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Baptist Health Nets Windfall Above $100M

3 min read

Baptist Health of Little Rock reported an eye-popping $115 million in operating income in 2020, thanks to government stimulus funds.

Baptist would have reported an operating loss of $14.9 million had it not been for COVID-19 government relief money, as unexpected costs surfaced, Brent Beaulieu, CFO of Baptist Health, told Arkansas Business. In 2019, Baptist Health reported a $3.3 million operating loss. It also had an operating loss of $12.7 million in 2018.

The nonprofit health care system, which includes 11 hospitals, urgent care centers and more than 100 primary and specialty care clinics in Arkansas, had budgeted for $31 million in operating income for 2020. That budget, of course, was prepared before COVID hit.

The stimulus funding Baptist used in 2020 included $75.5 million in federal grants, such as that provided by the CARES Act, and $26.1 million in state grants, with most of that money also originating with CARES Act funding to states.

About $65 million of the stimulus money Baptist received went for COVID-related capital equipment, including an air ventilation system needed to treat COVID patients, Beaulieu said.

“Baptist took care of more COVID patients than anybody in the state,” he said.

Those capital charges, however, aren’t itemized as operating expenses.

“So if someone looks at our 2020 audit, they could easily say, ‘Wow, Baptist really had a great year,’” he said. “But the reality is if the state and federal government did not step up,” Baptist would not have had money to buy equipment to care for COVID patients.

Government-imposed pandemic lockdowns, which included temporary bans on scheduled procedures, caused patient volumes to fall at Baptist and other health care providers.

Total admissions at Baptist hospitals were 60,700 in 2020, a nearly 7% drop from the previous year. Emergency room visits in 2020 were 218,595, a decrease of 16%.

Baptist reported $1.43 billion in net patient revenue for 2020, a 0.8% increase from the previous year. Baptist, however, had budgeted $1.48 billion in net patient revenue for 2020.

In recent months, patient volume numbers at Baptist are trending to pre-COVID levels.

Baptist is “getting close,” but it’s not there yet, Beaulieu said.

Other hospitals across the country also are experiencing similar trends. “Hospital volumes, revenues, and margins all rose in May compared to dramatic losses seen in the early months of the pandemic,” according to a June 28 news release from the management consulting firm Kaufman Hall of Chicago, which surveyed about 900 U.S. hospitals. “Even so, volumes and margins both remain below early 2019 levels while expenses continue to climb.”

The Need for Nurses

Around October and November, Baptist Health, like other hospital systems, found itself having to rely on contract labor nurses to keep its facilities staffed. With some hospitals nearly full with COVID-19 patients, the demand for nurses soared across the country. Some providers dangled pay packages worth $7,000 a week to attract nurses.

“We had people leave because of that,” Beaulieu said. The nurses could go to California and earn three to four times their normal salary.

In April of this year, Baptist Health had more than 400 contracted full-time equivalents, when in pre-COVID times that number was fewer than 100. By December, Baptist is expected to have 275 contracted FTEs.

In 2021, contracted labor is expected to cost the nonprofit hospital system $43 million more than pre-COVID levels.

In the first quarter of this year, Baptist “barely broke even,” Beaulieu said. And in the second quarter, Baptist’s operating margin was projected to be less than 1%, as inflation drove up the costs of supplies and services.

Baptist had budgeted a $9.1 million operating loss this year. But now it expects to receive more COVID money, which would result in $34 million in operating income for the year. “So we do think that we’re going to end up in the positive this year,” he said.

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