State officials outline ARPA hospital-review process, propose monitoring and funding tracks

State officials gave a detailed timeline and rationale for distributing American Rescue Plan Act (ARPA) funds to rural hospitals, describing a consulting review and a proposed funding approach that ties payments to measurable reform or transformation.

Christy Putnam (Department of Human Services) and Andy Babbit (Division of Finance and Administration) told the Public Health, Welfare and Labor Committee that DFNA selected Alvarez & Marsal through a special procurement in November 2022 and executed the contract in December 2022. Alvarez & Marsal conducted on-site evaluations in February–March 2023, draft reports were shared in May and the full consultant report was released in June. Officials said consultants reviewed payer mix, cash on hand, accounts receivable and other financial indicators to assess viability.

Officials said 26 hospitals were notified as eligible to participate in the review and 18 ultimately submitted requests. Committee members asked whether the initial ARPA pot—variously described as $65,000,000 by the chair and $60,000,000 by DFNA—would cover all requests. DFNA replied that nine hospitals requested specific dollar amounts (ranging from roughly $1.5 million to $10 million) while most hospitals did not request a fixed total and that a proposed cap of $5 million per hospital was intended to stretch finite funds and allow broader distribution.

DFNA and DHS outlined two funding tracks: strategic reform—operational changes and benchmarks monitored over 12–18 months—and transformative change—structural options such as conversion of designation, mergers, or procurement cooperatives. Officials said Alvarez & Marsal would help monitor benchmarks and that disbursements could be staged as hospitals meet agreed metrics. Drew Memorial and Ouachita received early allocations (Drew ~ $4.9 million, Ouachita approximately $6.0 million, per DFNA comments) and officials said some distributions already addressed immediate timing needs tied to a merger.

Committee members repeatedly urged faster disbursement for hospitals facing urgent financial stress; DFNA said it plans to seek an extension of the consultancy contract at the July ALC meeting and anticipated broader initial distributions as early as September 2023, depending on hospital responses and tracks chosen. Hospital association testimony emphasized the need for a bridge to sustainable reimbursement; Jodi Ann Trit of the Arkansas Hospital Association said Medicaid, Medicare and commercial payers each represent about one-third of hospital revenue and that many hospitals quietly reduce services rather than publicize closures.

Officials committed to supplying committee members a spreadsheet showing committed allocations and remaining balances once hospitals finalize their participation choices. They also said the proposed approach seeks accountability by linking funds to measurable plans rather than unconditional grants.