The Truth About Arkansas Hospitals' Financial Health

Every few months, lobbyists and executives for Arkansas hospitals throw themselves before state legislators, pleading for more taxpayer cash. According to these special interests, the hospitals are “cash-strapped” and at imminent risk of closing—and apparently have been for more than a decade. By stoking fears of Arkansans who do not want to lose access to potentially life-saving emergency care, they often walk away with a new bundle of cash which satisfies them for a few months. That is, until they spend all that money and suddenly need more. Then the cycle repeats.

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There is just one big problem: Arkansas hospitals have consistently misrepresented their true financial status.

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While fearmongering and spurring news headlines like “condition critical” every two years, Arkansas hospitals have been living high on the hog. Indeed, they have conveniently ignored their disastrous financial mismanagement and self-enrichment, as well as underrepresented the massive amounts of aid they receive from taxpayers.

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Arkansas hospitals have a spending problem, not a revenue problem

All across the state, Arkansas hospitals are claiming their financial position is so poor that they are on the brink of closing their doors.^1-2-3-4 Again, this is a claim that hospitals have made every few months for the better part of the last decade. In reality, however, Arkansas hospitals are enjoying record amounts of revenue coming through their doors.

The largest nonprofit hospitals and hospital systems in the state—representing roughly two-thirds of all licensed beds—reported nearly $4.1 billion in total revenue in their most recent filings, a more than 22 percent increase from five years prior.^5-6

^‍To illustrate how high these numbers are, these high-earning hospitals receive more revenue than the State of Arkansas spends on agriculture, commerce, corrections, energy, labor and licensing, tourism and parks, finance and administration, and veterans affairs—combined.⁷

Clearly, revenue is not the issue. The crisis these hospitals are facing is a spending problem—specifically, spending on compensating their highest paid officers.

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HOSPITAL EXECUTIVES ARE PROFITING JUST FINE

Among just the largest “nonprofit” hospitals and hospital systems, total annual compensation for the five highest-paid employees at each of these entities is an astonishing $38.9 million, for an executive average salary of more than $863,000 per year.⁸

Compare that average salary to the remaining 29,000+ hospital employees at these entities, who earn an average of just under $56,000 per year.⁹

But it is not just that hospital executive compensation is high; the jaw-dropping reality is that compensation has been steadily increasing over recent years, even while hospitals have been telling state policymakers that they are rapidly approaching bankruptcy.

After adjusting for significant one-time pay-outs, hospital compensation for the highest-paid executives among Arkansas’s largest nonprofit hospitals and hospital systems has risen by an unbelievable 47.6 percent over the last five years—far outpacing growth in revenue and overall expenses by more than double.^10-11

In some hospitals, the situation is even worse.

For example, at CHI St. Vincent Hot Springs—a hospital with 600+ beds—more than 5 percent of the hospital’s compensation went to the five highest-paid employees, who earn an average of $920,000 each.¹² The remaining 1,600 employees earned just under $50,000, on average.¹³

Meanwhile, Baptist Health’s hospital system— which consists of nine hospitals across the state—saw compensation for its top-five highest-paid employees increase by 104 percent over the last five years, more than five times its revenue growth over the same period.¹⁴

The same is true for the Arkansas Hospital Association, which routinely advocates for additional taxpayer funding to be directed to Arkansas’s hospitals.

The top five executives at the Arkansas Hospital Association earn a total amount equal to almost one-third of the organization’s revenue, or an average of more than $300,000 each.¹⁵

Unfortunately, the picture is not any better at state-run hospitals, which are largely funded by taxpayers.

‍At UAMS Medical Center—a hospital run by the University of Arkansas—nearly $1 billion was paid in compensation in FY2021.¹⁶ This includes seven-figure salaries to numerous individuals with the titles of “professor,” “associate professor,” and “assistant professor.” ¹⁷

Even among those hospitals reported to be in the most dire straits seemingly can afford to pay big bucks to their executives: Ouachita County Medical Center recently said it was on “life support” last summer, even after receiving $6 million in American Rescue Plan Act (ARPA) funds allocated from the state.¹⁸

Yet in Fiscal Year 2020, its top five employees earned an average of about $330,000 per year, not counting its CEO who takes in nearly $200,000.¹⁹

‍Together, this small handful of executives at this less than 500-employee hospital take in more than 10 percent of the payroll.²⁰

Overall, at Ouachita, pay for the top five executives has increased by 174 percent over the most recent reported five years, all while total revenue increased by less than eight percent over the same time period.²¹ Even supposed recent executive pay cuts by Ouachita leave the hospital's executives extremely comfortable with their annual compensation.

Meanwhile, Ouachita hospital executives are begging hat-in-hand for additional taxpayer funds, telling the public they are destitute.

Massive retirement payouts have also become the norm. In Fiscal Year 2015, the retiring president at Mercy Hospital’s Fort Smith location received a payout of more than $6.7 million— meaning seven percent of the hospital’s spend- ing on compensation that year went to a single departing individual.²²

ARKANSAS HOSPITALS ARE HAVING NO TROUBLE FINANCING MASSIVE CONSTRUCTION PROJECTS

Contrary to their assertions, some Arkansas hospitals are actually doing quite well, as evidenced by massive investments in expansions and construction. For examples, Mercy Northwest Hospital recently underwent a $500 million expansion.²³ Baptist Health just opened a new behavioral clinic in North Little Rock.²⁴ Unity Health is slated to open a new facility in Jacksonville for $36 million.²⁵ These projects are getting done, but these hospitals are so financially mismanaged that their substantial revenues are being consumed by executive pay increases.

Arkansas hospitals receive billions of dollars annually from taxpayers

As a result of the “cash-strapped hospitals” myth, hospitals are perpetually requesting and receiving additional funding from Arkansas taxpayers to pad their bottom lines. One of the more frequent claims is that Arkansas’s reimbursement rates for hospitals are stagnant or otherwise insufficient.^26-27 The CEO of the Arkansas Hospital Association has even suggested that “hospitals haven’t received any type of rate change for outpatient rates since 1992 and inpatient [rates] since 2007.”²⁸ But these claims are provably false.

ARKANSAS HOSPITALS ALREADY ENJOY GENEROUS REIMBURSEMENT RATES AND OTHER TAXPAYER SUPPORT

The 50-State Medicaid Budget Survey by the Kaiser Family Foundation reports inpatient hospital reimbursement rate increases in Arkansas in both state fiscal years 2010 and 2011—completely contradicting the claim of the Arkansas Hospital Association.²⁹

Furthermore, just before these rate increases took effect, Arkansas was ranked in the top ten states for Medicaid reimbursements to hospitals for inpatient services.³⁰ In fact, Arkansas Medicaid payments to hospitals were reported as roughly 30 percent higher than the national average and higher than every neighboring state.³¹

While hospitals allege that they face lower commercial reimbursement rates, more than half of all inpatient stays at hospitals in Arkansas are charged to Medicaid or Medicare.³² This percentage is unfortunately increasing as more and more Arkansans become reliant on Medicaid for their health coverage.³³

At some Arkansas hospitals, as much as two-thirds of their patient business is from Medicaid and Medicare.³⁴ Considering Arkansas’s Medicaid reimbursement rates exceed surrounding states and the national average, any further attempts to raise reimbursement rates are deceitful strategies to further squeeze Arkansas taxpayers into forking over more funds to hospitals.

Alas, the Arkansas hospital strategy "of continuing to milk taxpayers has largely worked for years. Policy-makers are already discussing raising hospital reimbursement rates in 2023.^35-36
Additionally, even without these potential future rate increases, hospitals have already seen more aid from state taxpayers. In fact, from 2015 to 2020, Arkansas state and local expenditures per capita on health and hospitals increased by 27.3 percent—a greater increase than in all but one neighboring state.³⁷

In addition, Arkansas taxpayers foot a bill of more than $100 million every year in sales tax exemptions for purchases made by nonprofit hospitals and related entities, on top of several other hospital-related tax benefits.³⁸

TAXPAYERS HAVE ALREADY BAILED OUT ARKANSAS HOSPITALS

In 2022 alone, Arkansas hospitals received what amounted to a de facto bailout at the expense of state taxpayers. Citing increased Medicaid costs, the Arkansas Department of Human Services (DHS) requested a $400 million supplement for the current budget year under the “hospital and medical services” expenditure category.^39-40 In total, the Arkansas Division of Medical Services received more than $7.5 billion in funding from taxpayers for “hospital and medical service- related expenses” in a single budget year (FY2022-2023) alone.⁴¹

Arkansas hospitals have also benefited from untold amounts of COVID-19-related federal support. More than $1.1 billion was distributed to Arkansas medical providers—with the largest amounts going to hospitals—from the U.S. Department of Health and Human Services (HHS) Provider Relief Fund as part of funding from the CARES Act of 2020.^42-43

An additional $5.4 million in funding from the Assistant Secretary for Preparedness and Response (ASPR) was also granted to Arkansas hospitals, as was $170 million in support related to Medicaid and CHIP expenses.^44-45 Roughly $326 million was also granted to more than 50 Arkansas hospitals and other medical providers as part of the Public Health and Social Services Emergency Fund under the CARES Act.^46-47

The situation is similar for relief under the American Rescue Plan Act of 2021. In Fiscal Year 2022, the Arkansas ARPA Steering Committee requested and secured $73 million for “hospital capacity” related support.⁴⁸ They also secured roughly $6 million in emergency aid to the Ouachita County Medical Center discussed above, despite its massive increases in executive pay leading up to its alleged cash crisis.^49-50

Additionally, the ARPA Steering Committee successfully requested massive distributions to Arkansas hospitals on a per-bed basis for COVID-Comm systems, monoclonal antibody treatments, and staff retention and recruitment, totaling at roughly $130 million.51-52 In total, Arkansas hospitals received more than $200 million in ARPA funding, on top of the hundreds of millions received in CARES funding.⁵³

The total amount of pandemic aid received by Arkansas hospitals could realistically exceed $1 billion. Ironically, millions were returned or undistributed, calling into question how much these taxpayer-funded hand- outs were really needed.⁵⁴

The reality is clear: Arkansas hospitals have long benefited from the pocketbooks of every-day Arkansans, from higher-than-average reimbursement rates to huge bailouts to unprecedented COVID-related support.