JOHNSON CITY – Ballad Health announced Wednesday that previous combined losses have turned into operating gains during the first nine months of its fiscal year that ends June 30.

“We know that in order to fulfill the vision of Ballad Health — to truly become a health improvement organization for our region — we must be strong stewards of our resources, especially given the headwinds all providers are facing,” Ballad Health Chairman, President and CEO Alan Levine said in a news release. “We are pleased by the strong financial performance improvements over the past three quarters and will strive to continue to improve.”

For the quarter, operating and total cash flow was up and revenue increased by 1.4 percent, while expenses decreased by 0.2 percent. Ballad Health reported its financial performance improved in the quarter due to exceptional expense management, including a 31.3 percent reduction in the use of contract — or temporary — labor, improvements in productivity and focused supply cost management.

For the nine months ended Dec. 31, 2018, Ballad Health said operating cash flow improved to $158.7 million from $141.4 million in the prior year, a 12.2 percent improvement.

“Ballad Health’s investment into the region’s labor force continues to be powerful, with Ballad Health expected to spend more than $1 billion on the region’s labor force in the fiscal year,” the release noted. “These improvements are in spite of challenges both reflective of what all providers are facing and also some that are unique to Ballad Health and the region.”

Ballad Health last week announced a $10 million investment into increasing direct care nursing and nursing support salaries, a direct result of improved financial performance.

Last week, the Tennessee Department of Health released its annual report of the Terms of Certification of the merger that created Ballad Health.

Ballad Health pointed out its financial challenges include:

• A trend of declining volumes in certain services, with acute discharges declining in the quarter by 5.5 percent. Adjusted discharges in the quarter increased slightly by 0.7 percent due to improved length of stay of inpatients and increased shift to outpatient services.

•  Total surgeries for the quarter decreased by 3.9 percent to 17,547 cases. Inpatient surgeries decreased by 5.4 percent, while outpatient surgeries decreased by 3.3 percent. Emergency department visits declined by 1.0 percent.

•  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 efforts by Ballad Health and area physicians to utilize lower cost alternatives to hospital stays as appropriate. This reduction, combined with low population growth, reduces the overall volumes.

“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. Lower length of stay, reduced rates of hospital acquired conditions, reduced re-admissions 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.

While Ballad Health said it was focused on improved financial performance, it also has continued to invest in capital for new equipment, diagnostic technology, information technology and building improvements. Ballad Health expects to spend more than $172 million on capital improvements in the current fiscal year.

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