Ballad Health Reports Six-Month Results: Better Quality, Strong Financial Performance, and Significant Capital Investments

In first six months of fiscal year, Ballad Health surpasses expected improvements in quality, capital investment and financial results.

Ballad Health today announced operational results from its first six months of the fiscal year, and quarterly results for the 2^nd quarter. The announcement coincides with the announcement by Moody’s Investor Services that Ballad Health’s outlook has been revised from Neutral to POSITIVE.

“Ballad Health’s operational performance is exceptional because of the incredible work of our team members and affiliated physicians,” said Alan Levine, chairman, president and chief executive officer of Ballad Health. “I am proud of the focus on quality, and I believe our results demonstrate that better quality reduces cost, improves outcomes and generates positive financial performance for our community’s health system.”

“Serving the people of Northeast Tennessee and Southwest Virginia is both our privilege and our great responsibility. The board of Ballad Health stands firmly behind the efforts of our leadership to ensure qualitative, financial, and operational success for our region’s healthcare system,” said David Lester, a member of the board of directors and lead independent director. “Our board and management team remain focused on implementing the vision of the merger. While this task is not always easy, as board members we want the best for our region, and we are pleased with the results so far.”

Quality improvement results

Driven by clinical leadership and the contributions of physicians and team members across the system, Ballad Health has seen significant improvements in objective quality measures since the merger just one year ago. In the first six months of the year, 14 of the 17 Target Quality Measures and 8 of the 13 Priority Measures identified in the Certificate of Public Advantage (COPA) regulating Ballad Health improved from the baseline period – in some cases dramatically. These measures are nationally benchmarked for improvement in all U.S. acute care hospitals. While quality measures can vary from month to month, and Ballad Health cautions about the use of data at any particular time, positive trends are emerging. Examples include:

• Pressure ulcer rates have declined by as much as 17%
• Iatrogenic pneumothorax rate has declined by as much as 58%
• Central venous catheter-related blood stream infection rate has declined as much as 40%
• Perioperative hemorrhage or hematoma rate has declined by as much as 65%
• Postoperative respiratory failure rate has declined as much as 44%
• Clostridium difficile rate has declined by as much as 41%
• Postoperative sepsis rate has declined by as much as 70%
• Inpatient opioid administration rate has declined by as much as 36%
• Median time from ED arrival to departure has improved by as much as 13%
• Median time from ED arrival to transport for admitted patients improved by as much as 30%
• Patients who reported their nurses “always” communicated well improved by as much as 8%

“While we certainly don’t draw conclusions about any one data point when it comes to measurement of quality, we are extremely pleased with the emerging trends,” said Levine. “While the results may vary month to month, over time we are seeing improvement. Behind these improvements in quality are patients who are safer and better off because of what our team is doing.”

Ballad Health’s Clinical Council, a system-wide physician-led effort to help the health system excel in improved quality, reduced cost and increased physician engagement, has taken active participation in driving Ballad Health to become a top-decile, zero harm health system. Chaired by Dr. Amit Vashist, in partnership with Ballad Health Chief Clinical Officer, Dr. Jerry Blackwell, the Clinical Council has already led Ballad Health to recognition for its efforts in value-based services. Ballad Health was selected by the High Value-Care Collaborative to participate with leading health systems to adopt strategies that will reduce unnecessary cost and deliver evidence-based care. The High Value-Care Collaborative is a joint project between the American Hospital Association, the American Board of Internal Medicine Foundation’s Choosing Wisely Campaign and the Costs of Care organization.

“Our priorities are clear,” said Blackwell. “Ballad Health is committed to being a reliably high quality healthcare system, and our physician community stands in strong support of leadership’s effort to transform our organization to becoming one of America’s leading health systems. This is a place doctors want to practice, and it’s a place patients will be able to count on consistently high quality.”

Ballad Health has remained active in the recruitment of new physicians and mid-level providers throughout the region, signing contracts for 51 full-time equivalent new doctors and mid-levels. Early successes include the recruitment of cardiology in rural Wytheville, Virginia, and Norton, Virginia; nephrology in Abingdon, Virginia; and neurology, orthopedics, pain management, hospitalists, psychiatry, and other needed specialties throughout the region.

Financial strength

“We know that in order to fulfill the vision of Ballad Health to be an effective health improvement organization for our region – we must be strong stewards of our resources, especially given the headwinds providers are facing,” said Levine. “We are pleased by the strong financial performance improvements over the past two quarters and will strive to continue to improve.”

Quarterly highlights include:

• Operating cash flow (Operating EBITDA) for the quarter improved to $54.7 million from $50.7 million in the same quarter prior year, an 8 percent increase.
• Total cash flow (EBITDA) improved to $72.8 million versus $62.7 million in the same quarter prior year, a 16.1 percent increase.
• Revenue for the quarter increased by 1.3 percent, while expenses increased by 0.6 percent - leading to an improvement in the operating margins for the health system.
• The EBITDA margin improved from 12.1 percent in the prior year to 13.9 percent in the current year.
• Operating income for the quarter improved to $6.8 million from $3.3 million in the same quarter prior year.

Six-month highlights include:

• For the six months that ended on December 31, 2018, operating cash flow improved to $103.2 million from $94.6 million in the prior year, a 9.1 percent improvement.
• Total cash flow (EBITDA) improved to $125.4 million versus $104.7 million in the same period prior year, a 19.7 percent increase.
• Revenue for the six months increased by 1.2 percent, while expenses increased by 0.7 percent - leading to an improvement in the operating margins for the health system.
• The EBITDA margin improved from 10.2 percent in the prior year to 12.1 percent in the current year.
• Operating income for the six-month period improved to $6.6 million from $0.6 million in the same period prior year.

Ballad Health’s improved financial performance in the second quarter and year-to-date follows dedicated expense management, improvements in productivity, reduced reliance on temporary (contract) labor and focused supply cost management.

Ballad Health’s investment into the region’s labor force continues to be powerful, with Ballad Health spending more than $500 million on salaries, wages and benefits in the six month year-to-date period. Ballad Health projects it will spend more than $1 billion on the region’s labor force in the fiscal year.

These improvements are despite challenges both reflective of what all providers are facing and also some that are unique to Ballad Health and the region. These include:

• Ballad Health continues to see a trend of declining volumes in certain services, with adjusted discharges for the six-month period declining 1.5 percent to 122,037. Inpatient surgeries declined 0.9 percent to 10,704. Outpatient surgeries, including ambulatory surgical cases, declined 0.4 percent to 26,066. ER visits declined 5.2 percent to 216,023 visits.
• Ballad Health continues to experience declining inpatient and hospital utilization rates, a phenomenon being experienced throughout rural America. The decline in admissions in Ballad Health’s service area is driven in part by a reduction in hospital admissions resulting from efforts by Ballad Health and area physicians to utilize lower cost alternatives to hospital stays as appropriate. This successful reduction, when combined with the region’s low population growth, reduces the overall volumes in the hospital setting.
• Ballad Health has also seen a lower volume of respiratory and influenza admissions relative to the prior year period.
• While admissions are declining, the overall patient mix shifted to higher acuity patients (patients who are sicker), with overall patient acuity increasing by 30 basis points, driven by improved utilization of outpatient settings combined with relatively flat inpatient surgery volume.

“Ballad Health is facing a rapidly changing landscape where our financial success is no longer judged solely by volume, but increasingly, how we care for fewer people more efficiently, effectively and with better outcomes,” said Levine. “Many of the quality metrics that we’ve seen improve have led to lower costs. Shorter length of stay, reduced rates of hospital acquired conditions, reduced readmissions and better integration with physicians has helped reduce the cost of care and has helped Ballad Health achieve success with the new value-based purchasing environment.”

Levine pointed to a 10 percent reduction in the hospital readmission rate over the prior year, and a 25 percent reduction among legacy hospitals since 2015 as evidence that physician and administrative partnership is resulting in lower cost and lower risk to patients. He also highlighted a recent announcement by the U.S. Centers for Medicare and Medicaid Services (CMS), which said that Ballad Health is one of only 21 Accountable Care Organizations in the nation that achieved savings for the federal government in each of the first five years of the program.

Reinvestment of capital throughout the region

While Ballad Health was focused on improved financial performance, it also has continued to invest nearly $60 million in capital for new equipment, diagnostic technology, information technology and building improvements. Just a few examples of capital spending in the year so far include:

• 2 new cardiac catheterization labs
• 5 new digital mammography systems
• Replacement CT scanners, ultrasound and radiology upgrades
• Hybrid cardiovascular surgical suite
• 3-dimensional cardiac ultrasound
• Electrophysiology lab upgrades
• New equipment and opening of new hospital
• IV pumps
• Replacement of hospital beds
• Resealing and external upgrades to physical plant
• New OR tables and equipment for bariatric surgery
• Internal facility renovation to rural facility