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Ballad Health sees revenue, cash flow gains during 2nd quarter

Zach Vance • Feb 14, 2019 at 9:27 PM

Citing expense management, improved productivity and a reduction in temporary labor, Ballad Health once again reaped financial gains in its second quarterly performance report since merging the region’s two largest health systems.

For the second quarter of the 2019 fiscal year, Ballad Health reported revenue growth of 1.3 percent, while its total cash flow grew $10.1 million, from $62.7 million in the second quarter of 2018 to $72.8 million, according to a Thursday press release detailing the company’s operational results.

Through the same period, Ballad’s operating cash flow, otherwise known as earnings before interest, tax, depreciation and amortization, or EBITDA, grew from $50.7 million to $54.7 million, when comparing the second-quarter results of 2018 and 2019, respectively. The EBITDA margin also improved from 12.1 percent in the prior year to 13.9 percent in the current year.

Expenses for the hospital system did grow by 0.6 percent, but the offset in revenue resulted in improved operating margins, the press release stated.

Through six months, Ballad Health grew its revenue by 1.2 percent when compared to the previous year, and improved its total cash flow to $125.4 million versus $104.7 million during the same period last year.

The announcement of financial results, according to the press release, coincides with Moody’s Investor Services revising Ballad Health’s outlook from Neutral to Positive.

“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,” Ballad Health CEO Alan Levine said in the press release.

“We are pleased by the strong financial performance improvements over the past two quarters and will strive to continue to improve.”

Employing between 14,000 and 15,000 employees, Ballad Health spent more than $500 million during the past six months on salaries, wages, and benefits, and the company’s labor force investment is expected to top $1 billion by the end of this fiscal year, the press release stated.

Capital investments in new equipment, diagnostic technology, information technology and building improvements are also expected to reach nearly $60 million.

Despite these significant gains and investments, Ballad Health still faces significant challenges as the health care paradigm evolves and more services are offered through outpatient settings.

Through the last six months, Ballad’s adjusted patient discharges declined 1.5 percent to 122,037. Inpatient surgeries also declined 0.9 percent, as did emergency room visits, which dropped 5.2 percent.

“Ballad Health continues to experience declining inpatient and hospital utilization rates, a phenomenon being experienced throughout rural America,” the press release stated.

“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.”

While admissions are declining, the overall mix of Ballad Health patients were deemed “higher acuity,” meaning they were sicker, with overall patient acuity increasing by 30 basis points.

However, the health care system experienced lower volumes of respiratory and influenza admissions relative to the prior year.

Levine also said hospital readmission rates decreased 10 percent, compared to last year, and 25 percent compared to the combined numbers of Mountain States Health Alliance and Wellmont Health System, pre-merger.

“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,” Levine said.

“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 have helped reduce the cost of care and helped Ballad Health achieve success with the new value-based purchasing environment.”

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