COVID-19 Slashes UAMS Profits

At the end of February 2020, the University of Arkansas for Medical Sciences in Little Rock had a surplus of $22 million. But then COVID-19 surfaced.

At the end of the fiscal year on June 30, UAMS, which includes the state’s only teaching hospital, reported a loss of $15.7 million. The loss could have been greater if UAMS hadn’t received $28.3 million in CARES Act funds to help offset the revenue lost because of patients avoiding medical care and the increased expenses needed to fight the pandemic.

For the fiscal year that ended June 30, 2019, UAMS had a $39.8 million surplus.

Through the first six months of its current fiscal year, UAMS has reported a surplus of $23.9 million, but that includes $24.2 million from the federal Coronavirus Aid, Relief & Economic Security Act, according to UAMS’ audit, done by KPMG LLP of Dallas.

The CARES Act funding has been “a tremendous help” to hospitals in Arkansas and around the country, said Bo Ryall, the president and CEO of the Arkansas Hospital Association. The money has been “instrumental for hospitals’ survival through COVID and to help out with increasing costs having to deal with COVID-19.”

After the Arkansas Department of Health banned elective procedures in April and into May, hospitals’ revenue plummeted. The American Hospital Association projected U.S. hospitals and health systems would lose about $323.1 billion between March and December 2020 as a result of the pandemic.

At UAMS, the combination of decreased revenue and increased expenses “had some pretty dramatic impacts on our financials for March, April and May,” Amanda George, vice chancellor for finance and chief financial officer of UAMS, told Arkansas Business last week.

UAMS will benefit, however, from several multimillion-dollar projects that have recently opened or will soon open to serve patients and boost revenue.

$25K Signing Bonus

George said UAMS is always working to control expenses, but the pandemic caused expenses to increase. For the fiscal year that ended midyear 2020, UAMS’ operating expenses were $1.7 billion, up 5% from the previous year. Some of the rise in expenses was tied to increased costs for equipment related to COVID and labor costs for overtime and contract labor, George said. “In recent months keeping nurses on staff has been a challenge,” she said.

Late last year, the demand for nurses soared across the country, and some out-of-state providers dangled pay packages worth $7,000 a week to attract travel nurses. “So we’ve had to get creative on how we recruit and retain our nursing staff,” George said.

The recruitment strategy includes offering a $25,000 signing bonus as well as an $18,000 referral bonus for current UAMS nurses who refer a nurse who is hired. “We focus our recruitment efforts on promoting the things that UAMS does well and that set us apart from other hospitals, areas including our Level One Trauma Center, orthopedics, neurosurgery and our Winthrop P. Rockefeller Cancer Institute,” UAMS spokeswoman Leslie Taylor said via email. “We believe this is the best place in Arkansas to practice nursing and we try to stress to the nurses why they should want to be here.”

Patient Volumes Drop

For the fiscal year that ended in June, UAMS’ operating revenue was $1.58 billion, a drop from its record amount of $1.625 billion the previous year.

The drop in revenue is tied to the decline in patient volumes. “And, of course, when volumes decline, the revenue flows with it,” George said.

Once UAMS was able to restart elective procedures, its patient volumes still lagged behind 2019’s numbers.

From July 1 through Dec. 31, UAMS’ inpatient volume was down 8% compared with the same period in 2019. Clinical visits fell 12%, and both inpatient and outpatient surgical cases have also declined about 5% during the first six months of the current fiscal year compared with the same period a year ago, George said.

With the pandemic, UAMS also saw its total liabilities increase, including a loan of about $110 million last fiscal year from the federal Centers for Medicare & Medicaid Services to help plug cash-flow issues caused by the coronavirus pandemic. CMS’ Accelerated & Advance Payment Program provided the money. The program was expanded for providers and suppliers during the pandemic, according to CMS.

The repayment of that loan starts in April and it has to be paid back over several years, George said.

Budget Planning

The unknowns tied to the pandemic make it difficult to budget for UAMS’ upcoming fiscal year, which starts July 1, George said.

“We’re not sure of the long-term impacts of COVID, and if our volumes will return,” she said. “So that worries me.”

She’s working on scenarios in which the patient volumes drop, stay the same or rise. “So we’re modeling it out to understand what we think is the most reasonable,” George said.

During COVID, UAMS has “done a lot of work to ensure that we’re being as efficient with our resources as possible,” she said. “But I wouldn’t say that we’ve completely recovered from the financial impact yet.”

University of Arkansas for Medical Sciences
For fiscal years ended June 30 (in thousands)

^*Includes depreciation and amortization
^**Includes net state appropriations and gifts
^#For the six-month period ended Dec. 31, 2020
Source: University of Arkansas for Medical Sciences and its auditors’ report