Arkansas’ 2022 decision to give rural hospitals a $60 million infusion of federal COVID relief money propped up tottering hospitals and probably saved Fulton County Hospital from going under.
The 25-bed hospital in Salem “was very close to closing,” said Ron Peterson, president and CEO of Baxter Health of Mountain Home, which started managing Fulton County Hospital last year.
Fulton County, like many hospitals, took a financial beating during the pandemic and its aftermath. It reported a $3.6 million loss for the fiscal year that ended in June 2023.
But the Arkansas Legislature approved $5 million in American Rescue Plan Act money for the Salem hospital last year, providing “the bridge that helped us … get to higher ground,” Peterson said.
Nevertheless, some rural hospitals found the state’s application system for the money cumbersome and even a bit unfair.
About a dozen hospitals have been approved to receive a portion of the ARPA funds. But instead of handing out money at once, the state is doling it out over time depending on how the hospitals pledged to improve. Lawmakers offered two tracks to improvement that they saw as necessary to rural hospitals’ long-term financial health.
So last year, the Legislature hired Alvarez & Marsal, a New York management consulting firm, to determine how to divide up the federal money.
Hospitals that applied for the funds agreed to let Alvarez & Marsal conduct financial and on-site reviews. The firm has reaped $2 million so far for its work, which has been expanded to include other detailed work with the hospitals.
One choice for hospitals was to undergo reclassification or merge with another health center.
The other track was a pledge to improve operations by cutting costs and increasing revenue.
In the first track, hospitals get 50% of the funding initially and the other 50% six months later. On the other track, hospitals get 20% initially, 40% at six months and the remaining 40% six months after that.
“We are currently at the first six month review,” Scott Hardin, a spokesman for the Department of Finance & Administration, said in an email in June. “For hospitals that did not meet the metrics they chose, they can still reach them and receive the full amount remaining six months from now.”
But Delta Memorial Hospital CEO Jeremy Capps criticized the process. His hospital, in Dumas, got about $500,000 of the $2.6 million the Legislature approved for it. “Because we didn’t hit the metrics, these arbitrary metrics, we’re not getting funding,” Capps said.
One metric was improving the hospital’s billing and revenue cycle. “But part of that problem is they’re measuring us from the time frame when we looked our best that we’ve looked in 10 years,” Capps said. “And it’s really hard to get. It’s even harder to get paid from the insurance companies today than it was four months ago.”
Keith Metz, an Arkansas Department of Human Services spokesman, said in an email that Alvarez & Marsal “have worked closely with the hospitals to develop the sustainable plans, which maximize the use of the ARPA funding as it supports these facilities beyond one-time money.”
Other hospitals welcomed the extra funding.
Legislators alloted $3.4 million to Chicot Memorial Medical Center, and it has received about $2 million, said John Heard, the hospital’s CEO.
One metric requires the 25-bed hospital to improve its billing cycle.
Chicot Memorial is using some of the money for deferred maintenance to roofs and parking lots. “The roof hasn’t been touched in this place on the older part of the building since the 1980s,” he said. “And the parking lot is about that long too.”
The hospital is recruiting a dentist with another portion of the funds. Chicot Memorial is one of the few Arkansas hospitals with a dental clinic, and its dentist is going on maternity leave. “We’ve been looking for another dentist for the last three or four months,” Heard said. “And it’s just difficult to find one for the area, to be honest with you.”
Here’s how other hospitals said the funds have helped:
Fulton County Hospital
The Salem hospital struggled during COVID. A computer system installed a few years ago had difficulty sending bills, Peterson said. “We went in, [and] we had to really stop the bleeding first,” he said.
Peterson said one of the first targets was the computer system, so bills could be sent to allow the hospital to pay employees and keep operations afloat.
Some of the ARPA money will go toward upgrading the hospital’s electrical system, which in some areas of the building hasn’t been upgraded since 1963, Peterson said.
It also is buying new patient care equipment, he said.
The management agreement ends at the end of December. The hospital then will become part of Baxter Health and be renamed Baxter Health Fulton County Hospital.
Peterson said he didn’t have the Salem hospital’s June 30 financial numbers, but its finances have improved since Baxter Health began operating it.
Fulton County Hospital’s operating loss has been reduced by $2.5 million since August, Peterson said.
“Utilizing the ARPA funds, our goal is to turn around the operating losses and create a sustainable future for Fulton County Hospital,” he said.
Baxter Health
Baxter Health chose the improvement track to get the ARPA funds. The hospital was losing from operations about $4.8 million a year during COVID. “We’re climbing out of that hole,” Peterson said. “We’re about break even now.”
The legislative approval was for $4.6 million. To get the aid, it has to hit certain metrics, such as improving its operating margin 20% to 40% in six months; then over a 12-month period, it needs to improve the margin by 70% to 90%.
It received about $920,000 in November and another $1.8 million in June.
Baxter Health reduced about $16 million in expenses last year. “We just started renegotiating some contracts with vendors and started looking at ways that we could do things differently,” Peterson said.
The hospital looked closer at open positions and didn’t fill about 100 vacancies, “which was very helpful in reducing costs,” Peterson said.
Baxter Health also changed how it provided care. It had a clinic for outpatient behavioral health but then decided to offer that service through telemedicine, reducing the costs to the hospital system and making it easier for patients because they don’t have to travel to a clinic for treatment.
The money from the ARPA funds also will go toward growth and infrastructure. The hospital is remodeling its emergency room to add six rooms, which will give it 29. That project cost about $2 million.
It also is expanding its operating room by three rooms. The construction cost and equipment are expected to total about $3 million. Both projects are expected to be completed by the end of the year. It also has added surgeons, including two vascular surgeons and a cardiothoracic surgeon.
Baxter Health is replacing emergency generators that are more than 25 years old. The new generator costs about $1.7 million, but there’s a two-year back order.
Peterson said he expects to know in November if the hospital will receive its final ARPA payment.
The ARPA funds have “definitely helped us get on a path to sustainability,” he said. The money has helped “us find a way to make investments so that we can grow, which leads us to a brighter future … more sustainability. And so it has been a lifesaver for us.”
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