VIEWPOINT
TOP CHALLENGES FACING HOSPITALS By Bo Ryall, President/CEO Arkansas Hospital Association
Hospitals in Arkansas, and indeed throughout the U.S., are facing a financial crisis. It can be difficult to grasp why this industry, in particular, needs specific and immediate relief and why that involves legislation, changes in rulemaking, and constant advocacy efforts at the local, regional, state and national levels. What’s much easier to understand is that if any of our hospitals were to collapse under this mounting pressure, it would put the health of our state – its economy and its people – at risk. The following Q&A is meant to offer some context on this complex and increasingly dire situation.
Why are hospitals experiencing financial difficulties? It is as simple as expenses outpacing revenues. You can say that all businesses are experiencing this right now to some extent, but unlike other businesses, hospitals cannot simply raise prices and pass expense increases along to consumers. Hospitals are paid by Medicare, Medicaid and commercial insurance, and those reimbursements have, for the most part, remained stagnant while labor and supply costs have significantly increased. Is it a management problem? No. With expenses increasing and revenue remaining stable, the challenge becomes what expenses to cut. Hospital costs consist largely of salaries; more than half of a hospital’s expenses fall under compensating the health care workers who provide care to patients. If a hospital were to
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reduce the number of nurses employed, for example, that would mean fewer beds available for patients. With flu, COVID and RSV reaching peak levels this fall, the result of these types of reductions would equate to reduced bed capacity statewide for sicker patients. Other possible reductions could include cutting unprofitable lines of service, such as labor and delivery or rural health clinics. Cuts like these have an overwhelmingly detrimental impact on health care access. Arkansas currently has fewer than 40 hospitals operating labor and delivery departments, and that number continues to decrease. Driving hundreds of miles to deliver a baby or to access prenatal care will inevitably have a negative impact on the health of mothers and newborns. Similarly, closing rural health clinics may save money in the short run, but these cuts also limit preventive care which
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in turn results in sicker patients who develop diabetes, suffer heart attacks and strokes or succumb to other illnesses. Are hospitals in danger of closing? The Center for Healthcare Quality and Payment Reform issued a report last November that identified 22 rural Arkansas hospitals (46%) at risk of closing, and six hospitals at risk of immediate closure. It’s clear that Arkansas’s health care industry is not only facing cutting services and bed capacity, but is also in danger of shuttering locations altogether, the victims of sustained financial losses on patient services reimbursement and low financial reserves. Why have labor costs increased? Health care was already experiencing a workforce shortage prior to the pandemic, but the last couple of years have greatly
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