Medical center’s only other option was ‘more debt than we originally hoped for’
By TESS VRBIN | Arkansas Advocate
State lawmakers approved $6.25 million in federal recovery funds for a rural Southwest Arkansas hospital on Tuesday, but not before a couple of senators complained about last-minute funding requests that seemed to bypass legislative procedures.
Not receiving the funds “would really put us in a financial bind,” hospital CEO Lori House told the Arkansas Legislative Council’s Performance Evaluation and Expenditure Review subcommittee. The hospital would have to go deeper in debt, she said.
The funds will pay for the new hospital’s equipment and furnishings in several departments, according to the appropriation request presented Tuesday.
The urgency behind the request comes because the hospital plans to open by the end of the year and because other funding sources, such as a bank loan or line of credit, have not been forthcoming, Greg Revels, the hospital board’s vice chairman, told the subcommittee.
Sevier County has been without a hospital since 2019, after the De Queen facility closed when its out-of-state owner was charged with Medicaid fraud. Voters in the county later approved a half-cent sales tax for a $24 million bond issue to pay for construction of a new hospital just north of De Queen.
If the Legislative Council gives final approval to the request on Friday, the Sevier County Medical Center will be the second hospital to receive American Rescue Plan Act funds from the Legislature. Ouachita County Medical Center in Camden received $6 million in September after hospital officials said they had five days’ worth of cash on hand.
Lawmakers, however, have balked at further ARPA grants to hospitals pending a review of funding requests to determine priorities.
Building a new hospital
In 2019, Sevier County voters approved the bond issue and a sales tax for the new hospital, but the county remained without a hospital throughout the COVID-19 pandemic. The two nearest hospitals are each about 35 miles away in neighboring Howard and Little River counties.
Sevier County Medical Center has hired 96 employees, Revels said. The hospital will open this month regardless of its funding source, but its other option would have been to take out a loan, both Revels and House said.
“We will have to incur a lot more debt than we originally hoped for,” House said, “and it may keep us from opening certain departments that we would prefer to open up front because we’re not able to get that equipment, and basically it will impact our community and the kind of health [care] we can provide that they’ve been without for the last four years.”
The hospital has about $2 million on hand but is set to pay almost all of it to the contractor that built the facility, Revels said.
Several Arkansas hospitals received advance payments in 2020 from the federal Centers for Medicare and Medicaid Services to stay afloat during the pandemic. Some of those hospitals in rural areas ended up financially strained after paying back the advances, now-former Department of Human Services Secretary Cindy Gillespie told the state’s 15-member American Rescue Plan Steering Committee in August.
The steering committee went on to allocate $60 million in ARPA funds to these struggling rural hospitals, and the allocation still has $54 million left after granting Ouachita County Medical Center’s request. The $6.25 million granted to Sevier County Medical Center did not come from this pot of ARPA funds, said Andy Babbitt, assistant accounting administrator at the state Department of Finance and Administration.
Ouachita County Medical Center received help with the condition that it repay the outstanding balance of $6 million within 90 days. The sole purpose of the funds was to cover three months of labor expenses, which was a relief because staff salaries had gone up during the pandemic, CEO Peggy Abbott said in an October interview.
“Health care of course was touched by escalating expenses as a result of historic inflation, but also [there was] the impact of supply constraints,” Abbott said. “It was a blessing to be allocated those ARPA funds.”
Murky request process
Sevier County Medical Center’s request was pending for a couple months and was placed on PEER’s supplemental agenda Tuesday morning before the meeting.
State Sen. Jonathan Dismang (R-Searcy) and Sen. Missy Irvin (R-Mountain View) both expressed frustration about the process through which ARPA requests come before the steering committee and the Legislative Council. Dismang claimed the way requests are prioritized is too unclear.
“There’s a large number of other programs that had requests in at the same time frame you had, and I understand this one has made it [to the Council], and I don’t know why it didn’t make it a month ago or two months ago,” Dismang told the Sevier County hospital officials.
Both the Legislative Council and the PEER subcommittee debated in September how to prioritize ARPA funds, which can be used to address the negative economic impacts of COVID-19, including providing assistance to small businesses and hard-hit industries, as well as for investments in water, sewer and broadband infrastructure.
Dismang and Irvin both said they support the efforts to fund rural hospitals but disapprove of supplemental agenda items coming forward with little warning and no public notice. Irvin agreed with Dismang that the apparent lack of transparency in how requests come before the subcommittee feels like “picking winners and losers.”
“I am so frustrated by the process [and] by the lack of communication and understanding that we in the Legislature serve the entire state,” Irvin said.
PEER also voted Tuesday to hold 12 ARPA appropriation requests for a future meeting. State Rep. Jeff Wardlaw (R-Warren) then moved to bring up each item and vote individually on whether to grant them.
Dismang and Irvin urged their colleagues to vote against the motion.
“We’re opening the door up for personal pet projects back in the districts,” Dismang said. “I didn’t like it when it happened in the past, and I’m not going to like it today.”
Wardlaw’s motion failed after a roll call vote.
One of the postponed items was from North Arkansas Regional Medical Center in Harrison, which approached the Legislative Council in September with a request for funding. Lawmakers directed the request back to PEER at the time.
Another postponed item was a request for $10 million from the Arkansas Rural Health Partnership “to address the critical needs of Arkansas rural hospitals post COVID-19” via staff salaries, operating expenses and other needs, according to documents provided with the meeting agenda.
PEER later voted to conduct an “independent review of the operational and financial viability” of up to 26 rural hospitals and critical access hospitals statewide, using $1.1 million of the state’s restricted reserve funds.