When Consolidation Isn’t About Pricing Leverage: How Ballad Health Merged Two Systems to Reduce Costs and Reinvent Rural Healthcare

In the United States, more than 90% of the landmass is rural. And
in rural communities from coast to coast, the challenges in
delivering healthcare can be very different than the urban and
suburban centers that get most of the attention.

There’s untapped opportunity in reimagining healthcare business
models and the technology that will enable them in rural areas,
according to Ballad Health CEO, Alan Levine. And he should know –
in the three years since Ballad was formed by merging Wellmont
Health System and Mountain States Health Alliance, it has had
exceptional success rewriting the rules of rural
healthcare.

Among some of its visible and measurable improvements, Ballad
Health has decreased pricing by an average of 17% for urgent care
and other physician-based services, cut its mortality rate for
trauma in half, reduced low acuity admissions by 16,000 per year,
and saved the region in which it operates more than $200 million
per year in healthcare costs. And it’s doing this with only a 20%
commercial payer mix.

In this episode of Healthcare is Hard, Alan talks to Keith
Figlioli about how Ballad Health is achieving these milestones by
better understanding the dynamics of rural healthcare and making
big structural changes to address them. He shares specifics about
many of the changes Ballad has already implemented and his plans
to continue down this revolutionary path. Their conversation
covers topics including:



Trading competition for regulation. In the areas of
Tennessee, Virginia, North Carolina and Kentucky where Wellmont
and Mountain States operated, only 50% of hospital beds were
occupied and rates were declining. To survive and give it
stability, Wellmont looked to be acquired by an outside system,
until Mountain States stepped in with a unique solution to
merge. But the FTC opposed the merger every step, forcing
legislation in Virginia and Tennessee followed by approval from
both states’ governors, attorneys general and health
commissioners. Against significant odds, the merger was
approved with Ballad agreeing to cap pricing and price
increases at a rate well below the hospital consumer price
index (CPI).


Eliminating duplication. Many of the structural changes
at Ballad Health revolved around reducing duplicate services.
Intense competition between Mountain States and Wellmont forced
one system to always keep up with the other. As a result, a
small town like Greenville, TN had two hospitals a little over
a mile apart which had both lost $70 million at 30% capacity in
the years leading up to the merger. One of Ballad’s key goals
is to implement a more rational approach and business model
that makes sense for rural areas.


Transforming from hospitals to health improvement. While
reducing duplication, Ballad is thoughtfully applying the
resources it saves to improve the health of its communities
upstream. For example, in one region where it consolidated
hospitals, it converted one building into a residential
facility for women who are pregnant, homeless, drug addicted or
have other needs. It gives these women housing security, food
security and resources to help ensure their babies are born
into a healthy situation.


The new competitive landscape. Alan says his biggest
competition is no longer the health system or physician group
down the street. It’s the tech-enabled company across the
country or a retail chain that could provide primary care. And
unlike health systems in urban areas that can offset the loss
of a patient with populated growth, there’s nothing to replace
that loss in a rural area. This is why technology will play a
significant role in the transformation of rural healthcare.



To hear Alan and Keith talk about these topics and more, listen
to this episode of Healthcare is Hard.