1. Made in Arkansas, By China
Reversing the “Made in China” label, this year Chinese manufacturers stamped their future as “Made in Arkansas.”
A wave of Chinese companies announced factory plans in the state or pushed them nearer to fruition in 2017, and Gov. Asa Hutchinson made his third trip to China, cementing deals and planting seeds for more.
Manufacturers seized on Arkansas as an ideal spot for “reshoring,” returning factory jobs to the United States after a long trend in the other direction, and products from cotton yarn to pulpwood products to pet treats will soon be made in Arkansas.
The companies will pay Arkansas workers more than they pay their Chinese laborers, but will save on transporting goods.
“Over the last two years, four Chinese companies have announced plans to locate new facilities in Arkansas,” Hutchinson said in early October, before another major project was announced for Jonesboro. “These companies will create a total of 1,520 new jobs while investing $1.4 billion in the state.”
The biggest prize, in terms of capital investment, is Sun Bio Materials Co.’s $1.3 billion pulp mill project south of Arkadelphia. The seeds for that plant, which will employ 250 and produce dissolving pulp used to make rayon, were planted by Gov. Mike Beebe’s administration. Hutchinson followed up with a 2016 announcement with Hongxin Li, chairman of Shandong Sun, the parent company of Sun Bio. Planners applied for their first state environmental permits in the spring, and construction is expected to start in 2018.
Another company from Shandong, the eastern coastal province where Confucius was born, announced plans in May to take over a vast former Sanyo television factory in Forrest City. Shandong Ruyi Technology Group’s $410 million project will employ 800 workers and consume the equivalent of Arkansas’ entire yearly cotton crop. Hutchinson called it “the largest economic development success in the Delta in recent memory.”
In November 2016, apparel maker Suzhou Tianyuan promised a $20 million clothing factory in Little Rock, and in May its U.S. subsidiary, Ty Garments USA, bought a 101,000-SF building on Fourche Dam Pike for $1.85 million. Pet Won Products of Shandong made an April commitment to put a $5 million, 70-employee pet-treat facility in Danville, and Hefei Risever Machinery Co., which makes heavy-machine parts, announced plans last month to put a $20 million factory in Jonesboro.
Hutchinson has grown so familiar with China, he offers directions. “To get to Risever headquarters in Hefei,” the governor joked, “go to Shanghai, take a left, and 300 miles later you arrive in the little community of 8 million people.”
2. Medical Marijuana Pushes to Become Bona Fide Business
Medical marijuana, tangled in state government-issued red tape, has yet to fully emerge as a new industry in Arkansas, but the stage for its debut has been set.
In November 2016, Arkansas became the 29th state in the nation and the first in the Bible Belt to legalize marijuana for medical use when voters approved Amendment 98.
Since then, the law has been amended to further protect employers, existing businesses have agreed to service the new industry, and entrepreneurs have delivered a ton of paperwork to the appointed five-member Arkansas Medical Marijuana Commission.
The commission will announce winners of five cultivator licenses on Feb. 27. It is reviewing 95 applications, each carrying a $15,000 fee just to apply, to grow marijuana.
The panel is also reviewing 227 applications ($7,500 each) for 32 dispensary licenses, though a date for the announcement of those sites has not been set.
David Couch, the Little Rock lawyer who wrote the amendment, expects about $3.5 million in fee revenue from obtaining and maintaining licenses to cover the state’s cost to administering the program, but said that’s not all Arkansas stands to gain.
The state could see 1,500 direct jobs created and some $10 million a year in sales tax revenue from $100 million in annual sales, Couch said, estimating that 65,000 Arkansans diagnosed with one of 18 qualifying medical conditions will get cards from their doctors allowing them to purchase medical marijuana. The Arkansas Cannabis Industry Association has identified 21 doctors willing to write certifications.
The state Department of Health will register patients and caregivers and oversee product testing standards. One testing laboratory, Steep Hill Arkansas, has already been announced. It was founded by former Windstream executive Brent Whittington and pharmacist Brandon Thornton.
The Arkansas Alcoholic Beverage Control Board will also be involved. The ABC’s responsibilities include security regulations, licensure of employees at dispensaries and cultivation facilities and overall enforcement.
The private sector has a role to play, too. Business leaders this year formed the Arkansas Medical Marijuana Association, a nonprofit trade group. Couch and six others serve on its board.
Existing businesses will also be needed in birthing the new industry. For example, medical marijuana businesses will require banking services, but that’s complicated by the fact that marijuana remains illegal under federal law. Though potential deposits and fee revenue are enticing to federally insured banks, serving the industry means more regulation.
Just one bank — HomeBank of Arkansas, chartered at Portland (Ashley County) — has publicly announced plans to provide services to the industry. HomeBank, which does most of its business in north-central Arkansas, will use a third-party vendor from marijuana-friendly Colorado, Safe Harbor Services LLC, to do so.
In addition, four Little Rock businessmen have announced their plan to offer cashless banking services to the industry through an Arkansas bank that has not yet been identified. MediPays is the name under which Rockview Digital Solutions LLC will offer its services. Rockview was incorporated in September by CEO Brian Bauer, CFO John Foley, Chief Technology Officer Greg Ellis and Chief Legal Officer Dan Roda.
The new industry also presents an opportunity for insurers. Several agents have expressed willingness to sell policies to the state’s marijuana-related businesses.
3. Firings Jolt Hogs, Usher In New Era For UA Football
The tandem firings of Jeff Long (Nov. 15) and Bret Bielema (Nov. 24) underscored just how grim things had become with Arkansas Razorbacks football.
“I’ve never been to a place where I can give them something they’ve never had,” Bielema said when introduced as the 32nd head football coach at the University of Arkansas on Dec. 5, 2012.
The context was bringing conference championships to Arkansas, something he helped deliver at the University of Wisconsin. But the quote took on ominous overtones during his rocky five years at Fayetteville.
Bielema gave Arkansas its two worst single-season conference records since joining the Southeastern Conference 26 years ago: 0-8 in 2013 and 1-7 in 2017.
He gave the football program its worst SEC conference record of any multiyear football coach: 11-29. Bielema gave the Hogs a 1-19 record against all opponents when trailing at halftime.
“It’s important for us to learn how not to lose a game before we learn how to win the game,” Bielema also said back at his first press conference.
Fans and boosters were sick and tired of poor showings on game day, with a learning curve that offered no hope in sight.
The product Bielema served at the stadium indicated he was a floundering coach out of his depth and unable to compete in the toughest conference in America.
Postgame assurances that “we’re close” and talk of how well the team practiced in the week preceding yet another loss only stoked the fires of change. The official striking of the match was the firing of Jeff Long as athletic director. Bielema’s failings helped propel the end of Long’s nearly 10-year run at the helm of the state’s premier collegiate program.
Both were deemed overpaid and underperforming in light of the haplessness of the gridiron Hogs.
Among the rational reasons that contributed to Long’s departure: He pushed out old-guard loyalists installed by his longtime predecessor, Frank Broyles; alienated too many big-bucks boosters; failed to properly supervise Bobby Petrino, who posted the best winning percentage of any UA football coach during the SEC era; hired John L. Smith as Petrino’s replacement for one disastrous season; hired Bielema, whose first and last seasons were even worse; and rewarded Bielema with an overly lucrative contract extension.
Next men up: Hunter Yurachek, athletic director at the University of Houston, coming in for Long, and Chad Morris, head coach of SMU and his go-go attacking offense, replacing Bielema.
4. Retail Reimagined
The retail industry in Arkansas continued to evolve this year, with Wal-Mart seeing success while other companies, like Dillard’s, stumbled.
Building on a $3 billion purchase of online retailer Jet.com in 2016, Wal-Mart Stores Inc. of Bentonville continued its focus on e-commerce in the era of Amazon.com. At its annual meeting in June, Wal-Mart CEO and President Doug McMillon said the retailer was recreating itself to better serve customers in the changing world of retail, after years of being slow to respond to Amazon.
Throughout 2017, Wal-Mart expanded its online portfolio, including the purchase of the online apparel retailer Bonobos Inc. for $310 million in cash, an acquisition announced in June. It also increased its number of online offerings to 60 million, up from about 20 million in November 2016.
The moves paid off. For the third quarter, e-commerce net sales at Walmart.com increased by 50 percent compared with the same period a year ago. (Wal-Mart doesn’t release online sales dollar numbers.)
The retailer’s net sales were up 2.6 percent to $360.6 billion for the nine-month period that ended Oct. 31 compared with the same period a year ago.
Wal-Mart’s share price jumped 40 percent between its opening on Jan. 3 to the closing price of $96.93 on Dec. 11.
The Wal-Mart-Amazon rivalry grew even more interesting with Amazon’s announcement in June that it was purchasing the upscale grocery chain Whole Foods for $13.4 billion.
In September, Wal-Mart announced it was building a new headquarters campus in Bentonville. And in December, Wal-Mart said that starting Feb. 1 its legal name will be Walmart Inc. The name change “chiefly demonstrates the company’s growing emphasis on serving customers seamlessly however they want to shop: in stores, online, on their mobile device, or through pickup and delivery,” Wal-Mart said.
While Wal-Mart gained online momentum, traditional department store chains like Dillard’s Inc. of Little Rock had problems adjusting as customers further continued to embrace shopping online instead of going to malls.
In its quarter that ended Oct. 28, Dillard’s reported that its same-store sales were down 1 percent, making it the ninth consecutive quarter of declines. Net sales for its first three quarters in 2017 were $4.2 billion, down from $4.3 billion during the same period a year ago.
Despite the sluggish sales, the publicly traded department store chain announced in August that its board of directors had approved raising its quarterly cash dividend from 7 cents per share to 10 cents, the highest in company history.
During Dillard’s annual meeting in May, Dillard’s CEO William Dillard II said that most sales remain at brick-and-mortar retailers and those locations aren’t going away. “We’ll have better times in the future,” he said.
But others don’t share his optimism. Credit Suisse projected that 20 to 25 percent of the malls across the country will close in the next five years as more people shop online.
It also noted that store closings have accelerated. Nationwide, department store chains such as Macy’s and Sears continued the sale and closing of hundreds of locations, adding 28 million SF of retail real estate to the market.
Away from the malls, Arkansas grocery stores also saw changes in 2017 thanks to the Legislature’s passage of Act 508. The legislation allows grocery stores in “wet” counties to sell an expanded selection of wine, a proposal that triggered fierce opposition from a number of liquor stores in Arkansas. Grocery stores previously had been limited to wine from “small-farm wineries,” which are those that don’t produce more than 250,000 gallons of wine per year.
More than 200 retailers in Arkansas received grocery store wine permits from the Arkansas Alcoholic Beverage Control Division, and the wider selection of wine was on many grocery store shelves by the end of November.
5. A Year of Change, Growth at Tyson
Tyson Foods Inc. of Springdale reported in late November that its fiscal 2017 set a company record with earnings per share of $5.31.
The year started with a bang, too, as the company made its first acquisition under CEO Tom Hayes when it bought AdvancePierre Food Holdings of Cincinnati for $4.2 billion. The deal was announced in April and completed June 7.
Hayes, who became CEO at the end of 2016, said at the time of the deal that buying AdvancePierre was “about growth. We are focused on driving growth and driving growth fast and profitably.”
The deal, which included Tyson absorbing $1.1 billion in AdvancePierre debt, was the company’s largest since it bought Hillshire Brands of Chicago for $8.5 billion in 2014. Hayes joined Tyson from Hillshire, where he had served as chief supply chain officer.
AdvancePierre, a national producer of value-added, ready-to-eat foods, allowed Tyson to enlarge its portfolio of branded and value-added foods. Tyson cut 450 jobs shortly after the acquisition, mostly corporate positions in Springdale, Chicago and Cincinnati.
In November, Tyson bought Original Philly Holdings of Philadelphia. The company makes raw and fully-cooked Philly-style sandwich steak and cheesesteak appetizer products through its subsidiaries, Original Philly Cheesesteak Co. and Philadelphia Pre-Cooked Steak Co.
Tyson also slightly increased its stake in Beyond Meat of Los Angeles, a private company that sells meatless burgers to retailers such as Whole Foods. Tyson had originally taken a 5 percent ownership stake in the company in October 2016.
Tyson had a busy year even without the acquisition of AdvancePierre. The company announced two significant reshufflings of executives during the year.
In February, a new executive team was formed that included former Hillshire executives Monica McGurk and Andy Callahan. Out were longtime Tyson executives such as Donnie King, Sara Lilygren and Gary Cooper.
Another restructuring in August, after the AdvancePierre deal, led to Callahan and McGurk leaving the company, and Sally Grimes, Doug Ramsey and Noel White were named leaders of the company’s prepared foods (Grimes); poultry (Ramsey); and fresh meats (beef and pork) and international divisions (White).
Tyson also announced a $300 million plan for a chicken product plant in Humboldt, Tennessee, in November. That project was announced shortly after a similar plan for a facility in Tonganoxie, Kansas, was derailed by citizens’ protests.
“Fiscal 2017 was a year of great change and, despite some challenges, our team remained focused on the long term by keeping consumer relevance, customer growth and shareholder value creation at the forefront,” Hayes said at Tyson’s year-end financial presentation. “Not only did we generate exceptional financial results, we also strengthened the foundation needed to accelerate growth through several initiatives. We refined our strategy and put in place a new management team to implement it.”
6. Banks Make Deals and Continue to Set Records
Continued activity in mergers and acquisitions produced record-setting deals for three prominent Arkansas lenders.
Conway’s Home BancShares Inc. completed three acquisitions during 2017 that grew its Centennial franchise and expanded its holdings in the Sunshine State.
The trio included its biggest transaction to date, the $820 million purchase of Stonegate Bank of Pompano Beach, Florida. The deal for the $3.1 billion-asset lender closed in September.
It was preceded by the $88 million purchase in February of Giant Holdings Inc., parent company of Landmark Bank of Fort Lauderdale. That deal was followed in March by the $4.2 million bankruptcy buy of the $182.5 million-asset Bank of Commerce in Sarasota.
The deals boosted Centennial Bank’s total assets to more than $14.2 billion and moved Centennial among the 25 largest lenders in Florida based on deposits.
In October, Simmons First National Corp. of Pine Bluff closed two of its biggest deals yet: the purchase of the $2.6 billion-asset Southwest Bancorp Inc. of Stillwater, Oklahoma, and the $2.5 billion-asset First Texas BHC Inc. of Fort Worth, Texas.
Adding to the Simmons asset total in March was the $78 million purchase of Hardeman County Investment Co. of Jackson, Tennessee. Hardeman owned the $464 million-asset First South Bank.
Little Rock’s Heartland Bank became an asset of Simmons Bank through a foreclosure stock sale in August. Shares in the $182 million-asset lender secured a bad loan to Heartland’s parent company, Rock Bancshares Inc.
Also in August, Fayetteville’s Arvest Bank announced an agreement to buy Little Rock’s Bear State Financial Inc. for $391 million.
The deal for the $2.2 billion-asset Bear State represents a historic acquisition for Arvest, owned by the Walton family. The transaction tops Arvest’s $211 million cash buy in 2003 of another publicly traded Little Rock bank holding company: the $1.78 billion-asset Superior Financial Corp.
In other M&A activity, Southern Bancorp Inc. of Arkadelphia bought the $42 million-asset Farmers Bank of Hamburg in a $4.5 million deal in June.
In November, First National Corp. of Wynne announced the completion of its purchase of the $79 million-asset Bank of McCrory. The transaction was valued at $9.5 million.
Bank of the Ozarks took a hiatus from the acquisition trail during 2017. The company’s only merger was in-house, absorbing Bank of the Ozarks Inc. into its $20.8 billion-asset namesake bank.
Doing away with the holding company simplified its corporate life by eliminating filings and regulatory dealings with the Federal Reserve and the Securities & Exchange Commission.
Other mergers between related entities were Twin Lakes Community Bank of Flippin folding into Anstaff Bank of Green Forest in March and Pinnacle Bank of Rogers combining with Central Bank of Little Rock in April.
7. Downtowns Are Up
Petula Clark was suddenly relevant again as downtowns throughout Arkansas saw continued redevelopment this year, a trend of several years’ duration.
Millennials are one driving force. It’s a generation dedicated to supporting local enterprises and whose members want to work near where they live and play.
In Fort Smith, the $58.6 million U.S. Marshals Museum arising on the banks of the Arkansas River will tell the colorful and important story of the marshals and what they have done to enforce the rule of law in the United States for almost 230 years.
Tyson Foods Inc. opened a 56,000-SF office building in downtown Springdale at 319 E. Emma Ave., the site of the company’s original headquarters and adjacent building formerly known as the Brown Hatchery building. That building will be the workplace for 300 employees and joins a 28,000-SF building opened last year at 516 E. Emma, the Tyson Foods JTL Building, at which 100 Tyson employees work.
In downtown Searcy, the 109-year-old Robbins Sanford Mercantile building underwent a $1.2 million renovation to open as a 20,000-SF mixed-use project housing office space and an events center.
And Arkansas Business reported on several Harding University graduates who had decided to stay in Searcy and open restaurants near downtown: Burrito Day and Slader’s Alaskan Dumpling Co. Amy Burton, the executive director of Main Street Searcy, said it’s not surprising that some Harding students decide to stay after graduating. “There’s something to be said about living in a small town.”
North Little Rock Mayor Joe Smith is among those excited about the $4.4 million Argenta Plaza project, envisioned as a beacon for millennials. Also planned for the area are the 80,000-SF First Orion Building; the 164-apartment, $16 million Thrive complex; a $10 million office building at 600 Main St.; and a 15,000-SF, $10 million restaurant-and-residence project at Sixth and Main.
In Little Rock, downtown development announcements this year were too numerous to do them all justice, but following is a sampling:
- A Virginia group paid $5.7 million for the Donaghey Building at 103 E. Seventh St., planning to turn it into an apartment building with office and retail space on the first floor.
- The Lasiter Group will renovate the Rose Building at 307 Main, a project that will include two restaurants on the building’s ground floor and 11 apartment units.
- The Lasiter Group announced a multifamily project called the Villa View at SoMa, in the 1300 block of Scott Street.
- A moribund apartment project known as the K Lofts at 315 Main was brought back to life under new ownership as the Mulberry Flats.
- The seven-story, $12.5 million Hilton Garden Inn at 322 Rock St. opened in October.
Hot Springs’ big development news was the $5 million-plus purchase of the Arlington Resort Hotel & Spa by Sky Capital Group LP, led by Al Rajabi, who plans a $30 million or more renovation of the 404,679-SF landmark hotel. The city’s downtown revitalization has sparked the opening of more hotels, such as The Waters at 314 Central Ave., and the planned transformation of the Hale Bathhouse at 329 Central Ave. into the Hotel Hale, a project undertaken by the city’s mayor and his wife, Pat and Ellen McCabe.
And in El Dorado, the city is working to transform itself into an arts destination, an effort whose $54 million first phase included the renovation of the historic Griffin Building into a restaurant, cabaret and music hall.
8. A Solar Year
Solar power kept its momentum in Arkansas in 2017, with businesses, farms and even a telephone company reaching for the sun, but the long-term fate of home-generated power faced high noon on Nov. 30. That’s when state regulators heard arguments for and against letting utilities essentially pay less than their retail rate to net-metering customers — those whose solar panels put excess wattage onto the grid.
The Public Service Commission’s staff, the state attorney general’s office and the power companies favor credits for returned solar energy that are less than the utilities’ retail rates — perhaps half. Solar contractors, environmentalists and hundreds of citizens spoke out for keeping the current one-to-one match of retail rates and solar credits.
Utilities argue that they should be able to recover infrastructure and transmission costs from solar-panel owners. Otherwise, they say, non-solar customers would have to pay more.
Solar advocates say utilities ignore benefits like lower peak loads, and cite a study finding that power companies and society reap a net benefit from solar. They say, too, that the utilities’ “two-channel” billing plan could kill solar growth by confusing potential customers and obscuring how long they might wait to recoup their solar investments.
Solar forces got a dramatic lift when Rep. Stephen Meeks, the Greenbrier Republican who sponsored the legislation mandating a new look at net-metering, spoke against the utilities’ two-channel plan.
Heather Nelson of Seal Energy Solutions called it a “mic-drop moment,” but the three-member commission has indicated it will give more weight to the attorney general’s arguments. A decision is expected by the end of spring.
Meanwhile, solar projects kept going in, with Entergy Arkansas completing the state’s largest solar array, an 81-megawatt project near Stuttgart, late in the year, then revealing plans for an even bigger 100-megawatt system near Lake Village, Chicot Solar.
Scenic Hill Solar of Little Rock, which installed multimillion-dollar industrial projects at L’Oreal plants in North Little Rock and Kentucky, is deep into work on a $10 million array for Clarksville’s municipal utility, and Stratton Seed Co. of Stuttgart and Ace Glass Construction Corp. of Little Rock announced sun projects to fully power their business operations. Ace Glass is partnering with Entegrity Energy Partners, and Stratton’s project was the first net-metering endeavor to gain PSC approval for generating more than 300 kilowatts of power. “To be a small family business and be the first to do this in net metering is pretty exciting,” CEO Wendell Stratton said.
Seal is providing solar systems for HVAC contractor Powers of Arkansas in North Little Rock and has installed an array for farmer Tom Jacobs of DeWitt. “Real-world numbers are what counts,” Jacobs said, describing himself as a “guinea pig” for agricultural solar. “It helps if the guy doing the testing is the guy writing the check. I look at solar as a piece of farm equipment.”
Today’s Power Inc. of Little Rock continued to install small utility-scale arrays for the state’s electric cooperatives, and last month dedicated a 1.3-megawatt array for Husqvarna Group in Nashville. It also completed a 120-kilowatt system for South Arkansas Telephone Co. in Hampton, making SATCO the nation’s first fully solar-powered telephone company. That project was in tandem with Ouachita Electric Cooperative Corp.
9. Public Officials and Corruption
It was the first big news of 2017: Just after noon on Wednesday, Jan. 4, the U.S. Attorney’s Office for the Western District of Arkansas emailed a press release with this ominous all-caps subject line: ARKANSAS STATE REPRESENTATIVE PLEADS GUILTY TO BRIBE CONSPIRACY.
The representative — his second term would end the following week — was Micah S. Neal, R-Springdale, who admitted that he had received approximately $38,000 in kickbacks in 2013-15 from two nonprofits to which he and a state senator had directed money from the state’s controversial General Improvement Fund.
Nearly a year has passed, but most of what we know now was public knowledge within a few days: The senator was Jon Woods, another Springdale Republican who didn’t seek re-election as the feds moved in on him in 2016, and the nonprofits that paid the kickbacks were tiny Ecclesia College in Springdale and Alternative Opportunities Inc. of Springfield, Missouri, which did business as Decision Point at the time.
Woods was indicted in March along with Oren Paris III, the president of Ecclesia College, and their mutual friend, Randell Shelton Jr. of Alma. The three were scheduled for trial this month, but it was postponed at the last minute when a trove of recordings that Neal made of Woods was discovered. No new trial date has been set, and Neal is not expected to be sentenced until he has finished assisting federal prosecutors.
Meanwhile, the federal investigation of misuse of GIF money has continued, and multiple legislators have been targets. One of them is state Sen. Jake Files, R-Fort Smith. Files has acknowledged that he submitted two fake bids plus the winning low bid on behalf of an unlicensed subcontractor — actually his employee — and then directed GIF money to the city of Fort Smith to pay her. And the employee has sworn in an affidavit that she then gave the $27,000 to Files.
A long-running case of official corruption in the U.S. Department of Agriculture child feeding program administered by the state Department of Human Services has resulted in 16 convictions and uncovered more than $13 million in fraud.
And in November, former Faulkner County Circuit Judge Mike Maggio reached the end of the line. The U.S. Supreme Court refused to consider his attempt to take back his plea of guilty to accepting a bribe.
Maggio, who had pleaded guilty in 2015 and been sentenced in 2016 to 10 years in federal prison, had reported to prison in July after the 8th U.S. Circuit Court of Appeals refused to let him withdraw the plea.
10. Health Care Still in Transition
At the beginning of 2017, Obamacare was in critical condition. Arkansas hospital executives braced for what they thought might be the end of the Affordable Care Act, former President Barack Obama’s landmark health care legislation.
President Donald Trump had said during his 2016 campaign that one of the first things he would do after taking office in January was repeal and replace the ACA.
But Congress’ initial attempts to repeal or replace the ACA failed. The Congressional Budget Office showed that tens of millions of Americans would end up without health insurance. The individual mandate, which requires most Americans to have health insurance or pay a penalty, soon might be gone, however.
Senate Republicans included an individual mandate repeal in their tax overhaul bill, but it wasn’t included in the House version. Republicans hope to pass a compromise by the end of 2017. The CBO estimated the number of people with health coverage would fall by 4 million in 2019 and 13 million in 2027 as a result of that individual mandate repeal.
As the fight over health care occupied Congress, Arkansas lawmakers in May approved Gov. Asa Hutchinson’s plan to make changes to Arkansas’ Medicaid expansion program known as Arkansas Works, which has saved hospitals $150 million annually in uncompensated care. The modifications call for capping the eligibility at 100 percent of the federal poverty level, down from 138 percent. That means that of the approximately 315,000 people on Arkansas Works, about 60,000 will be removed from the program.
Hutchinson told Arkansas Business that the reform was necessary to the “long-term success of the enhanced health care coverage.” The Arkansas Works adjustment was expected to save Arkansas between $66.6 million and $93.4 million between January and the end of the 2021 fiscal year.
The changes were targeted to take place Jan. 1, but as of last week the U.S. Department of Health & Human Services’ Centers for Medicare & Medicaid Services hadn’t approved the modifications. Nevertheless, a spokeswoman for the Arkansas Department of Human Services said last week that she was “very optimistic” that CMS soon will approve the changes.
The uncertainty surrounding health care reform has made planning stressful for Arkansas hospital executives.
“For a few years now, it’s been a challenge to do long-range strategic planning that in my early days in health care was a given,” said Peggy Abbott, the president and CEO of the 98-bed Ouachita County Medical Center in Camden. “We had a three-year range, a five-year range and even beyond. And that has … been thrown away because we can’t.”
In another development, a couple of major health care organizations in Arkansas agreed to work together. In August, the University of Arkansas for Medical Sciences and Baptist Health of Little Rock announced they would partner on clinical and academic efforts. The projects between Baptist Health and UAMS include trying to improve Arkansans’ health, which usually ranks near the bottom on nationwide assessment surveys.
Both UAMS and Baptist said they would maintain their identities as separate institutions while working together. Still, a key piece of the initiative is a new Baptist Health/UAMS Accountable Care Alliance to coordinate care for about 35,000 Medicare patients in Arkansas. Through the new partnership, the two organizations could share millions of dollars in savings if they hit goals set by the CMS.
Baptist Health President and CEO Troy Wells said that the health care industry is facing a difficult future with the continued uncertainty surrounding health care funding. “We believe that by working together, by collaborating in areas that make sense, that we’ll both be better prepared and more successful than if we didn’t,” he said. “And that’s part of the reason why we’re doing this.”