Changes necessary to maintain federal funding are driving up expenses at the Arkansas State Hospital.
Budget projections show the hospital will end the fiscal year $6 million in the red if expenses continue at their current rate.
The forecast was based on higher-than-usual firstquarter spending, which staff members expect to slow as the hospital adopts changes required to keep its Medicaid funding, administrators said.
The hospital added staff members, closed a special adolescent wing and hiredprivate consultants to answer concerns from the federal Centers for Medicare and Medicaid Services about treatment at the public acutecare psychiatric facility.
If the hospital does not raise enough revenue to cover its costs, those additional expenses will be absorbed into the budget for the Arkansas Department of Human Services, which operates the hospital, said Janie Huddleston, deputy director for the Human Services Department.
It’s not unusual for the hospital to spend more than it takes in, Huddleston said.
But expenses this year are higher than usual as the hospital goes through a transition.
“We expect it to change,” Huddleston said of the budget projection.
The hospital expects to reduce the deficit projection to less than $4 million later in the year, officials said.
Hospital officials’ budget projections were based on revenue and expenses in the first portion of the state’s fiscal year, which started July 1.
A review of year-end expenses showed the hospital operated within its budget for each of the last three years, said Amy Webb, the Human Services Department spokesman.
She did not know the last year the hospital ended a fiscal year with a deficit.
Some of the added expenses are related to a large number of patients sent to the hospital under court orders, Webb said.
Those patients, known as forensic patients, are criminal defendants found incompetent to stand trial, those whose competency is in question or those acquitted of a crime based on a diagnosis of a mental illness.
The 226-bed hospital has four 20- to 24-bed units for such patients, according to its website. The state gives the hospital a flat appropriation that doesn’t increase if it takes in a higher-than-expected number of forensic patients, Webb said.
Other additional expenses are related to salary costs for 27 new staff members, she said.
Chief Financial Officer Rebecca Jones presented the financial report to the Arkansas State Hospital Governing Authority this week.
The hospital’s revenue is falling behind projections because it has admitted fewerthan-expected self-insured and Medicare patients, Jones said.
“We don’t admit based on an ability to pay,” she said. “It can be kind of a gamble.”
Medicaid revenue also fellwhen the hospital recently closed a unit for “dually diagnosed” adolescents who were treated for mental illnesses and developmental disabilities, Jones said.
The unit, which held about 11 patients, was the focus of several critical reports by site reviewers from the Centers for Medicare and Medicaid Services.
The federal agency threatened to pull the agency’s Medicaid funding after those site reviewers documented four citations of “immediatejeopardy” for problems that threatened the life and safety of patients, such as improper restraints for a physically violent and suicidal child.
In July, Human Services Department leaders signed a one-year Systems Improvement Agreement with the federal agency that will allow the hospital to maintain its eligibility as a provider of Medicare and Medicaid funding, which makes up about a third of its budget.
Under the plan, the agency signed a $1.2 million contractwith Compass Clinical Consulting.
The third-party agency completed a top-to-bottom review of its policies, facilities and patient care, and it is drafting a plan to bring it back into compliance with federal standards.
Inspectors with the Centers for Medicare and Medicaid Services will complete a final review of the hospital sometime between January and July.
The cost of the Compass contract was covered byunbudgeted proceeds from the sale of a portion of Ray Winder Field to the University of Arkansas for Medical Sciences, Jones said.
The hospital also received unexpected money when Gov. Mike Beebe provided $2.5 million of discretionary funding to help cover additional personnel costs associated with forensic patients, Webb said.
Hospital Administrator Randy Fale said changes at the hospital are largely “cultural,” which means it will take time for them to take full effect.
Jennifer Gallaher, director of behavioral health services for the Human Services Department, said the hospital has faced higher staffing costs and unbudgeted overtime as the changes are implemented.
The hospital will retain staff that previously worked on the closed adolescent unit until Compass completes its recommendations.
“We’re doing an overall review of the hospital and looking at staffing issues, but we haven’t made wholesale staffing changes,” she said.
Front Section, Pages 1 on 11/26/2011