Legislative panel will hear Southeast Arkansas hospital’s $5M request for financial aid

Arkansas lawmakers will consider a request on Tuesday for nearly $5 million in federal financial assistance for a rural Southeast Arkansas hospital.

Drew Memorial Health System is asking for $4,926,897 from the pot of money the state received from the American Rescue Plan Act (ARPA) of 2021 in light of the COVID-19 pandemic, according to a May 26 letter from Arkansas Secretary of Human Services Kristi Putnam to Larry Walther, the state’s Secretary of Finance and Administration.

The hospital in Monticello is one of 18 rural Arkansas hospitals that the consulting firm Alvarez and Marsal evaluated to determine whether they are eligible for ARPA funds. The state hired the firm to help legislators decide how to prioritize hospitals’ requests for a dwindling pot of federal pandemic relief funds.

Daniel Harlan, a managing director at the firm, explained the methodology of their evaluation to the Arkansas Legislative Council’s Performance Evaluation and Expenditure Review subcommittee on Monday. The firm collected data between July and December 2022 on the 18 hospitals’ revenue and expenses, physical layouts, workforces, distance from other hospitals, patient volume trends, and use of technology among other things, Harlan said.

Legislators said they wanted more detailed information than Harlan had immediately available.

Rep. Jack Ladyman, R-Jonesboro, asked Harlan why he presented an overview but not a full report on the hospital data less than 24 hours before the subcommittee was set to vote on Drew Memorial Health System’s request.

Officials from the state Department of Human Services said the data from the Drew Memorial Health System would be available to lawmakers before Tuesday’s meeting.

Baptist Health Systems will acquire Drew Memorial Health System on July 1, which makes the small hospital’s funding request urgent, said Janet Mann, the state Medicaid director within the Arkansas Department of Human Services, and Mark White, the department’s chief of staff.

The merger puts Drew Memorial “on a different timetable” than other hospitals in need of financial aid, so DHS is “bringing them forward early” to explain the hospital’s financial situation to the PEER subcommittee on Tuesday, White said.

“They are in a very significant financial condition, but there’s two sides to it,” he said. “It’s both their condition and where they are on the road to a structural reform to address it, and they are much further down that process than anyone else is right now.”

If Drew Memorial Health System receives its funding request, it will be the third rural hospital in Arkansas to receive ARPA funds, after Ouachita County Medical Center in September 2022 and Sevier County Medical Center in December.

Ouachita County Medical Center was one of the 18 hospitals Alvarez and Marsal evaluated; Sevier County Medical Center was not.

The firm sought to evaluate rural hospitals that do not belong to larger health care systems. Twenty-six hospitals met this requirement, but eight declined to be reviewed, Harlan said.

Ten of the 18 reviewed facilities were critical access hospitals, which are located no less than 35 miles from other hospitals and maintaining no more than 25 beds. Drew Memorial and the remaining seven reviewed facilities are not critical access hospitals.

In addition to the availability of data about Drew Memorial Health System’s financial and operational situation, legislators expressed concerns about the sources of some of the data Alvarez and Marsal used to compare Arkansas hospitals to those nationwide.

For example, Arkansas hospitals have higher operating margins but fewer employees per patient than the national average, Harlan said.

In response to questions from Sen. Missy Irvin, R-Mountain View, Harlan said the Arkansas and national averages in the report came from a separate study with a sample size that might not have included the 18 Arkansas hospitals that Alvarez and Marsal studied.

Harlan said he could look into the sample size from the other report at Irvin’s request, since she said the comparisons in the firm’s report might be inaccurate.

“What I’m looking at is the operating margin, and that could be significantly altered or skewed if you have included in this list of averages… big system hospitals and not your rural hospitals,” Irvin said, mentioning the University of Arkansas for Medical Sciences as an example.