HJAR Jan/Feb 2025

CURRENT CHALLENGES The healthcare economy in Northwest Arkansas faces challenges and opportuni- ties over the next five years as it navigates rapid population growth and workforce constraints. With an annual influx of 15,000 new residents, healthcare providers grapple with the strain of meeting increasing health- care demands. Staffing shortages, wors- ened by pandemic-related burnout, pres- ent a critical issue as the region struggles to recruit and retain doctors, nurses, and other healthcare professionals. Rising labor and supply costs—some increasing as much as 60% since the pandemic—compound these workforce shortages. The cost of healthcare insurance also continues to rise. According to the Kaiser Family Foundation’s 2023 Employer Health Benefits Survey, the average premium for single and family coverage has grown 22% since 2018. At $24,000, the average premium for family coverage in 2023 is 22% higher than in 2018. At the same time, insurer reim- bursement rates have remained relatively stagnant, creating financial stress across the healthcare system. The sustainability of the current healthcare model is increas- ingly questioned, with regional stakeholders pushing for collaborative efforts to mitigate these issues. system, as patients with complex medical conditions who see multiple specialists face higher costs and poorer outcomes. Address- ing shortages of healthcare professionals at all levels is critical to ensuring effective care delivery to the growing population. Further- more, policy changes in reimbursement must accelerate to shift the focus from sick- ness to health, emphasizing preventive care and focusing on value-based care. The next five years are crucial, and a clear roadmap for 2030 is essential to ensure continued regional healthcare growth and economic development. most significant positive change in health- care employment as a percentage of total regional employment in 2018-2023. How- ever, while the region has achieved mile- stones, more work is needed to meet the healthcare demands of a population pro- jected to exceed 1 million by midcentury. Rapid population growth and shifting demographics are straining the region’s healthcare capacity. Compounding these challenges, the national healthcare indus- try has undergone significant changes, including the impact of the COVID-19 pan- demic. This disruption highlights the urgent need for a more coordinated regional care Northwest Arkansas Council’s Healthcare Transformation Division and Heartland Whole Health Institute - Vision 2030 HEALTHCARE JOURNAL OF ARKANSAS I  JAN / FEB 2025 19 Northwest Arkansas has made progress in expanding its healthcare industry from 2018 to 2023, with investments in infrastructure, services, and workforce development fuel- ing economic growth. Northwest Arkan- sas’ healthcare economy outpaced over- all economic growth during this period, demonstrating its increasing importance to the region. This expansion has resulted in new facilities, greater access to special- ized care, and more residency training pro- grams, and is poised to launch a new private medical school, theAlice LWalton School of Medicine (AWSOH). Compared with peer regions, Northwest Arkansas witnessed the CHALLENGE 1: Payment Rates for Healthcare Services Remain Among the Lowest in the United States As payments to healthcare providers move from the volume of care provided to the outcome of such care, the cost of healthcare in the region will be unsustain- able for individuals and employers. The financial burden of an unhealthy popula- tion results in massive losses to the overall healthcare sector. Northwest Arkansas is caught in the middle of an economic design shift in healthcare. New payment models have not fully developed to compensate for being behind the curve with chronically low reimbursement. Additional collaboration is needed to support the shift towards value- based care. Healthcare providers in peer markets with higher reimbursement are in a stronger financial position to invest in new programs and thereby lowering their finan- cial risk as they move from fee-for-service to value-based care. Arkansas is at a significant disadvantage as a result of national reimbursement meth- odologies. Payment formulas for Medicare are based on 60-year-old cost data when the entire state of Arkansas, including Northwest Arkansas, was severely disad- vantaged in most all measures compared to the nation. Because commercial insur- ers base their reimbursement rates on the amount of money providers receive from Medicare, Northwest Arkansas is burdened with the lowest government and private reimbursement rates. This accumulating impact has been a monumental challenge for the growth and development of health- care services. Unfortunately, historical pay- ment formulas for government payment levels drive payment formulas for private insurers. Currently, reimbursement method- ologies are limited for innovative care mod- els, inhibiting emerging strategies such as growth in virtual care. Medicare Geographic Payment Discrepancies Medicare, the federal health insurance program for persons over 65 years old, exhibits significant geographic variation in spending and reimbursement across the United States. The differences in Medicare spending per beneficiary arise from various factors, including healthcare utilization pat- terns, costs, and quality disparities. While some regions in the United States spend more on healthcare, others offer services at lower costs, raising concerns about fair- ness and efficiency. Policymakers have