Hospital executives say financial conditions dire, closures imminent if no action

After surviving the pandemic, Arkansas’ hospitals are anything but on a road to recovery. Mounting financial pressures from workforce to reimbursements to inflation are leading to reductions in services and access points and could lead to eventual closures of facilities if conditions don’t improve.

Two Arkansas hospital CEOs – Peggy Abbott, CEO of Ouachita County Medical Center, and Chad Aduddell, market CEO for CHI St. Vincent in Little Rock – said insurance companies and federal reimbursements must step up for the state’s healthcare community to survive.

“We’ve seen our expenses, we’re up more than 10%, which for us, our expenses are up over $100 million versus the pre-COVID year, and yet our revenues and volumes are actually down. So you don’t have to be, you know, a finance leader to know that that math’s not gonna work out, and not going to be sustainable,” said Aduddell.

“Hospital margins were slim before COVID, and COVID has certainly exacerbated the challenges of operating a hospital or a healthcare system, especially in a state like Arkansas, where we’re reimbursed lower than the rest of the country, whether it’s our reimbursement from Medicare or our reimbursement from commercial payers. And that’s something that I think a lot of Arkansans are unaware of,” he added. “You add double-digit increases in costs, whether it’s on the labor side, supply chain side, that certainly COVID exacerbated over the last two and a half years. And then add on other macro-level inflationary impacts, and it’s really a perfect storm.”

Abbott, who has 35 years of healthcare experience, said stimulus funds during COVID-19 helped significantly, but that money has run out. Now, faced with post-pandemic financial challenges, her independent hospital is deeply in the red and tapping into critical reserves.

“Our Medicare population days are not what they were even a year ago. We are sustaining, our revenue has decreased year-to-date, June 30 of this year, over one year ago, our revenue has decreased by $2 million. Our salaries have increased $1.7 million, and contract labor for use of agency staffing increased $800,000 this year to date over last year, putting that number at $1.3 million,” Abbott said.

“Insurance rates have increased hundreds of thousands of dollars. Overall, we have fewer days of cash-on-hand than I have ever seen. We are really at a crisis point, I think not just here in Arkansas but in America. And I have a concern that it could be the collapse of the healthcare system as we currently know it, if we don’t get some balance to reimbursements from both insurance companies, as Chad said, as well as Medicare and Medicaid,” she added.

Aduddell said last week Fitch Rating Agency changed its outlook for the nonprofit healthcare sector to “deteriorating” based on labor and inflationary pressures. Both CEOs said they’ve done what they can to cut costs internally and are now moving towards reductions in services and locations.

“First, we’re all operators and we’re all going to look internally at the things that we can do leaner, more efficiently. Every hospital in Arkansas, and probably across the country is doing that work, and candidly, we have been doing that work during COVID. So that’s already baked in,” Aduddell said. “We’ve already made as many of those cuts and changes as we can, and now we’re laying people off. And that’s unfortunate, but that’s the step that we were at in July. So what comes next? Well, reduction in services, consolidation of offices and different access sites. So that’s going to make it harder for the community, for Arkansans to access a location that’s close to them.”

“We’re trying to make people aware that we are at a ‘crisis’ point, not just in Camden. That’s a heavy word to use, but as Chad has alluded to, we are there. It’s real. And you know, we don’t get the opportunity, and we don’t want to. We start orchestrating change right here. I applaud the hospitals in Arkansas because we try to make the change and make it happen. We start in the C-suite. In Camden, we’ve already, I voluntarily reduced my salary. Many of our managers did. We had to make the heart-wrenching decision to close the service of a rural health clinic 20 miles from here that we’d operated for 25 years. Those are not easy decisions,” Abbott said.

You can watch their full interview in the video below.