UAMS continues to battle higher expenses due to inflation

Changes improve financial outlook

The University of Arkansas for Medical Sciences' Little Rock campus is shown in this file photo.
The University of Arkansas for Medical Sciences' Little Rock campus is shown in this file photo.

The University of Arkansas for Medical Sciences, which has been under financial strain for several months, continued to lose money in October, although the loss was less than the prior month.

The $3.8 million loss in October was also less of a loss than the revised budget of $4.5 million, said Amanda George, UAMS chief financial officer and vice chancellor for finance. However, "November probably won't be as good as October," although "we expect to climb out of the deficit in the coming months."

Chancellor Dr. Cam Patterson echoed those sentiments during a University of Arkansas System board of trustees meeting last week at the University of Arkansas at Fort Smith, noting that he remains "confident we'll be where we want to be in early 2024."

UAMS has made several changes to improve its financial outlook, but "we're prepared to do more, if necessary, to get the enterprise in the black," he said. Though the hospital at UAMS is profitable, it's not enough to cover losses throughout the entire enterprise.

UAMS is experiencing the "business equivalent of long covid," said trustee Ed Fryar. The "research and teaching side is underfunded by the state, and the clinical side's surplus can't keep up."

Though the hospital is making money, "our financial challenges can be attributed to a variety of factors including staffing shortages, flat to lower reimbursement for services from commercial payers, and inflation which has led to rising costs for wages as well as pharmaceuticals and other supplies," which are challenges shared by many hospitals, Leslie Taylor, vice chancellor for communications and marketing, said in an email Sunday. "Unlike other hospitals, however, our clinical enterprise not only must support itself, but also provide financial support for a university that includes five colleges and a graduate school as well as our research mission. UAMS receives about 6% of its funding from its state appropriation."

High inflation continues to plague UAMS, with elevated costs for medications, supplies, and labor, said Patterson. In addition, "it's difficult to keep OR beds open" without enough nurses.

UAMS is actually faring better than many academic medical centers nationwide, and several hospitals around Arkansas are "at near-death status," Patterson said. Southeast Arkansas is now "an obstetrics desert," for example, which "does not help" the state's already poor rates of maternal and fetal mortality.

Though UAMS is "hitting" its original revenue budget, "there are still opportunities there" for improvement, as "in-patient value is trailing expectations," and UAMS is going to resort to more contract labor to open more patient beds, George said. Even though contract labor is costly, UAMS will still make money with the strategy because of the additional beds, which drives revenue.

"We're ramping up new surgical sites, and that will help on the revenue side," as well, she said. However, "our payers have not kept pace with inflation."

Medicare, which represents 25% of UAMS' payers, "has been better than our other payers," but those others have not increased reimbursement rates enough, she said. A $33 million payment in January -- part of a recent settlement with the Centers for Medicare & Medicaid Services, which had been underpaying numerous hospitals for a certain prescription drug program -- "will definitely help" the UAMS financial outlook.

Medication expenses have increased rapidly recently, but another fiscal strain is that it "costs us more to procure organs," said Michelle Krause, senior vice chancellor for UAMS Health and chief executive officer for UAMS Medical Center. "We've seen that nationally," too.

UAMS received $30 million from the state's Budget Stabilization Trust Fund this summer, which UAMS will pay back by next summer, as the standard for loans from the Budget Stabilization Trust Fund is to repay them by the end of the fiscal year, according to George. The state is simply holding back $3 million of the medical center's funding each month as repayment.

UAMS had an operating loss of $46 million for its 2023 fiscal year -- July 1, 2022-June 30, 2023 -- and eliminated the positions of 51 employees earlier this fall, 11 of whom found other jobs at UAMS, while allowing other positions to go unfilled.

"We ended FY 2023 with a loss of $46 million out of our annual budget of $2 billion," Taylor said in the email.

Though UAMS also faced headwinds the past couple of years, those struggles were offset by funds from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act and American Rescue Plan, according to George. However, those funds are no longer available in fiscal year 2024.

UAMS is the state's only academic medical center -- Arkansas is one of eight states with a sole academic medical center -- and 70% of health care professionals in the state trained at UAMS, according to Patterson. UAMS annually ranks first or second nationally among academic medical centers in terms of retaining its graduates within its state.

UAMS has the only College of Nursing in the state to rank among the nation's 100 best undergraduate nursing programs for the 2023-24 academic year in the latest U.S. News & World Report rankings. UAMS also ranks 17th for best medical schools (primary care), up from 36th in 2022; fourth for most graduates practicing in medically underserved areas, up from 97th last year; 18th for most graduates practicing in rural areas, up from 20th; and 24th for most graduates practicing in primary care, up from 36th.

UAMS has expanded recently, opening an $85 million surgical facility dedicated to treating orthopedic and spine patients in May and a $65 million, 58,000-square-foot Radiation Oncology Center in Little Rock this summer, which includes the 9,000-square-foot Proton Center of Arkansas.

Though the proton center only opened last month, "it's already full" of patients, said Krause.

UAMS is also working to become a National Cancer Institute.

NCI designation is the country's most distinguished status for cancer centers, and there are 71 NCI-designated cancer centers in the country, but none in Arkansas, according to UAMS. More than two-thirds of funds awarded by NCI for research and clinical trials go to NCI-designated centers, and many NCI community outreach and program grants are only offered to NCI-designated cancer centers.

UAMS projects that NCI Designation would have an economic impact of $72 million to the state annually.


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