Hospitals Report Margins Are Better, but Still Worry

Hospitals Report Margins Are Better, but Still Worry
Dr. Shaletha Jones, right, a family medicine doctor and hospitalist at Ouachita County Medical Center, talks with a mock patient as Paige Garcia, a registered nurse, takes vitals. (Karen E. Segrave)

Arkansas hospitals have seen improved margins in recent months, but a financial hit could be looming with nearly 220,000 Arkansans having lost their Medicaid coverage since April 1.

Last week, the Arkansas Department of Human Services said that about 77,000 Medicaid beneficiaries lost their coverage in June because they were no longer eligible.

Since DHS started its redeterminations on April 1, 219,108 Arkansans have lost their Medicaid coverage, according to DHS. Of those cases closed, 135,000 were beneficiaries whose coverage had previously been extended because of the special eligibility rules implemented during the COVID-19 public health emergency. The other cases were closed as part of normal operations, it said.

In April, the DHS began reassessing the eligibility of beneficiaries who throughout the pandemic were guaranteed a place in the federal-state health care insurance program for low-income residents.

Arkansas and other states halted Medicaid eligibility verification procedures under national emergency and public health emergency declarations, but the Biden administration announced in January that the public health emergency would end in May.

“During normal eligibility rules DHS would disenroll approximately 20-30,000 ineligible individuals a month,” DHS said in a July 10 news release. As of July 1, total Medicaid enrollment in Arkansas was 971,364.

“We’re certainly concerned about anybody losing their insurance coverage,” said Bo Ryall, president and CEO of the Arkansas Hospital Association.

The former Medicaid beneficiaries are now uninsured patients, a status that could damage a hospital’s financial health. And some of the people who lost coverage may not realize it until they arrive at a hospital or clinic seeking treatment. “We’ll be working with those individuals as they come in to seek services to get them on the proper insurance that they’re eligible for,” Ryall said.

But he said it was too early to tell what the financial impact on hospitals will be as a result of thousands of people losing Medicaid coverage. That’s because those people all don’t seek services at one time.

Meanwhile, hospital operating margins have improved this year, according to Kaufman Hall of Chicago, which advises health care and education organizations and collects data from more than 1,300 American hospitals.

Kaufman Hall reported operating margins were up 0.3% this year through the end of May, according to its June report.

“However, operating margins continue to stand well below historic norms,” the report said.

The report also said that there is a sizable “and growing gap between primary hospital revenue sources. Revenue from outpatient care is increasing at a much greater rate than revenue from inpatient care.”

In addition, the report said that while labor costs remain high, expenses in May were well below comparable levels from May 2022.

Ryall said Arkansas hospitals are seeing similar numbers this year, but they haven’t recovered from the financial blows related to the pandemic.

“Things have gotten a little better recently, and I think that’s because people are coming in for services,” he said.

Contributing to the improved margins are the cuts hospitals have made to their expenses, including lessening their reliance on travel nurses, who are much more expensive than staff nurses.

Hospitals also have scaled back services that weren’t being used as much or weren’t important to the community, Ryall said.

Ryall said he hopes the trends will continue through the second half of the year. “So things have gotten a little better, but we’re still not to pre-pandemic levels,” Ryall said.

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