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S&P Global Ratings Affirms Ballad Health Credit Rating

Wednesday, November 6, 2019

S&P Global Ratings Affirms Ballad Health Credit Rating

Citing experienced management team, strong enterprise profile and solid balance sheet metrics, S&P ratings remain at A- with stable outlook

Six months after issuing the highest credit rating for either Wellmont Health System or Mountain States Health Alliance in more than 20 years, S&P Global Ratings in an interim report affirmed its upgraded A- rating with a stable outlook for Ballad Health.

In its report supporting the higher debt rating, S&P pointed to “generally solid balance sheet metrics” and balance sheet management, an “experienced management team” with “proven turnaround and integration skills,” a “strong enterprise profile” and solid market position. S&P also cited the significant operational and financial improvement over the two years since the merger creating Ballad Health was completed.

The report comes after Ballad Health’s audited results for the fiscal year ended June 2019 demonstrated significant improvement in operating income and exceptional cost management. Over the past fiscal year, while S&P calculates a total operating revenue increase of 1.3 percent, Ballad Health was successful in reducing operating expenses slightly, thus expanding the operating margin. A major highlight in the improved performance was the financial turnaround of Holston Valley Medical Center, which turned nearly a decade of continual operating losses into an operating gain in fiscal 2019.

“We are pleased that S&P has taken the time to evaluate our financial results and that they feel comfortable with the higher debt ratings they awarded Ballad Health last April,” said Ballad Health Chairman and Chief Executive Officer, Alan Levine. “While we have maintained a disciplined operating approach, we have invested in the recruitment of nearly 200 new providers to the region since the merger closed, an investment that will lead to even greater access for our communities. We have reduced pricing for our hundreds of physician access points and urgent care centers, invested in a new addiction medicine fellowship program at East Tennessee State University and a new dental residency program in Southwest Virginia, and we announced our intent to bring the first residential addiction treatment facility to the region to serve women who are pregnant or homeless and suffering from substance use disorder. We opened a new urgent care center recently in Lee County, Virginia, a prelude to the opening of America’s newest rural hospital – a hospital which was previously closed. The synergies from the merger are allowing us to stabilize our operating results and make these important COPA-related investments, all while reducing the overall cost of healthcare for our region’s employers.”

“The operating environment for non-urban and rural hospitals is challenging, and the continued trend of hospital closures across the nation is further impairing access to healthcare,” said Ballad Health Board Member and Lead Independent Director, David Lester. “As a board, we are focused on a sustainable operating model, which is compliant with the important COPA-related requirements we are all committed to.”

S&P said it will meet with Ballad Health management in the coming months for an update on the operating and financial plans.

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