The Arkansas Department of Human Services' request to use $60 million in federal American Rescue Plan funds to assist hospitals in immediate jeopardy of closure as a result of the extraordinary circumstances created by the covid-19 public health emergency cleared a state panel Wednesday.
Arkansas' American Rescue Plan steering committee, appointed by Gov. Asa Hutchinson in May 2021 to recommend the best uses of $1.57 billion in American Rescue Plan State Fiscal Recovery funds, advanced the Department of Human Services' request without any audible dissenting votes.
The panel also endorsed the Department of Human Services' request for $10 million in American Rescue Plan funds for services to benefit rural hospitals through the Arkansas Rural Health Partnership, and the department's request for $5 million to support the training and certification of teams employed by behavioral health agencies in evidence-based models.
The department still must obtain spending authority from the Legislative Council to spend these federal funds.
Hospitals continue to experience financial strain due to the economic impacts of the ongoing covid-19 pandemic, the department said in its written request for the $60 million in funding.
Increased costs and labor shortages have resulted in reduced revenues for the hospitals, and that's meant several hospitals across the state, particularly those that serve rural populations, are at immediate risk of closure, the department said.
Department of Human Services Secretary Cindy Gillespie said department officials have heard from some hospitals that are reaching the stage where they are looking at whether they will have to close their doors, and most of these hospitals are in rural areas of the state, are not connected to a large hospital system, and had "a very thin margin to work with" going into the covid-19 pandemic.
"For them, getting their footing back to be able to move toward long-term sustainability is really very much an issue," she said.
Jodiane Tritt, executive vice president of the Arkansas Hospital Association, said hospitals took out Medicare accelerated payments early in the covid-19 pandemic to keep their beds open and take covid and non-covid patients, and those payments are coming due now.
"Right now, we are at a crisis point," she said.
Gillespie and Tritt would have preferred the department seek a much larger amount than $60 million for the hospitals.
"Sixty million dollars in the hospital world is not going to go very far at all," Gillespie said.
Gillespie said department officials tried hard not to submit another proposal for $150 million to $200 million in American Rescue Plan funds for the hospitals, and submitted a targeted proposal instead.
"At this point, what we are trying to do is take this piece by piece," she said.
While department officials know some hospitals would meet the proposed requirements for the federal funding under this proposal and are in need, they don't know how many hospitals would apply for the funding, she said.
It's "a very, very large step" for a hospital to declare that it's in immediate jeopardy of closure, Gillespie said.
The Department of Human Services also is working with the Arkansas Hospital Association to undergo a rate review for Arkansas' inpatient and outpatient hospital rates, as well as examine policies to help address the strains placed on hospitals through the pandemic, according to the department.
"We know the rates will change as we go through this ... and that will benefit all the hospitals of the state," Gillespie said.
In its request, the department said hospitals eligible to seek these federal funds must be deemed in immediate jeopardy by showing insufficient assets to cover liabilities, as indicated by a quick ratio of less than one as shown by the most recent end-of-month financial statements and attested to by the chief executive officer or chief financial officer of hospitals, and less than 90 days of cash on hand or an operating margin of less than minus 10% in the first quarter or second quarter of calendar year 2022.
In addition, the hospitals must be licensed by the state Department of Health as a general hospital and must be currently enrolled with the Arkansas Medicaid program, the Department of Human Services said.
Hospitals will be able to apply for funding in the amounts of three months' worth of payroll expenses and contract labor not to exceed $10 million per hospital, according to the department. To apply for this amount, hospitals will be required to submit expense documentation for the three months preceding the date of application.
The funds may be used to recruit or retain health care staff and contract labor, but not for indirect costs for administrative, management and financial management personnel.
According to the Department of Human Services, qualifying applications from hospitals that meet all three of the criteria will be paid in the order in which they are received by the department:
• Independent, not part of a for-profit or 501 (c) (3) nonprofit multi-hospital system.
• Not designated as a critical access hospital, as these hospitals receive more favorable Medicare funding than other hospitals.
• Located in a county with a population of less than 50,000 people.
Any unallocated funding remaining as of Dec. 1 will be distributed next to qualifying applications received from the independent non-system critical access hospitals on a pro-rated basis, the department said, and then any remaining unallocated funds will be distributed to the remaining qualifying applications until all funds are exhausted.
Sen. Kent Ingram, D-West Memphis, said he worries about the future of two struggling system hospitals in the heart of the Delta that have dramatic needs.
Within 90 days of submitting an application, a hospital receiving funds under this proposal must submit to the Department of Human Services a plan for achieving sustainability, along with a statement of steps taken to date to improve the hospital's business model and practices.
The funds would have to spent in the period from July 1, 2022, through June 30, 2023, under this proposal.
Gillespie said the department also is seeking $10 million in federal American Rescue Funds in an effort to provide a mechanism through the Arkansas Rural Hospital Partnership to make services available to all rural hospitals.
"They have taken a hit going through the last few years," and many rural hospitals need to have a focused effort on sustainability plans and make operational changes, she said.
The Arkansas Rural Health Partnership is a nonprofit group of 17 rural hospitals, two federally qualified health centers and three medical schools where member rural hospitals are committed to remain autonomous for as long as they can, according to the department. There are 52 rural hospitals throughout Arkansas.
The department said in its written request that the rural hospitals would be offered technical assistance to make in-depth health system enhancements to improve their financial position and increase operational efficiencies, and would be assisted with workforce recruitment, training and retention needs. The rural hospitals also would be assisted with integrating social services to address socio-economic challenges and enhance services, and integrating mental and behavioral health services to address the shortage of these services in rural Arkansas.
Gillespie told the steering committee the state doesn't have a robust network of providers of intensive behavioral health services for individuals who need team-based services.
These services are critically important for certain adults, who often get caught up in the court system and jail system and need intensive services with a team wrapped around them to keep them from being in a jail or in an institution, she said.
For some children, certain intensive in-home services have been shown to have a tremendous impact in preventing the child and the family from being disrupted so the child doesn't end up in a child welfare system or in a psychiatric facility, Gillespie said.
"Medicaid paying for the service doesn't do any good if we don't have providers out there," she said.
The department said in its written request that it seeks $5 million in federal American Rescue Funds to support the training and certification of teams employed by behavioral health agencies in the assertive community treatment model for adults with the highest level of mental health needs, and an intensive in-home support model to serve a similar population of children and youth in Arkansas, who are involved with or at risk of involvement with the child welfare or juvenile justice system.
The department is simultaneously working with a behavioral health task force to identify and fill gaps in services, develop an appropriate rate structure for home and community-based models and establish expectations regarding the population these teams will serve and services these teams will provide, the department said.
Afterward, Department of Finance and Administration spokesman Scott Hardin said the state now has $452.9 million in unallocated federal American Rescue Plan State Fiscal Recovery Funds.