Hard Year Adds Pain for Small Hospitals in Arkansas

Hard Year Adds Pain for Small Hospitals in Arkansas
Bo Ryall, CEO of the Arkansas Hospital Association, fears that after another bad year for the state's smaller hospitals, some rural facilities may be inching closer to closing. (Karen E. Segrave)

2018 was not a good year for smaller hospitals in Arkansas.

“It’s been a tough year for them financially,” said Bo Ryall, president and CEO of the Arkansas Hospital Association.

Ryall worries that a few small rural hospitals are inching closer to closing, he said, but he declined to name them.

In February, the 25-bed De Queen Medical Center closed, leaving behind a pile of debt and lawsuits for its owner.

Sevier County Judge Greg Ray hopes to build a new hospital to take its place. On Oct. 8 voters will be asked to approve a 1% sales tax to maintain and pay for a proposed 12-bed hospital that is expected to cost $18 million.

The hospital will employ about 100 people and be used to attract businesses to the county of about 17,000, according to a fact sheet about the election provided by Ray’s office.

“Lack of emergency room and inpatient health care could be a factor that prevents businesses and industries from looking to locate in Sevier County,” the sheet said.

Other hospitals have also struggled.

Allegiance Health Management Inc. of Shreveport this year stopped managing River Valley Medical Center in Dardanelle. For the fiscal year that ended June 30, 2018, River Valley reported a loss of $2 million on net patient revenue of $11.2 million. The previous year it reported a loss of $1 million on net patient revenue of $12.4 million.

On June 1, Conway Regional Health System began managing the hospital, now known as Dardanelle Regional Medical Center.

But more bad news followed Allegiance. In August, it closed North Metro Medical Center in Jacksonville and converted it to a psychiatric facility called Freedom Behavioral Hospital of Central Arkansas.

North Metro reported a loss of $9.2 million on $18.2 million in net patient revenue for its fiscal year that ended June 30, 2018. The previous fiscal year, North Metro had a loss of $5.3 million on $25.3 million in patient revenue.

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However, larger hospitals in Arkansas, and across the country, did better in 2018. And Moody’s Investors Service reported in April that profitability at nonprofit hospitals held steady during 2018 after two years of declines.

Nonprofit hospitals were helped by consistent patient volume, mergers and acquisitions and improvements in obtaining payment for delivering patient services, Moody’s said in an April news release. Cost-cutting initiatives and smaller increases in drug prices also contributed to the financial health of the hospitals, Moody’s said.

Nevertheless, hospitals’ bottom lines were hurt by flat patient volume, a shortage of nurses and the high cost of specialty drugs, Moody’s reported.

Arkansas Business ranks hospitals and medical centers by net patient revenue based on information provided by the hospitals or annual Medicare cost reports, most of which are unaudited.

Rural Hospital Struggles

While several hospitals on this year’s list reported higher patient revenue than the previous year, others had to make do with less.

Magnolia Regional Medical Center saw its revenue slip by a little more than $550,000 to $20.2 million for its fiscal year that ended Sept. 30, 2018. Even so, its net loss of $1.9 million was smaller than the $2.6 million it lost the previous fiscal year.

Magnolia Regional is expected to book a $1 million loss for its fiscal year that ends Monday, said Rex Jones, CEO of the hospital. One of the hospital’s doctors stopped delivering babies during the year, which cut into revenue, Jones said.

But he said the hospital expects to see a net income in fiscal 2020 thanks to an increase in revenue from payers. He also plans for the hospital to expand services and is recruiting an orthopedic specialist.

Jones and other hospital administrators are still happy that Arkansas expanded Medicaid by buying private insurance off the health care exchanges established under the Affordable Care Act. The Medicaid expansion plan, originally called the private option, is now called Arkansas Works.

Jones said he’s seen a “bit of an uptick” in uninsured patients since Congress ended the ACA’s individual mandate in January. The mandate required most people to buy health insurance or face a penalty. Now, Jones said, a bigger problem is people who have insurance plans with deductibles too large for them to meet.

Uncertainty about the future prospects of the ACA makes it difficult to plan, he said. In December 2018, a federal judge in Texas struck down the ACA as unconstitutional but left it in force as the case moves through the appeals process.

UAMS Revenue Rises

The University of Arkansas for Medical Sciences Medical Center in Little Rock has seen growth in its outpatient services, said Amanda George, UAMS CFO and vice chancellor for finance.

For its fiscal year that ended June 30, 2018, the hospital reported $836.7 million in net patient revenue, the most in the state, up nearly $90 million from the previous year. It also had net income of $48 million, which is used for education and research.

The number of surgical cases rose about 13% year over year, said Jake Stover, the associate vice chancellor for finance. And UAMS’ kidney and liver transplant surgeries were up 25% over that period.

Meanwhile, its Level 1 trauma cases also grew by 30% since June 30, 2017, Stover said.

UAMS could handle more surgeries, but its inpatient beds are full, he said. “We’re trying to accommodate the most complex inpatient cases as much as possible,” Stover said. “Every week we’re facing maximum capacity.”

He said one of UAMS’ challenges is operating more efficiently to create more capacity. “So until we have a solution on creating more capacity in the future, we’re really just trying to work with what we’ve got,” Stover said.

St. Bernards Grows

St. Bernards Medical Center in Jonesboro reported that its patient revenue rose 5.1% to $320.2 million for its fiscal year that ended Sept. 30, 2018.

Ben Barylske, chief financial officer of St. Bernards Healthcare, attributed the increase in revenue to adding two neurosurgeons in early 2018 and offering new services.

“We’ve also seen a double-digit increase in our outpatient volume,” Barylske said.

He said St. Bernards has joined the national trend toward outpatient procedures, and its patients now split about 60% outpatient and 40% inpatient. A decade ago, he said, St. Bernards had “significantly” more inpatients than outpatient procedures.

Chris Barber, St. Bernards CEO, said advancements in technology have helped doctors perform surgeries that don’t require overnight stays.

St. Bernards should see another rise in patient revenue in the next 12 months. It expects to open in December a $102 million medical tower on the hospital campus. Patients are expected to move into the 245,000-SF building on Dec. 13.

Barylske said St. Bernards is paying for the majority of the tower project with its operations. For the fiscal year that ended a year ago, St. Bernards had $41.9 million in net income, up from $32.4 million in fiscal 2017.

The new tower should make surgical operations more efficient because all of the preoperative and post-anesthesia care units will be adjacent to the 14 surgical rooms on one of the tower’s floors.

“Continued growth is what we’re pushing for,” Barylske said.