Same as it ever was: UAMS' $39 million deficit gets a hearing, not a solution | Arkansas Blog

Wednesday, November 8, 2017

Same as it ever was: UAMS' $39 million deficit gets a hearing, not a solution

Posted By on Wed, Nov 8, 2017 at 6:34 PM

Cliff Gibson: Astounded by UAMS' FY 2018 budget, which includes a deficit of $39 million.
  • Cliff Gibson: Astounded by UAMS' FY 2018 budget, which includes a deficit of $39 million.
The University of Arkansas for Medical Sciences' presentation to the joint hospital committee of the University of Arkansas Board of Trustees today was pretty routine until board member C.C. "Cliff" Gibson III asked representatives of UAMS about an increase in uncompensated care of $44 million in 2017 over 2016. “That’s astounding to me,” Gibson said, as was the budgeted deficit of $39 million. He also expressed surprise that the deficit was included on the front end of the budgeting process.

He shouldn't have been surprised. This is the second year UAMS has budgeted a deficit. Trustee John Goodson reminded fellow trustees, meeting at UA Pulaski Technical College, that former Chancellor Dan Rahn laid out his estimate for this year's red ink and the next three at a meeting last January with trustees. Rahn told trustees then that the state needs to step up to the plate if it wants a first-rate, fiscally sound medical school.

UAMS receives $20 $100 million from the state, but typically uses all but $10 million as its Medicaid match. That means the hospital subsidizes education and research, spokeswoman Leslie Taylor said after the meeting. By contrast, Mississippi kicks in $160 million to its medical school.

Depreciation of its buildings — which stands at $65 million this year — accounts for some of the deficit. Expenses, including salaries, make up the rest. (The breakdown was not available Wednesday.) It’s money that will have to be made up from UAMS' cash reserves, which UAMS Vice Chancellor for Finance Jake Stover estimated at between $150 million and $250 million. Stover said the situation is not as dire as it was in 1999, when the hospital used up its reserves and had to operate on credit.

"That $65 million is the amount we need to reinvest" in UAMS' campus, Interim Chancellor Stephanie Gardner said after the meeting. She said UAMS had hoped to invest $40 million in the physical plant this year.

UAMS also reported that it has not met revenue growth budgeted for the first quarter; it’s lagging at about 4.4 percent instead of the 5.6 percent anticipated. Nevertheless, revenues are up compared to the same period in FY 2016. Part of the reason for the shortfall is that is when the budget was drawn up, UAMS expected to have 13 new hospital beds available on a renovated floor in the old hospital. The unit is still being built, and its construction required the hospital to shut down 13 beds on the floor above, Gardner said after the meeting. She anticipates the budgeted beds to be ready by February.

UAMS cannot continue to operate in the red, trustees and UAMS’ leadership acknowledged; the model, they said “not sustainable. “We knew this day would be coming,” Goodson said. Having said that, trustees did not say they would be running to their legislators for a fix.

Gardner assured trustees that she would be working every day with UAMS’ leadership to find ways to reduce the deficit, which could include cuts in areas not considered important to UAMS' mission and in staffing, though she said job cuts are not yet on the table. UAMS is also looking at ways to increase revenues; its new orthopedic clinic on Colonel Glenn Road has proved to be a boon to the bottom line.

In response to Gibson’s question the hike in uncompensated care, Chief Financial Officer Dan Riley explained that the $44 million does not represent one year but rather the accumulation of unpaid bills over time. The number of “real-time” insured patients, he noted, has risen since the private option Medicaid expansion that the Affordable Care Act brought about. In fact, UAMS’ uncompensated "real time" care has dropped from 14 percent before the ACA to under 3 percent, Riley said.

Gibson also wondered what would happen to UAMS’ bottom line when Arkansas Works, the Medicaid plan of Governor Hutchinson, kicks some 60,000 off the insured rolls. Riley said UAMS has not calculated that because it can’t know how many of those 60,000 would come to UAMS for care. (If Congress undoes the ACA, however, some rural hospitals may have to close or be unable to accept uninsured patients, thus sending those patients to UAMS.)

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