Ballad Health reports stable quarter despite rural patient headwinds

By | February 17, 2020

Dive Brief:

  • Ballad Health slightly improved its operating margin to 1.5% in its second fiscal 2020 quarter compared with an operating margin of 1.3% the prior-year quarter.
  • Revenue grew 2.4% for the not-for-profit 21-hospital health system based in Tennessee and outpaced expense growth. Operating earnings remained relatively flat year-over-year at about $ 55 million, the organization reported this week.
  • Moody’s Investors Service affirmed the rating of the system’s bonds at Baa1 and maintains a positive outlook on its operations, which dominate a large swath of Appalachia.

Dive Insight:

Ballad Health is attempting to combat a number of headwinds as an operator of hospitals and other outpatient services in non-urban and rural areas throughout Tennessee, Virginia, North Carolina and Kentucky.

Moody’s said its positive outlook reflects the benefits and savings that have come since the formation of what is now Ballad Health, the result of a merger between Mountain States Health Alliance and Wellmont Health System.

“Ballad Health will continue to realize synergies from the integration of two formerly competing systems as management has deftly demonstrated since the 2018 merger. The aging population and limited economic expansion will thwart higher revenue growth, leading to a revised and more moderate performance over the intermediate term,” the ratings agency said this week.

Ballad acknowledges that as it works to reduce low-acuity admissions and provide more services in a lower-cost setting — all while population growth is stagnant — these efforts will result in “reducing traditional revenue streams.”

Still, the system said that despite these headwinds, it sees stability in its financial performance, thanks to the shift toward risk-based and value-based payment arrangements with payers.

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Late last year, the Federal Trade Commission said it plans to launch a study on certificates of public advantage, which have allowed the formation of health systems like Ballad.

COPAs shield mergers from federal antitrust regulators in exchange for prolonged state oversight. The FTC wants to examine the effects these arrangements have on healthcare prices, quality and access to services.

Some states have given the green light to COPAs, which in effect create state sanctioned monopolies, after concluding that relying on regular market forces like competition wasn’t enough to either limit rising prices or ensure continued access to care, particularly in rural areas.

However, after its formation, Ballad sued thousands of poor, rural patients, according to reports. Since then, the organization said it has increased the uninsured discount it provides to patients and has adopted presumed eligibility for patients to receive charity care.

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