Upstate lawmakers urge state AG to investigate GHS, Palmetto Health partnership

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Earlier this month, the Greenville Health System (GHS) and Palmetto Health in Columbia announced plans to form the state’s largest health system, one that will serve 1.2 million patients annually and earn a projected $3.9 billion in annual net revenue.

But members of the Greenville County Legislative Delegation, a group that decides who serves on GHS’ board of trustees, want South Carolina Attorney General Alan Wilson to investigate the partnership.

The delegation — Reps. Garry Smith, Rita Allison, Mike Burns, William Chumley, Dwight Loftis, Leola Robinson-Simpson, and Tommy Stringer — recently sent a letter to Wilson, expressing concerns about the “anti-competitive nature” of the partnership.

“Over the past several years, GHS has been expanding horizontally, vertically, and geographically throughout a six-county region, such that it is now by far the dominant hospital and health care system in the Upstate,” the group said. “Depending upon the specific geographic area examined, GHS now controls between 75 percent and 100 percent of the market share.”

“It has acquired county hospitals, a 300-employee cancer treatment center, numerous physician groups and clinics, and a variety of other medical and nonmedical organizations throughout that six-county region,” the legislators added. “We believe that as attorney general, you should be investigating it for systemic and continual violations of the South Carolina antitrust laws.”

When it comes to such matters, the Federal Trade Commission (FTC) and the Department of Justice are already tasked with investigating whether or not the partnership violates antitrust laws.

“We are confident that the FTC will find that the affiliation is not anti-competitive and offers significant cost efficiencies, which will be of benefit to the consumers and markets in general,” GHS spokeswoman Sandy Dees said in a prepared statement.

According to GHS CEO Michael C. Riordan, the Upstate’s other medical systems do not oppose the partnership. As first reported in the Upstate Business Journal, Riordan spoke with leaders at Bon Secours St. Francis Health System in Greenville, AnMed Health in Anderson, and Spartanburg Regional Health System before the announcement.

“They have been incredibly supportive and see the need for what we’re doing for South Carolina,” he said. “There is nothing better for us than a strong Spartanburg [Regional Healthcare System], Bon Secours [St. Francis Health System], or AnMed [Health], and from a competition standpoint, they will keep us on our toes, and I hope they say we do the same thing for them.”

As South Carolina’s two largest health systems, GHS and Palmetto have a combined 13 hospitals and hundreds of physician practices and ambulatory centers. If the FTC approves their “merger of equals,” the new company will be one of the 50 largest health systems in the United States, according to Riordan. It will serve about one-third of South Carolina’s Medicaid population, and provide hundreds of millions of dollars in charity and uncompensated care.

The partnership could have several benefits to the community, said Riordan. For one, the two health systems could offer services that, individually, were not feasible. Riordan added the combined systems also could expand health care and medical school training and expand clinical trial research.

The Greenville Journal reached out to all the legislators who signed the letter to see if they could weigh in further. Burns of Taylors, S.C., and Smith of Simpsonville, S.C., were the sole representatives to reply ahead of the vacation-heavy Independence Day weekend.

Burns believes the partnership will not stop with just the Upstate and the Columbia metropolitan area. It would “become an entire state problem,” he said. “Greenville Health System’s quest is to cover all of South Carolina, from Greenville to Myrtle Beach and Charleston,” said Burns, who represents District 17.

“Greenville Health System in the Upstate already controls the lion’s share of patients, over 70 percent,” he added. “This trend will continue as they march toward the coast and continue to try to venture into neighboring states simultaneously. Again, lower competition only yields higher costs and lower health care.”

Dees responds, “We are focusing on programs that will bring value to the Midlands and the Upstate,” adding that GHS will maintain its relationship with the Medical University of South Carolina, McLeod Health, and Self Regional Healthcare through the hospital systems’ purchasing collaborative Initiant Health Collaborative. “We will continue to work with many hospitals and physicians on the many programs and services that benefit multiple communities in the state.”

In the letter, Burns and his fellow members of the General Assembly propose several remedies to boost competition, including prohibiting future acquisitions, divesting existing holdings, placing limits on new joint ventures, and appointing a monitor to ensure future compliance with state antitrust laws.

This isn’t the first time that the Greenville County Legislative Delegation has opposed a move by GHS. Last year, the delegation asked the FTC and the state Supreme Court to investigate GHS’ transformation into two separate, private nonprofit groups, the Strategic Coordinating Organization (SCO) and the Upstate Affiliate Organization (UAO). The UAO will handle the day-to-day operations of GHS, and the SCO will guide the UAO.

The state Supreme Court denied the request, and, according to Dees, the group later introduced a budget proviso that would have immediately closed GHS. The General Assembly voted against that measure 79 to 8.

While the state Supreme Court has refused to take up the matter, that doesn’t mean the issue is entirely settled. A lawsuit is still pending in Greenville County Court of Common Pleas.

According to S.C. Rep. William Timmons in an op-ed to the Greenville Journal, the court will “determine if the original GHS Board of Trustees possessed the legal authority to delegate its powers and duties to two newly formed 501(c)(3) organizations for a term of 100 years.”

Timmons later wrote, “In an Aug. 26, 2016, press release, GHS executives led the public to believe that the issue had been settled, since the S.C. Supreme Court refused to take original jurisdiction of the matter. This is intentionally misleading at best. The Supreme Court’s ruling simply requires the case to go through the traditional judicial process before being heard by the Supreme Court.”

Be that as it may, the FTC has looked into the delegation’s request and issued a notice that it wasn’t taking any action, Dees said.

“These are also the same members of the delegation who have on numerous occasions tried to block the efforts of GHS to improve care in our community. They unsuccessfully sought to have Gov. [Nikki] Haley refuse to certify a public hearing held to maintain the tax-exempt status of bonds issued by GHS. This would have cost GHS, and the people it serves, over $167 million in additional interest,” said Dees. She also noted the group previously asked the state Legislative Audit Council to investigate GHS, and the council refused.

According to Burns, the group of legislators have notified the FTC of their letter to the attorney general. He said the group wants to make sure the federal agency knows “people will be better off with a system that has competition, which will create better care at lower costs.”

“Attorney General Wilson has to consider the circuit court suit, the actions the Federal Trade Commission may or may not take, and the best interest of South Carolina,” said Burns. “The folks don’t deserve to have assets which they’ve bought and paid for with taxpayer dollars to be pulled away with no oversight from the public and no decision toward the future.”

The Attorney General’s office received the group’s letter on June 26 and plans to review the request in the coming weeks, according to a spokesman.

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