Moody’s Investor Services has upgraded the credit rating for Ballad Health to A3 from Baa1, the highest rating experienced by Ballad Health or its predecessor organizations by Moody’s.

The upgrade follows a recent report by Fitch Credit Ratings affirming Ballad Health’s “A” rating, according to a health care system news release.

“Ballad Health’s governance considerations continue to be favorable with a tenured management team,” Moody’s stated.

“The Board (of directors) is reflective of the community and has diverse competencies,” the release said.

Ballad Health is an integrated health care system serving Greene and 28 other counties of Northeast Tennessee, Southwest Virginia, Northwest North Carolina and Southeast Kentucky. Ballad Health operates a network of 21 hospitals,

Moody’s cited strong governance under its Environmental, Social and Governance framework for consideration in credit ratings.

Moody’s added: “Management has demonstrated the ability to operate effectively within the limits of regulation … and continues to demonstrate the value created by the merger for the service area …”

Citing ongoing challenges for not-for-profit hospitals, which face uncertainty with patient volumes and revenue due to the COVID-19 pandemic, Moody’s pointed to continued population decline as a risk in the Ballad Health service area, in addition to the increased shift of payer mix from commercial to Medicare, Medicaid and other governmental payers.

Ballad Health’s inpatient payer mix is one of the most challenging in the nation, with less than 20% of inpatients having commercial health insurance, according to the health care system.

Moody’s attributed part of Ballad Health’s volume decline to a “decrease in readmission rates as quality metrics improve and care shifts to outpatient and lower cost settings.”

Ballad Health has publicly reported its efforts to reduce lower-acuity admissions and readmissions and divert patients to lower-cost sites for care as part of its quality improvement initiatives, in addition to improving 13 out of 17 agreed-upon quality measures since its inception in 2018.

Most recently, Ballad Health was performing in the top ranking of American hospitals on five quality measures, making it among the best-performing in the nation, health care system Chairman and Chief Executive Officer Alan Levine said in the release.

“Ballad Health has remained focused on delivering high-quality care, reducing the cost of health care and being good stewards of our resources,” Levine said. “We are pleased Moody’s cited our improved quality and lower cost of care, because it demonstrates that our strategy of reducing unnecessary duplication, investing in needed services and using our scale and resources to expand access can work.”

Levine said Balllad Health officials already know “that we have reduced the cost of health care by more than $200 million annually, which benefits our employers, patients and taxpayers.”

“While the majority of credit ratings changes for health systems in the United States have been negative and downgrades during the last year, we are proud that against the backdrop of a negative outlook for the industry, Ballad Health has emerged with the highest credit rating it or its predecessor organizations have ever had,” Levine said. “To accomplish this even in the middle of a global pandemic is certainly unusual and rare, but it underscores the effectiveness of our focus on execution of our plan.”

Levine said that since March 1, 2020, Moody’s “has upgraded only five health systems, while downgrading more than five times that many. So this action is truly remarkable for Ballad Health and for our communities.”

“This upgrade to an A3 is historic for Ballad Health and its predecessor organizations, as none had ever had an “A” rating from Moody’s,” said Ballad Health’s lead independent member of its board of directors, David Lester.

“As we celebrate this milestone, our board also recognizes that Ballad Health has reduced the cost of health care, been effective stewards of our financial resources, has dramatically improved access to care and measurably improved quality. All these things combined are good news for the people we are entrusted to serve,” Lester said.

More information about Ballad Health is available at www.balladhealth.org.

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