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Government Aid Rescues Hospital Financials

6 min read

Hospitals and medical centers in Arkansas benefited from government relief money last year to offset losses caused by COVID-19.

Of the 92 hospitals on Arkansas Business’ list of the state’s largest, 25 reported a net loss. But it could have been far worse.

Arkansas hospitals received millions of dollars in government funds to help cover rising expenses and lost revenue related to the global pandemic.

In addition to money from the federal Coronavirus Aid, Relief & Economic Security Act, hospitals in Arkansas received about $140 million from the state for COVID-related expenses under the American Rescue Plan Act of 2021. The state also awarded hospitals $129 million to help with staffing costs, said Bo Ryall, president and CEO of the Arkansas Hospital Association.

“So both of those from the federal level and the state appropriation have definitely helped hospitals’ bottom line,” Ryall said.

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Largest Hospitals

A key driver of expenses for hospitals has been labor, especially keeping and recruiting nurses. In some cases nurses can earn twice as much working for a travel nurse agency.

Chad Aduddell, the CEO of CHI St. Vincent of Little Rock, said the hospital system’s supply costs have risen 20% since COVID. Labor costs have also spiked and are expected to remain high after COVID.

“Those two areas, our wages and our supplies, are 75% of every dollar we spend,” Aduddell said. “And those two areas are up significantly. And yet at the same time what we’re paid to take care of patients by both government payers as well as commercial payers is flat or in some cases going down.”

But hospitals needed the extra nurses and supplies to care for COVID patients.

In recent weeks, the number of Arkansans in hospitals from COVID has been falling. On Wednesday, 758 COVID patients were hospitalized, down 51 from the previous day. In August 2020, Arkansas hospitals reported a high of nearly 1,700 virus patients. In August 2021, the high was just over 1,400 patients.

The patients in the recent delta surge have required more ICU care, and “a higher percentage of those [patients] have been on ventilators, which require longer stays in the hospital and longer rehab stays,” Ryall said.

If the number of hospitalized COVID patients continues to decline, hospitals probably won’t renew travel nurse contracts, which can be for 60 to 90 days, he said. “But the fear is, as we’re winding down, we could have another surge in the next four months, and then we wouldn’t have the nurse staffing levels that we need to take care of those surges.”

He said it’s difficult for hospitals to know when, or if, there’s going to be another surge.

Hospital Trends

Hospitals nationwide have seen their margins, excluding federal relief funding, remain below pre-pandemic levels from 2019, according to a report last week from health care management consulting firm Kaufman Hall of Chicago, which compiles operational reports from about 1,000 U.S. hospitals.

“The CARES Act definitely had a very significant positive impact,” Erik Swanson, a senior vice president of data and analytics at Kaufman Hall, told Arkansas Business. But Kaufman Hall projects hospitals nationwide will lose about $54 billion in net income in 2021.

It said more than a third of U.S. hospitals will have negative operating margins through the end of the year. Uncertainty surrounding COVID variants in the fall means hospitals could see “even greater losses,” the report said.

The losses won’t be as bad as they were in the early days of the pandemic, when operating margins for hospitals were around negative 30% or more.

Hospitals received about $70 billion in federal relief last year, which helped margins get close to break even with 2019 levels. Without the CARES Act money, “it would have been devastating, frankly, for the performance,” Swanson said.

Still, hospitals have struggled financially. There have been “double-digit increases in almost every expense category across the board,” Swanson said. “So it’s really dramatic what we’re seeing.”

Hospitals by Net Income – Most Profitable

1. Baptist Health Medical Center-Little Rock
Net Income: $99.28 million
Beds: 819
FTE Employees: 2,926
Fiscal Year End: Dec. 31, 2020

2. Medical Center of South Arkansas, El Dorado
Net Income: $67.90 million
Beds: 166
FTE Employees: 317
Fiscal Year End: Dec. 31, 2020

3. UAMS Medical Center, Little Rock
Net Income: $56.79 million
Beds: 508
FTE Employees: 4,189
Fiscal Year End: June 30, 2020

4. Northwest Health Physicians’ Specialty Hospital, Fayetteville
Net Income: $49.34 million
Beds: 20
FTE Employees: 118
Fiscal Year End: Dec. 31, 2019

5. Mercy Hospital Fort Smith
Net Income: $44.33 million
Beds: 343
FTE Employees: 1,480
Fiscal Year End: June 30, 2020

6. St. Bernards Medical Center, Jonesboro
Net Income: $41.44 million
Beds: 440
FTE Employees: 2,311
Fiscal Year End: Sept. 30, 2020

7. Arkansas Children’s Hospital, Little Rock
Net Income: $41.30 million
Beds: 336
FTE Employees: 3,214
Fiscal Year End: June 30, 2020

8. Unity Health, Searcy
Net Income: $29.88 million
Beds: 283
FTE Employees: 283
Fiscal Year End: Sept. 30, 2020

9. Northwest Medical Center-Bentonville
Net Income: $26.15 million
Beds: 283
FTE Employees: 1,105
Fiscal Year End: Oct. 31, 2020

10. Baptist Health Medical Center-North Little Rock
Net Income: $24.53 million
Beds: 214
FTE Employees: 1,096
Fiscal Year End: Dec. 31, 2020

Hospitals by Net Income – Least Profitable*

1. Jefferson Regional Medical Center, Pine Bluff
Net Income: -$10.33 million
Beds: 300
FTE Employees: 1,500
Fiscal Year End: June 30, 2021

2. Baptist Health Medical Center-Conway
Net Income: -$6.59 million
Beds: 111
FTE Employees: 372
Fiscal Year End: Dec. 31, 2020

3. Baptist Memorial Hospital-Crittenden, West Memphis
Net Income: -$3.57 million
Beds: 11
FTE Employees: 62
Fiscal Year End: Sept. 30, 2019

4. Helena Regional Medical Center
Net Income: -$3.31 million
Beds: 127
FTE Employees: 117
Fiscal Year End: Dec. 31, 2019

5. North Arkansas Regional Medical Center, Harrison
Net Income: -$2.97 million
Beds: 120
FTE Employees: 577
Fiscal Year End: March 31, 2020

6. Wadley Regional Medical Center at Hope
Net Income: -$2.87 million
Beds: 67
FTE Employees: 99
Fiscal Year End: June 30, 2019

7. Izard County Medical Center, Calico Rock
Net Income: -$2.39 million
Beds: 25
FTE Employees: 55
Fiscal Year End: June 30, 2020

8. Dardanelle Regional Medical Center
Net Income: -$2.33 million
Beds: 25
FTE Employees: 124
Fiscal Year End: June 30, 2020

9. Springwoods Behavioral Health Services, Fayetteville
Net Income: -$2.24 million
Beds: 80
FTE Employees: 122
Fiscal Year End: Dec. 31, 2019

10. Drew Memorial Hospital, Monticello
Net Income: -$2.07 million
Beds: 50
FTE Employees: 257
Fiscal Year End: March 31, 2020

*Freedom Behavioral Hospital of Central Arkansas at Jacksonville lost $9.24 million in the fiscal year that ended June 30, 2018. It will reopen in 2022 as Unity Health-Jacksonville.
Sources: The hospitals, tax returns, audited financials and the most recent annual Medicare cost reports (most unaudited) filed with the Centers for Medicare & Medicaid Services.

Meanwhile, people are avoiding the hospital emergency room. From January through August, emergency department visits are down 11% compared with the same period in 2019.

Patients have turned to low-cost ways of accessing care, such as telemedicine and urgent care centers, Swanson said. More patients also are most likely going to their primary care physicians for care first, he said.

Some people might be delaying or forgoing care, “which is not a good thing,” Swanson said, while others might be staying away from the hospital emergency department because of perceived safety concerns about going to the hospital with COVID patients.

Swanson said it’s difficult to say if that trend will continue. But the drop in emergency department visits “has been so consistently low for so long now, it looks like this is a long-term trend and we may have to adjust to a new normal of lower ED volumes.”

The general trend is for hospitals with 25 beds or fewer beds to struggle. “If they get a surge in volume they may do really well one month,” Swanson said. “But generally, they’ve been performing quite a bit less favorably than the very largest systems.”

Of the 24 hospitals that have reported losing money on this year’s list, 10 of them had 25 beds or fewer.

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.

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