University of Arkansas for Medical Sciences Chancellor Dan Rahn told the joint committee of the hospital and the UA Board of Trustees today without the private option’s promise of newly insured Arkansans and additional revenues from the state, UAMS “is going to be a very different institution.”
“We are at a crossroads,” Rahn told the committee. If the hospital makes “only incrementally better changes we will fail … the model we’ve relied on will not support the mission going forward.”
In fiscal year 2013, the hospital’s budgeted revenue was $1.27 billion. Patient care provided 71 percent of the revenue; the remaining 29 percent came from the state (9 percent), fund-raising (5 percent), grants (12 percent) and tuition (3 percent). This year, the hospital has $30 million less to operate with than it did in 2013, thanks to federal sequestration ($10 million in cuts in Medicare and the budget of the National Institutes of Health) and one-time funds ($20 million). The hospital predicts an increase in patient revenues to 73 percent, thanks to persons already enrolled under the private option, but expects to receive less in grants, trimming this year’s predicted revenues to $1.25 billion.
Rahn noted that the future of Medicaid expansion “up in the air” — lawmakers are making noises about killing the private option in the upcoming financial session starting in February, taking away from more than 100,000 Arkansans the insurance they can obtain now. Without Affordable Care Act dollars, uncompensated care at UAMS will continue to be a huge burden ($67 million now, the sixth highest in the nation’s teaching hospitals). Maintaining the flow of health care dollars, through the private option, to insure low-income patients “is the most important thing to happen” to keep UAMS providing quality health care, education and research, Rahn said.
Should 75 percent of eligible Arkansans enroll in Medicaid and the private option, UAMS’ patient revenues would increase by $14 million this year and $28 million in 2015, Rahn said. “This will go two-thirds of the way toward dealing with the current financial challenges,” Rahn said. He hopes to make up the rest by belt-tightening restructuring of the university and hospital.
Another wallop to UAMS’ budget: Gov. Mike Beebe’s budget calls for a 1 percent decrease, to 8 percent, in the state’s appropriation to UAMS in 2015. The state cut $1.6 million from UAMS’ budget for this year, and Beebe’s cuts represent a reduction of $7.6 million. The reason for the cut: expected new revenues from the private option.
Factoring in UAMS’ cost of covering depreciation expenses will create a paper deficit of $45.3 million this year and $49.5 million in 2015. Without covering that expense, the university will be hampered in efforts to obtain bonds to grow or invest in new equipment, Rahn said.
Dr. Richard Smith, dean of the College of Medicine, said staffers are wearing buttons that say “Get In” to encourage patients to sign up for the new insurance coverage. Clinics also have counselors available to explain to uninsured patients how to sign up for the Affordable Care Act.
In other business, the committee voted to recommend to the full board the approval of the legislative audit report on the University of Arkansas and an internal audit concerning the nearly $5 million shortfall in the university’s advancement division. UA Chancellor David Gearhart and Vice Chancellor for Finance and Administration Don Pederson made a quick report to the board on progress the administration is making on meeting changes recommended by the legislative audit in its financial accounting. Committee chair John Goodson asked if there had been “any resistance to change” at the UA and Pederson said no. Goodson then gave a flowery declaration that the mismanagement was a “painful experience, but I view it as beneficial.” Now there are new policies to address “some issues we had up there,” Goodson said, and attention to it “brought to light all the good things that happen and are happening” at the UA. “We are lucky to have such a prosperous” university, he said. Prosperous enough to cover a little budget deficit in the millions.
The full Board of Trustees meets tomorrow at UAMS.