Tri Cities Business Journal sept2015

The Future is Now: Cabela’s, The Falls’ first retailer, prepares to open its doors Plus:

How the MSHA-Wellmont COPA will be implemented

and

College football in Johnson City and Bristol

T.J. Foy, general manager, Cabela’s, Bristol, Va. Photo by Scott Robertson

SEPTEMBER 2015

$3.00 Volume 28 Number 1

bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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Top 10% in the U.S. for Medical Excellence in Heart Attack Treatment – CareChex®

2015 Cardiac Surgery Excellence Award – Healthgrades®

TOP 10% IN THE NATION FOR CARDIAC SURGERY FIVE-STAR RECIPIENT FOR CORONARY BYPASS SURGERY FIVE-STAR RECIPIENT FOR PERIPHERAL VASCULAR BYPASS, 6 YEARS IN A ROW (2010-2015) TOP 5% IN THE NATION FOR PATIENT SAFETY TOP 10% IN THE U.S. FOR PATIENT SAFETY IN HEART ATTACK TREATMENT TOP 10% IN THE U.S. FOR MEDICAL EXCELLENCE IN CARDIAC CARE

When it comes to heart care, people trust experience.

Johnson City Medical Center has been named one of America’s best heart hospitals, not by just one, but by two quality ratings organizations.

We are proud to receive all of these honors, but our #1 commitment will always be to provide the best heart care for every patient.

When it comes to matters of the heart, choose our trusted and experienced heart team—right here, close to home.

For more information, call 844-488-STAR or visit MountainStatesHealth.com/heart.

MountainStatesHealth.com/heart

People. Trust. Experience.

All awards are 2015 unless otherwise specified.

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The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

MTN-150705_JCMC_Cardiac_7.875x10.25_V2.indd 1

8/27/15 2:45 PM

We are making a difference in

environmental stewardship.

Eastman’s commitment to environmental stewardship is integrated into all aspects of our business. “We recognize how important it is to balance our business practices with protecting the environment and conserving natural resources,” says Hanneke Counts, Eastman’s director of global environmental affairs. “It’s important to our customers, team members, communities and our future generations. And it’s important to me.”

We collaborate across the industry as well as with policymakers and nonprofit organizations to promote environmental awareness and advocate for positive change in the communities where we operate and conduct business.

Local river studies

The Nature Conservancy Eastman’s partnership with The Nature Conservancy (TNC) helps ensure large-scale ecological efforts around the world. TNC’s local efforts protect, conserve and restore the wetlands in the Shady Valley Nature Preserve in Northeast Tennessee, home to numerous indigenous plants and animals. TNC is a leading conservation organization working to protect the environment around the globe.

“

“

Eastman commissions the world-renowned, Philadelphiabased Academy of Natural Sciences of Drexel University to study the rivers upstream and downstream of our major United States manufacturing sites to ensure that our operations are not negatively impacting the environment.

Two of the most extensive of these river studies are focused on our largest site communities that include the South Holston River in Kingsport, Tenn., and the Sabine River in Longview, Texas.

We recognize how important it is to balance our business practices with protecting the environment.

Hanneke Counts Eastman’s Director of Global Environmental Affairs

To learn more, visit our website at www.Eastman.com and click on ‘Sustainability.’

EMN-CC-197 | 08/15

bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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Business Journal The

| COVER STORY

12 Cabela’s time has come

of Tri-Cities Tennessee/Virgina

Office

The Brisol, Va., Cabela’s location will open its doors Oct. 1. We talk with the new GM about what has to happen between now and then.

423.854.0140 Publisher

William R. Derby bderby@bjournal.com 423.979.1300

T.J. Foy, General Manager, Cabela’s, Bristol, Va. Photo by Scott Robertson

Assistant Publisher

Jeff Derby jderby@bjournal.com 423.306.0104

| FEATURES

8 17

Managing Editor

Chamber centennial The Chamber of Commerce Serving Johnson City, Jonesborough and Washington County toasts 100 years of success

16 The Pinnacle expands

125,000 square feet of new stores will open in Spring 2016

22

Better together, with oversight How Virginia and Tennessee plan to ensure regulation effectively replaces competition in the MSHA-Wellmont merger

Big Game 2015: 24 The Buccaneer football returns

Tennessee Governor Bill Haslam visits the Tri-Cities to make the case for increased infrastructure funding

The newest engineering program in Northeast Tennesse promises economic benefits for the entire region

Big Game 2016: 26 The Battle at Bristol

The Bucs are back, with the promise of more bucks for the local economy

28 First, state the problem

Milligan’s engineering school

What’s expected to be the best-attended game in NCAA history is one year away.

BMS’ Jerry Caldwell talks about the business of bringing football to a racetrack.

honored by US 30 Alexander Chamber Tennessee’s senior senator is feted for pro-business stance.

| DEPARTMENTS 7 From the Editor

36 Awards & Achievements

10 Residential Real Estate

38 The Last Word

11 FYI 32 On the Move

Scott Robertson srobertson@bjournal.com 423.767.4904 Associate Editor

Jeff Keeling jkeeling@bjournal.com 423.773.6438 Staff Writer

Sarah Colson news@bjournal.com 423.854.0140 Sales & Marketing

Jeff Williams jwilliams@bjournal.com 423.202.2240 Robin Williams rwilliams@bjournal.com 423.794.6938 Creative

Derby Publishing, LLC Graphics Director / Judd Shaw jshaw@bjournal.com 423.833.2726

The Business Journal of Tri-Cities Tennessee/Virginia is published monthly by Derby Publishing, LLC 1114 Sunset Drive, Suite 2 Johnson City, TN 37604 Phone: 423.854.0140 ©2015 Periodicals postage paid at Johnson City, Tenn. and additional offices.

ISSN#10406360

POSTMASTER:

Please send addresses to

Business Journal of Tri-Cities, TN/VA 1114 Sunset Drive, Suite 2 Johnson City, TN 37604 Subscription per year $35.

4

The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

Local Lending Leaders.

During the last thirty years, Tele-Optics has worked with a number of financial institutions, but we are proud to rate Citizens Bank as the best bank in East Tennessee.

In addition to professional and courteous staff, their services are superior. Their lenders worked with us to find solutions to accommodate our borrowing needs. Thank you Citizens Bank for helping Tele-Optics continue to succeed.�

Frank Waldo Director of Operations Tele-Optics Frank Waldo (right) with Citizens Bank Business Banker Brad Hoover

952-2265 www.citizensbank24.com

Bank your own way.

Member FDIC

Bristol

Elizabethton

J o h nbjournal.com s o n |CSeptember i t y 2015 | The KBusiness i n gJournal s p ofoTri-Cities r t TN/VA

5

2014

Photos by Adam Campbell at Carnegie Hotel

Plus:

Celebrating a “Good” Long Run at Frontier Health

November 2014

$3.00 Volume 27 Number 3

and

bjournal.com

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The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

Eastman Tops It Off The Business Journal of Tri-Cities TN/VA | November 2014

1

| FROM THE EDITOR

Governor Ramsey Governor Bill Haslam (soft focus, foreground) listens as Lt. Gov. Ron Ramsey speaks at an event in Bristol. Photo by Scott Robertson

He’s everywhere.

Seriously, Ron Ramsey is everywhere.

Developer Steve Johnson was only half joking when he called Ramsey, “the governor of East Tennessee” at an event earlier this month. While Johnson was jokingly suggesting Ramsey is more popular than the actual governor in East Tennessee, the bigger point of humor might have been that Johnson limited the scope of his comment to East Tennessee. For a couple of years now, many in Nashville have suggested Ramsey has more direct power in government statewide than does Governor Bill Haslam.

It’s hard to argue the point. When Sullivan County was falling behind in sales tax collections, it was Ramsey who shepherded through the legislation that allowed developer Steve Johnson to create The Pinnacle.

When East Tennessee State University needed to get state funding for a new football stadium, Ramsey was there to push it across the goal line.

The only person who gets more visibility out of Nashville is Taylor Swift, and I wonder some days if Ron’s not gaining on her.

He likes being called Governor Ramsey. He quotes his predecessor, John Wilder, regarding the practice. When Wilder was asked how he should be addressed, he said, “When you address a Lt. Colonel in the army, you don’t call him, ‘Lieutenant,’ do you?

No, you call him ‘Colonel.’ So call me Governor Wilder.”

Nobody in Nashville believes the state ends at Knoxville anymore. Governor Ramsey has seen to that. When the legislation that enabled The Pinnacle and Tri-Cities Crossing to be built was passed, it provided such an advantage that non-border counties demanded it be phased out, which it has been. One

legislator from one of those counties reportedly asked, “So the Lt. Governor got two of these developments funded in his district, then we shut the whole program down so nobody else could even get one, is that right?”

When Ramsey tells this anecdote, his kicker is that he looked the other legislator in the eye and said, “Yeah.” And smiled.

Last year’s session of the Tennessee General Assembly appear to have some similarities for Ramsey. Both years were marked by tours around the state in which the Lt. Governor had the Governor’s back on controversial topics.

When Haslam pushed his Medicaid expansion plan last year, Ramsey was on the tour with him, going around the state, making salient points. The plan failed, yet while Haslam took the heat, Ramsey came out unscathed. It was Haslam’s plan after all, Ramsey was just being the loyal footsoldier.

The same thing is happening this year, as Haslam tours the state in support of a revamping of Tennessee’s infrastructure funding. Most people think this will lead to a gas tax hike. And most of the ones who are already coming out against it are holding Haslam politicially responsible while giving Ramsey a pass - again.

Those folks call Haslam a RINO (Republican in name only). The truth may be closer to him being a GINO (Governor in name only).

So thanks for taking time to pen a guest column for us on page 38 of this issue, Governor.

With the Tennessee Democratic Party in freefall and no immediately recognizable GOP rivals, it shouldn’t be too long before that pesky “lieutenant” business falls by the wayside.

bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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Chamber of Commerce Centennial Gala The Chamber of Commerce Serving Johnson City, Jonesborough and Washington County celebrated its centennial with a gala at the Johnson City Country Club Aug. 7. More than 20 former chamber chairs helped cut the cake after hearing words of thanks for their service from Gary Mabrey, chamber president and CEO and Jeff Jones, current chair. The evening included heavy hors d’oeuvres and cocktails, as well as live music from the Spirit of Soul dance band.

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bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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| FEATURES July Tri-Cities home sales continue record-setting pace Tri-Cities homes sales posted a second straight month of double-digit growth and the third straight month of record levels in July. The Northeast Tennessee Association of Realtors reported 555 closings during the month on single-family, previously owned homes. That’s a 16.8 percent increase over July last year. Year-to-date, sales are 6.9 percent better than the first seven months of last year and 8.4 percent better than 2008 – the year before the Great Recession hit the local housing market.

HOME SALES

JULY 2015 HOME SALES

- 10 EXISTING HOMES

JUNE 2015 HOME SALES

JUNE 2014 HOME SALES

TRI-CITIES

555 / Average Price $168,914

546 / Average Price $161,621

475 / Average Price $165,707

WASHINGTON COUNTY, TN 176 / Average Price $198,855 160 / Average Price $195,156 129 / Average Price $199,048

SULLIVAN COUNTY 177 / Average Price $170,350 175 / Average Price $158,722 148 / Average Price $165,672

CARTER COUNTY

GREENE COUNTY

WASHINGTON COUNTY, VA

32 / Average Price $149,874

46 / Average Price $138,063

46 / Average Price $138,063

35 / Average Price $128,119

56 / Average Price $152,954

56 / Average Price $152,954

36 / Average Price $133,379

54 / Average Price $151,616

54 / Average Price $151,616

NOTE: NETAR counts city sales as those made in a city’s high school zone. City data is included in county totals.

10 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

| FYI

&Downs

Ups

A quick check of the conventional wisdom on who’s going what direction in Tri-Cities business

Eastman Chemical Co. - Eastman was recognized by the American Chemical Society with the Heroes of Chemistry award, an honor reserved by the ACS to celebrate innovative work in chemistry and chemical engineering that led to commercial products benefiting the world. Eastman received the award for the first time ever, for its Tritan copolyester line.

NN Inc. – The Johnson City-based public company announced August 17 the purchase of Precision Engineered Products Holdings Inc. for $615 million in cash.

NN CEO Rich Holder declared the move, “a transformative step in creating a diversified industrial company that serves a variety of end markets and delivers consistent results through the economic cycle.” Moody’s said the move was a credit negative for NN, but did not alter the company’s rating.

Archie Hubbard, Bristol, VA mayor and Lea Powers, Bristol, TN mayor Photo courtesy Bristol Chamber of Commerce

Bristol solidarity – One of the best things about the third annual State of the Cities luncheon last month in Bristol was the spirit of camaraderie. The cities have been friendly rivals often, and no love was lost over the retail developments along Interstate 81 in recent years. But both city governments are working on creating a single unified identity to transcend the competitive aspects of their co-opetition. As Bristol, Tenn., continues to grow and Bristol, Va., works to keep the industry it has while rediscovering financial restraint, each side has things it can offer the other.

NASCAR – We get what a big deal the recent night race at Bristol Motor Speedway was for the area’s economy, and we’re not minimizing that in any way. But we would recommend the Aug. 2 Forbes article

by David Trainer as a reality check on NASCAR in general and Speedway Motorsports in particular. Happily, Speedway as a whole and Bristol Motor Speedway in particular are working to diversify their portfolios of offerings far beyond just NASCAR racing (see page 26).

bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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| COVER STORY

T.J. Foy stands in front of the new Cabela’s store in Bristol, Va. Photo by Scott Robertson

The Business Journal Q&A: T.J. Foy General Manager, Cabela’s, The Falls, Bristol, Va.

R

eplete with a deli that serves wild game sandwiches, a fudge shop and a full array of powersports offerings, Cabela’s will open the doors of an 82,000-square-foot store at The Falls development in Bristol, Va., Oct. 1.

The opening marks the end of a long wait for all involved, from city officials to the store management team. Perhaps no single individual is more eager for the archer to cut the ribbon (yes, Cabela’s has an employee who cuts the ribbon at grand openings with a well-placed arrow) than T.J. Foy, general manager.

Foy spoke with The Business Journal

in September as around 70 of the store’s 190 employees were stocking shelves, placing mannequins and putting the finishing touches on what has been a two-year process.

Business Journal: So the heavy lifting is done as far as construction and hiring. With less than a month before grand opening, what’s left as far as high priorities?

T.J. Foy: Getting in the continuing education for the outfitters (Cabela’s refers to sales associates as outiftters)

12 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

on product knowledge, making sure they know exactly what they’re selling and continuing to ingrain the culture of the company, that sales culture. That’s the biggest thing in the remaining amount of time we have.

BJ: How do you define that culture?

TJF: They need to understand the customer is No. 1. That red carpet level of service is what it takes for us to be known by the title of the world’s foremost outfitter. It means that when I, as a customer, walk into this building, I’m going to be

treated with an unbelievable amount of customer service from people who are knowledgeable about the products they’re selling.

It means they’re going to get me what I need when I need it, not necessarily what I want, but what I need. You can have customers come in prepared to spend $1,000 on an item when all they really need is a $10 item.

It’s making sure the customer walks out of here with the experience that they have come to expect from Cabela’s.

When it comes to sales, you need a customer culture. You also need to know how to complete a sale. We do a lot of that kind of training. A lot of it is formal training, some of which is web-based and some of which is classroom-style training.

Using those tools, we ingrain in the minds of our outfitters what customers’ expectations are when they walk into a Cabela’s.

When you walk into Walmart, you have one expectation for the level of service. When I walk into Cabela’s it’s completely different. We have to meet a very high level of customer expectations if we want repeat business.

The retail environment is becoming ever more competitive. What segregates us from everybody else is the level of service. Everybody sells virtually the same things. There might be a brand difference here and there, but essentially the products are the same. What separates us from the competitors has to be the world-class customer service.

BJ: When you talk about creating a culture in a store where the vast majority of the employees are brand new to the company, that implies a longer, more intense training period at start-up than one would expect from most retailers. Is that a fair assumption?

TJF: You’re right, but you would be surprised how many outfitters already know a great deal before they set foot in the store. When we did the interview process, I wasn’t necessarily looking for work experience so much as, “Do they play with the toys that we sell?” So, for example, in archery, we have hired a large quantity of outfitters who know how to use a bow, who know what the

differences are between bows and they know how to work on them. It’s the same thing in firearms. They don’t have a firearm sales background per se, but because they use almost everything we sell, they can talk from personal experience about what they use, and apply that in their own sales and customer service work. Some positions are going to be more background-specific than others, but those will be more in the operations side of the business.

BJ: And using customer service as a unique selling point is a nice choice in today’s retail environment because you’re not just competing against the other brick-and-mortar direct competitor across the street, you’re up against the Amazons of the world as well.

TJF: Amazon is the No.1 online retailer out there, but we do have a very strong online presence. We have an initiative where you can buy it online and pick it up in the store for free. All our stores are generally going to be regionally-

merchandise-specific. So if someone walks into the Bristol store looking for something we only sell in Lehigh, Penn., we can still order that through any of several kiosks here in the store and I can get it within a matter of days.

BJ: This particular store is the mid-size version of a Cabela’s store, called the NextGen store. Is this the direction the company is moving?

TJF: Yes. As the company expands, from a business standpoint, the legacy stores (the older, larger stores) work very well when you don’t have any other stores within four or five hours’ drive from them. They draw from four hours away.

We also have outposts, which are smaller stores, and I think we’ve learned that some of them were almost too small. This is the compromise between the legacy and outpost formats.

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| COVER STORY CABELAS, CONTINUED

70,000 square feet of libraries and museums, you have a legacy store. So essentially, if you look at the downstairs portion of a legacy building, that’s what you have here.

Those library and museum spaces in the legacy stores are expensive to maintain. From a cost standpoint, the maintenance costs associated with those kinds of operations are very expensive.

BJ: What challenges are unique, and maybe greater, in running an outfitter store than any other retail platform?

TJF: Without a doubt it’s making sure you meet the customers’ demands. In my past life, I spent 12 years with Kmart where there was no expectation for service. But I also spent 13 years with Home Depot, where there is a huge expectation for level of customer service.

That expectation is higher here.

I have to make sure we get customer

demands met while at the same time taking care of my outfitters. There is no more important asset to me than my outfitters. When they truly feel and embrace the environment we are building here, they will pass that on to the customers.

One of the things we talk about is how many times you walk past an associate in some other store and don’t get greeted, smiled at, or even acknowledged.

They don’t even talk to each other, let alone the customers. So we have talked from day one about the fact that we have to build relationships with each other. If our outfitters don’t have that experience of having solid relationships among themselves, how will they pass that feeling along to the customers?

We’ve all walked into retailers where as soon as you walk into the building it feels dead. When you walk through our doors, we want you to feel electricity, a sense of “wow.” That happens when you have outfitters who are having a good

time doing what they’re doing. Those are my expectations, but yes, they are the toughest thing to get instilled.

BJ: If you can get that buy-in, though, then the store becomes more profitable as time goes by because low turnover means you’re doing less training, correct?

TJF: The heavy lifting is upfront. Most retailers, especially in the part-time ranks have high turnover. But the less training you find yourself having to do, the more efficient the entire process is. You have better performance.

And again, that’s relationship-driven.

A firearms customer who bought from Bob will have learned over time that Bob is someone he really trusts. That customer will come back to the building to buy again from Bob. BJ: You mentioned your expectations earlier. What are the expectations for what this store will gross in a year?

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14 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

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www.NortheastState.edu

TJF: (Laughs) I know what I want to do. We still haven’t really finalized a 2016 budget yet. I personally would like to see $800,000 to $900,000 a week. Is that doable? I don’t know, but that’s my personal goal.

BJ: The best of success to you.

TJF: Thanks!

The Bristol store is Cabela’s first to open in Virginia. Additional stores are slated to open in Short Pump (Richmond area) in spring 2016 and in Gainesville (Washington DC metro) in spring 2017.

Cabela’s, based in Sidney, Neb., currently operates or plans to open 74 stores in North America.

The Bristol Cabela’s location is five files from the TennesseeVirginia border. There are no Cabela’s stores in Tennessee, though the company serves Tennessee customers from three other locations near the state line: Bowling Green, Ky., is 23 miles away.

The Huntsville, Ala., store (scheduled to open the day before Bristol) is 23 miles away as well. The Fort Oglethorpe, Ga., store is less than two miles from Tennessee.

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bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

15

| FEATURES

Pinnacle expansion announced

By Scott Robertson

W

ith a new two-story Belk store on one side and a movie theatre complex slated to open in October on the other, developer Steve Johnson announced plans Sept. 3 for the next phase of The Pinnacle retail development in Bristol.

“Thirty-six months ago, we were standing here in a 300-acre green field, talking about a vision and a dream,” Johnson said. “Today we’re back, talking not about what the dream and vision is, but about what the reality is.”

That reality is what Johnson has dubbed the Crescent and Tower shops.

“It’s a lifestyle center,” Johnson said. “It’s 125,000 square feet. It represents another $30 million in private investment in this project…We’re at $150 million of private investment here already…This new phase brings our total square footage now to 700,000 square feet.”

Johnson quoted BurWil Construction’s Bill Prince as having counted more than 2,000 construction jobs created in the process of building out The Pinnacle.

“I also asked Heather Hill, our property manager, to reach out to every retailer and restaurant owner in The Pinnacle and ask how many full- and part-time jobs they have. That total is 1,500.”

Johnson estimated first-year sales for The Pinnacle, including the Crescent and Tower stores at more than $200 million.

Retailers who have signed leases for space in the Crescent and Tower shops include five companies new to the Tri-Cities: Carter’s, OshKosh, LOFT, Francesca’s and Party City. Other retailers include GAP, Old Navy, Justice and Yankee Candle.

Those stores are expected to open their doors in Spring 2016. Other new retail and restaurant construction at The Pinnacle scheduled to begin within the next few weeks include Steak and Shake, Panda Express and the region’s only CarMax.

The next venue slated to open is the Pinnacle 12 movie-theatre complex by Marquee Cinemas. Those screens will begin showing movies in late October 2015.

The Tennessee side of the develop-

Map showing the location and identities of the new Crescent and Tower shops.

ment, which straddles the Virginia state line, has only 20 acres of land still available, though Johnson said he already has plans for it.

He declined to go into specifics regarding that plot or the 300 acres he owns on the Virginia side, other than to say he looked forward to working with, “our friends in Washington County, Va., to do more retail, dining, entertainment and residential all the way up to the Gate City Highway.”

Johnson surprised some in the crowd of around 100 local business and government leaders by saying he would, “step back a little bit” before launching into the Virginia side of the development.

“There’s a time to go with extreme acceleration and there’s a time to tap the break a bit,” Johnson said.

Tennessee Lt. Governor Ron Ramsey congratulated “I just think at this point in time, developer Steve Johnson on the expansion. we’re screaming toward a million Photos by Scott Robertson square feet and over $200 million in outlay with literally thousands of jobs get it right. That’s a 300-acre blank canvas created. So the pause is not from any on that side of the state line. I just think reticence whatsoever. It’s to make sure I it’s prudent to get it just right.”

16 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

| FEATURES

Rules governing hospital merger published

By Jeff Keeling

“ “

It is the policy of this state, in certain instances, to displace competition among hospitals with regulation to the extent set forth in this part and to actively supervise that regulation to the fullest extent required by law, in order to promote cooperation and coordination among hospitals in the provision of health services and to provide state action immunity from federal and state antitrust law to the fullest extent possible to those hospitals issued a certificate of public advantage under this section. - Revised section of Tennessee’s Hospital Cooperation Act

“

(T)he Department is responsible for active state supervision to protect the public interest and to assure that reduction in competition of health care and related services continues to be outweighed by clear and convincing evidence of the likely benefits for the Cooperative Agreement, including but not limited to improvements to population health, access to services and economic advantages to the public. The COPA will be denied or terminated if the likely benefits of the Cooperative Agreement fail to outweigh any disadvantages attributable to a potential reduction in competition resulting from the Cooperative Agreement by clear and convincing evidence.

- Introduction, Tennessee Department of Health Emergency Rules Governing Hospital Cooperation Act

We have potentially here a structure to protect the public from the results of this merger. No question about that. There are two parties to keeping that. One is the merged entity. How seriously does it take its responsibility in terms of the index, the requirements? Are they going to be chiseling on it? And is the Commissioner of Health – if this is the only (COPA) in the state – how interested is he going to be? The real advantage of this is we have (Virginia) as well as the state of Tennessee both with a very clear vested interest in seeing this be successful.

- D. Bruce Shine, Kingsport attorney

I

f they’re to be deemed “better together” by state regulators, the Tri-Cities’ two hospital systems will need to create one system that leads to a healthier regional population, greater access to health care and preventive services, reduction in operating expenses, and lower consumer prices. Oh, and they’ll need a plan to return to two separate systems if the state decides they’re not adequately meeting those and other expectations. That’s the takeaway from a recently published set of Tennessee Department of Health rules governing Tennessee’s recently amended “Certificate of Public Advantage” (COPA) law that would allow for the proposed merger, and subsequent reduction in competition, it would create.

In addition to protecting the public, a major reason for what Mountain States Health Alliance CEO Alan Levine called a “robust posture” by the state is to steer clear as much as possible of antitrust action by the Federal Trade Commission (FTC). A recent decision out of Georgia upholding an FTC action surrounding a hospital merger was likely front of mind

this spring as lawmakers tweaked the COPA law, called the “Hospital Cooperation Act of 1993” in anticipation of the merger proposal.

“Given the consolidation that’s occurred in the industry, both with hospitals and now with the insurance companies, what’s readily evident to me is that the state is in a better position to know the healthcare marketplace in each area of the state, and is in a better position to regulate it, than Washington is,” Levine told The Business Journal Sept. 3.

Wellmont Health System and Mountain States have, since their April betrothal, been trumpeting the notion that they’ll be “Better Together” following approval and consummation of a merger.

The systems also have known and accepted since then that the state will judge whether they’re truly better together, given that a merger will essentially create a monopoly. The systems knew regulators would consider whether and how much improvement would come in access to care, preventive services, cost to consumers and insurers, operational efficiencies

and several other factors when compared to maintaining the status quo, which is inherently preferable at least from an antitrust standpoint.

With mid-July’s publication of emergency rules promulgated by the Department of Health, the systems learned more about just how high that bar will be.

An exhaustive 12-page document drafted by the department’s Malaka Watson and dated July 14 is effective through Jan. 10, 2016 – a date likely to be well into the systems’ application process for a COPA. Those rules flow from several causes: the revision of the law that allows a COPA to be granted and administered by the state; the desire to avoid issues with federal antitrust concerns; and the imminent submission of the Wellmont-Mountain States merger proposal.

The old COPA law wouldn’t have allowed a merger. It envisioned “cooperative agreements” for the sharing, allocation or referral of patients, personnel, and some other services traditionally offered SEE MERGER, 18

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17

body for health care organizations).

“The index is going to be the critical thing that determines whether this program is working, whether it’s servicing the people,” Shine said. “And it’s going to be pretty specific. The end effect is that it’s got to show that the advantage (over the current competitive status quo) is clear and convincing. If it doesn’t then they’re out of it.”

The new COPA law itself adds two new benefits that “may result from the cooperative agreement” to the previous list of five. The existing list primarily centers around cost-efficiency, avoidance of duplication of services and improvements in utilization, while the new items relate more specifically to a region’s long-term population health and access to care for people who traditionally struggle to get it. They are, “demonstration of population health improvements in the region served according to criteria set forth in the agreement and approved by the department;” and “the extent to which medically underserved populations have access to and are projected to utilize the proposed services.”

Bruce Shine

by hospitals. The amended law – co-sponsored in the Tennessee Senate by Lt. Gov. Ron Ramsey (R-Blountville) and Johnson City Republican Rusty Crowe – adds the following language preceding the “sharing” bit: “consolidation by merger or other combination of assets, offering, provision, operation, planning, funding, pricing, contracting, utilization review or management of health services.”

The Department of Health rules, which will be replaced at some point by a version that has gone through the standard review and public comment process, govern application for a COPA, “terms of certification issuance,” issuance of a COPA, active supervision by the terms of certification, and modification or termination. They also provide a purpose and definitions, deal with public notice and hearings, and with hearings and appeals.

Bruce Shine is a Kingsport attorney who has followed the local merger talk since it first surfaced in August 2014, and in fact reviewed COPA law for the audience at a public meeting that month in Kingsport. Shine told The Business Journal he is cautiously hopeful that the state rules can create a structure that ensures such a massive change – which also includes a major role for East Tennessee State University – brings about the promised benefits. Shine said a required “index” with proposed measures and baseline values related to the overall population’s health will be a key. Per the rules, potential measures of such an index can include: improvements in the population’s health that exceed measures of national and state improvement; continuity in available services; access and use of preventive treatment; operational savings projected to lower health care costs to payers and consumers; and improvements in quality of services as defined by surveys of the Joint Commission (the accrediting 18 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

What the Supremes have to do with it

The new language (see the long quote at the top of this article) introducing the revised COPA law shows clear state efforts to keep any approved COPA free from federal antitrust action. Just as clearly, it is written to avoid a scenario similar to that undergone by the state of Georgia and Phoebe Putney Health System.

In the Phoebe case, the Federal Trade Commission in 2011 objected to Phoebe Putney’s proposed acquisition of rival Palmyra Park Hospital in the Albany, Ga. market. The FTC held that “the deal will reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, substantially harming patients and local employers and employees.”

After two courts sided with Phoebe, the Supreme Court in 2013 reversed the decision. But by then, it was essentially too late to unwind the merger, a reality that did not escape Ms. Watson in her promulgation of the rules. They require a “plan of separation” that would make it feasible “to return the parties to a Cooperative Agreement to a pre-consolidation state.”

The Supreme Court was clear on a couple of points. One was that, “the state legislature’s objective of improving access to affordable health care does not logically suggest that the State intended that hospital authorities pursue that end through mergers that create monopolies.” The other was the finding that “Georgia has not clearly articulated and affirmatively expressed a policy to allow hospital authorities to make acquisitions that substantially lessen competition.”

The ruling seems to suggest such a policy would have been a path to “state action immunity,” a concept with precedent dating back to a 1943 case, Parker v. Brown. That case found state authorities, “are immune from federal antitrust lawsuits for actions taken pursuant to a clearly expressed state policy that, when legislated, had foreseeable anticompetitive effects.”

That is what the amended COPA law attempts to do with its language in Section 2 concerning state policy, “in certain instances,” to displace competition. That new section also seeks to include hospitals that have been granted COPAs in that

immunity. That, too, would answer precedent, that others could say that the state hadn’t been at least according to Cornell University Law meeting the second prong (the “active superviSchool’s Legal Information Institute. The sion” of the state immunity doctrine).” institute adds this to its description of the state Levine referenced studies he said have action immunity doctrine: “This doctrine can shown that non-regulated acquisitions that apply to provide immunity to non-state actors the FTC hasn’t seen as anti-competitive have, as well if a two-pronged requirement is met: in some cases, actually led to higher prices or (1) there must be a clearly articulated policy costs in a market. That is the outcome he has to displace competition; and (2) there must previously cautioned could have come about be active supervision by the state of the policy had Wellmont, or Mountain States at some later or activity.” Whether this newly established time, been acquired by a system from outside policy and the Department of Health’s rules are the region. Levine also expressed confidence enough to keep the FTC at bay in the event of that the revised COPA law (and a similar new a Wellmont-Mountain law in Virginia) and the States merger remains to Department of Health’s be seen, but Shine said rules and oversight are the attempt is obvious. more than adequate to

Another new piece of Everything we’re doing is assuage federal conlanguage in the amended transparent, we’re doing it above cerns. law also raises the bar, “We’re following board, we’re following precedent, decades of precedent and appears designed to placate the FTC as we’re following the Supreme under the state action much as it is to protect Court’s ruling, we’re going to immunity. So we are consumers. It requires the well within the boundcomply with the state’s rules, and ary that we should be Department of Health to review the COPA at least I think all of that should give the operating in, and our annually. If “the likely public comfort, because we’re commitment is that benefits resulting from we’re going to continue doing it the right way. to do that. That’s why a certified agreement no longer outweigh any dis- Alan Levine, Mountain States I’m glad the state has advantages attributable Health Alliance CEO taken a robust posture. to any potential reduction They’re taking it in competition,” the seriously, which takes department can seek a away the argument that modification, or terminate it (subject to appeal). they’re not providing adequate supervision.

“The statute under which they’re operating “We’re certainly not going to take an should give comfort to the public that there’s a adversarial posture with the FTC – if they have structure in place that will protect them from questions we’re certainly going to be responsive. the adverse effects of a merger,” Shine said.

But everything we’re doing is transparent, we’re “Whether it works or not is an entirely different doing it above board, we’re following precedent, matter, and there it lies with the commissioner we’re following the Supreme Court’s ruling, of the Department of Health.” we’re going to comply with the state’s rules, and

Levine has reviewed the Department I think all of that should give the public comfort, of Health rules. He said that while they’re because we’re doing it the right way.” stringent, he’d much rather see the states rather than the federal government in charge of ensur- Details that will matter ing the merger is beneficial to the region – both The recently published rules are comto the hospital systems and the public. prehensive. They’re also challenging. They “I think the reason they’ve done that is the state envision, if not require, a new system that’s has to presume, from their perspective, that better than the two current ones at providing others may try to do it, too (receive a COPA). health care, and that does it less expensively.

They want to establish a precedent that they’re They also raise plenty of ancillary issues. For going to be very engaged and they’re going to instance, the application must describe “how ask the tough questions, which they should. the Cooperative Agreement prepares and posi “I think it’s preferable to have the state tions the parties to address anticipated future taking it seriously and doing their job in a changes in health care financing, organization meaningful way because it reduces the risk SEE MERGER, 20

“

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| FEATURES MERGER, CONTINUED

and accountability initiatives.” It also must address an issue about which many in the community have expressed concern, as it is required to describe, “impact on the health professions workforce including long-term employment and wage levels and recruitment and retention of health professionals.”

The “big three” general issues that emerge, though, relate to population health, access and cost. On the cost side, the application’s “description of financial performance” must include details on projected changes in volume, price and revenue resulting from the merger. It must describe, “how pricing for provider insurance contracts (is) calculated and the financial advantages accruing to insurers, insured consumers and the parties to the Cooperative Agreement.” In other words, it must show how the merger can result in lower prices for consumers and better margins for the newly merged system.

The population health and access pieces go somewhat hand in hand. The application must show proposed use of cost savings to fund low or no-cost services – immunizations, mammograms, chronic disease management and the like, “designed to achieve long-term population health improvements.”

The rules regarding every factor, from finance and cost to services and population health, are too comprehensive to be thoroughly explained in this space. They can be viewed in their entirety at bjournal.com/COPArules. But when it comes to proof of a merger’s effectiveness, much will ride on the measures noted above. Will services remain adequately available?

Will access and preventive care be sufficient? Will operational strategies – including eliminating duplicated services where appropriate – yield lower health care costs to payers and consumers? Will quality of acute care improve? And will the population get healthier, and do so at a rate that exceeds health improvements of the population as a whole?

Levine has pointed to a COPA that has governed hospital care in the Asheville, N.C. market since the 1996 merger of Memorial Mission and St. Joseph’s hospitals as a model for this proposed merger. The Mission system’s cost containment, health results and quality measures all suggest it can be done, he said. Whether that can be successfully emulated, with appropriate variations, in a larger, two-state system is a question that probably won’t be answered until the merger, if approved, has been in place for several years if not longer. Levine is confident, and said what he termed “active support” from the business community is a result of people’s belief in the COPA process as a path to better, more affordable health care for the region.

“They’ve done their homework and they’ve seen the results from Mission. Mission’s costs per adjusted admission are lower than all their peers, and Mission’s nowhere near as regulated as we’re proposing to be,” Levine said. “And their charges per admission are lower than their peers. So if the antitrust regulations are designed to prevent pricing going up from beyond what it would have gone up if there was no merger, the case in point is right there.”

Timeline-wise, Levine said the systems have not yet filed their letter of intent, but that it should come soon. A joint board 20 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

Alan Levine

task force and “integration council” both are completing due diligence toward a definitive agreement that will form the basis for the post-merger “health improvement organization.”

Shine acknowledged that rapid changes in health care have created, “a new ballgame.” He called the amended COPA law laudable for its “noble goals and aspirations.”

The Department of Health, using its rules and the proposed cooperative agreement as a framework, will know at least theoretically whether this whole experiment is working, Shine said, based on its review of operational and cost data as well as health outcomes.

“What the document that is going to be filed with the Department does is set goals and aspirations, and mechanisms for accomplishing those specific goals,” Shine said. “And then the Department says, ‘we’re going to check into, on a regular basis, whether you’ve done this.’

“The question becomes, ‘can those noble goals and aspirations become a reality, and if so, who’s responsible?’ Well, first of all, the new merged entity is responsible. Who should bring to their attention the deficiencies? The public and the commissioner.”

Much of what comes forth during the application process will be public record, and The Business Journal will endeavor to provide useful data online. A copy of the amended COPA law can be viewed at bjournal.com/newcopalaw. The old version is at bjournal.com/copalaw. Information on the systems’ merger endeavor, including upcoming public meeting dates, is at becomingbettertogether.org.

| FEATURES

A year after selling its share, Wellmont buys back Greeneville hospital

O

wnership of Takoma Regional Hospital is transferring to Wellmont Health System.

After a comprehensive evaluation by Wellmont and Adventist Health System, Takoma will now become solely a member of the Wellmont family. The two organizations jointly owned Takoma Regional from 2007 until 2014, when they concluded the most appropriate direction for the hospital during a changing health care environment was to have only one owner – Adventist Health System.

When Wellmont and Adventist Health System chose that option, they included a provision that enabled both health systems to re-evaluate the best approach for Takoma Regional in the future. Further discussions since that date led both parties to recognize the value of Takoma Regional being aligned with a health system that provides care exclusively in the region. The change in ownership is expected to be complete Nov. 1.

“We have tried several models these past few years, including a joint venture with Wellmont, and it is evident that the best success for Takoma’s future resides in a wholly owned model with a regional leader,” said Randy Haffner, executive vice president and president/CEO of the multistate division of Adventist Health System.

In addition to the hospital, Takoma Medical Associates, the umbrella organization for integrated physicians, will become part of Wellmont.

Bart Hove, Wellmont’s president and CEO, said the health system is intimately familiar with Takoma Regional and its caregivers and is excited to bring them into the Wellmont network.

“Takoma Regional is an outstanding hospital, with an admirable faith-based approach to medicine and remarkable leadership, and we will welcome their contributions to our delivery of superior health care with compassion,” he said.

Hove said this decision about Takoma Regional has no connection to the proposed merger between Wellmont and Mountain States Health Alliance. But if that merger is finalized following a governmental approval phase that will likely take through the end of the year, Takoma Regional will become part

of the new health system, he said.

While Takoma Regional has been part of a different health system for the last year, it has retained connections to Wellmont, particularly with heart care.

Takoma Regional was a leader in implementing computerized provider order entry and meeting the federal government’s meaningful use standard for electronic medical records. Wellmont has met the same benchmarks and also adopted the Epic

electronic health record – a single place for all of a patient’s health care delivered by the organization.

Recently, Takoma Regional was named one of the 150 Great Places to Work in Healthcare by Becker’s Hospital Review.

Gov. Bill Haslam has also named the hospital a Healthier Tennessee Workplace in recognition of its promotion of healthy lifestyles to staff members.

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| FEATURES

Engineering project: Milligan begins to build a program

By Jeff Keeling

T

wo stories below Greg Harrell’s makeshift office, workers are busily transforming the high-ceilinged ground floor of a seminary into a mechanical and electrical engineering laboratory.

Biblical scholars pass through the halls in this building on a hill, from which Emmanuel Christian Seminary, now part of Milligan College, has sent God’s emissaries throughout the world for five decades. An engineer whose career has spanned industrial work, academics and consulting, Harrell has the responsibility for leading another sending effort from this building – this one, of Christian engineers with a liberal arts education who are ready to serve both their employers and the world.

The program will become the Greater Tri-Cities’ first four-year, calculusbased engineering program, admitting its first class next fall. By 2020, the year Milligan hopes to achieve ABET (Accrediting Board for Engineering and Technology) accreditation, the school should have between 160 and 240 engineering majors on campus.

Hongyou Lu and Greg Harrell in what will become the

“What we’re building – not only Milligan College engineering program’s lab space. the curriculum, but the experiences the Photos by Jeff Keeling students go through – is work-ready participants,” Harrell says. From a Hongyou Lu, is part of a package deal for career standpoint, combining strong Milligan. One of her roles will be identifying curriculum and hands-on work in the lab “design experience” projects for students including a “capstone laboratory experithat do more than just check a box for ABET, ence” he says will differentiate Milligan which requires projects for students at from some regional counterparts, leaves ABET-accredited schools to graduate.

Harrell confident that graduates will have

“We’re going to choose projects that both theoretical and practical experience will change the world,” Harrell says. “That that readies them to make an immediate will supply clean water, that will desalinate impact occupationally. “We’ll be leveraging water, projects that use solar panels to real-world experience to help students get provide cooking energy, or light energy.” an education that will build their knowledge Harrell isn’t the only one who’s excited, base and skill set such that they can move or at least enthusiastic, about the Tri-Cities into industry and their careers,” he says. finally getting an engineering school. (East

But it’s what he envisions MilliganTennessee State University is also working trained engineers doing with the rest of their toward a joint engineering offering with lives – and probably sometimes in careers Tennessee Tech). with non-governmental organizations or on “I think it’s certainly going to be the mission field – that helped draw Harrell beneficial for us having somebody local to his new job. His wife, fellow engineer that provides this type of curriculum,” says 22 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

Aaron Cox, vice president of marketing and part owner of TPI Corp. in Gray.

“The markets that we sell – electrical and mechanical – mesh with the type of students that Milligan’s going to train in this program. I think that the establishment of the engineering program at the school is going to benefit people here in ways we can’t really fathom yet.”

TPI and other regional industries have backed up their verbal support with in-kind and monetary support for the fledgling program first announced by the college last November, says Milligan’s Vice President for Institutional Advancement, Jack Simpson. “We’ve never seen a program developed that’s generated the level of support this program is getting.”

The primary benefactor of Milligan’s year-old School of Business and Technology also sounds bullish on the likely impact the engineering school will have on the region’s economy.

“It’s wonderful that a high-quality, nationally-ranked college in our area can now plug in to the engineering that is so desperately needed here by so many industries,” says BancTenn CEO and Milligan Trustee Bill Greene. Greene’s multimillion dollar gift, announced in early 2014, was the catalyst for Milligan’s School of Business and Technology, which bears his name.

“All you’ve got to do is go to Unicoi County, go to Kingsport, Johnson City, Bristol and then spread out from there, and you have an enormous demand for the engineering product. That’s what Milligan’s offering now, and I’m so delighted to be a part of that. I’m going to continue to be a part of it and it’s going to end up being one of the big lifesavers for the expansion and continued growth of our area.”

Part of that growth will be coming at Johnson City-headquartered NN Inc. The company, which moved into an expanded headquarters building last July, has announced two major acquisitions in the past year, including a recent $600 million

purchase of Massachusetts-based Precision Engineered Products that will close later this fall. NN has legacy plants in Erwin and Mountain City, and CEO Rich Holder says he was pleased to learn about Milligan’s plans.

“We’re pretty excited about it, because as we grow into different market segments, we have a need for more and more engineering,” Holder says.

“We are looking for a place to create a technical incubator, a place to expand our R and D resources, and we’re going to go to a place that has engineering talent that we can take advantage of. If that talent is in concert with an academic institution, that’s even better.”

Milligan’s program will be among barely more than a handful at traditional small liberal arts colleges. Harrell, Lu and the team built around them will be responsible for meshing the rigor of an engineering curriculum with the additional coursework and experiences particular to liberal arts schools, all while integrating those into Milligan’s ethos of Christian servant leadership.

“We worked very diligently to make sure that we built the skills that are the core for all engineering degrees and also left room for the liberal arts piece,” Harrell says. “That was actually the big challenge in setting up the program.”

A Morristown native who first heard Milligan was considering adding engineering about two years ago, Harrell cut his teeth after graduating from UT-Knoxville working as a utilities process engineer for BASF’s Lowland plant in the late ‘80s and early ‘90s. Harrell then taught at Virginia Tech, earning his doctorate in thermodynamics while an assistant professor. He was also Virginia Tech’s main consultant to industry, and transitioned to full-time consulting work more than a decade ago.

Of late, he’s had much work serving as lead technical advisor for Alcoa Corp.’s global energy team.

Milligan will have six engineering professors, three each in mechanical and electrical, Harrell says. He’ll be one of the three mechanical engineering profs, and he’s beginning a search for an engineering fundamentals professor. Those professors’ personal traits will be as important as their skill sets, Harrell says, noting that faculty’s deep interaction with students is a hallmark of Milligan that will help differentiate its

companies are counting on a program that can produce graduates on a par with more established programs from larger schools.

Harrell isn’t phased. For starters, he says Milligan’s lab will take students from theory to practice. They’ll operate air compressors, heat exchangers, pumps, fans – “all these pieces that we very commonly come in contact with in industry.”

Students will also have what Harrell calls a “capstone laboratory experience” their senior years (Milligan’s program will also offer a fifth year for those who want to do a year-long co-op in industry) that he says will differentiate Milligan from some of the Southeastern schools with which Harrell is familiar.

“Through junior year, they’re learning theory and application,” Harrell says. “As Greg Harrell seniors, they’re going to spend a significant amount of their time in these laboratories engineering program from competitors’. with real-world equipment, where they

“Students at other engineering schools will actually apply the knowledge and have interaction in the classroom and lab. skills they’ve developed in their classroom They don’t have mentoring. That is the experience.

Milligan community. Professors have a

“All of these things that are the core life with the students. That is why it’s so part of an energy engineer, or a process important to choose the right professors. engineer’s livelihood, and we will have our They have to have the right heart to say students with explicit, direct, hands on not only, we want to invest knowledge and experience with these pieces of equipment. skills, we want to invest life in life.”

Other engineering schools have some of

Ron Dailey, engineering director at that. We are making this a central focus of Nuclear Fuel Services in Erwin, confirms our curriculum.” that. NFS works in realms that require

Harrell says that approach jibes with Department of Energy security clearances, industry needs. Engineers less often spend and Milligan students generally fit the an entire career with one company, and mold, as several have been hired in other companies seldom have the resources and areas of NFS. time to mentor newly minted engineers.

“Milligan provides well-rounded

“They are looking for engineers that graduates with strong Christian values that have skills ready to apply in the field,” would be a good fit for our organization,” Harrell says.

Dailey said.

As much as anything, though, he

Looking further ahead, he said NFS – hopes to see former students making a diflike many employers – has concerns about ference in the world thanks to the breadth recruitment and retention. Around the time of their education and the ingrained the college starts sending out its first grads, “Milligan ethos.” say 2020, NFS will be in the market.

“Couple a very skilled technical engineer

“We have a good-sized population that with a grounding in liberal arts, with a will be retiring in the next five years or so,” grounding in people skills, with an attention Dailey says. “To have a feed of students who to other peoples’ needs, with the Milligan are ready to work, well-trained, and want to community molding them, and they come be in this area is a positive for us. up with a power wheelchair. They come up

“Students who are from this area like with something that is not only a conveyance this area and want to be here. So if you vehicle but also changes someone’s life. have an engineering student who is from That’s a product of engineering design with a this area, they’ll tend to be strong, stable liberal arts basis. That’s our passion.” employees for the region.”

Of course, all of those supportive bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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Bucs are Back | FEATURES

24 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

East Tennessee State University’s new football program kicked off Sept. 3 in Johnson City after 12 years off. While the on-field results were disappointing (a 56-16 loss to Kennesaw State), there was much room for enthusiasm from an economic perspective. The 400 additional students between the team and the band help offset the drop in four-year university enrollment that comes with Tennessee Promise. And an ETSU College of Business study has found that each ETSU student represents around $55,000 in annual economic impact. Thus, the total impact from the program claimed by the university is more than $22 million a year. And that’s before ancillary factors enter the equation. The bottom line? The Bucs mean bucks.

Photos by Jeff Keeling and Bart Nave Photography

bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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| FEATURES

Bristol Motor Speedway concept art of the Speedway hosting the Battle at Bristol.

Caldwell: The Battle at Bristol is the start of something big

By Scott Robertson

Eighteen years of dreaming down, one year of preparation to go. What started as a wild hare has become a way for a publiclytraded company, Speedway Motorsports, to diversify its sports offerings at a time when its primary provider, NASCAR is trying to reverse a long-term decline.

“It was originally an idea of Bruton Smith and Jeff Byrd,” says Jerry Caldwell, BMS executive vice president and general manager. “As has so often been the case, Bruton was on the leading edge of this idea.”

Fast forwarding to 2012-2013, Marcus Smith, Speedway Motorsports CEO, led an evaluation of what else could be done to monetize the massive speedways the company was paying to keep up. Massive facilities, with massive infrastructure and remarkably well-trained event staff needed to do more than host a few weekends of activity every year.

“Certainly NASCAR is our core business and we don’t want to do anything to hurt that,” Caldwell said. “So we had to figure out if our people could do this without killing themselves. Our people understood what

Jerry Caldwell and ESPN’s Dr. Jerry Punch discuss plans for the game. Images courtesy BMS

was being asked of them and have responded with great enthusiasm.”

The company’s Las Vegas track plays host to a four-day techno music festival, “The Electric Daisy Festival,” so going beyond cars turning left was not a totally unconsidered idea at Speedway Motorsports. In fact, BMS has hosted events from outdoor expos to a Dukes of Hazzard festival in the past. Still, hosting the best-attended college football game in the history of the sport dwarfed

26 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

those other notions.

“So in late 2012 we got our arms wrapped around what it would cost us to do it and whether we physically could make it happen,” Caldwell says. “It was less than a year process from evaluating to announcement.”

This is not meant to be a one-shot deal, Caldwell says, “We’re setting a benchmark here. We’re branding ourselves with this event. We’re putting our stake in the ground to say, ‘we can do this and we can do it well.’”

And once the final gun sounds at the end of the Battle at Bristol, all the specific details that have had to be worked out for this game will be in the playbook, ready to be tweaked and used for the next game. For instance, “we’re ranking ticket allocations off a point system we had to build, working with Ticketmaster for nine months. We had to build into our NASCAR system what a university already does.”

“This is the beginning of things,” Caldwell says. “What does that look like totally? I don’t think we know that yet.”

But it’s sure going to be fun finding out.

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Financial planning and trust services provided by FTB. Investment management services, investments and annuities available through FTB Advisors, Inc., member FINRA, SIPC, and a subsidiary of FTB. Arkansas License # 416584. Insurance products available through FTB Advisors Insurance Services, Inc. (”FTBIS”), a subsidiary of FTB. Arkansas License # 247414. In some states, insurance products and annuities are provided by First Horizon Insurance Services, Inc. (“FHIS”), a Tennessee corporation, and a subsidiary of FTB. The principal place of business of FHIS is 165 Madison Ave., Memphis, TN 38103. California License # OD12174. FTBIS, FTB Advisors, Inc., and FHIS may transact insurance business or offer annuities only in states where they are licensed or where they are exempted or excluded from state insurance licensing requirements. FTB Advisors does not offer tax or legal advice. You should consult your personal tax and/or legal advisor concerning your individual situation. bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA 27 ©2015 First Tennessee Bank National Association. www.firsttennessee.com

| FEATURES

Governor Bill Haslam speaks as Lt. Gov. Ron Ramsey looks on. Photos by Scott Roberston

Haslam calls current infrastructure revenue plan unsustainable

By Scott Robertson

T

ennessee Governor Bill Haslam brought a road show that included Lt. Gov. Ron Ramsey, TDOT Chief Engineer Paul Degges and Transportation Commissioner John Schroer to Kingsport Aug. 17. Haslam invited local government and business leaders, as well as the media, to discuss the problem of funding Tennessee’s road and infrastructure projects

under the current formula.

“This is not a time when we will propose a solution to the issue,” Haslam said. “This is a time for us to talk about what the issue is – why we have a strain on our infrastructure system in Tennessee.

“There are $6 billion worth of projects in Tennessee right now that are approved but not funded. Those aren’t just made up

things we would like to do. They are things we really need.”

Tennessee has maintained the same formula for paying for road and bridgework since 1989. That amounts to a 35 to 40 percent tax break when comparing 1989 dollars then to current dollars today.

Cars get better mileage, so drivers pay less tax per mile driven. “People having more

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money in their pockets is great,” Haslam said.

“But the fact is that in paying for the roads that we love and appreciate, we have that much less funding.” At the same time, the cost of doing repair and maintenance on existing roads and building new roads and bridges has risen.

“This is not sustainable,” Haslam said.

Schroer made the point that simply cutting spending will not solve the problem. “We have been streamlining and reorganizing this department for four years to make it as efficient as possible. We have turned over every rock to find money. We spend less money per capita than any state in the nation on our highways, yet our roads are ranked in the top three or four states in America every year. We are getting our dollar’s worth, but as the governor said, that’s not sustainable.”

Because Tennessee has been a pay-as-yougo state on road projects, taxpayers have never had to pay interest on infrastructure, keeping costs low compared to other states. But the rising costs and continually dropping gas tax collections make it impossible for that model to continue without an increase in year-to-year revenue from some source.

While he did not specifically state any pro-

Haslam talks about the need for more revenue.

posal for how to raise the funds, the governor did single out one method he would oppose: toll roads. Aside from that, he said, all options should be on the table at this time.

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bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

29

| FEATURES

Alexander recognized for pro-business votes

By Sarah Colson

S

enator Lamar Alexander visited the General Shale Conference Center at ETSU’s Natural History Museum in Gray, Tenn., Sept. 2 to receive the United States Chamber of Commerce’s Spirit of Enterprise Award and update those present on what he’s been doing in Congress for the past year, namely looking out for small business and emphasizing the importance of higher education at an affordable cost.

The Spirit of Commerce Award was given to 32 members of the Senate who exhibited support of pro-growth and projob policies. Recipients must support the Chamber’s position on at least 70 percent of votes relating to critical business legislation.

“Last year in the second session of the 113th congress, just 14 votes of the many votes out on the floor were considered to be key votes considered in the spirit of enterprise rankings,” U.S. Chamber of Commerce representative Pamela Gregory, said. “I am proud to tell you that your Senator Alexander scored 100 percent.”

Alexander is the only Tennessean popularly elected both governor and senator.

His efforts to improve state education have been evident in both his roles as former president for the University of Tennessee and the Secretary of Education and also in the recent legislature he has worked to pass.

“We’ve done something Congress hasn’t been able to do in several years,” Alexander said, “and that is to fix No Child Left Behind, both throughout the senate and the house. I believe in better teaching. I believe in higher standards. I believe in real accountability. And I believe the path to do that is not through Washington D.C., but through states and communities. So we can recruit for an industry, and so our citizens can get good jobs, we want to set those standards.”

He added that not only is East Tennessee a good region for educational opportunities, but that the Tri-Cities in particular is well-situated for any kind of industry and manufacturing.

“You’re right smack dab in the center of the most competitive part of the Ameri-

Pamela Gregory presents Senator Alexander with the Spirit of Commerce Award. Photo by Sarah Colson

can auto deal industry,” he said. “You have an excellent four-lane highway system, a good work force. You’re in pretty good shape for the future.”

Alexander spent some time cautioning businesspeople of the Tri-Cities about the new legislation the National Labor Relations Board (NLRB), which he described as a “runaway organization,” has passed recently regarding the status of small franchises and “micro-unions.”

“What the NLRB has done has taken away a strong incentive for major corporations in this country to allow franchise opportunities—780,000 of them in the U.S.,” he said. “What that will mean is the big will get bigger, the small will get smaller, and there will be fewer examples of small business.”

Alexander added that the danger of micro-unions is that it makes organization and accountability a lot more complicated than they need to be.

“Imagine if you’re an employer in a company and then there are dozens, maybe

30 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

hundreds of individual unions that are that small,” he explained. “(This will) make it more difficult to create more jobs. So I’ve introduced legislation to try to change that. It would say that there would be an equal number of republican and democrat members of the NLRB. It would reign in the general council from being so active.”

The Senator ended his speech with the assurance that he understands the connection between education and a successful workforce and that he was working on legislation to prove it.

“What I’m doing is trying to fix No Child Left Behind that affects 100,000 public schools and 50 million children. I’m trying to make it easier for college students to go to ETSU and our many colleges and technical institutes so that governor Haslam’s Tennessee Promise program can realize its full promise. I get up every day hoping that I have the chance to make some kind of difference for the better in this state and most of the time when I go home to bed at night, I think that I have.”

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| DEPARTMENTS ON THE MOVE

Jennifer Greenwell has been named marketing coordinator for Mullican Flooring, a leading manufacturer of quality hardwood flooring.

In her new position, Greenwell is responsible Jennifer Greenwell for overseeing the Johnson City, Tennesseebased company’s sales incentives, the Partners in Profit program, all social media activity and blog postings, and managing the organization’s Gold Dealer Program, a special rebate initiative for Mullican Flooring dealers.

A native of Johnson City, Greenwell has more than 16 years of sales and marketing experience in the Tri-Cities region, including six years in a previous marketing role for Mullican Flooring.

“We are pleased to welcome Jennifer back to our organization,” says Neil Poland, president of Mullican Flooring. “With her

extensive sales and marketing background, as well as her detailed knowledge of our operations, she will certainly be an asset to our company.”

In addition to her professional experience, Greenwell earned a Bachelor of Science degree in business administration, with an emphasis in marketing and advertising, from Milligan College.

Asbury Place continuing care retirement communities recently named Norene Cochran health care administrator for its Kingsport campus.

Cochran has extensive experience in long term care management, hospital departmental management, clinical nutrition and long term care nutrition. Before joining Asbury Place, she had a long career with Saber Healthcare, formerly Videll Healthcare.

“With her knowledge and passion for our industry and vast experience, Norene is a tremendous asset to Asbury Place,” said Marjorie Shonnard, chief operating officer for Asbury Inc. “We are fortunate to have her.”

Cochran is a licensed nursing home administrator (LNHA) and a graduate of East Tennessee State University, where she earned her master’s degree in clinical nutrition and bachelor’s degree in dietetics.

She is a member of the American College of Health Care Administrators and American Dietetic Association and is past president of the Tennessee Dietetic Norene Cochran Association.

An active community volunteer, Cochran currently serves on the board of Kingsport Meals on Wheels and has previously served on the boards of other organizations, such as Second Harvest Food Bank in Gray, Tenn., and the Boys and Girls Clubs in Kingsport.

She also is an active member at Grace Fellowship Church in Kingsport.

Creative Energy has hired a major creative talent and announced a promotion as part of its expansion of the ad firm’s

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FTB Advisors is the trade name for wealth management products and services provided by First Tennessee Bank National Association (“FTB”) and its affiliates. Financial planning and trust services provided by FTB. Investment management services, investments and annuities available through FTB Advisors, Inc., member FINRA, SIPC, and a subsidiary of FTB. Arkansas License # 416584. Insurance products available through FTB Advisors Insurance Services, Inc. (”FTBIS”), a subsidiary of FTB. Arkansas License # 247414. In some states, insurance products and annuities are provided by First Horizon Insurance Services, Inc. (“FHIS”), a Tennessee corporation, and a subsidiary of FTB. The principal place of business of FHIS is 165 Madison Ave., Memphis, TN 38103. California License # OD12174. FTBIS, FTB Advisors, Inc., and FHIS may transact insurance business or offer annuities only in states where they are licensed or where they are exempted or excluded from state insurance licensing requirements. FTB Advisors does not offer tax or legal advice. You should consult your personal tax and/or legal advisor concerning your individual situation. Banking products and services provided by FTB. Member FDIC. ©2015 First Tennessee Bank National Association. www.ftbadvisors.com

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creative services. The move is in response to significant growth in the company’s list of clients.

While serving at Leo Burnett’s Chicago office, Greg Nobles helped to conceptualize and orchestrate many award-winning campaigns, including those for Allstate Insurance and Delta Faucet.

Nobles’ Allstate “Mayhem” campaigns earned numerous top awards, including multiple Cannes Lions, One Show Pencils and National Addys.

Nobles will serve as creative director at Creative Energy, managing all creative activities and its talented creative team.

As part of the company’s expansion, Will Griffith has been promoted to the new position of executive creative director. Griffith joined the agency in 2012 after serving similar roles in the healthcare and entertainment industries. Griffith will expand the agency’s video service capabilities and support new business activities.

Creative Energy is a full-service advertising, marketing, digital and public relations agency, serving clients across America. The company operates offices in Johnson City, Tenn., and Asheville, N.C. Greg Nobles

Ann Marie French has been promoted to director of strategy for The Corporate Image (TCI), an integrated communications firm headquartered in Bristol, Tennessee.

In her new position, French will advance the continuous growth of TCI and its marketing and advertising division, Corporate Marketing, through existing client development and strategic communications planning. In addition, she will assist in the strategic development of prospective clients for both companies.

A member of TCI since 2013, French’s previous responsibilities as a project manager included executing client projects that involved research, writing and media relations.

In addition to her experience at TCI, French’s background includes nearly a decade serving as a reporter and freelance writer for a variety of news publications, as well as editor of a weekly newspaper.

“Ann Marie has proven to be a key strategic asset for our organization, and she plays a vital role in helping our clients achieve their respective goals,” says Jon Lundberg, president and CEO of The Corporate Image. “This transition will provide her an opportunity to increase her strategic involvement in our day-to-day operations, which will be of tremendous benefit to our Ann Marie French respected clients.”

French holds a master’s degree in journalism and mass communications with a public relations concentration from Kent State University in Kent, Ohio. She also earned a bachelor’s degree in English from the University of New Hampshire in Durham.

Mountain Commerce Bank (MCB) has promoted several key personnel.

Tracy Jones has been promoted to senior vice president. She has a bachelor’s degree in business administration from East Tennessee State University. As director of operations, Jones SEE ON THE MOVE, 34

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bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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| DEPARTMENTS ON THE MOVE, CONTINUED

continues oversight of the deposit and electronic banking operations. In addition, she will provide oversight of treasury management operations. She has 24 years of banking experience.

BSA (Bank Secrecy Act) Officer Victoria McKinsey has been promoted to assistant vice president. McKinsey has a bachelor’s degree in business administration from Tusculum College. She has over eight years of experience in the financial industry.

McKinsey is responsible for maintaining the security and compliance of the bank’s BSA Program.

Melissa Haines, the bank’s security officer and senior branch operations specialist, has been promoted to assistant vice president. She has over 11 years of experience in deposit operations.

Sean Short has been promoted to electronic banking services officer. His focus is on MCB’s electronic banking, credit cards and treasury management operations. Short has over 14 years of experience in the banking industry.

Kristie Gross has been promoted to senior loan coordinator banking officer. Gross has 15 years of banking experience, serving in several retail positions as well as a credit analyst and mortgage loan coordinator. She received her bachelor’s degree in business administration from East Tennessee State University.

Ben Berglund has been promoted to administrative officer, network administrator II. He has a bachelor’s degree in computer information technology from Milligan College.

Berglund has four years of experience in MCB’s information technology

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Naples, Fla., in 2006 as a CT supervisor. While in Florida, he earned his masters of health services administration from Florida Gulf Coast University and soon after was named associate administrator Eric Carroll for Physicians Regional Healthcare System in Naples.

Carroll returned home to Bristol in 2012 as the chief operating officer of Select Specialty Hospital of the Tri-Cities, a facility specializing in care for patients with acute or chronic respiratory disorders. Carroll was named CEO in 2013. He was responsible for all daily operations, both clinical and financial, as well as for business development, physician relations, and quality of care for the 33-bed hospital, a division of Select Medical.

Carroll will assume the role of administrator of Unicoi County Memorial Hospital on Sept. 8.

Food City officials recently announced the promotion of Dan Glei to executive vice president of merchandising/ marketing. Glei formerly held the position of vice president of center store operations for the retail Dan Glei supermarket chain. He brings more than 25 years of industry experience to the position.

Prior to joining the Food City team in 2014, Glei served in a number of capacities for Ahold USA/Giant Food Stores, including senior vice president merchandising, senior vice president brand and format development and senior vice president e-commerce.

His new responsibilities with Food City include the functional areas of merchandising, marketing and procurement, field supervision, merchandising support and leading the collaboration with consumer product goods partners.

Glei holds a Bachelor of Arts degree in marketing from Michigan State University.

Branding Iron Marketing, Advertising and Public Relations has announced the hiring of Alison Castle as the company’s newest art director. Alison previously worked Alison Castle as a senior graphic designer for the largest healthcare system in East Tennessee. She graduated from Memphis College of Art in the fall of 2013 with a bachelors’ degree in digital art with a concentration in graphic design and a minor in art history.

“We looked at many candidates to fill the position available. Alison has both the characteristics and talent required to be a Branding Iron employee.” said Creative Director and Co-founder, Marne Brobeck.

“Alison is from our community and we love being able to recruit local talent from the region,” added Branding Iron Co-Owner and Co-founder Scott Emerine.

“Our customer base is expanding, our focus on health care is increasing and we are glad to add Alison to our team.”

bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

35

| DEPARTMENTS AWARDS & ACHIEVEMENTS TRI Accounting Department wins GAO award

For the sixteenth consecutive year, the Tri-Cities Airport Authority has been awarded a certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association of the United States and Canada (GFOA) for its Comprehensive Annual Financial Report (CAFR). The Certificate of Achievement is the highest form of recognition in the area of governmental accounting and financial reporting.

An award of Financial Reporting Achievement was also presented to Rene Weber, Tri-Cities Airport Authority’s Director of Finance, for his role in preparing the award-winning CAFR.

“We are pleased to be recognized by the Government Finance Officers Association for our Annual Financial Report,” said Patrick Wilson, TCAA executive director. “I especially appreciate the effort and attention to detail that Rene Weber and the rest of the

staff exhibit daily when managing the Airport’s finances. I would also like to recognize the Airport’s accounting firm, Blackburn, Childers & Steagall, for their assistance in preparing the winning report.”

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Eastman was recently ranked as a top 50 employer for 2015 in the 14th annual listing published by Workforce Diversity for Engineering & IT Professionals. The list is based on a reader survey and will appear in the magazine’s Summer/Fall 2015 edition.

Through the survey, readers selected the top companies in the U.S. for which they would most prefer to work or believe would provide a positive working environment for engineers and IT professionals who are minority group members.

“As a company of people who highly value a diverse workforce and inclusive workplace, we are extremely pleased to receive this recognition,” remarked East-

man Sr. Vice President and Chief Human Resources Officer, Perry Stuckey. “Eastman is building a richly diverse and creative culture to solve challenging problems and create a brighter tomorrow. Our global team is focused on innovating the future and delivering consistent, superior results to all of our stakeholders.”

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bjournal.com | September 2015 | The Business Journal of Tri-Cities TN/VA

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11/

| THE LAST WORD

The Tennessee Way to a transportation solution

by Ron Ramsey I’m proud of the fact that, year after year, Tennessee is recognized for the high quality of our roads and bridges.

Good roads mean jobs, and jobs mean economic growth and prosperity.

As a conservative, I believe government that governs best governs least. We live in an era when government, especially the federal government, is involved in areas it should not be. Government is only supposed to do things that the private sector cannot. Roads, bridges and transportation infrastructure fall firmly under that heading.

Not only does Tennessee have great roads, we pay for them – on time and in full. While other states build roads and bridges that are reduced to rubble before the debt ever gets paid off, Tennessee is a pay-as-you-go state.

We carry little debt on our infrastructure and what debt we do incur we pay back. This kind of fiscal discipline is the Tennessee way. If we don’t want to transfer today’s burden to tomorrow’s generation, something will have to change.

Tennessee’s per gallon tax on gasoline is the user fee that funds the roads that bring jobs to Tennessee. That fee remains unchanged since 1989.

But the world has.

The U.S. consumer price index has risen 92 percent since 1989. And inflation -- which includes the price of raw materials used to pave our roads -- has risen 20 percent over the last ten years.

At the same time, technology has advanced precipitously. The average new car got 36 mpg in 2013, up from 28 mpg in 1990, a 22 percent decrease in both gas consumption and tax collected for the same miles driven.

Because of inflation and technology, we are effectively taking care of our roads today with the power of $150 million less today than we had ten years ago. If we allow our road funding formula to remain unchanged for the next ten years, this trajectory will only get worse.

Put simply, while both the cost of doing business and inflation have increased exponentially, a gallon remains a gallon. Plus, technology has enabled a gallon of gas to stretch further and further. This is to say nothing of hybrid and electric cars that do not pay their fair share to maintain our roads – a fact I believe will be addressed by the upcoming General Assembly.

We must recognize the path we are on is unsustainable. The day of reckoning is coming. Washington bureaucrats are experts at shifting blame and kicking the

38 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com

can down the road. They would rather pretend the problem doesn’t exist or paper over the problem until a crisis occurs. That is the Washington way, not the Tennessee way. Tennesseans prefer to tackle and solve our problems before they become catastrophic.

We must leave all options on the table and have a frank discussion about how we fund our roads and bridges. We must admit a problem exists. Then we can address it, and Tennessee can continue to have the best roads and bridges in America.

And in the most fiscally responsible way possible.

Ron Ramsey is Lt. Governor of Tennessee and Speaker of the State Senate. He holds the Second District State Senate seat, representing Johnson and Sullivan counties.

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40 The Business Journal of Tri-Cities TN/VA | September 2015 | bjournal.com