The University of Arkansas for Medical Sciences and Baptist Health of Little Rock, which recently announced plans to work together on several clinical and academic efforts, both reported millions of dollars in operating losses for their most recent fiscal year.
Baptist Health reported an operating loss of $9.2 million for 2016, which mainly was tied to the opening of its ninth hospital, Baptist Health Medical Center-Conway in September 2016, said Brent Beaulieu, vice president of financial services at Baptist.
In the projections for the $150 million hospital, “we knew we would have some startup cost with that,” he said. “So part of what you’re seeing in ’16 is some of that startup costs that we’re incurring.”
Baptist Health had an operating income of $51.2 million in 2015.
Meanwhile, UAMS’ unaudited operating loss was $86.4 million for its fiscal year that ended June 30. The operating loss doesn’t include items such as state appropriations and investment gains. When the $64.1 million in nonoperating revenue is factored in, the loss shrinks to $22 million for the fiscal year. Most of the loss came from a rise in compensation and benefits, supplies and other services from the previous year.
Stephanie Gardner, interim chancellor of UAMS, said the deficit is a concern for UAMS, but it is pushing forward and investing in its mission of education, research and patient care.
“We’re a growing institution and these are challenging times,” she said. “But we’re doing a lot of things to continue to advance the mission.”
UAMS and Baptist have announced several plans to collaborate in a variety of areas that include adding residency spots and working together to treat Medicare and Medicaid patients. “The Baptist Health collaboration is an example of where we’re trying to expand our reach,” Gardner said.
A UAMS feasibility study is also considering opening a college of dental medicine. A building for that could cost between $50 million and $80 million.
“We are now going to be exploring how do we pay for that and whether or not that’s consistent with all the other things we want to do,” she said.
Increased Pay, Benefits
Both Baptist and UAMS increased spending on compensation and benefits.
UAMS devoted $987.9 million to those costs for the fiscal year that ended in June, up $109.3 million (12.4 percent) from the fiscal year that ended in 2015. UAMS is the state’s largest public employer with more than 10,000 workers.
UAMS added employees because of the increased patient volume it has seen, said William Bowes, its CFO. Revenue from patients has jumped 16.2 percent to $1.2 billion since June 30, 2015.
Baptist Health also saw its expenses for salaries, wages and benefits increase, rising 11.3 percent to $312.5 million for the first six months of this year compared with the same period in 2016.
Beaulieu said Baptist Health added 450 employees to its Conway hospital and has expanded services and added employees in other Arkansas cities.
It had 8,250 employees in 2016, up 2 percent from the previous year.
For the first six months of this year, Baptist’s unaudited operating loss was $15.4 million, compared with an operating income of $908,000 for the same period a year ago. Its financial statement attributes nearly all of the loss to costs associated with the Conway hospital.
Cost-Cutting
Bowes said UAMS has made several changes to save the university money. In the current fiscal year, it is examining its patient revenue cycle and looking particularly at the coding of bills so that insurers pay for everything they should.
“We’re looking at denials and how we’re managing denials,” Bowes said. “And how we can reduce denials.”
Bowes said UAMS could see an increase in revenue of between $10 million and $40 million. “We think it will be significant,” Bowes said.
Other measures have also cut costs. In August 2015, UAMS joined Upper Midwest Consolidated Services Center of Irving, Texas, which does group purchasing. “At the time we got into it, we were almost guaranteed $1.5 million in savings, and that was just by converting existing contracts to their contracts,” Bowes said. He said Midwest used the same suppliers as UAMS. And by using Midwest for other services, UAMS has saved almost $5 million over the past two years, Bowes said.
About a year and a half ago, UAMS also reduced the number of printers it had on campus. It seemed as if all employees had their own printers, with each printer being a different brand.
“We were spending a fortune” on printer supplies, Bowes said. UAMS opted for a central printer for several employees.
“We thought we’d save $1 million,” Bowes said. “We’re already up to $1.7 million.” And more printer changes in other UAMS buildings are in the works.
Beaulieu said Baptist is constantly searching for efficiency.
“We want to make sure that we’re taking our limited resources and focusing where it really matters, and that’s at the bedside and taking care of patients instead of doing administrative things behind the scene.”
Arkansas Works
UAMS and Baptist Health said their financial health has improved because of the Affordable Care Act.
Arkansas accepted federal Medicaid expansion money and used it to buy private insurance for households with incomes just above the poverty line — the working poor who earn too much to qualify for traditional Medicaid but too little to afford health insurance.
Bowes is concerned about the changes coming Jan. 1 to the program, now known as Arkansas Works.
The modifications call for capping the eligibility at 100 percent of the federal poverty level, down from 138 percent, beginning on New Year’s Day. That means that of the 315,000 people on Arkansas Works, about 60,000 who earn more than $11,880 a year for an individual or $24,300 for a family of four will be removed from the program.
Bowes said he’s not convinced that everyone who is moved off of Arkansas Works will obtain insurance somewhere else.
“We don’t know how that’s going to impact us yet,” Bowes said.
University of Arkansas for Medical Sciences
Years ended June 30 (in thousands)
| 2017* | 2016 | 2015 | |
| Total operating revenue | $1,446,158 | $1,427,635 | $1,274,336 |
| Total operating expenses** | $1,532,579 | $1,432,604 | $1,337,064 |
| Operating loss | $86,421 | $4,969 | $62,728 |
| Total nonoperating revenue | $64,079 | $17,236 | $32,678 |
| Income or loss | -$22,342 | $12,267 | -$30,050 |
| Other changes in net position# | $1,306 | $6,272 | $3,991 |
| Increase (decrease) in net position | -$21,036 | $18,539 | -$26,059 |
* Unaudited
** Includes depreciation and amortization
# Changes in net position include capital gifts and appropriations, federal grants for capital projects and interagency disposition.
Source: UAMS
Baptist Health of Little Rock
January-June (in thousands, unaudited)
| 2017 | 2016 | |
| Total operating revenue | $521,173 | $495,977 |
| Total operating expenses* | $536,576 | $495,069 |
| Operating income or loss | -$15,403 | $908 |
| Total other income** | $26,301 | $6,628 |
| Revenue over expenses | $10,898 | $7,536 |
| Additional Information | ||
| Baptist Health Medical Center-Conway | ||
| Operating loss | $15,017 | $5,264 |
* Includes depreciation and amortization
** Includes investment returns
Source: Baptist Health’s unaudited consolidated financial statements and statistics for second quarter ended June 30, 2017
