Fitch affirms Ballad's 'A' credit rating

This credit rating affects Ballad Health’s series of debt instruments, as well as the organization’s planned refunding of variable rate demand bonds expected to be issued this summer. The new issue, up to $176 million, is designed to reduce existing cost of credit, saving Ballad Health several millions of dollars annually in interest. Ballad Health will not be assuming any incremental new debt as it restructures existing higher interest debt, replacing it with lower interest vehicles and utilizing appropriate tax-exempt financing for eligible capital expenditures.

“Despite persistent pressure and disruption from the pandemic, Ballad has maintained its operating and financial profile throughout, demonstrating considerable credit resiliency,” the Fitch report said. “As with most in the sector, Ballad is experiencing escalating pressure on operating expenses related to staffing shortages, supply chain issues and inflation. These pressures mounted in fiscal 2022 as Ballad faced simultaneous headwinds of added labor costs, general inflationary pressure and the Omicron variant surge at the end of 2021.”

“Ballad Health has prioritized investing in our workforce as the labor shortages became more intensive over the last two years,” Ballad Health Chairman and Chief Executive Officer Alan Levine said. “We have invested an additional $120 million into base wages for our nurses and front-line caregivers, and while the shortage remains severe, it has been clear to the rating agencies that our efforts have begun to show some stabilization.”

In addition to investing in wage increases for caregivers, Ballad Health also provided more than $20 million in special appreciation bonuses for all team members and invested $10 million into the creation of the new Appalachian Highlands Center for Nursing Advancement at East Tennessee State University. This center is designed to collaborate with all regional nursing programs to enhance the pipeline of nurses and nursing support professionals for the region. The creation of the center attracted the attention of Tennessee Gov. Bill Lee and the Tennessee Legislature, which provided $1 million of annual funding and created, by statute, the Tennessee Center for Nursing at ETSU.

“The Board of Directors of Ballad Health remains focused on ensuring our most important asset — our team members — is taken care of as we mitigate the effects of the national labor shortages,” Lead Independent Director David Lester said. “This is why we authorized management to invest more than $30 million to expand child care options for our team members throughout the region with the addition of 13 new child care centers. And it’s why we invested in expansion of the Employee Assistance Program. We know that in order to achieve our mission, we must ensure a stable health care delivery workforce.”

“The Fitch ratings recognize that the labor and inflationary pressure on Ballad Health is not unique,” Levine said, “but they also recognize that we have a plan for dealing with it, and based on our past performance, they have confidence we can execute on our plan. Our plan was developed with input from our team members, as we all — together — want to ensure they have the resources they need to provide the best possible care.”

According to a recent national survey of nursing leaders, 92% of respondents indicate the nursing shortage will intensify in the coming 18 months, while other reports predict that more than 1 million new nurses will be needed by 2030.

“We believe the credit rating agencies appreciate our candor about the problem and that our board of directors has worked with us to invest in our efforts to retain and recruit,” Levine said. “Most importantly, they trust our team based on our performance, and I have no doubt the 13,000 people who make up the Ballad Health family will continue to achieve the expectations of our stakeholders.”