Many of Arkansas’ Largest Hospitals Report Losses in 2023 as Financial Struggles Continue

CHI St. Vincent Hospital in Little Rock (Amanda Cordell)

(A correction has been made to this article. See below)

Some hospitals and medical centers in Arkansas continued to struggle in 2023. 

Of the 95 hospitals on Arkansas Business’ list of the state’s largest, 38 reported a net loss, as reimbursements for services failed to keep pace with rising expenses. 

But 2024 should be a better year for hospitals. “Inflation has leveled off and decreased a bit, so the cost of supplies has gone down and leveled off in some areas,” said Bo Ryall, president and CEO of the Arkansas Hospital Association. 

While prices for pharmaceuticals are still up from previous years, labor costs have been steady, a situation that has helped the hospitals’ bottom line. 

For 2024, hospitals, as a whole and not including their systems, are seeing about 4.2% margins, Erik Swanson, Kaufman Hall’s senior vice president of data and analytics, told Arkansas Business last week. Kaufman Hall is a Chicago consulting firm that advises health care and education organizations and collects data from more than 1,300 American hospitals. “What we are beginning to see is some stabilization and normalization … of these margins.”

He said the trends should continue through 2024. “I think 2024 is going to end up being a stronger year than we’ve had in the last several,” Swanson said. 

But the challenge will be the growing divide between the top and bottom performers. 

“About 37% of hospitals as of right now are operating below zero,” Swanson said. “So it’s still a very significant portion of hospitals, and so that’s going to be the group that we’re going to have to keep an eye on.”

A $98.4M Loss

The least profitable hospital on this year’s list is CHI St. Vincent Infirmary Medical Center in Little Rock. It reported a loss of $98.39 million for its fiscal year that ended June 30, 2023. The 379-bed hospital also reported a loss of $51.49 million for its fiscal year that ended in 2022. The loss in fiscal 2023 wasn’t the largest loss in CHI St. Vincent Infirmary’s history. It reported a loss of $128.9 million in its fiscal year that ended June 30, 2019. 

Another CHI hospital in Arkansas, CHI St. Vincent North of Sherwood, was on the list of the least profitable hospitals. It reported a loss of $11.2 million for its fiscal year that ended midyear in 2023, which was the second least profitable hospital in the state.  

CHI St. Vincent is part of CommonSpirit Health, a nonprofit Catholic health system, which was created in 2019 as a result of the combining of Catholic Health Initiatives of Englewood, Colorado, and Dignity Health of San Francisco. 

A spokesperson for CHI St. Vincent told Arkansas Business last week that no one was available for an interview to discuss the numbers.

But not all hospitals suffered eye-popping losses in 2023. Unity Health-Searcy reported  net income of $31 million for its fiscal year that ended Sept. 30, 2023. In its fiscal year that ended in 2022, the 179-bed hospital reported a loss of $31.1 million. Unity Health didn’t respond by Arkansas Business’ deadline to questions about its financial performance. 

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.

Small Hospitals Struggle

Across the country, the lowest performing hospitals tend to be small rural hospitals, said Swanson.  

Of the top 10 hospitals in Arkansas that had the highest net patient revenue, only one reported a net loss. But five of the 10 hospitals that had the lowest net patient revenue reported a loss. 

“It’s definitely concerning that the small, rural hospitals continue to struggle,” Ryall said. “We’re certainly worried about the ability for those to remain independent, and hopefully they can remain independent and remain in those communities.”

In May 2023, the University of Arkansas for Medical Sciences acquired the Medical Center of South Arkansas. The 114-bed hospital in El Dorado, which was renamed South Arkansas Regional Hospital, posted a loss of $1.64 million for its fiscal year that ended June 30, 2023. The previous fiscal year, it reported a net income of $3.55 million. 

Hospitals also are continually evaluating the services that they offer, including labor and delivery. 

Obstetrics units are expensive to operate because they have to be ready 24 hours a day to care for a woman giving birth. 

Earlier this month, the Arkansas Democrat-Gazette reported that Unity Health-Newport stopped delivering babies in September. It reported net income of $2.37 million for its fiscal year that ended Sept. 30, 2023.

“We continue to be concerned about maternal services and hospitals delivering babies,” Ryall said. He said the number of hospitals in the state that have a labor and delivery unit is now down to 34. It’s “hard to keep that service going,” Ryall said. “It requires a couple of physicians, and it’s very expensive to provide that to the community.”

A Steady Flow of Patients 

What has helped hospitals’ financial performance improve is a steady flow of patients. Patient volumes, which had seen monthly fluctuations during the pandemic, are now steady, Swanson said.  

The predictable flow of patients makes it easier for hospitals to plan their staff.

Some of the patient growth is coming from the outpatient setting, such as ambulatory surgery or clinics, which is another benefit to hospitals because they usually receive a facility fee, “which can make those areas quite profitable,” he said. 

Pre-pandemic, it was the hospital’s emergency department that generated patient volumes. “So what’s been surprising is how well organizations have been able to leverage their medical groups and other relationships to then drive referrals into their hospitals,” Swanson said. 

Correction: Unity Health-Searcy’s net income was $31 million for its fiscal year that ended Sept. 30, 2023, according to the hospital, which plans to file an amended cost report with the Centers for Medicare & Medicaid Services.)