LGH:  Your story “LGH 990 Report: A modest improvement, a huge misdirection” contains multiple errors. The most glaring one involves the cost of care we provide Medical Assistance.

Last year, the actual cost of providing healthcare to Medical Assistance (or Medicaid) patients was $49 million higher than what the government paid us for that care. The “Medical Assistance Unpaid Cost of Care” is based on the actual cost to provide that care. It is not based on charges.

We are not, as you say, “treating the difference between the seldom charged highest price and what they are actually paid as a “community benefit.” Again: That $49 million figure is based on the actual cost to provide care.

NEWSLANC: Thank you for finally responding to the question we posed a week before publication.  We will make appropriate revisions.   However the thrusts of our assertions remain the same..

The $49 million you claim as “community benefits” are the normal services and expenses borne by hospitals as part of their mandate.

Furthermore, they are ‘ordinary expenses’, so they do not come out of LGH’s $78 million in profits.

Moreover,  LGH provides a lower level of unpaid aid than most hospitals according to state reports.

The NewsLanc 2008 study based on State Health Department records established:

“Uncompensated Care (bad debt + charity) for LGH is 1.5% of Net Patient Revenue.   For the Region, 2.8%.   For the State, 2.3%.   The less bad debt, the greater profitability.”

“LGH’s Charitable Care in 2007 amounted to 0.5% of Net Patient Revenue. The State was 0.9% (Regional data was unavailable.) Note that LGH only provides about half as much charitable care as do hospitals throughout the state. The less Charitable Care, the greater profitability.”

LGH: Furthermore, all items we list as “community benefit” are based on categories, definitions and reporting guidelines outlined in “Guidelines and Standard Definitions for the Community” published by the Catholic Health Association of the United States and VHA Inc. Thank you

NEWSLANC: The terms were used to give the impression of an abundance of charity on the part of LGH which is contrary to fact, despite an improvement from the prior year.   We call that spin, obfuscation and propaganda.

Our contention is that LGH is earning exceptionally large profits as a result of its local market dominance. Since LGH is a ‘public charity’, the earnings which indirectly come from the public, a reasonable amount should be used for the public health, the social safety network, and education.  Instead, LGH’s contribution to worthy causes are relatively small.  Furthermore, its self perpetuating board of trustees does not permit the public to attend any meetings except one annually and shields from public its use of its vast earnings as it enhances its market dominence.

Below is the NewsLanc report from 2008 which was never challenged by LGH or others at the time or since:

Report #1: Reasons for LGH’s exceptional profits

Posted on July 30th, 2008

NewsLanc borrowed the services of Douglas McVay, Director of Research with an affiliated non-profit organization, to determine what circumstances have enabled Lancaster General Hospital (LGH) to earn the second highest profits in the State, amounting to $136 million in fiscal year 2007. Findings are not meant to detract from the efficiency and competence of LGH and the high quality service they provide.

McVay has examined and correlated information provided from Federal and State sources, LGH itself, and other publications deemed reliable. The research indicates special circumstances that are unique to our region plus LGH’s strong market position contribute substantially to LGH’s remarkable profitability.

Though LGH’s representative was cooperative at the outset, he became less forthcoming and then ceased to respond to inquiries as McVay’s inquiries became more knowledgeable and pertinent.

Therefore, the following factors for profitability are not a definitive list, but only those supported by current data on hand.

1) Proportion of LGH’s revenues from Medicare is 30%. For the region of which LGH is a part, 34%. For the state, 37%. Medicare pays a set fee which is considerably lower than private insurers and may not always cover the full costs of services. By law, Medicare rates are the lowest which hospitals are allowed to charge. The fewer Medicare patients, the greater profitability.

2) Proportion of LGH’s revenue from Medicaid is: 5%. For the region, 7%. For the State, 11%. Reports suggest that reimbursement for Medicaid is similar to Medicare. The fewer Medicaid patients, the greater profitability.

3) Uncompensated Care (bad debt + charity) for LGH is 1.5% of Net Patient Revenue. For the Region, 2.8%. For the State, 2.3%. The less bad debt, the greater profitability.

4) LGH’s Charitable Care in 2007 amounted to 0.5% of Net Patient Revenue. The State was 0.9% (Regional data was unavailable.) Note that LGH only provides about half as much charitable care as do hospitals throughout the state. The less Charitable Care, the greater profitability.

5) Percentage of “Charges” collected for LGH is: 50%; for the Region, 46%; for the State, 27%. Although available information is limited in this area, a comparison of LGH charges for ten medical procedures with a sample of hospitals from across the state indicated that LGH charges were about average. (Note: The “Charge” is a virtually mythical figure from which there are various discounts depending upon who is the payer.) The higher the proportion of Charges collected, the greater the profitability.

6) LGH’s program provides Amish and other cash payers with a standard 25% discount. According to the Wall Street Journal, Heart of Lancaster “agreed to discounts of up to 40% off its top rates” for the Amish. Lancaster County’s population is approximately 5% Amish. The less the discount to the Amish and cash paying patients, the greater the profitability.