UPDATED: Ahead of state budget talks, UAMS announces 600 job cuts

The University of Arkansas for Medical Sciences (UAMS), which supports over 10,000 jobs across the state, announced Monday (Jan. 8) it is cutting 600 positions to close a budget gap of more than $30 million as Gov. Asa Hutchinson and the Arkansas General Assembly begin prepping this week for the upcoming fiscal session.

UAMS interim chancellor Stephanie Gardner said 258 of the affected positions are occupied. The main UAMS campus is in Little Rock. There is also a regional campus in Fayetteville.

“UAMS has had financial challenges for many years and we have always made up for any shortfall by using our reserve funds,” Gardner wrote in an email to staff Monday. “However, we are depleting our resources and we cannot continue to do that and sustain UAMS into the future.”

According to a statement released by UAMS spokesman Leslie Taylor, the state’s only health sciences university made the budget cuts in order to comply with its fiscal 2018 budget that was approved earlier this year by the University of Arkansas Board of Trustees.

A recent economic impact study of UAMS by TEConomy Partners shows the Little Rock-based healthcare giant generates nearly $3 billion in economic activity statewide. For every dollar of taxpayer money UAMS receives, $24.53 of economic activity is supported across the state economy, according to the study.

As the state’s only comprehensive academic medical center, UAMS officials tout the fact the hospital system plays an enormous role in educating the state’s physician workforce, producing nearly half of the state’s practicing physicians. In rural parts of the state that often face a shortage of doctors, UAMS trains about 60% of the physicians in those areas.

According to Taylor’s statement, UAMS leadership has conducted a comprehensive review of all programs to identify cost savings and make adjustments over the past several weeks.

“However, personnel is our largest expense and we have come to the extremely painful realization that we can’t meet our budget without also eliminating jobs,” Taylor said. “We have no choice but to reduce our workforce by about 600 positions. We have made every effort to cut unfilled positions where possible, but 258 of the affected positions are currently occupied.”

UAMS employees whose jobs are being eliminated will be notified Monday. Human resources representatives will also reach out to them to provide services to assist them in finding other jobs, officials said.

Across the state, UAMS operates the colleges of Medicine, Nursing, Pharmacy, Health Professions and Public Health; a graduate school; a hospital; a northwest Arkansas regional campus in Fayetteville; a statewide network of regional centers; and seven research institutes. It is the state’s largest public employer with more than 10,000 employees, including about 1,200 physicians who provide care to patients at UAMS and its regional campuses throughout the state

“This is a very difficult decision. These positions are not being eliminated because of performance issues but simply because we do not have the money to fund everything we have in the past,” Taylor said. “We are very grateful to the colleagues who are leaving us for their many years of service to UAMS and our state.”

GOVERNOR TO OUTLINE STATE BUDGET
UAMS job cuts and rising healthcare expense will likely be at the forefront of pre-fiscal session meetings on Tuesday when Hutchinson outlines his fiscal 2019 budget before the Joint Budget Committee at the state Capitol. The biennial assembly begins on Feb. 12 in Little Rock, where lawmakers will consider budget requests for fiscal year 2019 and consider other financial matters concerning the state’s operations.

The Arkansas Revenue Stabilization Act mandates a balanced budget to provide appropriate funding levels for all the state’s major priorities under Gov. Hutchinson’s earlier $5.5 billion budget for fiscal 2018. In a recent interview with Talk Business & Politics, Rep. Lane Jean, R-Magnolia, co-chairman of the legislative budget panel, said the fiscal session will be “dominated” by discussion on ways to cut Medicaid costs, including outlays for Arkansas Works.

Last week, Hutchinson and Department of Human Services (DHS) Director Cindy Gillespie announced Arkansas had reduced the state’s one million-plus Medicaid count by 10% in the past year as part of the state’s ongoing effort and transformation to pare rising costs for a federal-state program that helps low-income individuals with medical-oriented expenses.

Those initiatives, along with implementing recommendations made by the legislature’s Health Care Task Force, led to net savings of $77 million to the state of Arkansas through fiscal year 2017. According to Hutchinson, DHS now expects to meet its five-year, $835 million saving targets resulting from those efforts.

The Joint Budget Committee meetings this week will hear budget requests for higher education institutions, Department of Education Public School Fund Account, the Department of Human Services, Department of Health, Department of Corrections and the Department of Community Correction, commonly referred to as the “Big 6.” Other agencies may be heard after receiving approval from the Legislative Council or the Joint Budget Committee.

In late August, UAMS and Baptist Health Medical System, two of Arkansas’ largest healthcare organizations, announced a strategic alliance to expand the hospital groups’ educational opportunities and deliver clinical care more efficiently.

At the time, Gardner and Baptist Health CEO Troy Wells told Talk Business & Politics the alliance began a few years ago and sped up at the beginning of 2017 amid the ongoing national healthcare debate.

Although the alliance does not have any financial ties, both hospital groups said they were seeking synergies and ways to operate more efficiently through the hospitals’ joint efforts.

“A lot of things have happened that made what I feel like this (alliance) more important, and give us a greater ability to have a greater impact on the community,” Wells said. “We share the same electronic medical records, which today is a pretty important aspect of delivering patient care and tracking clinical information about our patients.”

The UAMS-Baptist Health alliance is part of an ongoing trend in the health industry to tackle rising costs, brought on by the competitive pressures from the Affordable Care Act, changes in Medicaid and evolution of the traditional fee-for-service reimbursement model to one that is based on improving outcomes for patients.

In a recent white paper on the growing number of healthcare alliances, Chicago-based advisory firm Baker Tilly said providers seeking to improve quality and lower costs are also pursuing other types of affiliations, including joint ventures and joint operating agreements with organizations that have complementary specialties.

“These alternatives may provide a better way to provide higher quality offerings to patients, as well as increased revenues for the participating providers,” Baker Tilly noted. “For these ventures to succeed, organizations need to identify their appropriate area(s) of strength and partner with other institutions that complement existing services.”

The UAMS-Baptist Health partnership occurred after DHS also announced a reorganization that will shift 171 employees to a newly created division, impacting more than 40 DHS contracts and streamline the agency’s oversight of thousands of Medicaid providers across the state.