Ballad ends year with $6.7 million operating income

JOHNSON CITY, Tenn. (WJHL) — Ballad Health has completed its second straight challenging fiscal year financially, but its CEO said one major bright spot is a big improvement in nursing turnover rates that should help finances and patient experience in the long run.

Helped by a $38.7 million settlement from the federal government, Ballad finished fiscal 2024 with an operating income of $6.7 million, reversing a $34.6 million loss suffered the previous year. Without the one-time settlement, which was for underpayments from 2018-2022 for the federal “340B” drug program, Ballad would again have posted a loss of more than $30 million.

Fiscal 2023 was the first year in the system’s six-year history that it had an operating loss.

A quarterly filing for bondholders issued this week shows the hospital system had an operating loss of $7 million in the fourth quarter (April-June). Ballad, whose fiscal year runs from July 1 to June 30, lost $17 million in the fourth quarter of fiscal 2023.

CEO: Labor situation improving

Expenses have markedly increased for Ballad the past several years, primarily driven by labor costs as the system has raised nurse and other patient care salaries to try and decrease a major reliance on contract labor (travel nurses). Regular salaries rose 10% from 2023 to $761 million and are up 22% from 2021 to 2024.

Contract labor, which had increased rapidly from $53 million in 2020 to $149 million in 2022, peaked in 2023 at $161 million and finally dropped in the just-completed year, to $141 million. The filing notes nursing turnover at Ballad is down to 13.8% after spiking as high as 28% during 2022, and that it is below the current national rate of 18.4%.

CEO Alan Levine called that evidence of “an amazing turnaround year for Ballad Health” in an email to News Channel 11.

“We all knew it was going to be bumpy given how bad the vacancy rates were/are, but I’m really proud that the Board stood by us as we very methodically implemented our (very expensive) plan to improve retention, and close the gaps,” Levine said.

He said Ballad hasn’t reduced contract labor as fast as it could have, because a higher-than-desired percentage of newly graduated nurses continue to quit within their first year. Keeping higher numbers of experienced nurses on the floor is meant to help keep rookie staff from quitting, Levine said, especially since shortages have often meant higher-than-preferred workloads.

“If we’d have cut it like many other systems did, our burnout rate for the new nurses would be unsustainable,” he said.

Levine acknowledged the labor shortages have negatively impacted patient experiences and contributed to long emergency room wait times. Ballad’s own records show the median time from emergency room arrival to transport for patients who are admitted to the hospital — which has a desired “baseline” of 223 minutes, or slightly under four hours — was 551 minutes in fiscal 2022 and 603 minutes in fiscal 2023.

Through the first half of fiscal 2024, it was down to 411 minutes.

That statistic is no longer used by the federal Centers for Medicare and Medicaid Services in its hospital compare statistics, but one that is shows Ballad’s three main hospitals comparing favorably with national averages.

The most current statistics for time from presentation at an ER to discharge, provided by Ballad, show an average of 211 minutes nationwide. Those figures are 210 minutes for Johnson City Medical Center, 211 minutes for Holston Valley Medical Center and 194 minutes for Bristol Regional Medical Center. Statistics for University of Tennessee hospital and Fort Sanders Medical Center, both in Knoxville, are 274 and 262 minutes, while Vanderbilt University Medical Center’s figure is 220 minutes.

“I have believed from two years ago, which is confirmed by the data, that if we focus on stabilizing our nursing staff, the experience of the patient will improve,” Levine said.

“This is why our ER throughput data, while still not where we want it, outpaces the national average and most of our comparable peers.”

More financial and patient data

Ballad had net patient service revenue of $2.41 billion and total revenue of $2.526 billion for the year, compared to $2.519 billion in total expenses. That left it with $6,651,060 in operating income.

A year ago, the system reported its first-ever annual operating loss. It had $2.27 billion of net patient service revenue and $2.353 billion total revenue in fiscal 2023 versus $2.388 billion of expenses for a $34,576,090 loss.

The gap between net patient service revenue and total expenses was very similar in 2023 and 2024. Those revenues were $113 million less than expenses in 2024, versus $115 million less in 2023.

The figure was also very similar in fiscal 2022, while it was even higher at the height of the COVID-19 pandemic when net patient service revenue was $161 million less than expenses in fiscal 2021 and $132 million less in fiscal 2020. COVID relief funds in those years (FY 2020-2022) helped Ballad post overall positive operating incomes ranging from $18.9 million to $28.7 million.

Ballad reported 54,186 surgical cases for fiscal 2024, down from 56,185 in fiscal 2023. Births in Ballad hospitals, though, were the highest since 2020, at 6,392. That’s up a little more than 2% from the prior year.

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