Ballad Health merger is preventing rural hospital closures in region, CEO says

Health officials say Tennessee has the second highest rate of rural hospital closures in the nation, behind only Texas. 

On Wednesday, it was reported that yet another rural hospital in Middle Tennessee is expected to close.

Since 2012, ten of these facilities have shut down across the state.  

A financial analysis, first reported by the Tennessean, concluded that at least fifteen other facilities are at high risk of closing because they’ve lost millions of dollars between 2015 and 2017. 

Ballad Health CEO Alan Levine told News Channel 11 that the merger of our region’s two health care systems is preventing that fate for several local hospitals. 

“There were three or four hospitals in immediate jeopardy of closure in the two years prior to the merger,” Levine said. “We predicted this was going to happen, and we went to the state and said ‘if you permit us to bring our assets together and eliminate the wasteful duplication, we can use those dollars to sustain access which otherwise would’ve disappeared.'” 

When the state approved the merger of Wellmont Health System and Mountain States Health Alliance in January 2018, Ballad agreed not to close any rural hospitals for at least five years. 

“It’s a five-year commitment to keep them open, our goal is to keep them open forever,” Levine said. 

Levine said Ballad will need to achieve healthy operating margins at their three main metropolitan hospitals to be able to offset losses at rural facilities. Right now, he said one of their main concerns is to flip the financial outlook for Kingsport’s Holston Valley Medical Center, which lost more than $40 million from 2015 to 2017. 

Challenges remain, in part, because a push by the federal government to divert patients to lower cost settings has decreased revenue-driving hospital admissions in rural areas already facing population decline, according to Levine. 

Meanwhile, he said staff and capitalization costs are rising. 

“At some point you can’t afford to do it anymore and that’s the failure of the rural business model,” said Levine. 

He said that challenge is compounded by high rates of poverty and low rates of private insurance coverage in rural areas. 

In Ballad Health’s service area, Levine said about 70 percent of patients are uninsured or on Medicare or Medicaid. 

“There hasn’t been an increase in hospital reimbursement under TennCare in over ten years,” Levine said. “So for every patient that’s covered under TennCare that we treat, we lose money on it.” 

Levine said he supports efforts to expand TennCare coverage to cut down on the cost burden for rural hospitals. 

Republican Governor Bill Lee has been reluctant to expand Medicaid but said Thursday that something needs to change, “It’s an old model. It doesn’t really work, and we see that particularly in rural Tennessee, so we have to work to lower the cost of healthcare so that every Tennessean has access to quality healthcare they can afford.

Lee said a Healthcare Modernization Task Force was recently created to find innovative ways to cut down on costs. 

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