Tennessee tries to rein in Ballad’s hospital monopoly after years of problems

KFF Health NewsSep 18 2024

Ballad Health, an Appalachian company with the nation's largest state-sanctioned hospital monopoly, may soon be required to improve its quality of care or face the possibility of being broken up.

Government documents obtained by KFF Health News reveal that Tennessee officials, in closed-door negotiations, are attempting to hold the monopoly more accountable after years of complaints and protests from patients and their families.

Ballad, a 20-hospital system in northeastern Tennessee and southwestern Virginia, was created six years ago through monopoly agreements negotiated with both states. Since then, Ballad has consistently fallen short of the quality-of-care goals, according to annual reports released by the Tennessee Department of Health.

Despite these failures, Tennessee has given "A" grades and annual stamps of approval to Ballad that allow the monopoly to continue. This has occurred, at least in part, because Ballad is graded against a scoring rubric that largely ignores how its hospitals actually perform.

Now that may change. In an ongoing renegotiation of Tennessee's monopoly agreement, the state health department has pushed for an eightfold increase in the importance of hospital performance, making it "the most heavily weighted" issue on which Ballad would be judged, according to state documents obtained through a public records request. The negotiations appear to be the state's most substantial response to residents who sound alarms about Ballad hospitals.

Dani Cook, a community organizer who has led efforts against Ballad for years, including an eight-month protest outside a Ballad hospital in 2019, said a renegotiated monopoly agreement could be a first step toward progress that locals have long sought, but only if it is enforced by the state.

Cook also questioned why Tennessee took years to prioritize something as fundamental as good care.

"That's what baffles me about this entire relationship: Ballad seems to never be held to account," Cook said. "And that's why, when I look at this, I say, 'Oh that sounds great.' But let's see what happens."

Ballad Health was created in 2018 after Tennessee and Virginia officials waived federal anti-monopoly laws and approved the nation's biggest hospital merger based on what's called a Certificate of Public Advantage, or COPA, agreement. Despite the warnings of the Federal Trade Commission, the region’s rival hospital systems became a single system without competition. Ballad is now the only option for hospital care for most of about 1.1 million people in a 29-county region at the nexus of Tennessee, Virginia, Kentucky, and North Carolina.

In an effort to offset the perils of the monopoly, Ballad was required to enter agreements with the states that set expectations for the company and limited its ability to raise prices or close hospitals. Each year, Tennessee grades Ballad against this agreement on a 100-point scale. If the company performs poorly, Tennessee could in theory revoke the COPA, and then enforce a plan to split Ballad into separate companies, according to the monopoly agreement.

The new negotiation documents offer a snapshot of how Tennessee hopes to reshape this agreement, detailing more than a dozen changes the health department proposed in February and a counterproposal from Ballad in May. It is unclear if or how these proposals may have changed in the subsequent months.

Tennessee Department of Health spokesperson Dean Flener said the agency would not comment on Ballad or the ongoing negotiations.

In a written statement, Ballad did not comment directly on the negotiations but said the company "enthusiastically agrees that the most important thing to our patients is the quality of care they receive." The company said in 2023 that its hospital quality slipped due to the pressure of the coronavirus pandemic and that it was in the process of rebounding.

"We strongly support a shared focus on quality of care as it relates to the COPA," Molly Luton, a Ballad spokesperson, said in the statement.

Historically, quality of care has been just a small part of how Ballad is held accountable. Twenty percent of Ballad's annual COPA score comes from measurements of hospital quality, but the company gets full credit on three-fourths of those measurements if it reports any value — even a terrible one. Only 5% of the annual score is determined by real-world hospital performance.

If quality was weighted more, Ballad would have scored much worse in past years. Annual reports released by the Tennessee Department of Health over the last two years show that Ballad failed to meet more than 74% of the state’s quality-of-care benchmarks, including some about mortality rates, readmission rates, emergency room speed, surgery-related infections, and patient satisfaction.

Under Tennessee's proposed changes, all these metrics would matter much more. But Tennessee would also lower the overall standards for Ballad's monopoly and ease a charity care obligation that Ballad has repeatedly not met, according to the negotiation documents. Ballad has said it hasn't met the charity care obligation because changes to Medicaid programs have left fewer patients uninsured and in need of charity.

The documents show that:

• Tennessee has proposed increasing the share of Ballad's annual score that is attributable to real-world quality of care from 5% to 40% and no longer giving Ballad any points for merely reporting quality statistics. In a counteroffer, Ballad proposed raising this percentage to 34%, with some points still awarded to the company just for reporting.
• Tennessee proposed lowering the minimum overall score that Ballad needs to obtain each year for its monopoly to be considered a "clear and convincing public advantage." If Ballad falls below this threshold, the COPA agreement could be modified or "terminated." Tennessee wants to lower the threshold from 85 out of 100 to 75. In its counteroffer, Ballad proposed 70.
• Tennessee would reduce or weaken a requirement for Ballad charity care spending that is largely moot. Ballad has been required to provide more than $100 million in free or discounted charity care to low-income patients each year under the current monopoly agreement, but it has failed to do so five years in a row, falling short by about $194 million in total. Tennessee has waived the requirement each year.

Cook, who described the new documents as a rare glimpse into closed-door dealings that Ballad patients never get to see, said it was striking to witness the company push for lower standards.

"Why would they be pushing back on improving the quality of care that people receive?" Cook said. "If they are really among the nation’s best — because that's what they tell the entire region — why do you need the standards lowered?"