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Arkansas Hospitals Brace for More Insurer Showdowns Amid Financial RecoveryLock Icon

6 min read

Hospitals in Arkansas and nationwide ended 2024 a bit healthier financially, but experts see significant challenges even as they hope for a strong recovery this year.

Bo Ryall, Arkansas Hospital Association president and CEO, is grateful that inflation has eased, but he fears that revenue issues and battles with pressured health insurers will continue in 2025.

“Having inflation kind of flattened a bit certainly helps when hospitals are looking at their expenses, but we still have issues with trying to improve revenues,” Ryall said, “whether that’s Medicare, Medicaid or insurance payers. That’s going to be a focus of every hospital: reducing expenses and looking to improve the revenue situation.”

Ryall noted that expenses have outstripped hospital revenue in Arkansas for the “past couple of years.” Margins are improving, and patient volume has bounced back, but not quite to pre-pandemic levels, he said.

And with Medicare and Medicaid payments flat, pressure is growing on insurance contracts, so Ryall expects contract showdowns with insurers to continue this year. “I think you’ll see more contentious negotiations as we move into this year,” he said.

Arkansas Blue Cross & Blue Shield opened the year with 75 layoffs, about 2% of its workforce, and revealed that it has imposed “substantial premium increases on our small and large groups.”

Insurance Battles

A year ago, Baptist Health of Little Rock, the state’s largest health provider and a nonprofit, was out of UnitedHealthcare’s insurance network for six weeks in a battle over reimbursement rates. And in December, Walker Bowden of Stephens Insurance told Arkansas Business that tough negotiations were likely to continue. “If anything, you’re going to start seeing that rise with all of the facilities in the state of Arkansas and all of the carriers,” Bowden said.

Ryall said his member hospitals continually skirmish with insurance companies over required pre-authorization for some procedures and outright denials of coverage for some care.

“It’s a requirement to submit paperwork and documentation that a procedure is needed,” Ryall said. The process takes a long time, and burdens hospitals and providers with significant administrative costs. “It delays care and sometimes denies care that the physician thinks should be provided to the patient.”

Nationwide, not-for-profit hospitals face substantial headwinds but have generally improved their margins and reined in “very, very high labor costs,” according to Fitch Ratings health sector experts Mark Pascaris and Kevin Holloran. Most Arkansas hospitals are nonprofit.

In a presentation Jan. 8, Pascaris and Holloran noted that Fitch had raised the nonprofit health sector’s creditworthiness rating from “deteriorated” to “neutral” late last year.

“The single biggest challenge that had been facing the sector coming out of the pandemic were labor costs and labor availability,” Pascaris said. “There are a lot of headwinds in the sector, but … management teams in the sector have worked very, very hard over the last couple of years to manage those labor costs, and the results of that are starting to show. We expect that that will continue into 2025.”

Hospitals are using fewer traveling nurses, who filled crucial gaps at very high wages during the pandemic, and have reduced hourly costs per unit back to pre-COVID levels, Holloran said.

“Volumes are back, and this has been the trend for the last couple of years. We think that will continue into 2025 unless we have an economic dislocation.”

Ryall said staffing has been a challenge for years, and will most likely remain so in Arkansas. “It has been a challenge as far as competing on the level of salaries, competing with each other in hospitals, and competing with other industries that are able to pay more for some hospital employees,” he said.

Pascaris noted a rebound in health sector operating margins, as well as strong returns from the stock market for many hospital groups. “The sector has definitely benefited from a robust equity market that’s been in 2023 and 2024 at almost record levels of equity returns. Those have benefited the balance sheets.”

Top Trends for U.S. Health Care in 2025

Percentage of health plan and health system respondents who identified the trend as having a “significant impact” or separately considered the corresponding action “very important.”
(Source: Deloitte’s 2025 U.S. Health Care Outlook survey)

A Trump Administration

Hospitals face real uncertainty about the impact of the changing presidential administration and the current session of the Arkansas General Assembly, Ryall said.

“There are a lot of unknowns right now,” he said. “We don’t feel like [health care] is going to be a 100-day priority, but certainly health care is always in front of things that need to get done on the federal level.”

Reauthorization of Affordable Care Act subsidies, which are set to expire at the end of the year, are likely to “generate some discussion towards the end of 2025,” Ryall said, adding that he expects Congress to extend them.

“I would say right out of the gate that health care wasn’t really the running topic du jour” of the presidential campaign, Fitch’s Holloran said. “It was immigration, border security, inflation, groceries, things like that. So I don’t think we expect any immediate change other than the uncertainty.” The ratings agency’s formal view is that it doesn’t really “expect too much to happen from the incoming administration.”

If the administration at any point puts serious emphasis on the national deficit and debt, “the all-seeing eye” could turn toward Medicare and Medicaid, Holloran said. “That would certainly be credit negative and something to watch. But the initial indications are that those programs seem to be protected and supported.”

The AHA’s legislative priorities this year include improving Medicaid funding to help stabilize hospitals’ financial footing, Ryall said. “We’re also concerned about relationships with insurance companies, particularly the Medicare Advantage plans and prior authorizations, claims denials, things like that.”

Bo Ryall, CEO of the Arkansas Hospital Association, said that hospital expenses have outpaced revenue for several years. (Steve Lewis)

Ryall, Pascaris and Holloran all expect artificial intelligence to play a bigger role in health care this year.

“There’s experimentation going on with revenue cycle management,” Ryall said. “By that, I mean claims processing, whether that’s filing those with insurance companies or Medicare and Medicaid.” Hospitals are using AI for that task because “insurance companies are using AI to administer claims on their level. So I think for hospitals to be able to keep pace in the filing of claims and providing the documentation needed, I think they’re experimenting and using, in some ways, AI with claims processing.”

Emergency Route

Four Arkansas hospitals have improved their financial footing by becoming rural emergency hospitals, and Ryall expects that “a few” others may take that path this year.

Hospitals joining the program agree to drop most inpatient care and pledge to keep a staffed emergency room open at all times. In return, the Centers for Medicare & Medicaid Services pays them a monthly facility payment of $285,620. The program has been crucial to keeping hospitals open in Helena, Eureka Springs, Pocahontas and Osceola.

“I don’t think it will be a wholesale change, but I think there are some hospitals that … need to do that to survive,” Ryall said.

Holloran and Pascaris praised nonprofit hospital executives for their dedication in riding out an unprecedented era.

“Despite everything that’s gone on in the last five years — and now it’s been almost five years since the pandemic hit — this sector has faced a lot of challenging periods and has generally demonstrated considerable resiliency and ability to manage through the stress,” Pascaris said.

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