MSHA Repositioning for the Future


JOHNSON CITY, Tenn. – Mountain States Health Alliance (MSHA) officials announced today a realignment of resources that they believe will enable the health system to maintain its leadership position in the regional market and prepare the organization to better manage the changes that are coming in the health care industry nationwide.

“We have spent the past three years identifying and implementing a robust strategic plan that will allow us to not only meet the challenges our industry is currently facing, but also to bring our region to the forefront when it comes to health care quality, cost, and patient satisfaction,” said Dennis Vonderfecht, President and CEO of MSHA.

Low cost of care is of particular importance in the current U.S. economic climate, Vonderfecht said, and although MSHA has been repeatedly recognized as a national leader in both low cost and high quality, the health system is continuing to implement a broad spectrum of initiatives designed to drive the cost of care even lower while raising quality standards.

“We are reaching for what is known in the health care industry as ‘Medicare break even,’ which is the alignment of cost with what Medicare will reimburse,” said Marvin Eichorn, MSHA Senior Vice President and Chief Financial Officer. “Currently, Medicare reimburses about 90 percent of what it costs us to care for Medicare patients. There is also downward pressure on rates from commercial insurers, so although our costs are already quite favorable compared to other providers, we must continue to make improvements in order to be prepared for what we see coming in the market.”

Unfortunately, a number of market forces have accelerated in the region over the past six months, forcing the health system to, in turn, accelerate some of the restructuring processes that are necessary to support future financial strength. The primary factors MSHA is facing include:  

  1. A substantial increase in charity care and bad debt;

  2. A reduction in patient volumes associated with declining health care utilization rates throughout the region;

  3. A shift in patient mix from surgical patients to medical patients with less profitability;

  4. A shift from inpatient surgery to outpatient surgery with less reimbursement;

  5. A shift in payor mix from commercial insurance to government payors who reimburse at levels below cost; and

  6. A number of expense categories that have increased at the same time that the health system’s revenues have been challenged.


Over the past several weeks, MSHA leadership has identified approximately $70 million in expense reductions that will be implemented over the next several months in order to better meet the system’s budget target for fiscal year 2012, which ends June 30 of this year, as well as financial targets for fiscal year 2013.

Included with this financial plan is a reduction of the health system’s team members to take effect on Wednesday, May 2, which will eliminate 168 currently occupied positions, representing approximately 2 percent of nearly 9,000 positions within MSHA. In addition, 90 positions that are currently open will not be filled. Many of the affected positions are in management at both the corporate and facility levels.  A minimal number of front-line clinical positions are being impacted, and no bedside nurses were affected.  Total annual savings for MSHA from this restructuring is more than $11 million in salaries and benefits.

“This move is, at its heart, a realignment of workforce resources to where they are most needed, which is at the patient bedside,” said Vonderfecht. “While the loss of even one job is a regrettable matter, we must reposition MSHA so that it not only continues our mission of ‘bringing loving care to health care’, but it does so while improving the health of our communities, enhancing the patient experience and reducing costs.”

In addition to this staff restructuring, other expense reductions have been and will continue to be identified and implemented over the next several months.  These could total as much as $60 million, and include supply cost reductions, elimination or reduction of fees, elimination of non-value-added processes, and other measures. 

MSHA’s overall market-leading position in this region remains solid, with steadily increasing market share.  The health system, besides being the largest health care provider, is also the largest single employer in its 29-county service area. 

“We are a financially strong organization today, but a successful health care organization within today’s environment has little chance of success in the future without significant re-engineering of its organizational model,” said Vonderfecht. “We are committed to making the changes necessary to ensure our success in this market for years to come.”


About Mountain States Health Alliance

Mountain States Health Alliance, a not-for-profit, fully integrated health care organization based in Johnson City, Tenn., operates a family of hospitals, as well as outpatient, ambulatory, and retail entities,  serving a 29-county, four-state region (Northeast Tennessee, Southwest Virginia, Southeast Kentucky and Western North Carolina). MSHA offers a large tertiary hospital, several community hospitals, two critical access hospitals, a rehabilitation hospital, a children’s hospital, a behavioral health hospital, home care and hospice services as well as a comprehensive medical management corporation. Its 13,500 team members, associated physicians and volunteers are committed to its mission of “bringing loving care to health care”. For more information, visit

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