Survey of hospitals shows the impact of COVID-19 on the financial health of hospitals in 2021

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.

# # # 

The Arkansas Hospital Association has 106 member hospitals that serve Arkansans living in cities, towns, and communities located throughout the state. For more than 90 years, the association’s leadership has focused on advocacy that promotes initiatives to improve health care access, quality, value, service, and safety. In partnership with our members and stakeholders, the association also provides resources, builds alliances, and develops services that support Arkansas hospitals, as they strive to deliver superior health care to all Arkansans.

Arkansas Community Foundation made a grant from the Lindsey East Endowment as part of the Access to Local Foods program. This grant supports the Center for Arkansas Farms and Food and Arkansas Food Innovation Center (both programs of the University of Arkansas) by providing funds to teach undergraduate interns how to create value-added foods from surplus produce grown at the Center for Arkansas Farm and Food.

The Arkansas Food Innovation Center is a commercial food production facility that helps farmers and food entrepreneurs bring their products to market. One of the pain-points these two programs have been working to address is how to help farmers find alternative uses for their unsold or second-grade (edible but ugly) produce so they don’t lose revenue. Creating “value-added” foods (for example, turning tomatoes in to sauce or berries into jam) is one such solution.

The Center for Arkansas Farm and Food is a teaching farm that offers experiential learning programs for beginning farmers and experienced farmers who want to expand their knowledge or markets. The goal is to increase the number of thriving farms and farmers in Arkansas, particularly those growing vegetables and specialty produce.

The grant enabled the Food Innovation Center to hire student interns for an experiential learning program that would help them understand the process of creating and marketing value-added foods from start to finish.

The Food Innovation Center prepared a video that shows all the complexity that goes into creating tomato sauce from surplus produce:

To learn more about this program, visit Center for Arkansas Farm and Food and Arkansas Food Innovation Center.

By Kimberly Dishongh

Tony McDaniel’s life has changed drastically in the last two years. He still enjoys watching sports and fishing, but his thoughts are often dominated by dialysis and medical debt. It’s been a shock to his system.

“Especially when you’re healthy and all of a sudden your life gets turned upside down, no fault of yours,” said McDaniel.

McDaniel, of Little Rock, had hip replacement surgery during the summer of 2020 and was still healing when he caught COVID-19 in November of that year. “I went in the hospital on November 14, and I was doing OK for the first week, but the week of Thanksgiving, COVID attacked my kidneys and made my kidneys fail,” he said. “I also had pneumonia so my lungs were affected.”

His doctors started 24-hour dialysis to support his kidney function, put him in an induced coma and on a ventilator. “I was in an induced coma for a month and a half,” he said. “During that time, they accidentally nipped an artery checking something in my lungs. My wife was called twice to pull the plug on me. I was on a vent for four months and on ECMO [heart-lung bypass] for a month and a half.”

McDaniel was released from the hospital in April and returned home in a wheelchair, with the hope that he could regain the ability to walk.

“Then I started getting these bills in the mail,” he said.

He sorted through invoices, payment records and benefits explanations with the help of a social worker, and learned that the insurance he has through his employer had kicked in when he got sick but there were coding errors that didn’t link all of his health issues to COVID which meant he hadn’t met his deductible.

McDaniel had been paying toward previous medical debt when he was hospitalized. Those bills fell past due while he was sick and were turned over to collections. Those agencies weren’t sympathetic to his plight.

“Nobody wanted to help me,” McDaniel said.

His employer held his position while he was out, and he’s back at work on a schedule limited by his continuing need for dialysis. Sometimes he doesn’t feel well, but he goes to work anyway because he has upwards of $20,000 in
medical bills to pay.

“I’m stuck with this. I’m just dealing with this now,” said McDaniel. “I’m trying to rebuild my credit because all that stuff that happened. You’re steady dealing with it, and they’re asking you for more and more. What am I supposed to do?”

“I’ve just been trying to work through it. I’m thankful to just still be here, but I feel like I’m being penalized because I got sick.” said McDaniel

Crystal Collins’ story is vastly different. Her daughter, JaKiah, was diagnosed with a Wilms tumor at the age of four. Upon JaKiah’s admittance to Arkansas Children’s, the family was assigned a financial counselor, who reviewed their insurance coverage and evaluated their ability to pay for medical care. The counselor helped them look for potential financial resources, including nonprofit assistance to Medicaid, TEFRA and the Arkansas Health Insurance Marketplace, as well as funds that helped cover gas, food and other expenses related to extended hospital stays and frequent clinic visits.

The family qualified for TEFRA and made small monthly payments for that coverage. Throughout JaKiah’s year-long cancer treatment, Collins only saw one hospital bill, totaling about $100,000, covering her daughter’s first hospital stay, surgery for the insertion of a port and her first chemo treatment.

“The balance was $0,” said Collins of Little Rock. “It said it was just for my records.”

She was relieved to have dealt with financial responsibilities on the front end so she could focus on JaKiah, who is now a thriving 13-year old.

“Our language to the patient is, ‘You focus on getting well, while our team focuses on addressing financial health,’” said Le’Kita Brown, vice president of Revenue Cycle for the state’s only pediatric hospital. “Arkansas Children’s is grateful for the multitude of community-based partners who come together to help address the needs of the patients and families we serve.”

Many Arkansans struggle with finding answers about their health as well as with associated finances.

Davey Ramirez of Hot Springs was misdiagnosed for months before experiencing almost unbearable pain while at work in June 2020. In the emergency room, he was told he had kidney stones and needed emergency surgery.

“I ended up having surgery the next day, and it all went without incident,” he said. “Then I was stuck with this tremendous medical bill.”

He had a second surgery to remove a stent put in during the first one. A few months later, he broke his hand and needed another surgery. “I think just the surgery to correct the damage done to my hand was like $25,000,” he said. “I had insurance, by the way. Even with that, I would have been paying this off for the next 20 years.”

Ramirez negotiated a payment plan with the companies the hospital used to outsource billing and was getting two bills each month, one for $92 and one for $100. He works 40-60 hours a week as a contracted employee at an aluminum mill.

“I get overtime pay, and that’s wonderful, but I’m not able to make it stretch very far after everything,” said Ramirez, a single parent. “I applied for financial assistance and one was forgiven. But they’re still taking the money out of my bank account, and I don’t know why.” He has tried to apply for
help with the remaining bill but has been unable to figure out who to ask.

“It’s been so confusing,” he said. “I’ve had to call all these financial institutions to find out if they have received my paperwork, I get bounced around between four different people who don’t want to take my call because they don’t know anything, and then they defer me to someone else,
and then those people send me to someone else.” After taking time out of work to make calls — each lasting 40 minutes or more, including time on hold — he was told at one point that he would be reimbursed for payments he made, and he got several checks in the mail.

“They were in different amounts, like a couple were for $200, and there was one that was $16 and one for $60 and some change,” he said. “There was nothing attached, no letter or anything saying what they were for so I have a hard time telling what’s been paid and what I still owe for. It’s frustrating and confusing, and I don’t know who has time to do all this.”

“Beth,” who asked that her full name not be used because she worries her business colleagues would perceive her as someone who simply can’t pay her bills, understands Ramirez’s struggle. Beth’s former husband had long-term chronic health issues. They filed for bankruptcy after being overwhelmed by medical bills associated with his treatment and from her treatment for injuries sustained in a car accident.

“We were spending so much on his daily care, on just his regular maintenance meds, that when it came time for me to go to the hospital with an emergency situation on my feet, there was just no money,” said Beth, who has worked for the same company for 23 years. “I had been putting money in my HSA [health savings account], but it was going out as quick as it could be put in. I was never able to save the money to even pay down the out-of-pocket expense, the deductibles and copays. There were always copays.”

Beth was notified earlier this year that a bill she owed for foot surgery was part of a $35.2 million medical debt payoff by philanthropic organizations — including Arkansas Community Foundation.

“I was surprised, number one, that the bill even existed,” said Beth. “I was even more surprised that someone, out of the kindness of their heart, paid it for me. It literally blew my mind.”

McDaniel hopes for a similar miracle. He makes less money than before he got sick because of his physical limitations. He is awaiting a kidney transplant, which will improve his quality of life but will also add to his debt load. And still the bills pile up.

The Arkansas Asset Funders Network, Arkansas Community Institute, Arkansas Community Foundation and Hope Policy Institute joined together in January 2022 for an announcement highlighting the escalating debt issues in Arkansas and a set of recommendations for addressing the issue. Moderated by Talk Business and Politics host Roby Brock, the event provided an overview of medical debt and court costs and described how debt cycles disproportionately harm lower income communities, ALICE households and people of color. A cohort of policy analysts, nonprofit leaders and representatives from the private sector developed a series of recommendations and action steps for policy makers and funders to affect change for the medical debt crisis.

RECOMMENDATIONS AT THE FEDERAL LEVEL:

• Implementing the No Surprises Act, which increases consumer protections for those receiving medical care from out-of-network providers. Under the No Surprises Act, which is slated for implementation in 2022, patients will only be required to pay the in-network cost-sharing amounts when they receive emergency care or when they unknowingly receive
non-emergency care from an out-of-network provider at an in-network facility.

• Increasing attention to the harms of medical debt by the Consumer Financial Protection Bureau. Specifically, the Bureau could act to limit medical debt reporting on credit reports; create and publish new data on the impact of medical debt on consumers, particularly in communities of color; and increase consumer safeguards against debt collectors and healthcare providers.

• Broadening federal protections that limit wage garnishment by hospitals.

RECOMMENDATIONS AT THE STATE LEVEL:

• Enacting comprehensive legislation to protect consumers from surprise (out-of-network) medical bills.

• Centering medical debt elimination and protections in COVID-19 recovery plans.

• Regulating and expanding hospital-based financial assistance programs.

• Providing state-level protections from abusive medical debt collection practices, limiting reporting of medical debt to credit report agencies, and limiting the amount of interest that can be charged on medical debt.

HOSPITALS CAN LESSEN THE BURDEN OF MEDICAL DEBT BY:

• Ensuring that information about hospital-based assistance is prominently displayed at all points of patient contact and that employees are trained to tell patients about assistance programs.

• Actively creating payment plans or offering other options for patients rather than sending returned checks to collection agencies or district courts.

RECOMMENDATIONS FOR FUNDERS:

• Increasing access to legal representation for debt collection cases, either directly or through support for advocacy organizations.

• Funding advocacy and research that identifies the specific changes needed to increase racial equity in the medical and courts systems and supporting pilot initiatives.

• Working with the state bar association to increase legal aid or pro bono representation for debt collection cases.

• Exploring employer-sponsored legal counseling as part of employee benefit packages. Models for this, sometimes called Judicare, are in operation around the country.

Medical debt is a barrier for 37 percent of Arkansans. That is a disheartening statistic, but the future need not be bleak. National and local experts are tackling the problem strategically in hopes of creating a better tomorrow.

“These aren’t mistakes those individuals made. This isn’t where an individual has taken out a loan,” said Signe-Mary McKernan vice president for labor, human services and population and population codirector of the Opportunity and Ownership Initiative at the Washington, D.C.-based Urban Institute. “People need to have quality health insurance, and policies that support wealth building instead of stripping wealth from people.”

McKernan lauded the passage of Medicaid expansion in Arkansas, which allows more low-income Arkansans to get health insurance coverage.

“There is strong research that shows personal financial improvements in states that expand their Medicaid programs so residents are less likely to have new medical debt in collections, and they’re more likely to have improved credit scores and reduced bankruptcy filings,” she said.

Neil Sealy is the executive director of the Arkansas Community Institute, a membership organization of working families with low to moderate income. Arkansas Community Institute has made recommendations for simplifying the application process for Medicaid, including hiring state workers to facilitate enrollment.

“The other piece related to medical debt is looking at court cases, beginning in Pulaski County District Court, and then we’re going to other counties, to see what’s happening, and reaching out to people in the community who have debt,” he said. “We’re hoping to get them talking about what they’re experiencing so we can look for ways we might be able to help them.”

Sealy, citing instances of people paying off medical debt from hospitals but still being pursued by collections agencies, said the debt collection process needs to be streamlined. Medical debt that goes to collections results in lower credit scores, and subprime credit scores make many things more expensive, from buying a house to repairing a car. Making minimum payments to avoid this debt spiral is, of course, key.

“Our research has shown that even a small amount of emergency savings can help families be resilient,” McKernan said. “Families that had non-retirement savings, a cushion of as little as $350 to $749 were less likely to be evicted, were less likely to miss housing or utility payments after a job loss or a health issue or a large income drop.”

Joanna Ramani, managing director at the Aspen Institute Financial Security Program in Washington, D.C., is interested in looking at ways to eliminate the ways people end up in debt in the first place as well as how to get them out of it.

“We want to stop the spigot of debt from building,” she said. “But even if you did all of that today — like if tomorrow, we fully changed the healthcare model — you still would have a bunch of people sitting in the debt they already accrued, and we can’t forget about them.”

RIP Medical Debt, a nonprofit organization formed by two former debt collections executives, buys medical debt for charitable reasons rather than for profit, said RIP spokesman Daniel Lempert.

“It’s for individuals who are 400 percent or below the federal poverty level or for individuals who have medical debt that is 5 percent or more of their gross annual income,” said Lempert. “We go high and low anywhere we can to get access to those specific debts, and we’ll purchase them from debt collectors and debt collection agencies.”

Lempert said that for every $1 donated, RIP can erase $100 of medical debt. Lempert said the organization has raised enough money to abolish $6.6 million for over 3.5 million families.

“It really stretches the donor’s dollar a lot further,” said Lempert.

Organizations that set up funds to buy medical debt at a reduced price and forgive patients’ bills are promising and important, said Ramani, but they aren’t a perfect solution.

“They put a lot of pressure on the private sector for donations and in some ways the responsibility hasn’t changed off of the person who had the health need because they still have to find a source where someone’s going to help them,” she said.

In the same way patients are counseled about physical care as they go home after a hospital stay, the same could be done for finances. Financial coaches could work directly with patients to ensure that patients are enrolled in federal or state healthcare programs and connected with available resources.

“It’s almost unconscionable to let this person who’s been through a traumatic health event out into the world again without counseling them on how they will help with their financial side, the same way you wouldn’t let them back out into the world without counseling them on what to do about their health,” said Ramani. These are important steps, she said, for the good of families as well as for communities.

“It is real and documented and evidence-based that even if you don’t care about a single family, the fact that there are so many families in communities in Arkansas means that as a state, the economic development and the financial costs of the state is high,” said Ramani. “For that reason alone, you should care about it.”