Arkansas Hospitals Report Healthier Results in 2015

2015 seemed to be a good year for Arkansas hospitals.

On the annual checkup of hospitals, 61 out of the 86 hospitals on this year’s list of the state’s largest hospitals and medical centers — 71 percent — reported making money. That compares with 62 percent on the list that ran in 2013, just before the main features of the Patient Protection & Affordable Care Act took effect.

Having fewer uninsured patients has been key to the improved financials. In 2015, 9 percent of Arkansas’ population was uninsured, down from 15 percent in 2013, according to the Kaiser Family Foundation.

The reduction in uninsured patients came in part as a result of the state’s hybrid Medicaid expansion plan first known as the “private option” and now as Arkansas Works. But the Medicaid expansion hasn’t cured all the financial headaches for all hospitals, especially the smaller, rural ones.

Of the 16 hospitals that had less than $10 million in net patient revenue, 11 reported losing money.

“There are hospitals in the state that continue to have financial problems,” Paul Cunningham, executive vice president of the Arkansas Hospital Association, told Arkansas Business. “I think it’s erroneous to presume that all uncompensated care is gone. It’s also erroneous to presume that the private option had an equal impact on every hospital.”

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But the Medicaid expansion has helped most hospitals. St. Bernards Medical Center reported net income of $30.6 million on patient revenue of $270.4 million for the fiscal year that ended Sept. 30, 2015. The previous year, the Jonesboro hospital had income of $20.5 million and patient revenue of $267.2 million.

The hospital had seen growth in inpatient and outpatient services, Harry Hutchison, vice president and chief financial officer for St. Bernards Healthcare, said in an email response to questions from Arkansas Business.

“The Private Option/Arkansas Works has certainly had a positive financial impact on St. Bernards as well as other hospitals and providers throughout the state,” Hutchison said.

Still, other hospitals saw their bottom lines dragged down by factors that didn’t have anything to do with uncompensated care.

Magnolia Regional Medical Center, for instance, reported a $3.1 million loss on patient revenue of $20 million for the fiscal year that ended Sept. 30, 2015. CEO Margaret West blamed the loss on a $1.6 million settlement with Medicaid paid in 2015.

West said the hospital had to repay Medicaid payments “because of some changes in what we originally thought we could bill versus what Medicaid, after five years, said we should have been billing.”

In addition, the balance sheet reflected depreciation of about $1.3 million for the value of its hospital, which is less than seven years old. It also didn’t help that the number of patients had declined, she said.

Without those two factors in 2015, Magnolia Regional would have had a net operating income of about $500,000.

West said the hospital is being hurt because it is small and in a rural area. “We have a lot of people that choose to go the larger facilities like Texarkana and El Dorado because we may not offer some of the services that they have,” she said.

The fiscal year that ended Friday looks “much better,” West said. “We haven’t had any calls for paying back money for previous years.”

West announced earlier this year that she will retire in December after 30 years at the hospital. Last week, Magnolia Regional said she will be succeeded by Rex Jones, now the administrator at Bradley County Medical Center in Warren. His last day there is Nov. 18.

BCMC said Thursday it had just learned of Jones’ notice and will start looking for his replacement.

DeWitt Hospital & Nursing Home also is feeling the pain of being a rural hospital. It lost $935,000 on net patient revenue of $7.6 million in 2015.

“For most rural areas, … people aren’t lining up to come and live and work here,” said CEO Philip Hanna, who has been at hospital less than three months. “So that has an effect on everything you’re doing. It has an effect on recruitment, an effect on retention of people.”

He said another blow to the hospital’s bottom line is the amount of reporting hospital regulators require.

“It can turn out to be the impact of dozens of people,” Hanna said. “And when you run a small hospital, … we don’t have the range of services that allows us to generate the charges that a larger institution can generate.”

Those charges allow the larger hospitals to have teams of people to handle the required reporting, he said.

Hanna said he would rather focus on improving patient care than “put the emphasis on collecting data that are sent to regulators that then get filed and really nothing is done with it.”

Conway

One of the biggest changes in the Arkansas hospital landscape occurred in Conway.

In August 2015, Conway Regional Health System partnered with CHI St. Vincent in a management agreement.

And last month, the $150 million Baptist Health Medical Center-Conway started taking patients. The hospital opened with a fully functioning emergency department and an eight-bed intensive care unit. It also opened 24 of its eventual 88 inpatient beds on the first day, and more beds will become available as the patient volume increases.

Conway Regional Health System CEO Matt Troup said he thinks Conway, with a population of about 65,000, is big enough to support two hospitals.

“But it’s going to take time to get there,” he said. “We certainly see opportunities to grow, but it takes time to recruit patients, develop the medical staff and develop the referral network that makes Conway a destination city.”

Troup said his plan to compete includes focusing on the medical staff under a model where the doctors help the administration manage the hospital and make operational decisions.

In addition, Conway Regional will add more medical staff and turn the hospital into a regional provider of care.

“We know with another hospital in town, we’ve expanded our reach to be more accommodating to other referral sources,” Troup said.

When Troup started at the hospital at the time of the CHI announcement, the staff had a lot of questions about the partnership with CHI St. Vincent and Baptist Health’s impending arrival.

“A lot of people didn’t know if they should fear St. Vincent more than Baptist,” he said. “What we had focused on is really basic. It’s earning trust and engaging staff and building that up.”

For the fiscal year that ended Dec. 31, Conway Regional Medical Center reported net income of $2.4 million on patient revenue of $132.5 million.

Steven Rose, the chief financial officer for Conway Regional Health System, said the hospital kept a close eye on expenses, which helped give it a profit in 2015, and that is expected to continue in 2016 too.

Also the profit was a result of the “higher volumes and then also increased coverage under the private option, which has continued to help us as it has many hospitals,” Rose said.

Most Profitable Hospitals
Ranked by net income

Least Profitable Hospitals
Ranked by net loss

Sources: The hospitals, tax returns and most recent Medicare cost reports available