LITTLE ROCK, AR (August 9, 2022) – A recent financial survey conducted by the Arkansas Hospital Association shows that the COVID-19 pandemic continues to create profound financial volatility for the state’s hospitals. On average, hospitals responding to the survey saw a total margin decrease of 3.5 percentage points between the first quarter of 2019, prior to the pandemic, and the first quarter of 2022, leaving a full 52 percent of respondents now in the red. This sustained financial squeeze could result in diminished access to care for Arkansans.
“The survey certainly paints a bleak picture for Arkansas hospitals’ finances,” Arkansas Hospital Association President & CEO Bo Ryall commented. “The fact that about half of the facilities who responded are now operating on negative margins should be a major cause for concern for all of us. In many of our communities, the hospital is the largest employer, and 40 Arkansas counties are served by a single hospital. Without a hospital, the most vulnerable residents – often the elderly and those living in poverty – may find their access to health care severely limited.
“The people who work in our hospitals are remarkably strong,” Ryall continued, “and our hospital leaders are equally motivated by their shared mission to provide care to the people of our state. It is because of their vision and commitment that I’m confident we can navigate our way through this difficult time. But hospitals won’t be able to do it alone; it will require all of us to recognize the crucial role they play as both the heart of the health care system and a major driver of the state’s economy. Unless hospitals receive additional assistance from state and federal government, we will see more reductions in services and possibly even closures.”
It is difficult to overstate the environment of uncertainty within which hospitals have had to make clinical, operational, and financial decisions throughout the pandemic. Unlike other industries, hospitals cannot just raise their prices; they are primarily paid by Medicare, Medicaid, and negotiated contracts with commercial insurers. Before COVID-19, Arkansas hospitals faced downward revenue pressure from payers, and many were operating on slim – and, in some cases, negative – margins. Since the beginning of the pandemic, hospital expenses have increased more rapidly than revenues. As demand spiked and many health care workers were pulled away by lucrative jobs elsewhere, total hospital staffing vacancies skyrocketed, leaving facilities throughout the state reliant on expensive contract labor to maintain a safe and effective environment for patients and employees. Even as COVID-19 cases ebbed during the spring, the survey shows that inflationary pressures increased, further exacerbating the financial situation in hospitals.
Hospitals are cornerstones of Arkansas communities, and the risks they now face highlight the need for policy, legislative, and regulatory approaches to support and strengthen the health care system.