White River Health Revamps Finances After Violating Bond Covenant

White River Medical Center in Batesville. (Rachel Elmakiss)

White River Health is working to improve its finances after it violated a bond covenant for its fiscal year that ended Sept. 30.

The Batesville health care system was required to comply with certain restrictive covenants of its $32.5 million bond issued in 2020 to refinance debt. The covenants included maintaining a maximum debt-service coverage ratio of at least 1.1 to 1.0.

White River Health’s audit for the 2023 fiscal year said the health system did not meet the required debt service coverage ratio. As a result, White River was required to hire a consultant to improve its financial performance and file a report with the bond trustee, according to the March 12 audit by Forvis of Little Rock.

Gary Paxson, White River Health president and CEO, recently told Arkansas Business in a statement that the hospital hasn’t missed a bond payment, nor is it at risk of missing any.

“Also, WRH has complied with the terms in the bond documents which apply to this situation, and it has remedied all bond-related issues resulting from 2023 debt coverage ratio results,” Paxson said in the statement.

The consultant helped “identify and evaluate initiatives to improve our operating margins long term,” he said.

The system is in the process of executing those suggestions, which include cutting expenses and improving revenue, Paxson said.

One initiative involves renegotiations with payers for reimbursements and claims processing issues such as the use of prior authorization, denials and underpayments, he said.

White River Health isn’t alone in its financial struggles. Other hospitals have faced “unprecedented” costs to cover wages, supplies and pharmaceuticals since the pandemic, but have seen stingy reimbursement deals from insurers and government payers.

Nevertheless, the financial performance of some hospitals nationwide has improved in the first quarter. “Starting out this year in 2024, we are generally off to a relatively strong start to the year, much more so than we’ve seen in the last several years,” Erik Swanson, Kaufman Hall’s senior vice president of data and analytics, told Arkansas Business. Kaufman Hall is a Chicago consulting firm that advises health care and education organizations and collects data from more than 1,300 American hospitals. “But, it is true that we have seen a slow — albeit slight — deterioration of margins over the last couple of months as well.”

He said that outpatient revenue is growing for hospitals as patient volumes are higher than what they were in prior years.

Emergency room visits per day were 25% higher in the first quarter of 2024 than they were in the same period in 2021, according to the latest National Hospital Flash Report from Kaufman Hall. In addition, operating room minutes per day were up 6% in the first quarter compared with the same time in 2021.

Loss Widens

White River Health, which operates White River Medical Center and Stone County Medical Center, saw its operating loss in 2023 widen to $13.3 million compared with a loss of $6.5 million the previous year.

White River didn’t receive any money from the federal Coronavirus Aid, Relief & Economic Security Act in 2023, a major factor. The year before, White River received $11.7 million.

White River reported its patient service revenue increased 1.84% to $271.1 million for the fiscal year that ended in September. Its total revenue, however, dropped to $284.2 million from $289.6 million the previous year.

Meanwhile its expenses, including depreciation and amortization, rose slightly. For the fiscal year, the total expenses were $297.6 million, up from $296.1 million in 2022.

“These are challenging times for our industry,” Paxson said. “But we remain steadfast in the resolve to serve our mission and advocate for the needed changes to make health care more sustainable for both patients and those who provide such valuable care.”