Nearly $100 million in additional spending on traveling nurses and other contract workers, driven primarily by the COVID-19 pandemic, will see Little Rock-based Baptist Health lose money this fiscal year. But not only Baptist Health is struggling with staffing problems.
“[In] In 2020 and 2021 we were in the black, and in 2022 we will be in the red. … I don’t see any way that we’ll be positive by the end of the year,” said Troy Wells, president and CEO of 11 Hospital Baptist Health System in Arkansas.
In fiscal 2021, Baptist Health paid $89 million in contract award labor costs outside of its normal business expenses, primarily for traveling employees, but federal dollars helped offset the costs. In 2022, Baptist Health had budgeted $74 million for its world-class workforce, but at the current pace it will exceed that by about $20 million. It also spends another $35 million on wage adjustments, mostly for nursing. According to Wells, this represents an approximately 10% increase in overall budget for a system with approximately $1.8 billion in overall sales.
“It’s like a revolving door: our people go on trips and we would then have to bring travelers in, and that has a huge cost that we still face today,” he said.
Likewise, the University of Arkansas for Medical Sciences spent $44 million on contract labor in its most recent fiscal year, which ended June 30, Dr. Steppi Mette, CEO of UAMS Medical Center and Vice Chancellor for UAMS Health. In the year before the COVID pandemic began, UAMS paid $600,000 for contract labor. UAMS expects its contract labor costs to be halved, but it’s too early to predict that, Mette said. Market forces are driving contract labor prices down by 30-40% and the number of contract workers at UAMS has fallen from a peak in the high 200’s to 190-220 out of a total workforce of 11,000.
“We’re always on the verge of thinking about cutting elective benefits just because we don’t have enough staff to staff care, which is a painful thing for any healthcare system to think about,” he said.
Mette said high labor costs coupled with a 30% increase in drug and utility costs are affecting UAMS’s clinical business, which typically generates between $50 million and $70 million in margin, and helps support the system’s other functions. The system didn’t close its books for the last fiscal year, but the hospital was able to improve its position with government stimulus dollars that are no longer being offered.
“We will almost break even in the past fiscal year, but I can’t tell you for sure,” he said.
According to Wells, nursing has become a national job market, which means Arkansas is competing with other states for wages despite having the lowest commercial insurance reimbursement rates in the nation. Mette also said Arkansas has lower Medicare reimbursements than any other state.
Traveling nurse spending came as the profession was already facing a nursing shortage. Wells said hospitals need to deliver healthcare with fewer people through technology and by finding ways to train other caregivers to fill some of those roles.
“We look back, how did we do that 50 years ago?” he said. “Well, we’ve trained a lot of clinical staff on the job, and over the last 50 years there’s been all these licensing requirements, certification requirements, things that different societies that represent these professionals have created, and it’s made it really difficult for people to do that quickly into the labor market.”
Wells said some two-year certifications need to be shortened or eliminated. He assumes that there will be efforts in the 2023 legislature to address the staffing restrictions.
The shortage of skilled workers is not as acute for doctors as it is for nurses. Baptist Health recently completed its first class of general practitioner and internal medicine physicians from its new residency program at its North Little Rock campus. About half remain in Arkansas. Approximately 90 to 100 physicians are in training in these disciplines and in psychiatry in the North Little Rock program.
Baptist Health is also grappling with sustained double-digit inflationary medical spending and supply chain disruptions.
“On any given day, we have 20 things we can’t find,” Wells said.
Wells said hospitals couldn’t pass the cost on to their customers. Baptist Health can’t just ask for more money from Medicare and Medicaid, its biggest revenue streams. Baptist Health negotiates with commercial payers, as does UAMS.
“If we don’t find ways to do this together, we’re going to starve our healthcare facilities in this state, and it’s going to be really difficult to recover from,” Wells said. “So I think we have to look at this differently than in the past. This isn’t a situation where you sit down and the payers try to give you as little as possible and the providers try to get as much as possible because that’s how you negotiate. We need to think really hard about the way forward because if we don’t, we’re going to have big, big challenges with healthcare facilities in Arkansas.”
Wells said large, independent hospitals and small-to-midsize healthcare systems will collaborate with spending on information technology, electronic medical records and other digital tools. Hospitals’ financial challenges could lead to more mergers and acquisitions. Wells said small, independent hospitals are navigating a difficult environment.
“We’ve had people talking to us, you know what are we doing and are there any options? I think we’ll continue to see that,” he said.
RURAL CHANGE, COVID CASES
dr Joe Thompson, president and CEO of the Arkansas Center for Health Improvement, said the state’s expansion of Medicaid eligibility under the Affordable Care Act remains a “safety net” for hospitals.
“It’s more than $2 billion a year that’s being pumped into the healthcare system and I think you’re seeing the impact of that on hospital closures in surrounding states that we haven’t had before,” he said. “That’s not to say the impact of the pandemic isn’t increasing the risk to our hospitals. I think we are in the early stabilization phase where we will see what economic difficulties our hospitals will face in the future.”
He said hospitals will evaluate whether to designate them as rural emergency hospitals under Medicare under the federal Consolidated Appropriations Act of 2021. The new designation allows hospitals to provide emergency services, observational care, and ancillary services without providing longer-term care. Regulations are formulated by the Arkansas State Board of Health. Thompson said the naming was in the best interests of some hospitals.
The COVID cases have increased in the last few days. Wells said more employees are testing positive, so the system needs to manage its workforce. Mette said UAMS is seeing COVID hospitalization rates consistent with March and April, but many are being hospitalized for other reasons and testing positive, and fewer patients are in intensive care. At Baptist Health, 66% of COVID-positive patients list COVID-19 as the top reason for hospitalization.
Positive outcomes of the pandemic include increased collaboration within the Baptist health system when beds in intensive care units are scarce. Wells said the system created an access center that helps find the right bed for patients. Historically, hospitals with emergencies have typically approached Little Rock Hospital first, but the system’s Conway facility may have an available bed.
Mette said the demand for care has increased. He said UAMS has become more efficient and has streamlined some of its processes.
“The spirit of collaboration and teamwork and the willingness to perform of our organization has improved dramatically, proving to ourselves that we can rise to any opportunity, get the job done and provide quality care,” he said.
Wells said growth in the use of telemedicine in retail has slowed. While it was a necessary tool in early to mid-2020, since then it has been most commonly used in behavioral health care and by women in their 20s. Baptist Health is focused on using telemedicine to provide specialty care for places with limited access.
“It’s run down quite dramatically,” he said. “Now it’s higher than it was before the pandemic, but there was a huge stake in 2020 and then it started going down again as doctors’ offices reopened. Turns out people liked seeing the doctor in person.”
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