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Thursday, Nov 8, 2018

Ballad Health reports first quarter results

Strong financial results, significant capital investment highlight first quarter with combined budget

Ballad Health today announced financial results from its first operating quarter under a combined operating budget. For the quarter, operating cash flow (operating EBITDA) for the newly merged health system improved to $49.7 million from $45.3 million in the same quarter prior year, a 9.8 percent increase. Total cash flow (EBITDA) improved to $52.6 million versus $42 million in the same quarter prior year, a 25.2 percent increase. Revenue for the quarter increased by 2.0 percent, while expenses increased by 1.5 percent - leading to an improvement in the operating margins for the health system. The EBITDA margin improved from 8.4 percent in the prior year to 10.4 percent in the current year.

Ballad Health’s financial performance improved through exceptional expense management, including a 34 percent reduction in the use of contract – or temporary – labor, improvements in productivity and focused supply cost management. Ballad Health’s investment into the region’s labor force increased, with Ballad Health spending $267.1 million on salaries, wages and benefits, an increase of $1.5 million from the prior year period.

“Ballad Health is committed to contributing to the economic success of our region,” said Alan Levine, chairman and chief executive officer of Ballad Health. “Because we remained a locally operated system through our merger, we continue to put investment back into our communities through employment and through good-paying jobs. At the same time, we are focused on managing our labor costs, so this growth, and our margins, are sustainable and will support ongoing capital investment into our facilities as well as the investments we are committed to which will improve the health of our region.”

“Prior to our merger, we shared that if either legacy health system had instead been acquired by larger health systems based elsewhere, there would be a massive reduction in the workforce, likely affecting as many as 1,000 jobs,” Levine added. “This is based on the evidence and what typically happens when larger health systems acquire smaller regional ones, which is that administrative and support functions are no longer needed locally. By our calculations, a decrease of 1,000 jobs would have a more than $100 million negative impact on labor spending annually in our region. While we are seeing success at achieving local synergies, and making good decisions related to productivity and efficiencies, we have not seen any reduction in aggregate labor spending compared to the same period in the prior year. In fact, we’ve spent more, even as we’ve been more productive. This is a clear benefit of the merger between Wellmont and Mountain States as it relates to our local economy. I cannot overstate how important this factor was in both legacy systems’ deliberations about the merger. This approach was heavily preferred because of the unique economic issues within our region, and the devastating impact the loss of 1,000 high paying jobs would have had.”

Levine reiterated that trends in healthcare point to declining inpatient hospital utilization, particularly in rural and non-urban parts of the country. Ballad Health continues to experience this decline in overall volumes, with admissions in the quarter declining by 4.3 percent, and adjusted admissions declining by 0.7 percent. The admission decline is also being driven by a reduction in lower-acuity admissions, a result of focused efforts by Ballad Health and primary care physician groups to reduce unnecessary admissions and utilize lower cost outpatient services where possible. While admissions were down, the overall patient mix shifted to higher acuity patients, with overall patient acuity increasing by 2.5 percent, driven by the reduction in lower acuity admissions and an overall increase in surgeries. Total surgeries increased by 1.7 percent to 18,290 cases. Inpatient surgeries increased modestly by 0.1 percent, while outpatient surgeries increased by 2.4 percent. Emergency department visits declined by 3.2 percent.

“Despite the ongoing changes in the landscape that further reduce the demand for inpatient hospital care, this was a very successful first quarter as the board and management team have worked hard to begin achieving the benefits of the merger between Mountain States Health Alliance and Wellmont Health System,” said Levine. “Our financial success will be driven based on how we adapt to this changing landscape. The premise behind the merger was that we cannot succeed by increasing prices, or increasing unnecessary utilization, but rather, we will be better stewards of these community assets by reducing unnecessary cost and duplication, while investing well in the services and programs that improve patient outcomes, reduce waste, and improve technology.”

Dr. Jerry Blackwell, chief clinical officer of Ballad Health, added, “As doctors, it is not only important that our health system remain financially strong, but that we do so through the improved quality of our clinical services. This is our primary focus.”

Ballad Health’s clinical council, a group of dozens of physicians focused on helping Ballad Health achieve high quality performance, announced the successful results of an initiative to reduce certain infections by 40 percent since the merger was completed. Because of its efforts to improve value and reduce costs, Ballad Health was named to participate in a national initiative to enhance the value of care patients receive while reducing spending nationwide, a collaboration partnership between the American Hospital Association, the American Board of Internal Medicine Foundation’s Choosing Wisely campaign, and the Costs of Care Organization. Ballad Health was also selected to participate with 16 highly recognized health systems in the Medicaid Transformation Project, a national project to improve and transform care for vulnerable populations.

Ballad Health has remained active in the recruitment of new physicians and mid-level providers throughout the region, signing contracts for 33.5 full-time equivalent (FTE) new doctors and mid-levels. Early successes include the recruitment of cardiology in rural Wytheville, Va., nephrology in Abingdon, Va., neurology, orthopedics, pain management, hospitalists, psychiatry, and other needed specialties throughout the region.

While Ballad Health has focused on improved financial performance, it also has continued to invest more than $25 million of capital investing in new equipment and diagnostic technology. Additionally, $68 million was committed in the quarter toward the $76 million that will be invested this year in upgrades to information technology, including the conversion to a common health information technology platform. Just a few examples of new diagnostic and treatment equipment investments made during the quarter 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

“Ballad Health remains committed to strong performance in a very difficult operating environment for hospitals,” said David Lester, a member of the board of directors and lead independent director. “Our board and management team remain focused on achieving a better coordinated system of care at a lower cost with high quality. While these decisions are not always easy, as board members we want the best for our region, and we are pleased with the results so far.”