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Baptist Health Reports $20.9M Operating Loss

3 min read

Baptist Health of Little Rock reported an operating loss of $20.9 million for 2018, marking the third straight year of operating losses for the state’s largest hospital system.

But 2018 was an improvement from 2017, when Baptist reported an operating loss of $30 million.

About $4 million of the loss last year was connected to the purchase of Sparks Health System on Nov. 1 from publicly traded Community Health Systems Inc. of Franklin, Tennessee, said Brent Beaulieu, senior vice president and chief financial officer of Baptist Health. The purchase price was listed as $105.3 million, and included Sparks’ hospitals in Fort Smith and Van Buren, according to Baptist’s audit, filed in June with the Electronic Municipal Market Access system. The purchase brought Baptist’s total number of hospitals in the state to 10.

Beaulieu told Arkansas Business last week that Baptist has a positive cash flow. Some of the operating loss was linked to depreciation being included as an expense.

Still, Baptist is in the same position as other nonprofit or public hospitals. Hospitals are seeing lower reimbursement rates and shifts to outpatient care while expenses are rising, according to an Aug. 28 news release from Moody’s Investors Service.

“This is the second consecutive year expenses have topped revenues, and will remain the largest strain on [nonprofit] hospital profitability through 2019,” said Moody’s, which used fiscal 2017 numbers for U.S. nonprofit and public hospitals.

Baptist also is seeing more uninsured patients. In 2018, the number of uninsured patients rose to 4%, up from 3% the previous year. But the value of its charity care increased 59% to $23.8 million last year over 2017’s numbers.

Part of the rise in uninsured patients is tied to changes to Arkansas Works, the state’s version of Medicaid expansion. The program uses federal Medicaid funds to buy private insurance for Arkansans within a certain income bracket.

Beaulieu said the Arkansas Works program “really reduced” Baptist’s charity care.

But in 2018, the federal government approved a work requirement that applied to about 65,000 of the 250,000 people receiving insurance through the Arkansas Works program.

About 17,000 people lost their insurance last year for failing to comply with the reporting requirement. Baptist is seeing the impact of people who “don’t qualify for coverage anymore,” Beaulieu said.

To reduce expenses, Baptist is in the middle of a “performance improvement plan,” Beaulieu said. “There’s been a lot of effort to make sure we do things that are sustainable, not just flat cuts,” he said.

Baptist’s plan has shown improvements. For the quarter that ended March 31, Baptist had an operating loss of $2.9 million, compared with a loss of $6.5 million for the same quarter in 2018.

The first quarter also saw Baptist’s investment return bounce back. In 2018, Baptist reported a bottom-line loss of $45.1 million, most of which was a $26.2 million paper loss on its investment portfolio.

“The markets kind of went crazy in the fourth quarter of ’18,” Beaulieu said. But the markets rebounded in the first quarter, resulting in Baptist seeing an investment return of $28.8 million.

Beaulieu said Baptist doesn’t plan to make any across-the-board layoffs to cut expenses. “But we’re constantly looking at our levels, … just making sure that we’re staffing to the needs we have,” Beaulieu said.

Baptist learned from laying off 170 workers in 2013 that across-the-board job cuts don’t work, he said. “Several hospitals did that back in 2013. … It’s not sustainable,” he said.

Baptist is “really working to avoid” layoffs, Beaulieu said. “Across-the-board cuts don’t change the need.”

Baptist Health Financial Statements*

2018 2017 2016 2015 2014
Total Revenue $1,215,914 $1,089,266 $1,025,400 $1,007,654 $958,699
Total Expenses $1,236,792 $1,119,318 $1,034,634 $956,427 $910,532
Operating Income -$20,878 -$30,052 -$9,234 $51,277 $48,167
Other Income -$24,201 $52,653 $26,795 -$22,108 $14,176
Revenue Over Expenses -$45,079 $22,601 $17,561 $29,119 $62,343
*Dollar figures given in thousands.
Source: Baptist Health. Operating expenses includes depreciation and amortization. Other income includes investment returns.
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