Medical Group to the

FTC Attachment – January 5, 2017 	Page 2
any other payers that provide two percent (2%) or less of the New
Health System’s net revenue. Notwithstanding any provision to the
contrary, the limitation on rate increases applicable to insurers
providing coverage on behalf of governmental payers (i.e., Medicare
Advantage Plans or Medicaid Plans) does not apply if the
adjustments are tied to actions made by government entities,
including but not limited to, market basket adjustments,
adjustments tied to area wage index, or other governmentally
imposed rate adjustments. The limitations on pricing committed to
by the parties are intended to ensure price increases beyond the
limits imposed by the Cooperative Agreement (COPA) do not occur
as a result of increased market concentration resulting from the
merger transaction. The price limits imposed by the Cooperative
Agreement (COPA) are not intended to interfere with government-
imposed pricing which would occur with or without the creation of
the New Health System. To the degree pricing for insurers providing
coverage on behalf of governmental payers is tied contractually to
Medicare rates (i.e., a percent of Medicare), the Cooperative
Agreement (COPA) is not intended to interfere with such pricing
relationships. The intent is to ensure future pricing is not increased
as a result of the merger transaction.
2 For purposes of these commitments, the Commissioner shall
not appoint an individual as his or her delegate if such person
has a conflict of interest. If the Commissioner appoints an entity
as his or her delegate, such as the Southwest Virginia Healthcare
Authority, the entity must take steps to assure that no person
involved with the entity in its role as the Commissioner’s
delegate has a conflict of interest. Notwithstanding anything
herein to the contrary, the Commissioner shall retain the final
authority with respect to conclusions reached by the
Commonwealth or actions to be taken by the Commonwealth.
3 This estimate is nonbinding. To the extent, however, that
there is a dispute on the New Health Systems compliance
with these rate of increase commitments, the estimate may
be used as a tool to interpret what the commitment means.
potentially leaving thousands of these payers’ enrollees –
residents of Tennessee and Virginia – subject to
unrestrained price increases. There is no meaningful
reason why the price commitment should exclude any
payers, including small commercial and governmental
payers. The parties’ claim that these smaller payers raise
a higher “risk profile” is a red herring – the current
contract prices that Mountain States and Wellmont have
negotiated with these smaller payers already should
reflect this risk profile. Post-merger, these smaller payers
will have no meaningful ability to resist demands for
higher prices from New Health System (“NHS”).
6. 	The preamble to Commitment 1 (“In order to ensure
pricing is not increased as a result of the elimination of
inpatient competition…”)(emphasis added) suggests this
commitment may only apply to inpatient prices. If so,
then this price commitment would not reduce prices for
NHS’s outpatient services, physician services, or any
other prices.
7. 	It is still not clear when the pricing commitment takes
effect. In the first paragraph, the text states that NHS will
reduce rates “for the second full fiscal year commencing
after the closing date of the New Health System.”
(emphasis added) The “Timing” paragraph, however,
states that it will be effective in the “First full fiscal year
following the first contract year after the formation of the
New Health System.” (emphasis added) The parties state
in their December 19 response to public comments in
Tennessee that the first formulation is the correct one,
but the commitment language itself appears inconsistent.
8. 	The parties provide an unsubstantiated and unexplained
estimate of achieving lower healthcare costs, but state
that their estimate is “nonbinding.”
9. 	This commitment does not provide any price cap if NHS
terminates its contract and goes out of network (i.e.,
become non-par) with any payer – even with Principal
Payers.
10. There does not appear to be an enforcement mechanism
if the parties exceed any price caps. None appears in the
commitment itself.
11. The commitment does not restrict NHS with respect to
Tennessee Department of Health Regarding Certificate of Public Advantage Application (Dec. 19, 2016), Section III, at 22-23,
https://www.tn.gov/assets/entities/health/attachments/Response_to_Public_Comments_Submitted_to_TN_DOH_with_TOC2_.pdf
[hereinafter Mountain States-Wellmont Response to Public Comments].

FTC Attachment – January 5, 2017 	Page 3
any other negotiated contract provisions, such as outliers
and stop-loss provisions, leaving ample room for NHS to
exploit its greatly enhanced bargaining leverage to the
detriment of consumers.
12. There are gaps in the commitments, which open the door
for NHS to impose higher prices. For example, what
happens if NHS acquires another hospital in the area?
What happens if NHS buys another hospital in the area
through a 50-50 joint venture with another hospital
system? What happens if another entity acquires NHS?
The price commitment does not appear to apply in any of
these circumstances.
Commitment 2 – Limit on Pricing Growth 	FTC Staff Comment
To ensure the Cooperative Agreement protects
consumers from pricing increases that could otherwise
result from the elimination of competition, a limit on
pricing growth is applied for each year to restrain
pricing growth to below the national hospital consumer
price index. Effective on the closing date of the merger,
the New Health System will commit to not adjust
hospital negotiated rates by more than the hospital
Consumer Price Index for the previous year minus
0.25%, while New Health System negotiated rates for
physician and non-hospital outpatient services will not
increase by more than the medical care Consumer Price
Index minus 0.25%. This is a ceiling in rate adjustments;
nothing herein establishes these adjustments as the
floor on rates. To the extent, if any, that the Applicants
negotiate contracts with Principal Payers between
October 10, 2016 and the closing date of the merger
and such contracts include fixed rate increases in excess
of the hospital Consumer Price Index for hospital
inpatient and outpatient services and the medical care
Consumer Price Index for physician and non-hospital
outpatient services compared with previous contracts
with the same payer, no later than one month following
the closing date, New Health System will rollback its
rates to what they would have been if the negotiated
rates of increase had been no more than the above-
referenced Consumer Price Index changes. Applicants
represent that their current contracts with Anthem for
nongovernmental patients will not expire prior to the
now-expected date of the rate increase commitment
Generally:
1. 	Price commitments are unlikely to replicate the benefits
of competition or what pricing would have been with
ongoing competition between Mountain States and
Wellmont.
2. 	Price commitments are difficult to construct, monitor,
and enforce.
3. 	Pricing commitments do not remedy the harm to non-
price competition – such as competition to improve
quality, access, and invest in healthcare services,
facilities, and equipment. In fact, price regulation is likely
to make harm to quality even worse, according to
economic literature.
Specifically with respect to Commitment 2:
4. 	The price cap may well result in higher prices than with
competition. Indeed, because of competition between
Mountain States and Wellmont, health plans have
obtained significantly lower reimbursement rates on
behalf of their members.
5. 	The price cap is likely to represent not just a price ceiling,
but a price floor. Because health plans and consumers
will not have viable alternatives to NHS, NHS has no
reason to agree to prices that are below the price cap.
6. 	Even under the revised definition of “Principal Payers,”
the price commitments provides no price protection to
payers that represent 2% or less of the combined

FTC Attachment – January 5, 2017 	Page 4
becoming effective, i.e., July 1, 2018.
This provision only applies to contracts with negotiated
rates and does not apply to Medicare or other non-
negotiated rates or adjustments set by CMS or other
governmental payers. The New Health System agrees
that contract structures may include rates being tied to
a percentage of Medicare, or may establish base rates
with annual inflators or quality incentives. The New
Health System will not refuse to enter into any of these
types of structures on the basis of the structure and will
negotiate the rate structure in good faith. For purposes
of calculating rate increases and comparison with the
relevant Index, baseline rates for an expiring contract
will be used to compare with newly negotiated rates for
the first year of the relevant new contract. For
comparison with the relevant Index, new contract
provisions governing specified annual rate increases or
set rates of change or formulas based on annual
inflation indices may also be used as an alternative to
calculated changes. Subject to the Commissioner’s
approval, the foregoing commitment shall not apply in
the event of natural disaster or other extraordinary
circumstances beyond the New Health System’s control
that result in an increase of total annual expenses per
adjusted admission in excess of 250 basis points over
the current applicable consumer price index. If
following such approval, the New Health System and a
Principal Payer are unable to reach agreement on a
negotiated rate, New Health System agrees to
mediation4 as a process to resolve any disputes. The
New Health System shall timely notify the
Commissioner of any mediation occurring pursuant to
this commitment if the payer has insureds (or
members) in the Commonwealth of Virginia, and shall
offer updates to the Commissioner on the progress of
such mediation.
Timing: Subsequent contract years.
Amount: The estimated annual savings to consumers
for the combination of Commitments 1 and 2 are $10
million in lower health care costs annually.
Metric: Easily verifiable.
4 Nothing herein is intended to override dispute resolution
system’s net revenue. The parties admit that this
definition will exclude 200 payers from the price cap,4
potentially leaving thousands of these payers’ enrollees –
residents of Tennessee and Virginia – subject to
unrestrained price increases. There is no meaningful
reason why the price commitment should exclude any
payers, including small commercial and governmental
payers. The parties’ claim that these smaller payers raise
a higher “risk profile” is a red herring – the current
contract prices that Mountain States and Wellmont have
negotiated with these smaller payers already should
reflect this risk profile. Post-merger, these smaller payers
will have no meaningful ability to resist demands for
higher prices from NHS.
7. 	There is no assurance that healthcare costs will be lower
and, even if so, passed on to consumers. The parties
provide an unsubstantiated and unexplained estimate of
achieving lower healthcare costs, but state that their
estimate is “nonbinding.”
8. 	This commitment does not provide any price cap if NHS
terminates its contract and goes out of network (i.e.,
become non-par) with any payer – even with Principal
Payers.
9. 	The commitment only applies to negotiated rates for
current contracts. As such, we question whether this
commitment would provide any protection if NHS has, or
demanded in the future, contracts without fixed rates.
For example, the commitment may not apply to contracts
with risk-based or value-based reimbursement.
10. There does not appear to be an enforcement mechanism
if the parties exceed any price caps. None appears in the
commitment itself.
11. The commitment does not restrict NHS with respect to
any other negotiated contract provisions, such as outliers
and stop-loss provisions, leaving ample room for NHS to
exploit its greatly enhanced bargaining leverage to the
detriment of consumers.
12. At the end of the COPA period, which could be as soon as
10 years, the price cap expires and there would be no
price cap regulation and likely no meaningful competition
to restrain NHS’s prices.
13. There are gaps in the commitments, which open the
door for NHS to impose higher prices. For example, what
4 Mountain States-Wellmont Response to Public Comments, Section III, at 22-23.

FTC Attachment – January 5, 2017 	Page 5
provisions that may be parts of binding contracts between
New Health System (in its own name or as a successor to the
Applicants) and any payer.
happens if NHS acquires another hospital in the area?
What happens if NHS buys another hospital in the area
through a 50-50 joint venture with another hospital
system? What happens if another entity acquires NHS?
Do the price caps apply in any of these circumstances and
to which hospitals do they apply?
Commitment 3 – Negotiations with Principal Payers 	FTC Staff Comment
In order to minimize any adverse impact on the ability
of insurance companies to contract with the hospitals,
and while this Cooperative Agreement ensures open
access and choice for all consumers to choose any
hospital in the region, it also remains the intent of the
Cooperative Agreement that consumers and businesses
enjoy a competitive market for insurance. As such, the
New Health System will negotiate in good faith with
Principal Payers to include the New Health System in
health plans offered in the Geographic Service Area on
commercially reasonable terms and rates (subject to
the limitations herein). The New Health System will not
unreasonably refuse to negotiate with potential new
entrants to the market or with insurers that do not
meet the definition of “Principal Payer”, as long as the
payer has demonstrable experience, a reputation for
quality and negotiates in good faith. New Health System
will resolve through mediation any disputes as to
whether this commitment applies to the proposed
terms of a health plan contract. The New Health System
shall timely notify the Commissioner of any mediation
occurring pursuant to this commitment if the payer has
insureds (or members) in the Commonwealth of
Virginia, and shall offer to the Commissioner updates on
the progress of such mediation.
Timing: Immediately upon closing of the merger and
then upon expiration of existing contracts or with
contracts with any new payers coming into area, and
ongoing.
Amount: No cost.
Metric: Complaints from payers and credible report by
the New Health System.
1. 	This commitment provides no benefit over the status quo
unless the parties are not today negotiating in good faith
to reach commercially reasonable terms and rates with
health plans.
2. 	The commitment contains multiple undefined terms that
likely will be subject to dispute, including, for example,
with respect to the requirement to negotiate “in good
faith” with payers to include NHS in health plans on
“commercially reasonable terms and rates,” and that
prohibit NHS from “unreasonably” refusing to negotiate
with a potential new entrant.
3. 	The commitment provides for resolution of disputes
through mediation, but there are no provisions
addressing, for example, how this mediation would
occur, how the mediator would be selected, whether the
mediation would be binding, which party pays for the
costs of mediation, and what happens if mediation is not
successful.
4. 	The commitment lacks an enforcement mechanism if
NHS breaches this commitment.

FTC Attachment – January 5, 2017 	Page 6
Commitment 4 – Will Not Require Exclusivity 	FTC Staff Comment
In order to ensure providers in the region not affiliated
with the New Health System may continue to operate
competitively, and to ensure new provider entrants to
the market are not disadvantaged by the New Health
System, the New Health System will not require as a
condition of entering into a contract that it shall be the
exclusive network provider to any health plan, including
any commercial, Medicare Advantage or managed
Medicaid insurer. Nothing herein shall be construed as
to impede the discretion of the payers in the market
from designating the New Health System (or
components thereof), as an exclusive network provider
in all or part of the New Health System’s service area.
Timing: Immediately upon closing of the merger and
then upon expiration of existing contracts or with
contracts with any new payers coming into area, and
ongoing.
Amount: No cost.
Metric: Easily verifiable.
1. 	New hospital entry (at least on a meaningful scale) is
unlikely in the Geographic Service Area even with this
commitment. This commitment does not make new
hospital entry more likely.
Commitment 5 – Participation in HIE 	FTC Staff Comment
In order to improve quality for patients, ensure
seamless access to needed patient information, and to
support the efforts of the local physician community to
access needed information in order to provide high
quality patient care, the New Health System will
participate meaningfully in a health information
exchange or a cooperative arrangement whereby
privacy protected health information may be shared
with community-based providers for the purpose of
providing seamless patient care.
Timing: No later than 36 months after closing.
Amount: Up to $6 million over 10 years.
Metric: The New Health System shall report annually to
the Commissioner on mileposts toward meeting this
1. 	Mountain States and Wellmont already participate in a
health information exchange (“HIE”) called OnePartner,
so the merger is not needed to do so. One Partner says
the benefits of its HIE include reduced cost, improved
efficiency, improved quality, improved patient safety and
satisfaction, and reduced duplication of services.5
OnePartner’s website states that “[e]very electronic
medical record system can connect!” and that, including
Mountain States and Wellmont, the HIE includes “over
80% of the primary care providers in the Tri-Cities TN/VA
market.”6
2. 	The parties have not sufficiently substantiated what
additional benefits they would achieve that they could
not achieve independently, with another merger partner,
or through the OnePartner HIE.
3. 	Because the parties already participate in the OnePartner
5 Press Release, OnePartner, Mountain States Health Alliance Announces Participation in the OnePartner Health Information Exchange
(Aug. 26, 2014), http://www.onepartner.com/news/mountain-states-health-alliance-announces-participation-with-onepartner-hie.
6 OnePartner, OnePartner HIE, http://www.onepartner.com/hie.

FTC Attachment – January 5, 2017 	Page 7
commitment. 	HIE, we respectfully submit that the only benefits from
the COPA that should be credited are those that are
incremental – above and beyond – those the parties
could achieve without the COPA. Those incremental
benefits likely would be relatively small and must be
weighed against the cost to fulfill this commitment.
4. 	There is no requirement that NHS share health
information with other providers. The revised
commitment was weakened to eliminate the
requirement that the HIE be “open to community
providers.” Now, the commitment states only that
health information “may” be shared with other
providers.
5. 	The commitment now states that the parties will either
“participate” in an HIE or a so-called “cooperative
arrangement” where protected health information can
be exchanged with “community-based providers.” The
meaning of “participate meaningfully” is undefined, so it
is unclear how substantial and meaningful their
participation must be for this commitment to be deemed
fulfilled. The meaning of “cooperative arrangement” is
also undefined. If this means that the parties will make
arrangements to share protected health information with
local physicians, they can already do this without the
COPA.
6. 	If the parties are not participating in an HIE by the end of
36 months, the commitment provides no enforcement
mechanism.
Commitment 6 – Collaboration with Independent
Physician Groups
FTC Staff Comments
In order to enhance quality and decrease the total cost
of care, the New Health System will collaborate in good
faith with independent physician groups to develop a
local, region-wide, clinical services network to share
data, best practices and efforts to improve outcomes
for patients and to deliver such outcomes at the highest
possible value.
Timing: No later than 36 months after closing.
Metric: The New Health System shall report to the
Commissioner on the mileposts toward meeting this
commitment.
1. 	The commitment lacks details of what this collaboration
will actually entail. For example, the commitment does
not say what data will be shared, with how many
physicians, what outcomes will be improved, or how
substantial and extensive NHS’s collaborations will need
to be for this commitment to be fulfilled and meaningful
benefits realized.
2. 	The commitment to collaborate with independent
physicians to share data, best practices, and improve
quality is not a meaningful benefit over what the parties
could engage in today without a merger (or through
alternative collaborations or mergers) because there is
likely little or no impediments to Mountain States and

FTC Attachment – January 5, 2017 	Page 8
Wellmont doing so today under the antitrust laws.
3. 	There is no enforcement mechanism if the parties do not
fulfill this commitment within 36 months.
Commitment 7 – Quality Improvement 	FTC Staff Comment
In order to enhance quality, improve cost-efficiency and
reduce unnecessary utilization of hospital services, for
all Principal Payers, the New Health System will
endeavor to include provisions for improved quality and
other value-based incentives based on priorities agreed
upon by each payer and the New Health System.
Timing: Immediately upon closing of the merger and
ongoing.
Amount: No incremental cost.
Metric: Annual report and complaints, if any, from
payers.
1. 	The commitment does not require NHS to include
provisions for improved quality or other value-based
incentives in contracts with Principal Payers. NHS simply
commits to “endeavor” to do so, without any definition
or standard for what that means, so NHS need not
include any such provisions in any of its contracts.
Consequently, this is not a substantial commitment and
provides no meaningful benefits over what the parties
separately could achieve today without the cooperative
agreement.
2. 	Today, Principal Payers can use competition between
Mountain States and Wellmont to spur the parties to add
quality-related terms or to engage in value-based
contracting. Post-merger, there is no meaningful threat
that a Principal Payer can drop NHS from its network, and
NHS faces little risk that a significant number of patients
will turn to other providers as a substitute for NHS. As
such, the merger greatly diminishes, if not virtually
eliminates, payers’ ability to negotiate for such terms in
contracts with NHS, except on NHS’s terms.
3. 	Because the definition of “Principal Payers” excludes
payers that represent 2% or less of the combined
system’s net revenue – approximately 200 payers7 – NHS
has no obligation even to endeavor to include quality-
improvement or value-based incentives in its contracts
with these other payers for the benefit of their
Tennessee and Virginia enrollees.
4. 	The commitment states that it is intended to reduce
unnecessary utilization, but this is not a meaningful
benefit unless the parties are suggesting that they
engage in unnecessary medical care today.
5. 	There is no enforcement mechanism if the parties do not
include provisions for improved quality or other value-
based incentive in any contracts – even if payers
complain.
7 Mountain States-Wellmont Response to Public Comments, Section III, at 22-23.

FTC Attachment – January 5, 2017 	Page 9
Commitment 8 – Quality Reporting 	FTC Staff Comment
In order to enhance quality of patient care through
greater transparency, improve utilization of hospital
resources, and to ensure the population health of the
region is consistent with goals established by the
Authority, the New Health System will establish annual
priorities related to quality improvement and publicly
report these quality measures in an easy to understand
manner for use by patients, employers and insurers.
Such reporting shall include posting of quality measures
and actual performance on New Health System’s
website accessible to the public. The New Health
System shall report such data timely so the public can
easily evaluate the performance of the New Health
System as compared to its competitors, and ensure
consumers retain the option to seek services where the
quality is demonstrably the highest. The New Health
System will give notice to the Authority of the metrics
the New Health System is prioritizing, and will, in good
faith, include input from the Authority in establishing or
modifying its priorities.
Timing: Annually, based upon when the New Health
System establishes its annual quality goals.
Metric: Compliance with commitment as agreed upon
and modified subsequently.
1. 	As sophisticated health systems, Mountain States and
Wellmont should already have established priorities
relating to quality improvement goals. If they do not,
that would be remarkable. In any event, the parties
could establish such priorities and report quality
measures on their own without the COPA. As such, this is
not a substantial commitment and does not provide
meaningful benefits over what could be achieved
independently or through alternative means.
2. 	The commitment does not indicate which quality
measures will be measured and reported, how the
metrics they will be measured, or which quality measures
they will prioritize. The parties have no obligation to
accept Tennessee’s or Virginia’s input as to which quality
measures to prioritize and report. NHS could selectively
pick certain quality metrics to measure and report in
order to highlight positive and easily achievable
measures, but not negative or difficult-to-achieve–yet
important–quality measures.
3. 	The claim that the requirement to publish quality
measures will help consumers evaluate NHS’s
performance against competitors and ensure that the
public retains the option to seek services where quality is
highest is flawed for at least two reasons: (1) it assumes
that these unidentified competitors are measuring the
same metrics in the same way and reporting the same
metrics publicly in order to allow such comparisons,
which may very well not be the case, and (2) for many
patients in the Geographic Service Area, there are no
meaningful competitors to NHS. Because most patients
generally prefer local care and, in this area, seek care at
either Mountain States or Wellmont, the reporting of
quality measures is unlikely to make significantly more
patients travel outside their local area to competing
hospitals.
Commitment 9 – Charity Care Policy 	FTC Staff Comment
In order to ensure low income patients who are
uninsured are not adversely impacted due to pricing,
the New Health System will adopt a charity care policy
that is substantially similar to the existing policies of
both Parties and consistent with the Internal Revenue
Service’s final 501(r) rule. The New Health System shall
1. 	The commitment requires only that NHS adopt a charity
care policy that is substantially similar to what the parties
offer today, so this is not a substantial commitment and
does not provide meaningful benefits over what could be
achieved today or without the COPA.
2. 	The commitment appears to be subject to revision at the

FTC Attachment – January 5, 2017 	Page 10
furnish a copy of its policies relating to charity care to
the Commissioner no later than the end of the third
month following the closing of the merger. Thereafter,
the New Health System shall furnish to the
Commissioner a copy of any revisions to such policies
immediately upon the effective date of such revisions.
These policies shall provide for the full write-off of
amounts owed for services by patients with incomes at
or below two hundred percent (200%) of the federal
poverty level. The New Health System shall inform the
public of its charity care and discounting policies in
accordance with all applicable laws and shall post such
policies on its publicly accessible web site and on the
separate web sites for all provider components that are
part of the New Health System.
Timing: Immediately upon closing of the merger and
ongoing.
Amount: Extent of additional cost is unknown but is not
immaterial.
Metric: Charity care costs as measured in cost of care
furnished. For hospital services, that number can
come from the Medicare cost report S-10 schedule.
New Health System’s annual report to the
Commissioner shall also include data on the number
of individuals receiving uncompensated care and
compare that number to prior fiscal years when the
New Health System was in operation. The cost for
charity care for nonhospital services may be
estimated using the cost to charge ratio aggregated
for all nonhospital services.
unilateral discretion of the parties at any time because
the charity care policy can be revised at will by NHS–it
only needs to notify the Commissioner of any changes.
3. 	The parties provide no estimate of how much
incremental charity care will be provided (other than
stating it “is not immaterial”); thus, the incremental
benefits, if any, cannot be quantified.
4. 	The commitment states that the charity care policy will
include a write-off for certain patients, but that write-off
is limited to “services,” and does not include a write-off of
any products or medications associated with the service.
5. 	Mountain States and Wellmont already inform the public
of their charity care and financial assistance policies
online,8 so the commitment to post NHS’s charity care
policy provides no incremental benefit.
Commitment 10 – Discounts to Low Income Patients 	FTC Staff Comment
In order to ensure low income patients are not
adversely affected due to pricing, uninsured or
underinsured individuals who do not qualify under the
charity care policy will receive a discount off hospital
charges based on their ability to pay. This discount will
comply with Section 501(r) of the Internal Revenue
Code, and the rules and regulations relating to that
Section governing not for-profit organizations, and
There appears to be gaps in the commitment to uninsured and
underinsured individuals who do not quality for charity care:
1. 	The commitment provides for a “discount off hospital
charges,” but a hospital’s chargemaster is subject to
change (increase) at the complete discretion of the
hospital.
2. 	The commitment provides no details about how much
8 See, e.g., https://www.mountainstateshealth.com/sites/default/files/documents/MSHA-00042_Charity_Policy.pdf;
http://www.wellmont.org/Patients-and-Visitors/Financial-Assistance.aspx.

FTC Attachment – January 5, 2017 	Page 11
payment provisions will be based on the specific
circumstances of each individual/family. The New
Health System will seek to connect individuals to
coverage when possible.
“Uninsured” patients are those with no level of
insurance or third-party assistance to assist with
meeting his/her payment obligations. “Underinsured”
patients are those with some level of insurance or
third-party assistance but with out-of-pocket expenses
that exceed financial abilities. These patients will not be
charged more than amounts generally billed (AGB) to
individuals who have insurance covering such care in
case of Emergency or other Medically Necessary
Services.” AGB percentage is determined using the
look-back method utilizing the lowest percentage for all
facilities per the IRS regulatory guidelines set forth in
501(r). Emergency Services are defined in accordance
with the definition of “Emergency Medical Conditions”
in Section 1867 of the Social Security Act (42 U.S.C.
1395dd). Medically Necessary Services are defined by
Medicare as services of items reasonable and necessary
for the diagnosis or treatment of illness or injury and
are Services not included in the list of “particular
services excluded from coverage” in 42 CFR § 411.15).
Financial assistance eligibility will be determined by a
review of the Application for Financial Assistance,
documents to support the Application for Financial
Assistance (i.e. income verification documentation),
and verification of assets. Financial assistance
determinations are based on National Poverty
Guidelines for the applicable year. The New Health
System shall adhere to the IRS regulatory guidelines set
forth in Section 501(r) of the Internal Revenue Code.
Timing: Immediately upon closing and ongoing.
Metric: Credible report.
the discount will be, other than a reference to not
exceeding amounts generally billed to individuals with
insurance in the case of Emergency and other Medically
Necessary Service.
Commitment 11 – Default Notices 	FTC Staff Comment
In order to demonstrate the New Health System
maintains the financial viability to fulfill its
commitments of this Cooperative Agreement, and to
ensure proper state supervision, any notices of default,
technical or otherwise, that the New Health System, or
an affiliate, receives under bond or other debt
1. 	The commitment to provide a notice of default may be
too late to put the state on notice of potential problems
and, in any event, does not give the state the right to do
anything about the default once notice is received.
2. 	The commitment does not require NHS to cure or
otherwise remediate the default.

FTC Attachment – January 5, 2017 	Page 12
documents, must be furnished to the Authority and the
Commonwealth.
Timing: Ongoing.
Amount: No cost.
Metric: Credible report.
Commitment 12 – Material Adverse Event Notification 	FTC Staff Comment
In order to demonstrate the New Health System
maintains the financial viability to fulfill its
commitments of this Cooperative Agreement, and to
ensure proper state supervision, If the New Health
System records a liability for a Material Adverse Event
which may impair the ability of the New Health System
to fulfill the commitments, the New Health System will
notify the Authority within 30 days of making such a
determination.
Timing: Ongoing.
Amount: No cost.
Metric: Credible report and easy to determine.
1. 	The commitment to provide a notice of a Material
Adverse Event (“MAE”) to the state does not give the
state the right to do anything about the MAE.
2. 	The commitment does not require NHS to cure or
otherwise remediate the MAE.
3. 	The commitment does not provide any time limit for how
long NHS’s ability to fulfill a commitment could be
impaired due to a MAE before it has to come back into
compliance with the COPA commitments.
4. 	The term “Material Adverse Event” is not defined in the
commitment. The precise definition of MAE could
significantly affect NHS’s obligations, and if and when the
state receives notice of any adverse events.
Commitment 13 – Employee Vesting 	FTC Staff Comment
In order to ensure employees are properly recognized
for their years of service, and to protect the benefits
they have earned over time, the New Health System will
honor prior service credit for eligibility and vesting
under the employee benefit plans maintained by
Wellmont and Mountain States, and will provide all
employees credit for accrued vacation and sick leave.
Timing: First year.
Metric: Easily verifiable.
1. 	This commitment should not be credited as a benefit of
the merger since employees have this benefit today,
without the merger.
2. 	The commitment does not clearly state that the “credit
for accrued vacation and sick leave” will be full credit. As
such, NHS could provide partial credit and still comply
with this commitment.
3. 	This commitment is not merger specific since any other
acquirer could agree to this same commitment.

FTC Attachment – January 5, 2017 	Page 13
Commitment 159 – Pay Structure Differences 	FTC Staff Comment
In order to ensure a uniform system of compensation,
and to ensure competitiveness of pay for attracting and
retaining employees, the New Health System will work
as quickly as practicable after completion of the merger
to invest up to $70 million over 10 years addressing
differences in salary/pay rates and employee benefit
structures between Wellmont and Mountain States. The
New Health System will offer competitive compensation
and benefits for its employees to support its vision of
becoming one of the strongest health systems in the
country and one of the best health system employers in
the country.
Timing: By the end of the first full fiscal year upon
closing of the merger.
Amount: The estimated incremental investment in
addressing salary/pay rate differences is approximately
$70 million over 10 years.
Metric: Credible report which shall be provided
confidentially in order to preserve a competitive
employment environment. Such report will include if
there were grievances filed by employees with respect
to pay adjustments related to the merger and how the
grievances were addressed.
1. 	Although the commitment begins by the end of the first
full fiscal year after closing the merger and the parties
may plan to do so, the commitment itself does not
require that the parties invest any specific amounts over
any of the first nine years. Thus, NHS would have until
year 10 to meaningfully close any salary/pay and benefits
gap.
2. 	The commitment does not require that the salary/pay
and benefits gap be closed only by raising salary/pay and
benefits of the lower-compensated system’s employees.
As such, some or even a large portion of this
commitment could be satisfied by (a) letting higher-paid
employees leave through attrition or otherwise, (b)
freezing the salary/pay and benefits of the higher-
compensated system’s employees, or (c) slowing the rate
of salary/pay and benefits increases at the high-
compensated system.
3. 	Depending on any differences in, for example, employee
jobs, titles, and responsibilities, there may be significant
discretion and room for disagreement about whether a
particular employee’s or group of employees’
compensation needs to rise to that of the higher-
compensated system.
4. 	The commitment is to spend “up to” $70 million to
address discrepancies, but it is not clear that it needs to
approach that amount.
5. 	This commitment is not merger specific since any other
acquirer could agree to this same commitment.
Commitment 16 – Severance Policy 	FTC Staff Comment
In order to ensure employees are treated fairly in the
event there is a facility closure or termination of
services related directly and demonstrably to the
merger, the New Health System will provide to the
Commissioner, within two (2) months of closing, a
severance policy addressing how employees will be
compensated if they are not retained by the New
Health System or any of its subsidiaries or affiliates. This
policy shall not affect termination of employees if the
1. 	The commitment does not commit NHS to any particular
severance policy or that the new policy will be better
than the parties’ current severance policies. It is merely a
commitment to develop a policy in the future.
2. 	The commitment limits application of the new severance
policy to employees whose termination is caused by a
facility or service closure “related directly and
demonstrably to the merger.” There is no definition of
how a closure or a termination would be “directly and
9 Commitment 14 was deleted from the revised commitments contained in the Southwest Virginia Health Authority Report, but
subsequent commitments were not renumbered. For consistency, this chart keeps the commitment numbering that is reflected in the
Southwest Virginia Health Authority Report.

FTC Attachment – January 5, 2017 	Page 14
termination was for-cause or related to the routine
operation of such facility. The severance policy shall
consider several factors, including but not limited to,
each individual’s position within his/her current
organization and years of service. The policy will also
address outplacement support to be provided to any
such employee. Compliance with this commitment in
Virginia shall be judged solely by the Commissioner and
corrective action required for noncompliance shall be
determined solely by the Commissioner. This provision
shall not be construed to create a right of action for any
individual employee.
Timing: 5 years.
Amount: Severance cost is estimated to be
approximately $5 million from the closing of the merger
to the end of the first full fiscal year after the closing of
the merger, attributable mostly to corporate level
synergies. Severance cost thereafter is not easily
calculable due to unknown variables in the market,
including ongoing attrition in the workforce as inpatient
hospital use rates continue to decline.
Metric: Confidential annual report for the first five full
fiscal years after the closing of the merger reporting on
the total number of involuntary employee terminations
due to merger-related reductions, the number of such
terminations for which severance compensation was
paid, and the aggregate cost of such severance
compensation. Importantly, it is also recognized that
there will be new employment created as the New
Health System makes the committed investments in
research, academics, new specialties and services and
population health. The New Health System may also
provide as part of the annual report the number of new
jobs created due to such investments, and approximate
incremental payroll costs resulting.
demonstrably” related to the merger. As such, discretion
and disagreements over whether a termination is
“directly and demonstrably” related to the merger may
well arise. Moreover, the commitment does not indicate
whether it is NHS’s, the employee’s, or the states’
obligation to show or contest whether the termination
was “directly and demonstrably” related to the merger
and what happens in the event of a dispute.
3. 	Implicitly, this commitment suggests that NHS plans to
terminate employees by closing facilities and/or services.
4. 	The parties also commit to reporting on the number of
new jobs, but there is no requirement – as there is with
terminating employees – that NHS specify which, if any,
new jobs are “directly and demonstrably” related to the
COPA, as opposed to jobs that Mountain States or
Wellmont would have filled without the merger.
5. 	The commitment provides the state with some undefined
ability to take “corrective action … for noncompliance,”
but this may require the state to evaluate any or all
terminations related to the merger to see if NHS
complied with the new severance policy.
6. 	The commitment appears to apply only for five years.
The parties have committed to keep certain facilities
operating as healthcare facilities for five years, but not
beyond that. As such, this commitment to provide a
severance policy would expire at the very time when NHS
would be free to close facilities and eliminate services.
Commitment 17 – Career Development Programs 	FTC Staff Comment
In order to invest in the advancement of employees,
and to assist employees in achieving growth in their
careers, the New Health System will combine the best
of both organizations’ career development programs in
order to ensure maximum opportunity for career
enhancement and training.
1. 	This commitment and what the parties will actually do is
undefined and ambiguous.
2. 	To the extent the commitment involves the sharing of
best practices, the parties likely could develop career
development programs without the merger – either
collaborating together, with another merger partner, or

FTC Attachment – January 5, 2017 	Page 15
Timing: No later than 24 months after closing.
Metric: Credible report.
with an outside career development consultant.
Commitment 18 – Post-Graduate Training 	FTC Staff Comment
In order to ensure training of physicians and allied
health professionals meets the goals and objectives of
the health system and the Authority, the New Health
System will develop, in partnership with at least its
current academic partners, a 10-year plan for post
graduate training of physicians, nurse practitioners, and
physician assistants and other allied health
professionals in Virginia and Tennessee. The plan will
include, but not be limited to, how it will address the
Authority’s goals, how training will be deployed in
Virginia and Tennessee based on the assessed needs,
clinical capacity and availability of programs. Contingent
on continued funding for existing programs from federal
and state sources, the New Health System will not
reduce or eliminate any medical residency programs or
available resident positions presently operated by the
Applicants at any Virginia facility provided, however,
that such programs may be moved within Virginia, or
substituted for residency training in Virginia in other
specialties if that is in the best interests of the patient
population in the area. Notwithstanding the foregoing,
minor and temporary decreases in the number of full
time equivalent residents working at Virginia hospitals
may reflect year-to-year variations in residents applying
for such training, dropping out of such training, electing
to rotate to other hospitals, or transferring to another
residency program, and shall not be deemed to violate
this agreement.
Timing: 10 years.
Amount: Combination of commitments 17 and 18 total
$85 million.
Metric: Annually, the New Health System will report
to the Commissioner: the number of accredited
resident positions for each residency program
operated in Virginia and the number of such positions
that are filled, and shall furnish copies of the relevant
pages of the Medicare cost reports showing the
1. 	The commitment provides that the 10-year training plan
must be developed by June 30, 2018 – 18 months after
the COPA could be approved and the merger
consummated, well after the time at which the benefits
of this commitment can be assessed against the harms
stemming from the COPA.
2. 	The commitment does not clearly identify by when the
10-year plan must be implemented. In fact, the parties
deleted prior draft language for this commitment that
required the implementation of the 10-year plan, so it is
not even specified that the plan must be implemented at
all.
3. 	The training commitment has no specifics details or
training goals. As such, there is no requirement that the
number of persons trained or expected expenditures on
such training be any higher than the levels today.
4. 	The commitment not to reduce or eliminate medical
residence programs or available residency positions is
“contingent” on federal and state funding. If that funding
is not continued, NHS seemingly has no further
obligations. As such, it could reduce or eliminate medical
residency programs and residency positions.
5. 	The COPA and this commitment are not necessary to
develop such a training plan and maintain residency
programs. The parties have not shown that they could
not engage in these activities without the merger– either
on their own working directly with medical schools, or
collaborating with each other, or with another merger
partner that could agree to the same commitments.
6. 	Before crediting this commitment, the state should
confirm if the parties even had plans to reduce or
eliminate training or medical residency programs and
positions, the extent to which the parties already had
undertaken to maintain or expand training and residency
programs, and the availability of alternatives. Otherwise,
there is no way to assess the incremental benefit this
commitment provides.

FTC Attachment – January 5, 2017 	Page 16
number of full time equivalent residents. An annual
report shall also include a description of any
affiliation agreements moving resident “slots” from
one hospital to another pursuant to Medicare rules,
resident programs moved from one hospital to
another, and new programs started. No later than
June 30, 2018, the New Health System will furnish to
the Commissioner a plan for medical residency
training programs and other health care professional
training. The plan shall set forth the targeted number
of persons to be trained by physician specialty or
health care professional category, the location(s) of
such training, the schedule for starting such training,
and the expected gross annual expenditure relating to
such training. It is acknowledged that the service area
for the New Health System extends across state
boundaries and patients, employees, and vendors
freely cross those state lines. Accordingly, the
Commissioner will not apply a fixed ratio to
determine whether each year’s expenditure under
commitments number 17 and 18 is appropriately
shared in by Virginia. On the other hand, the
Commissioner will review expenditures made
pursuant to this commitment for appropriate
inclusion of Virginia sites and/or demonstrable
benefit to Virginia residents and businesses.
7. 	The commitment appears to expire after 10 years.
Commitment 19 – Academic Partnerships 	FTC Staff Comment
In order to help create opportunities for investment in
research in partnership with Virginia’s academic
institutions, the New Health System is committed to
collaborating with the academic institutions to compete
for research opportunities. The New Health System will
work closely with current academic partners to develop
and implement a 10-year plan for investment in
research and growth in the research enterprise in
Virginia and Tennessee service area. The plan will
include, but not be limited to, how it will address the
Authority’s goals, how research will be deployed in
Virginia and Tennessee based on the needs and
opportunities, capacity and competitiveness of the
proposals.
Timing: 10 years.
Amount: Combination of commitments 17 and 18 total
1. 	The commitment does not require the parties to develop
the plan for investment in research until “the end of the
first fiscal year after the merger” is consummated, well
after the time at which the benefits of this commitment
can be assessed against the harms stemming from the
COPA.
2. 	Although the commitment suggests that NHS will begin
making expenditures in the second full fiscal year after
the merger closes, this is not clearly required by the
commitment, and there is no minimum investment
required by year two or any other particular year.
3. 	The commitment contains no specific details or
thresholds set out or promised.
4. 	The commitment lacks an enforcement mechanism if the
parties fail to develop or implement the investment plan,
including if NHS fails to fulfill its commitment.

FTC Attachment – January 5, 2017 	Page 17
$85 million.
Metric: Report in year one and dollars spent thereafter.
The New Health System will present a plan for research
expenditures for full fiscal years two and three starting
after the closing of the merger no later than the end of
the first fiscal year after the merger. Thereafter, the
New Health System must update its plan to address
subsequent fiscal years no later than the end of the
period for which the prior plan ends up to the end of
the ninth full fiscal year after the closing of the merger.
The annual report should include a description of
research topics, the entities engaged in the research,
the principal researcher(s) who is/are responsible for
each project, any grant money applied for or expected,
and the anticipated expenditures. Annual reports for
full fiscal years three and through ten should report on
the outcome of previously reported research projects
including references to any published results. The
Commissioner will review expenditures made pursuant
to this commitment for appropriate inclusion of Virginia
sites and/or demonstrable benefit to Virginia residents
and businesses.
5. 	The commitment appears to expire after 10 years.
6. 	The COPA and this commitment are not necessary to
invest in research. The parties have not shown that they
could not have invested in these activities without the
merger – either on their own working directly with
medical schools, or collaborating with each other, or with
another merger partner that could agree to the same
commitments. Before crediting this commitment, the
state should assess these alternatives. Otherwise, there
is no way to assess the incremental benefit this
commitment provides.
Commitment 20 – Common IT Platform 	FTC Staff Comment
In order to enhance hospital quality, improve cost-
efficiency, improve the utilization of hospital-related
services, and to enhance opportunities in research, the
New Health System will adopt a Common Clinical IT
Platform as soon as reasonably practical after the
formation of the New Health System. The New Health
System will make access to the IT Platform available on
reasonable terms to all physicians in the service area.
This fully integrated medical information system will
allow for better coordinated care between patients and
their doctors, hospitals, and post-acute care and
outpatient services and facilitate the move to value-
based contracting. Subject to confidentiality laws and
rules, the New Health System will grant reasonable
access to the data collected in its Common Clinical IT
Platform to researchers with credible credentials who
have entered into Business Associate Agreements for
the purpose of conducting research in partnership with
the New Health System.
Timing: Implementation No later than 48 months after
With respect to the commitment to implement a Common
Clinical IT Platform:
1. 	The parties have not shown that they could not achieve
comparable benefits using an HIE or developing a
“bridge” between their existing clinical IT platforms
(without merging) as an alternative. To the extent they
could achieve some, but not all, of the benefits using an
HIE or a clinical IT platform bridge, then the parties have
not shown the incremental benefit of implementing a
common platform.
2. 	The parties have not shown that they could not
implement a common clinical IT platform with another
merger partner and achieve comparable benefits. To the
extent there would be greater benefits under the COPA,
they have not shown how much greater the benefits are
than having a common platform with a different merger
partner.
3. 	The common IT platform will not be implemented for up
to 4 years, so there will be little or no benefit during that
interim time period.

FTC Attachment – January 5, 2017 	Page 18
closing.
Amount: Up to $150 million.
Metric: Implementation of promised system with
mileposts along the way. The mileposts shall be
proposed by New Health System no later than three
months after the closing of the merger or June 30,
2017, whichever is later. The New Health System will
report in each annual report its progress toward
implementing the Common Clinical IT Platform, and
after implementation, any material enhancements or
changes. The New Health System will also include in the
annual report the researchers (by individual or by
group for those working together) who have entered
into Business Associate Agreements for purposes of
conducting research.
4. 	The benefits of the common IT platform should be
“netted” against the cost of implementing and
maintaining such a platform, both of which can be
immense.
5. 	There is no enforcement mechanism if the parties are
delayed or fail to implement the common clinical IT
platform, or if the platform does not work properly.
With respect to the commitment to make the IT platform
available to physicians:
1. 	The commitment to make the IT platform available on
“reasonable terms” is vague, subject to interpretation,
and may preclude widespread physician use.
2. 	The parties could already make their clinical IT systems
available to physicians today, without the COPA or this
commitment.
3. 	There is no specified enforcement mechanism if the
parties do not make their IT platform available to
physicians in the area.
Commitment 21 – Preservation of Hospital Services 	FTC Staff Comment
In order to preserve hospital services in geographical
proximity to the communities traditionally served by
such facilities, to ensure access to care, and to improve
the utilization of hospital resources and equipment, all
hospitals in operation at the effective date of the
merger will remain operational as clinical and health
care institutions for at least five years. After this time,
the New Health System will continue to provide access
to health care services in the community, which may
include continued operation of the hospital, new
services as defined by the New Health System, and
continued investment in health care and preventive
services based on the demonstrated need of the
community. The New Health System may adjust scope
of services or repurpose hospital facilities. In the event
that the New Health System repurposes any hospital, it
will continue to provide essential services in the
community. For purposes of this commitment, the
following services are considered “essential services”:
• Emergency room stabilization for patients;
• Emergent obstetrical care;
• Outpatient diagnostics needed to support emergency
Perhaps in response to our public comment, the parties
enhanced their commitment regarding preservation of existing
facilities, but it still has significant limitations:
1. 	The commitment does not require the parties to keep
the vast majority of their hospitals open as hospitals for
any period of time. (The parties do commit to keep three
tertiary hospitals open in Commitment 22).
2. 	The commitment requires only that the parties keep
certain basic “essential services” available for five years.
But the parties make no promise to keep a host of other
services available at these non-tertiary hospitals,
including, but not necessarily limited to:
a. 	Secondary care services
b. 	OB services (except “emergent obstetrical care”
and “primary care services”)
c. 	Outpatient services (except “outpatient
diagnostics needed to support emergency
stabilization”)
d. 	Behavioral health services (only requires “access
to a behavioral health network…”) (emphasis

FTC Attachment – January 5, 2017 	Page 19
stabilization of patients;
• Rotating clinic or telemedicine access to specialty care
consultants as needed in the community and based on
physician availability;
• Helicopter or high acuity transport to tertiary care
centers;
• Mobile health services for preventive screenings, such
as mammography, cardiovascular and other screenings;
• Primary care services;
• Access to a behavioral health network of services
through a coordinated system of care; and
• Community-based education, prevention and disease
management services for prioritized programs of
emphasis based on goals established in collaboration
with the Commonwealth and the Authority.
If the New Health System becomes the primary health
service partner of the Lee County Hospital Authority,
the New Health System will be responsible for essential
services as outlined above.
Timing: Ongoing.
Amount: The net cost varies depending on annual
operating losses. The current annual operating losses
for the predecessors of the New Health System for
Virginia hospitals that are losing money are
approximately $11 million.
Metric: Each year, the operating results for the Virginia
hospitals and sites furnishing “essential services” as
defined above will be reported to the Commissioner.
The annual report to the Commonwealth will also
outline services provided in each community by the
hospitals or other sites furnishing “essential services” as
specified in this commitment.
added)
3. 	The commitment only applies to hospitals and hospital
services. There is no commitment to keep any
freestanding outpatient facilities open or not to eliminate
services at those outpatient facilities. Further, there is no
commitment to maintain current or comparable levels of
physicians, nurses, and other staff at any hospital or
outpatient facility.
4. 	There is no specified enforcement mechanism if the
parties do not fulfill this commitment. It is unclear how
the state would require the parties to re-open a facility,
re-establish a service, or re-hire a physician.
5. 	The parties have not shown that they would have closed
any hospitals or eliminated “essential services” at these
hospitals without the merger. If there was no such plan,
then this commitment should not be credited as a benefit
of the COPA.
6. 	The merger and COPA are not necessary to preserve the
other hospitals or maintain “essential services.” The
parties have not shown that they lack the financial
resources to maintain these facilities. In any case,
another merger partner could make the same
commitment as the parties have. Unless the state can
validate that no other bidder for Wellmont would make
this commitment, the Department should attribute little
weight to this commitment.
7. 	Interestingly, the parties deleted the prior draft language
that stated that there was no current commitment to
keep rural institutions open. If there was such a
commitment, then this COPA commitment provides no
benefit over the status quo.
8. 	The reference to the Virginia hospitals that are losing
money fails to acknowledge that both Mountain States
and Wellmont are substantial and profitable health
systems. Indeed, in fiscal year 2015, Mountain States
generated total revenues of approximately $1 billion and
approximately $55 million in excess revenues over
expenses and losses, and Wellmont generated total
revenues of approximately $813 million and $16 million
in revenue and gains in excess of expenses and losses.10
While individual hospitals may not be, on a stand-alone
10 Response to TDH Questions, July 13, 2016, Exhibit 23 at 5 (Audited Financial Statement on MSHA as of June 30, 2015); Mountain
States Health Alliance & Wellmont Health System, Application for a Certificate of Public Advantage for State of Tennessee (Feb. 16,
2016), Exhibit 11.5, Attachment B, at 4, http://tn.gov/assets/entities/health/attachments/COPA_application.pdf.

FTC Attachment – January 5, 2017 	Page 20
basis, particularly profitable, they may contribute to the
overall profitability of the health system by serving as
feeder hospitals to the tertiary hospitals or otherwise as
access points to the health system, which increase the
system’s revenues and profits.
Commitment 22 – Maintain Three Tertiary Hospitals 	FTC Staff Comment
In order to ensure preservation of hospital facilities and
tertiary services in geographical proximity to the
communities traditionally served by those facilities, the
New Health System will maintain, for the Virginia and
Tennessee service areas, a minimum of the three full-
service tertiary referral hospitals located in Johnson
City, Kingsport, and Bristol, to ensure higher-level
services are available in close proximity to where the
population lives.
Timing: Immediately upon closing of the merger and
ongoing.
Amount: Not applicable.
Metric: Easily verifiable. The New Health System must
report immediately to the Commissioner the closing of
any of the above referenced three full-service tertiary
referral hospitals and must also report any reduction in
the capability of any of the three tertiary referrals
hospitals so that they can no longer be credibly viewed
as tertiary referral hospitals.
1. 	As with the prior commitment, this commitment only
applies to tertiary hospitals. There is no commitment to
keep any freestanding outpatient facilities open or not to
eliminate services at those outpatient facilities. Further,
there is no commitment to maintain current or
comparable levels of physicians, nurses, and other staff
at any hospital or outpatient facility.
2. 	There is no specified enforcement mechanism if the
parties do not fulfill this commitment. It is unclear how
the state would require the parties to re-open a tertiary
facility, re-establish a service, or re-hire a physician.
3. 	The parties have not shown that they would have closed
any tertiary hospitals or other hospitals without the
merger. If there was no such plan, then this commitment
should not be credited as a benefit of the COPA.
4. 	The COPA is not necessary to preserve the three tertiary
hospitals. Again, the parties have not put forward
evidence that they would have closed these hospitals
without the merger. In any case, another merger partner
could make the same commitment as the parties have.
Unless the state can validate that no other bidder for
Wellmont would make this commitment, little weight
should be attributed to this commitment.
5. 	Although the commitment initially states that the parties
will keep open three tertiary facilities, the last provision
in this commitment states that NHS must report to the
Commissioner if it plans to close a tertiary facility or
eliminate capabilities that would no longer make the
hospital a tertiary facility. This makes the commitment
much less certain than it appears and potentially the
benefits of this commitment less creditable.
Commitment 23 – Maintain Open Medical Staff 	FTC Staff Comment
In order to ensure choice of providers for consumers
and to ensure physicians are free to practice medicine
without any adverse effect from the merger, the New
1. 	This commitment has been revised and may be narrower
than the parties’ original commitment. Previously, the
parties committed to maintain an open medical staff

FTC Attachment – January 5, 2017 	Page 21
Health System will maintain an open medical staff at all
facilities, subject to the rules and conditions of the
organized medical staff of each facility. Exceptions may
be made for certain hospital departments or services as
determined by the New Health System’s Board of
Directors or the hospital board if the hospital board is
acting as the ultimate fiduciary body.
Timing: Immediate upon closing of the merger and
ongoing, subject to current contractual obligations.
Amount: No cost.
Metric: Easily verifiable.
except perhaps for “hospital based physicians.” Now
they exclude from the commitment entire “hospital
departments or services.” The commitment now gives
NHS discretion to “close” any hospital’s hospital
departments or services, possibly displacing assigned
medical staff, for any reason without apparent limitation
or restriction.
2. 	The commitment references a timing caveat for “subject
to current contractual obligations,” which may delay the
implementation of the commitment by an indeterminate
period of time. The scope of this limitation should be
understood before it is accepted.
Commitment 24 – Independent Physician Exclusivity 	FTC Staff Comment
In order to ensure physicians and patients maintain
their choice of facilities, and to ensure independent
physicians can maintain their independent practice of
medicine, the New Health System will not require
independent physicians to practice exclusively at the
New Health System’s hospitals and other facilities.
Timing: Immediate upon closing of the merger and
ongoing.
Amount: No cost.
Metric: Easily verifiable.
1. 	If independent physicians in the area do not today
regularly practice at hospitals other than Mountain States
and Wellmont, this commitment provides little benefit.
2. 	In general, physicians do not like to practice at hospitals
far from their offices or homes. As such, the
commitment to allow local-area physicians to practice at
hospitals that may be quite far from their current office
or home is unlikely to be a benefit that most such
physicians will take advantage of, which means the
commitment provides little benefit.
Commitment 25 – Independent Physician Health
Networks
FTC Staff Comment
The New Health System will not take steps to prohibit
independent physicians from participating in health
plans and health networks of their choice.
Timing: Immediate upon closing of the merger and
ongoing.
Amount: No cost.
Metric: Easily verifiable.
1. 	Unless the parties are suggesting that they currently take
steps to prohibit independent physicians from
participating in health plans and health networks of their
choice, this commitment does not provide any new
benefit.
2. 	Otherwise, the commitment appears to concede that,
without this commitment, the COPA would enable the
parties to exercise market power by taking steps to
prevent even independent physicians from participating
in health plans and health networks of their choice.

FTC Attachment – January 5, 2017 	Page 22
Commitment 26 – Physician Needs Assessments 	FTC Staff Comment
In order to enhance access to services for patients, and
to ensure robust choices remain in the market for
physicians in the various specialties needed throughout
the region, the New Health System will commit to the
development of a comprehensive physician/physician
extender needs assessment and recruitment plan every
three years in each community served by the New
Health System. The New Health System will consult with
the Authority in development of the plan. The New
Health System will employ physicians and physician
extenders primarily in underserved areas and locations
where needs are not being met, and where
independent physician groups are not interested in, or
capable of, adding such specialties or expanding. The
New Health System will promote recruitment and
retention of pediatric sub-specialists in accordance with
the Niswonger Children’s Hospital physician needs
assessment.
Timing: Every 3 years, starting within the first full fiscal
year.
Amount: Costs of recruitment related to
implementation of the recruitment plan shall be part of
the $140 million commitment referenced below in
number 26. Expenditures incurred in the development
of the community needs assessment and the
recruitment plan shall not be credited toward that $140
million commitment.
Metric: Credible evidence of recruitment plan, which
identifies needs and priorities. The first community
needs assessment and physician/physician extender
recruitment plan shall be presented to the
Commissioner no later than in the annual report
submitted after the end of the first full fiscal year after
closing of the merger, and thereafter at three (3) year
intervals (or more frequently if the plan is amended). In
each annual report, the New Health System shall report
on progress toward its recruitment goals including the
number of recruited physicians by specialty, and
related data such as recruitment efforts, interviews
conducted, and the number of offers extended. To the
extent that physician needs identified in the plan are
not met in 600 days or more (measured at the end of
each full fiscal year), the New Health System shall
include an explanation of the feasibility of meeting the
1. 	The commitment provides no specific details of the
proposed plan or how much of the $140 million
commitment referenced in Commitment 27 will be
devoted to this recruitment plan.
2. 	The development of the proposed plan need only be
completed by the end of the first full fiscal year after
closing. As such, the plan’s benefits, if any, cannot be
assessed until well after closing of the merger and
decision on the COPA application.
3. 	The commitment to conduct a needs assessment and
recruitment plan for physicians and physician extenders
is something the parties could do today, without the
merger, either independently, with another merger
partner, and perhaps even with each other through a
collaboration short of a merger. In fact, the penultimate
sentence of the commitment specifically refers to
“alternatives such as building relationships with centers
of excellence.” Therefore, the parties have not shown
that the COPA is necessary to achieve this benefit.
4. 	To the extent that the parties argue that they could not
hire as many physicians/physician extenders without the
merger, they have not shown the incremental benefit of
the COPA by specifying how many physicians/extenders
they will employ above what they could do alone or
through alternatives.
5. 	Similarly, although the parties commit to hiring
physicians and physician extenders “primarily in
underserved areas,” there is no specific commitment as
to the number of physicians to be hired, what specialties,
or where. The parties could arguably satisfy the
commitment by hiring a single physician assistant. As
such, the parties have not shown the magnitude of the
benefit or that it will be significant.
6. 	Based on the specific language in the commitment, the
parties do not specifically commit to employing any
pediatric sub-specialists, just that they will “promote
recruitment and retention of pediatric sub-specialists in
accordance with” the Niswonger needs assessment.
7. 	Although there is a reporting requirement, NHS must
only explain the feasibility of meeting the plan and
explain what steps “if any” it “believes are appropriate to
take” if it does not meet its employment plans. There is
no specific enforcement mechanism if it falls short of
employing a meaningful number of physicians/extenders

FTC Attachment – January 5, 2017 	Page 23
plan for the unfilled position(s), additional steps, if any,
that management believes are appropriate to take, and
consideration of alternatives such as building
relationships with centers of excellence to improve the
availability of the missing specialty to patients in the
region. In order to preserve competition, this annual
reporting requirement will be treated as confidential.
in underserved areas or recruiting and retaining pediatric
sub-specialists.
Commitment 27 – Enhancement of Healthcare Services 	FTC Staff Comment
Enhancing healthcare services:
a. In an effort to enhance treatment of substance abuse
in the region, the New Health System will create new
capacity for residential addiction recovery services
serving the people of Southwest Virginia and
Tennessee.
b. Because improved mental health services is a priority
of the Authority and the law, the New Health System
will develop community-based mental health resources,
such as mobile health crisis management teams and
intensive outpatient treatment and addiction resources
for adults, children, and adolescents designed to
minimize inpatient psychiatric admissions, incarceration
and other out-of-home placements throughout the
Virginia and Tennessee service area.
c. As part of the priority of preserving hospital services
in geographical proximity to the communities
traditionally served by the facilities, and to ensure
access to care, the New Health System will develop
pediatric specialty centers and Emergency Rooms in
Kingsport and Bristol with further deployment of
pediatric telemedicine and rotating specialty clinics in
rural hospitals to ensure quick diagnosis and treatment
in the right setting in close proximity to patients’
homes.
Timing: The plan will be developed no later than 24
months after closing and will include a time schedule
for implementing the plan and expenditures under the
plan.
Amount: $140 million over 10 years including physician
recruitment referenced in number 25 above.
1. 	The commitment only requires the parties to develop a
plan within 24 months, well after a decision on the COPA
is made, thus preventing an accurate assessment of the
benefits of the plan. The commitment lacks any
requirement as to when these enhanced services will be
available nor does it specify how much of the $140
million NHS will invest in these services.
2. 	In FTC staff’s public comment to the Tennessee
Department of Health, we addressed the deficiencies in
the parties’ claims about developing new substance
abuse and mental health resources, but to summarize:
a. 	The parties have actively opposed efforts by
other providers to begin offering substance
abuse services, so they should not be given credit
for bringing those same services into the area.
b. 	The parties have not shown that these services
could not be offered through alternatives that
are less restrictive to competition – either on
their own, through a collaboration with each
other short of a merger, or with another partner.
The state should evaluate what plans each party
had to enhance existing services before the
planned merger and what alternative bidders
may have offered Wellmont with respect to
enhancing area health services before crediting
this commitment.
c. 	To the extent the parties could not offer a new
health service independently but only through a
collaboration with each other, those are the
types of non-merger collaborations that are most
likely to be non-problematic under the antitrust
laws.
d. 	To the extent that the COPA would result in some
new services that would not be developed
through alternative means, the parties have not

FTC Attachment – January 5, 2017 	Page 24
Metric: The New Health System will include in the
annual report for the second full fiscal year the plan for
enhancing healthcare services, and in that report and
each following, shall include in the annual report
progress in implementing the plan and expenditures
made.
specifically shown the incremental benefit of the
cooperative agreement over available
alternatives.
3. 	There is no enforcement mechanism if the parties do not
develop these services, delay the development of these
services, do not meaningfully develop these services, or
primarily develop them in Virginia rather than Tennessee
(or vice versa).
Commitment 28 – Population Health 	FTC Staff Comment
In an effort to enhance population health status
consistent with the regional health goals established by
the Authority, the New Health System will invest not
less than $75 million over ten years in population health
improvement for the service area. The New Health
System will establish a plan, to be updated annually in
collaboration with the Authority, the Commonwealth,
and possibly the State of Tennessee, to make
investments that are consistent with the plan and to
complement resources already being expended. The
New Health System also commits to pursuing
opportunities to establish Accountable Care
Communities in partnership with various local, state
and federal agencies, payers, service providers and
community groups who wish to partner in such efforts.
It is the desire of the New Health System for the
Commonwealth and Tennessee to collaborate with the
New Health System to establish a regional plan that
disregards state boundaries.
Timing: 10 years.
Amount: $75 million.
Metric: The New Health System will establish and track
long-term outcome goals similar to those developed in
Healthy People 2020 and consistent with the health
plans of Virginia and Tennessee, and will be evaluated
based on whether expenditures made are consistent
with the plan established by the collaborative between
the states, including the Authority, and the New Health
System.
Discussion: The expenditures of $75 million throughout
the region have the greatest positive impact only if
those dollars are spent in a prioritized way in
With respect to the commitment to invest in population health
improvement efforts:
1. 	Health systems do not need to merge in order to engage
in population health management. Indeed, hospital
systems smaller than the parties already engage in
population health management on their own.
2. 	The parties have not shown that the COPA is necessary to
engage in population health management. They have not
shown that they could not engage in population health
management on their own, with each other in a
collaboration short of a merger, or with another merger
partner. Indeed, this commitment refers to “resources
already being expended” and “efforts already underway
through community based assets,” suggesting the
population health management efforts are proceeding
even without the merger.
3. 	To the extent the parties are arguing that the COPA
enables them to engage in aspects of population health
management above what they could do through these
alternatives, they have not shown what those
incremental efforts are or the specific benefits from their
undefined post-merger efforts. Similarly, the parties
have not shown how much they had planned to invest in
efforts to enhance population health status without the
merger. Only the amount by which the $75 million
commitment exceeds their pre-merger investment plans
should be credited as a benefit of the COPA.
4. 	There is no enforcement mechanism if the parties do not
implement, invest in, or achieve population health
management programs and goals.

FTC Attachment – January 5, 2017 	Page 25
collaboration with the state health plan and the
regional priorities as established by the Authority, and
in partnership with efforts already underway through
community based assets.
With respect to the commitment to “pursu[e] opportunities to
establish Accountable Care Communities”:
1. 	Assuming the “Accountable Care Communities” (“ACCs”)
here refers to the approach being developed to partner
with counties and private entities to achieve healthy
counties, this approach is still under development and
the benefits of such an approach are unknown.
According to the National Association of Counties: “ACCs
are in the early phases of adoption; therefore limited
analysis and research are currently available.”11 The
parties have not shown that a merger is required to
establish an ACC.
2. 	The commitment language indicates that the parties will
“pursu[e]” ACC opportunities, but there is no
commitment to actually establish an ACC.
3. 	There is no enforcement mechanism if the parties do not
establish an ACC.
Commitment 3012 – Reimbursement of Authority 	FTC Staff Comment
In support of the Authority’s role in promoting
population health improvement under the
Commonwealth’s Cooperative Agreement with the New
Health System, the New Health System shall reimburse
the Authority for costs associated with the various
planning efforts cited above in an amount up to $75,000
annually, with CPI increases each year. No reimbursable
costs shall be paid toward compensation for any
member of the Authority’s Board or Directors.
Timing: Annual.
Amount: Up to $75,000 annually as part of the $75
million for population health improvement, with annual
CPI increases.
Metric: Reimbursement is made or is not made. All
amounts paid to the Authority shall be included in the
annual report submitted to the Commissioner.
1. 	It is unclear whether this commitment is solely for
purposes of supporting the planning related to
Commitment 28 or for all the commitments in the
cooperative agreement.
2. 	It is unclear whether $75,000 will be sufficient to engage
in the planning efforts related to Commitment 28, but it
is likely that $75,000 per year would be insufficient to
supervise the COPA as a whole.
11 http://www.naco.org/sites/default/files/documents/Accountable-Care-Communities.pdf.
12 Commitment 29 was deleted from the revised commitments contained in the Southwest Virginia Health Authority Report.

FTC Attachment – January 5, 2017 	Page 26
Commitment 31 – Board Membership 	FTC Staff Comment
Best practice governance of the New Health System is
critical to the success of the efforts outlined in the
Cooperative Agreement. As such, the Board of Directors
of the New Health System will operate such that each
Board member must exercise the Duty of Care, Loyalty
and Obedience to the New Health System required by
law, and all Board members must adhere to the strict
fiduciary policies established by the Board. It is
recognized that governance of the New Health System
should reflect the region, including both Virginia and
Tennessee. As such, the New Health System makes the
following commitments related to governance:
• Currently, one member of the Board of Directors
resides in Virginia. No later than 3 months after closing,
an additional resident of Virginia will be appointed to
serve on the Board of Directors of the New Health
System. Such resident shall be appointed through the
governance selection process outlined in the bylaws of
the New Health System;
• The New Health System will ensure membership from
Virginia on the following Board committees, with full
voting privileges: Finance, Audit and Compliance,
Quality, Community Benefit/Population Health, and
Workforce;
• The New Health System will ensure than not less than
30 percent of the composition of the Community
Benefit/Population Health committee will reside in
Virginia (committee will be the Board committee
responsible for the oversight of the compliance of the
Cooperative Agreement); and
• Within 5 years, not less than 3 members of the Board
of Directors will reside in the Commonwealth of
Virginia, and such composition shall be sustained.
Timing: Ongoing.
Amount: No dollar cost.
Metric: Easily verifiable.
No comments on this commitment.
Commitment 32 – Annual Report 	FTC Staff Comment
The New Health System expects that the conditions
under which the Cooperative Agreement is granted will
be enumerated in a formal enforceable agreement
between the New Health System and the
1. 	As explained throughout, the commitments, as drafted,
leave doubts about the degree to which particular
commitments could be enforced. While the state may
be able to enforce the prohibitions imposed on NHS

FTC Attachment – January 5, 2017 	Page 27
Commissioner, and it is expected an annual report will
be required. Any report will be attested to by the
appropriate leadership of the New Health System,
including the Senior Executive.
Timing: Annual.
Amount: No material cost.
Metric: Receipt of compliant report.
(which does not necessarily mean the anticompetitive
harm would be prevented), it is unclear if the state
would be able to enforce the affirmative obligations for
NHS to engage in any quality- or population-health-
enhancing activities; how that enforcement would
occur; who would pay the costs of any mediation,
arbitration, or court action; and what happens if the
state does not prevail in an enforcement action.
2. 	Before or concurrent with any COPA approval, the
binding commitments should be finalized, rather than
left to post-merger and post-COPA-approval negotiation
with NHS, as required by the Tennessee Hospital
Cooperation Act.13
Commitment 33 – Quarterly Financial Reporting 	FTC Staff Comment
The New Health System will provide information on a
quarterly basis of the key financial metrics and the
balance sheet comparing performance to the similar
prior year period and year to date. This information will
be provided on the same timetable as what is publicly
reported through EMMA (Electronic Municipal Market
Access).
Timing: Annual and quarterly.
Amount: No material cost.
Metric: Easily verified.
1. 	The commitment leaves undefined what “key financial
metrics” are and which of such metrics will be reported.
2. 	To the extent that these key financial metrics and the
parties’ balance sheet are available in what is publicly
reported now through EMMA or in the parties’ IRS Form
990, then this commitment provides no new benefit.
Commitment 34 – Facility Closings 	FTC Staff Comment
The New Health System will adhere to Exhibit 12.1
setting forth relevant considerations and the process for
closing a facility should it be necessary. This policy will
remain in effect unless the change is agreed to by the
Commissioner.
Timing: If closing a facility is considered.
Amount:
1. 	The Exhibit (12.1 of the parties’ Virginia Cooperative
Agreement Application) sets forth a policy for
“alignment” (i.e., closing clinical facilities and clinical
services), which contains a variety of considerations that
NHS will review before closing a facility or service. The
policy, however, provides no sense of how NHS will
weigh any of these considerations. As such, while the
impact on community health status and access are
among the considerations, so too is the effect on NHS’s
finances and its operating margins, and neither the
13 Tennessee Rules Implementing Laws Relative to Cooperative Agreements and the Granting of Certificates of Public Advantage
Pursuant to the Hospital Cooperation Act of 1993, T.C.A §§ 68-11-1301 through 68-11-1309, Chapter 1200-38-01-.05 (2) (filed Jul. 14,
2015), http://share.tn.gov/sos/rules_filings/07-13-15.pdf (emphasis added).

FTC Attachment – January 5, 2017 	Page 28
Metric: Annual report will provide evidence of
compliance with policy.
commitment nor the policy indicates whether NHS will
give community health or NHS’s financial considerations
more, less, or equal weight.
2. 	According to the definitions in the policy, “Clinical
Facility or Facilities” is defined as any location where
“inpatient care is provided.” This suggests that the
alignment policy is limited to closing inpatient facilities
and services. As such, NHS would not be bound by the
same alignment considerations, including the effect on
the community when closing and discontinuing
outpatient facilities or services, physician medical office
buildings and services, and other non-inpatient facilities
and services.
Commitment 3514 – Joint Task Force 	FTC Staff Comment
The New Health System shall create, together with the
Southwest Virginia Health Authority, a Joint Task Force
comprised of four members, two from the New Health
System and two from the Southwest Virginia Health
Authority. The Task Force shall meet at least annually to
guide the collaboration between the Authority and the
New Health System, and to track the progress of the
New Health System toward meeting the commitments
of the Cooperative Agreement and shall report such
progress to the Authority. The Task Force shall be
chaired by a member of the Authority. The members
appointed by the Authority may not have a conflict of
interest.
Timing: Immediate upon closing of the merger.
Amount: No cost.
Metric: Creation of a Joint Task Force.
1. 	No comments on the creation of the Joint Task Force,
other than it currently appears limited to Virginia.
Revision of Commitments 	FTC Staff Comment
A. 	Revision of Commitments – Recommendations by
the Authority to the Commissioner
These commitments have been negotiated and drafted
with the intent of them remaining in place for ten (10)
Provision A raises several questions and concerns:
1. 	The first sentence of the provision states that the
commitments are intended to be in place for only 10
years. The merger, however, is intended to last in
14 Commitments 36 and 37 appear to have been deleted from the revised commitments contained in the Southwest Virginia Health
Authority Report.

FTC Attachment – January 5, 2017 	Page 29
years. Nevertheless, there may be changes in
circumstances that arise which affect the feasibility or
the meaningfulness of the commitments and which are
not possible to foresee presently. For example, 5 a major
structural change to the federal payment system could,
depending on how it is implemented, materially change
both the needs of the region and the New Health
System’s ability to meet those needs. Other events
which may have a material effect include, but are not
limited to, substantial and material reductions in
federal reimbursement, repeal of Certificate of Public
Need, labor shortages causing significant and material
increases in labor expense, significant reductions in
inpatient hospital use rates which cause a material
decrease in revenue (and which may be demonstrated
to reduce the total cost of care), or an act of God. It is
the interest of the Commonwealth that the region’s
hospitals maintain their financial viability, that they are
of sound credit worthiness and that they are capable of
reinvesting capital. Accordingly, if the New Health
System produces clear and convincing evidence that
changes in circumstances have materially affected its
ability to meet the commitments and that its inability is
not affected by deficiencies in management, either the
Commissioner or the New Health System may petition
the other to amend the commitments to reduce the
burden or cost of the commitments to a level that may
be more sustainable. The amendment process should
not be used to increase the overall level of burden or
cost on the New Health System, although the parties
acknowledge that depending on the change in
circumstance, measuring the change in the level of
burden or cost may be subject to reasonable ranges
and disagreement of the impact within a range. If
either party petitions for amending the commitments
and the parties cannot come to agreement, the parties
shall agree on a dispute resolution process in order to
reach agreement.
5 These are examples only and are not intended to be
exclusive basis for amending the agreement, but simply as an
illustration of a possible change in circumstances that may
have a material impact.
perpetuity. One of the greatest concerns is that the
COPA allows the parties to merge to a monopoly and
later rid itself of any and all limitations on NHS’s market
power by terminating the COPA commitments.
2. 	One of the COPA’s greatest risks is that it is impossible
to foresee all the ways the market could evolve, how the
commitments could be deficient, and the gaps in the
commitments that become evident only after the
parties have integrated their operations. In fact, this
provision in the commitments specifically notes that
there may be “changes in circumstances” that may arise
that are “not possible to foresee,” which could affect
the parties’ ability to comply with the conditions of the
COPA (e.g., change in federal healthcare
reimbursement, repeal of Certificate of Public Need,
etc.). The Southwest Virginia Health Authority Report
further states that these are only examples of the
changes in circumstances that may justify a
commitment amendment and “are not intended to be
exclusive basis [sic] for amending the agreement...”15
3. 	Many aspects of this provision contain terms that are
subject to interpretation and disagreement: “major
structural change to the federal payment system”;
“materially change . . . the needs of the region”;
“material reductions in federal reimbursement”;
“significant reductions in inpatient hospital use rates”;
“clear and convincing evidence that changes in
circumstances have materially affected its ability to
meet the commitments.” (emphasis added)
4. 	Provision A says that the amendment process should not
be used to “increase the overall burden or cost on the
New Health System.” That suggests that, if the cost
required to achieve a particular benefit or fulfill a
particular commitment exceeds that contemplated by
the parties today, the state might not be able to require
NHS to expend those additional costs.
5. 	Neither Provision A nor the other commitments
describe in detail the commitment-amendment process.
Provision A does indicate that either NHS or the state
may petition the other for an amendment to the
commitments, but if they cannot reach agreement, they
shall then agree on a dispute resolution process. But it
provides no details on what the dispute resolution
process will entail, whether it will be binding, who will
15 Southwest Virginia Health Authority Report, at 150 n. 188.

FTC Attachment – January 5, 2017 	Page 30
pay the costs of dispute resolution, and what happens if
NHS and the state cannot agree to the terms of the
dispute resolution process.
Ten-Year Review 	FTC Staff Comment
B. 	Ten-Year Review of Cooperative Agreement –
Recommendations by the Authority to the
Commissioner
Before the end of calendar year 2026, the New Health
System and the Commissioner shall review how well
the formation and operation of the New Health System
has served the overall interests of Virginians and
Virginia businesses in the area. That review will
consider all the elements set forth in Section 15.2-
5384.1, Code of Virginia, and will also consider New
Health System’s profitability. It is the opinion of the
Authority that the citizens of the region and the
Commonwealth are well-served when the health
system generates the resources necessary to be
sustainable, of good credit, and capable of meeting its
commitments as a community-based health system in
the region. It is the hope of the Authority that the New
Health System achieves financial sustainability that
exceeds national or regional averages. If, however, it
appears the New Health System is generating excessive
profits and negotiated payment rates to the New
Health System have increased more rapidly than
national or regional averages, new or additional
commitments may be appropriate. Conversely, if the
New Health System is unable to attain sufficient
profitability notwithstanding effective management,
reducing the burden of the commitments would be
appropriate. Likewise, if the New Health System is not
maintaining its support of population health,
subsidizing money-losing services, medical education,
research, and physician recruitment, new commitments
may be appropriate. In the event that an extension of
the existing cooperative agreement or negotiation of a
new or amended agreement is not achieved, the
Commonwealth should withdraw its support for the
cooperative agreement.
1. 	Provision B states that “new or additional conditions
may be appropriate” if, for example, NHS is generating
excessive profits or negotiated payments rates, but does
not define “excessive,” specify who defines that term,
whether “excessive” is to be judged on a system or
stand-alone-hospital basis, and whether the state will
assess this only for Tennessee hospitals or all NHS
hospitals. The use of “may” in this provision also makes
it uncertain whether the state can demand an
amendment based on excessive profits or payment
rates, or whether some dispute resolution or litigation
process would be required.
2. 	Provision B says that if an amended or extended COPA
cannot be reached, the state should “withdraw its
support” for the COPA. This suggests that if NHS
refused to extend or amend the COPA – which appears
to be in its sole discretion – the state could only
“withdraw” from the COPA. It is not clear that the state
could require NHS take any action or even to implement
the Plan of Separation. Even if the state could order
NHS to effectuate the Plan of Separation, as we stated in
our public comment, staff has concerns that the
separation may be too difficult or even impossible after
10 years of integration. Even if separation were
feasible, it may very well not restore Mountain States
and Wellmont to their pre-consolidation state since
their plan includes closing facilities and consolidating
services.

FTC Attachment – January 5, 2017 	Page 31
Other commitments and provisions 	FTC Staff Comment
Several commitments, including the pricing
commitment, rely on payers to report complaints about
NHS failures to fulfill commitments.
1. 	Payers may not be in a position to monitor NHS’s
compliance with all commitment terms, due to
limitations on resources, lack of incentive, concern about
repercussions or retaliation, or lack of information.
2. 	NHS’s failure to meet a commitment may not have a
material effect on a payer’s business, but might violate
the commitment and have an effect on the community.
3. 	Because the definition of Principal Payer excludes the
smaller payers for which NHS is likely to constitute a
relatively more significant portion of the payer’s overall
business, the commitments exclude those payers who
are more likely to have an incentive to monitor NHS’s
compliance with the commitments. Whereas, large
national Principal Payers for whom NHS may constitute a
relatively smaller portion of their overall business, may
have a lower incentive to monitor NHS’s compliance.
Revised Plan of Separation
(submitted to Tennessee Department of Health on
September 9, 2016)
1. 	Provision 2.B is unclear whether it limits the parties each
from transferring 10% (or “roughly” $300 million) of
NHS’s total assets or whether it applies to the parties on
a combined basis. In any case, this threshold is likely
much too high as a threshold for materiality because
operationally significant back-office and other expenses
would likely fall below this threshold.
2. 	Provision 2.B is also unclear in whether it limits the
parties (individually or combined) from transferring
assets that in the aggregate are valued at 10% (or
“roughly” $300 million) of NHS’s total assets, or whether
it merely limits the parties (individually or combined)
from transferring a single asset whose value is 10% (or
“roughly” $300 million) of NHS’s total assets. These
differences could have a tremendous effect on the value
of assets that the parties are permitted to transfer.
3. 	Provision 2.B. also does not define the meaning of
“Assets used in providing support services,” which leaves
the parties with substantial discretion to decide which
assets may be transferred without restriction.
4. 	Paragraph 2.C.(3)c) provides no deadline or funding
source for appointing new executive officers of the
separated hospital systems. Paragraph 2.C.(3) overall
likely underestimates the time and resource that will be
required to restoring the executive management
personnel at the separated health systems.
5. 	Paragraph 2.C.(4)a) provides for separation of debt

FTC Attachment – January 5, 2017 	Page 32
based on debt that each party “brought to the merger,”
but this method for allocating debt fails to take into
account the actual reasons for the issuance of any NHS
debt. Debt may have been issued for the benefit of one
or only a few NHS hospitals, so it should not be allocated
upon separation based on debt brought into the merger.
6. 	Paragraph 2.C.(4)b) requires cash and marketable
securities to be separated in proportion to the parties’
original contribution, but this fails to account for
whether (i) one party may have simply had more cash on
hand at closing to contribute but whose hospitals may
generate lower profits, and thus have contributed less to
the available cash reserves at separation, and (ii) the
marketable securities being contributed by one party,
even if in a smaller amount, may have appreciated at a
faster rate than the party contributing more marketable
securities at closing.
7. 	Paragraph 2.C.(5) provides that employees will be
assigned to their principal place of business/service, but
if NHS has closed any hospitals, outpatient facilities, or
other medical facilities, then the Plan of Separation does
not account for staffing any restored facilities. Further,
to the extent a facility provides a service using part-time
staff from another NHS facility from the other system,
then the first facility may receive no employees to
continue to provide these services under this provision.
8. 	Paragraph 2.C.(6) does not make clear whether the
credit for service will be full credit or something less.
9. 	Paragraph 2.C.(7) indicates that there will be little clinical
consolidation in the Short-Term Period, meaning any
cost or quality benefits will be minimal in that period.
10. Paragraph 2.C.(8) indicates that there will not be full
implementation of the Common Clinical IT Platform in
the Short-Term Period, meaning the benefits of this
system may be limited in that period.
11. Paragraph 2.C.(9) says that NHS will abide by existing
payer contracts and will negotiate in good faith if payers
wish to modify or replace existing contracts. If payers
wish to do so, however, no provision is made for who
will negotiate such contracts on behalf of Mountain
States and – separately – Wellmont, since presumably
NHS will have only one person leading contracting
negotiations with health plans.
12. The Paragraph 2.C.(10) plan for restoring physicians to
the entity that employed them at closing does not

FTC Attachment – January 5, 2017 	Page 33
account for physician lay-offs or departures that may
reduce the number of physicians available to be restored
to Mountain States and Wellmont facilities, which may
compromise the ability to restore physician services at
those facilities.
13. The Long-Term Plan of Separation is not a real plan, but
only a commitment to develop an actual plan of
separation. This is not a meaningful commitment or
workable proposal.
14. Paragraphs 3.B.(4) and 3.C. provide that a Proposed Plan
shall be submitted within 180 days of notice from the
Department that the COPA has been terminated and that
it will be implemented within some indeterminate time
after the Final Plan is approved. This means that the
actual separation will not occur for well beyond six
months after the COPA is terminated. To the extent that
the COPA commitments do not continue to restrict NHS’s
conduct after termination of the COPA but before the
effectuation of separation, NHS would have unfettered
ability to exercise its market power.