NEW YORK TIMES: When the Evanston Northwestern Healthcare Corporation merged its two hospitals with the neighboring Highland Park Hospital just north of Chicago 13 years ago, the deal was presented as an opportunity to increase efficiency and improve the quality of patient care.

But when the Federal Trade Commission finally decided to look at the deal, it encountered an entirely different objective: to gain market power…

It was a great deal for the hospitals. The fees they charged to insurers soared. One insurer, UniCare, said it had to accept a jump of 7 to 30 percent for its health maintenance organizations and 80 percent for its preferred provider organizations… (more)

EDITOR: Given the concerns about Evanston Northwestern Healthcare Corporation, Lancaster General Health may be subject to the same scrutiny given its extending its tentacles into virtually all areas of health care in Lancaster County and its growing monopolistic influence over the market place. When the insurance companies have to pay more, then they pass on their costs to the policy holders.

Lede (“lede” is the actual spelling as Chris Hart-Nibbrig keeps on reminding us) “Hospital charges a mystery to many” asserts:

“And even more confusing.

Hospitals offer discounts to self-pay patients, which vary greatly from place to place.

“Remember the hip replacement surgery charges, where Regional had the highest charge and LGH the lowest?

“LGH offers a much lower discount for self-pay patients, 25 percent, bringing its total to $28,321, about $6,500 more than Regional’s.”

WATCHDOG: Two wags of a tail: One for the reporters who set forth the issues so clearly…with the above possible exception. The other is for the editor who assigned and approved the report.

The article covers some of the ground that Newslanc’s borrowed reporter Doug McVay researched and wrote a series about in 2008 and has been added to over the years.

What is meant by “Hospitals offer discounts to self-pay patients”?

Discounts from what? We know that the government and the insurance company pay far less. So if “self-pay” patients are offered discount, who is the dumb SOB who is paying the full freight?

The answer: The so call “price” is ficticious and strictly for calculating actual prices according to a sliding scale of discounts are based. Think of it as a sticker price on a new car.

We are separately posting three NewsLanc articles from 2008 and 2009 resulting from McVay’s ground breaking research on LGH.

Lead article “Do hospitals pay fair share?” reports:

” ‘A question is sometimes raised as to why not-for-profit institutions such as Lancaster General Health … are exempt from paying property taxes,” wrote LGH President and CEO Thomas E. Beeman. But LGH does pay property taxes, he wrote; by the end of fiscal year 2013, on June 30, LGH will have paid more than $6 million in taxes and payments in lieu of taxes to local municipalities and school districts.’ ”  …

“Here, officials say they’re generally pleased with the generosity of local health care systems. In Lancaster city, the health system’s $237,000 in tax payments and $1.38 million payment in lieu of taxes mean that in fiscal year 2013, it will pay about 95 percent of what its tax bill would have been without the exemptions.”…

“In 2012 the Pennsylvania Supreme Court issued a landmark decision asserting that to prove it is a tax-exempt charity, an organization had to meet five specific criteria — it must “operate entirely free from profit motive” and donate “a substantial portion of its services,” among other requirements.”

WATCHDOG: Six comments:

1) Thank you Sunday News for at least discussing the matters of importance, albeit always in a way that minimizes offense to the establishment.  For this a wag of the tail.

2) Readers should always continue to the end of such articles and also between the lines.

3) The authorities do not pay much heed to updating assessments on tax exempt properties, so it well may be that the tax Lancaster General Health would have to pay without an exemption would be much greater than their current contributions.

4) Lancaster General Health clearly has not donated “a substantial portion of its services” nor does it provide adequate support to other charities that share its mission, as also required.  Concerning services, the trick they play is to set artificially ‘retail rates’ on its services and then treat discounts to insurance plans and the Amish as contributions.

5) The Lancaster General Health governance lacks transparency, is self-perpetuating, and the all Caucasian establishment board does not reflect community diversity. It is also gradually creating a monopolistic strangle hold on all medical services in the county.

6) The public ends up paying for Lancaster General Health’s self-serving actions through higher medical bills and health insurance rates.

Discussing viewer reactions to the recent series on Lancaster General Hospital executive compensation, Editor Marv Adams comments  towards the end of the his “Lancaster Connections” column:

“One former employee sent us a November 2007 article from a Nashville newspaper reporting that LGH President and CEO Tom Beeman got $2.33 million in pay, deferred pay and benefits when he left his previous CEO post at St. Thomas Health Services in Nashville in 2005.

“An unhappy employee informed us that the gift cards LGH gives to its many employees and volunteers this time of year had dropped from $20 to $15.”

WATCHDOG: Adams must have wrestled with whether to and, if so, how to report the compensation that Tom  Beeman had received after three years of heading St. Thomas Health Services.   Adams could have sensationalized it on the front page; or let it go unreported as irrelevant and a hot potato.

For those who would like more information on the matter, visit the Nashville Post’s contemporary article  “St. Thomas paid millions to ex-CEO.”

The most poignant paragraphs  read:

“The mission statement of St. Thomas Health Services commits the Roman Catholic-based organization to “serving all persons with special attention to those who are poor and vulnerable.” It has enjoyed broad community support over the years in aspiring to fulfill that mission. In the same year Beeman received his payout, 4,761 different donors gave the hospital system $6.35 million in contributions, of which $1.77 million was spent on “programs that target the poor, both within Saint Thomas Health Services and in the wider community,” according to the 2006 annual report of the Saint Thomas Health Services Fund.

“The payment to Beeman, thus, ate up more than a third of all donations received for the year and exceeded the amount spent on programs meant to help the poor. STHS did provide a total of almost $40 million in overall charity care during the year, counting uncompensated services for the uninsured and other concessions — an amount comparable to what many for-profit and academic hospitals, without a specific mission of aiding the poor, provide in unpaid care annually.”

We don’t blame Beeman, although we hope he and the Lancaster General Health are investigated, fined and forced to personally  make restitution  if they indeed  unduly enriching Beeman with $1,150,000 for the year he did not work at LGH.   As much as Beeman, it is the directors who need to be held accountable. For the board at LGH controlled  by a clique of white millionaires,  these type of payments seem reasonable.

So does reducing year end gifts to volunteers from $20 to $15!

NEW YORK TIMES: …A little over half of the 1,400 doctors in southwestern Idaho are employed by St. Luke’s or its smaller competitor, St. Alphonsus Regional Medical Center.

Many of the independent doctors complain that both hospitals, but especially St. Luke’s, have too much power over every aspect of the medical pipeline, dictating which tests and procedures to perform, how much to charge and which patients to admit. ..

Boise’s experience reflects a growing national trend toward consolidation. Across the country, doctors who sold their practices and signed on as employees have similar criticisms. In lawsuits and interviews, they describe growing pressure to meet the financial goals of their new employers — often by performing unnecessary tests and procedures or by admitting patients who do not need a hospital stay… (more)

EDITOR: Lancaster General Health now controls perhaps half of the major practices her in the county and continues to acquire more.  Does this reach  by a chartered ‘Public Charity’ for monopolistic control serve the community?  Is it likely that the outcome for Lancaster will be different than  Boise, Idaho and elsewhere across the country?

On  Supreme Court’s largely upholding of the Affordable Care Act, the New York Times reports:

“Hospitals will gain millions of paying customers. Insurers, by contrast, could face crimped profits from restrictive rules. Medical device and pharmaceutical companies will bear new taxes and other higher payouts, but they were already expecting such costs…

“That will mean fewer uninsured people streaming into their emergency rooms receiving treatment for which they cannot pay.”

It is highly likely that once again LGH’s ‘profits’ will exceed $100 million per year.  Yet this ‘Public Charity’ is run by an Establishment clique with no accountability to the broader Lancaster public.

Even LGH has acknowledged that, due to its virtual monopolistic advantage, it is able to extract high payments from health insurance companies.  The insurance companies in turn pass along the added cost to Lancaster residents in the form of higher premiums.

If LGH utilized its vast earnings in a responsible manner that pursued its mission of public health and education, the added insurance premiums would be conscionable.  Instead, the LGH board and administration acts in a clandestine manner and, to the extent that a single federal report discloses its activities, have wasted huge sums on perks for its president and likely others.

Tom Beeman received $1,150,000 for not working for LGH for a year, a gift of questionable legality.  But the politically hobobled state attorney general’s office is highly unlikely to address the issue.  (As we saw from the Sandusky scandal, the AG’s office even demurs at investigating child rape when politics and campaign contributions are involved!)

LGH’s failure to provide transparency and to give more than token support to public health care (no contributions for a syringe exchange) and public education (token gifts to pacify local organizations) is the greatest Lancaster scandal since the disingenuous promotion of the Convention Center Project.   Yet no one but NewsLanc has the guts to report and editorialize about it.

Much of the communities  resources and bonding capacity was squandered on the Convention Center / Marriott project.   Now tens of millions that should be helping to improve our community is being siphoned off and mismanaged by the LGH establishment clique, which neither allows reporting and public attendance at all but one meeting a year and then no longer permits public comment.

Very sad.  Very sad indeed.

Lancaster General Health has  published its annual 990 federal financial report and the results are described in an unbiased first page article of the Sunday News.  Below are excerpts with comments:

“Lancaster General Hospital’s yearly surplus fell last year for the fourth year in a row, due in large part to a growing number of patients relying on government programs like Medicare and Medicaid — and reimbursement rates that haven’t kept up with the cost of care…”

“[Spokesman John] Lines said 60 percent of LGH patients are enrolled in Medicare or Medicaid. “The other 40 percent is commercial insurance, people who are insured by their employer. That’s where we make our money.”

WATCHDOG: The main reason that LGH is able to earn extraordinarily high profits as compared to almost every other hospital in the state is its monopolistic control of hospital and other health care services which enables it to extract high reimbursements from insurance companies who in turn charge businesses and individuals more than would otherwise be the case.  This is not necessarily a bad thing if the profits earned by this Public Charity were properly expended.

“We’ve moved staff from services that are either no longer in demand, or where demand is decreasing to areas where demand has been on the rise,” he said. “There’s an increased focus on wellness to make patients healthier before they need costly care. Going forward, LGH may rely more on philanthropy for new ventures.”

 We cannot reconcile LGH’s unwillingness to provide funding to the Urban League when it offered to sponsor a syringe exchange with a “focus on wellness to make patients healther before they need costly care.”

Hospital CEO Thomas Beeman — a captain in the U.S. Naval Reserves who was on a military leave of absence from the hospital for eight months of the 12-month reporting period.  Beeman was paid while on leave — in fact, he got a raise, though one lower than the LGH average.  Beeman’s compensation totaled $1.35 million last year, up from $1.32 million the year before — a 2.1 percent increase.

“Lancaster General Hospital’s yearly surplus fell last year for the fourth year in a row, due in large part to a growing number of patients relying on government programs like Medicare and Medicaid — and reimbursement rates that haven’t kept up with the cost of care.”

At least half of the drop can be attributed to the $1,350,000 gift to Beeman and the extraordinary increase of compensation to Executive Vice President Jan Bergen, “$1.1 million in compensation last year — up from $733,145 the year before.”  Bergen’s husband is partner in the law firm that LGH’s chairman heads.

“Lancaster General disbursed grants and other payments to local governments and other organizations totaling $4.3 million last year, up from $3.97 million the year before. The City of Lancaster received $1.38 million; the School District of Lancaster got $1.34 million.”

 This is still tiny considering LGH is a public charity that generates mammoth profits and operates in a totally opaque manner.  It has a self-selected board of trustees made up of white leaders of the medical profession and business establishment.  As such, it lacks a smidgeon of diversity.  Moreover,  LGH refuses to allow public comment even at the single public annual meeting mandated by regulations.

We applaud the quality of care, competence and dedication of the medical staff and workers, but we do resent certain physicians and executives  profiting excessively (and there is much we cannot see due to lack of transparency) while LGH’s mission, “To advance the health and well-being of the communities we serve,” is in many ways neglected.

It is time to return this captive Public Charity to a board of trustees that truly represents all aspects of the Lancaster community.

Lancaster General Health is a 501(c)3 tax exempt organization, a ‘public charity.’ Therefore, it pays no real estate taxes to the county, city or school district which otherwise might amount to over a million dollars a year. Also contributions to LGH are tax deductible, encouraging donations.

Its president, Tom Beeman, was absent a year while serving as a captain in the U. S. Navy. LGH, a ‘public charity’, paid him the difference between what he was paid by the Navy and his regular annual compensation. The difference amounted to about $1,150,000.

For a ‘public charity’ to gift $1,150,000 to an executive was mentioned by the Lancaster Sunday News but went without criticism or further comment.

The following pertains to 501(c)3 non-profit hospitals and is excerpted from “The Private Inurement Prohibition” posting at Guide Star USA:

…“The courts and the IRS have consistently ruled that any unreasonable benefit or inurement, however small, is impermissible and can result in the revocation of a charity’s tax-exempt status.”…

“In ‘an excessive compensation case, the ‘excess benefit’ is the amount by which the total compensation paid by the charity to an insider exceeds the reasonable value of the services provided by the insider to the charity’.…

“Section 4958(a)(2) of the Internal Revenue Code also imposes a tax equal to 10 percent of the excess benefit on any charity manager, typically a board member, who knowingly approved the excess benefit transaction, unless his or her participation was not willful. (emphasis added)…”

If the $1,150,000 pay is ruled improper, each LGH board member may be fined $115,000 by the IRS.

While the Attorney General office is conducting this necessary investigation, it should also look into LGH blatant and contemptuous refusal to allow public to its meetings, most recently even preventing the public from being able to address the board and audience during the Annual Meeting session.

It isn’t that the individuals who make up the board of directors set out to cheat the public who actually own LGH. Rather, it is their misguided sense of being the omniscient stewards of what is best for the community. It is the arrogance of not feeling responsibility to share what they do through public exposure. It is not allowing representation on the Board of Directors other than to members of the affluent Caucasian establishment. It is the silence of the editorial voice of the Lancaster Newspapers, Inc. whose Executive Director is a Board member. (Shades of the Convention Center conflict of interests.)

LGH can set its own prices with insurance companies. The result is the public pays higher premiums. Hence come LGH extraordinary profits averaging around $100 million a year.

LGH has been allowed to go dangerously astray without public check. It has a strangle hold on the medical community and monopolistic control of health pricing.

Lancaster is justly proud of the people who work for LGH and for the quality of the care it gives.  But the public with the aid of the media needs to break through the wall of arrogance and secrecy, insist that the directors represent the diverse interest of the community, and demand that LGH indeed conducts its stated mission:   “To advance the health and well-being of the communities we serve.”

A positive first step would be to help fund the syringe exchange that the Urban League has offered to establish to reduce the spread of HIV / AIDS and other diseases and to help get addicts off drugs and back to their loved ones and productive activities.

Sadly, who dares criticize LGH, Lancaster’s powerful sacred cow?  Thus the need for intervention by the State Attorney General and the State Department of State, both involved in the supervision of 501(c)3 institutions.

Do you notice a common thread among the below?  All are powerful establishment figures, either affiliated with Lancaster General Health for their livelihood or a head of a major Lancaster institution.   There is a lack of diversity.

Should Dennis Getz, Executive Vice President of the Lancaster Newspapers, Inc., even be a board member? Is this a way of muzzling possible criticism from the Fourth Estate?

Clergy? No.   Social workers?  No.  School teachers?  No.  People of color?  No.

It is hard to perceive an advocate for the legitimate needs of the community as defined by their mission statement:  “To advance the health and well-being of the communities we serve.”

More likely, the discussions are about enriching LGH, its executives and affiliates.

All of the above are at the summit of prestige and affluence, all ‘givers’.  Not represented are leaders of charities that are ‘receivers’ who are essential advocates of the health and educational needs of the community.

Little wonder the hospital only gives a pittance of its vast earnings to struggling organizations who also seek to “advance the health and well-being of the communities.”

We are not questioning the integrity or dedication of the individual trustees.  We are challenging the lack of representation of the diverse needs of the community and failure of the LGH to provide transparency concerning its plans and dealings.

Board Members

	Alexander Henderson, III, Esq. Chairman Hartman, Underhill & Brubaker		Robert F. Latshaw, MD Lancaster Radiology Associates
	C. Clair McCormick Vice Chairman Lebzelter’s Total Car Care		Bruce R. Limpert  CPS Management Services
	Thomas E. Beeman, Ph.D. Lancaster General Health		Deborah K. Riley, MD Infection Specialists of Lancaster, P.C.
	Rebecca S. Bumsted Retired		John Rose Horst Group (Retired)
	Gibson Armstrong Pennsylvania State Senate (Retired)		Antonio Suarez McDonald’s
	T. Raymond Foley, MD Regional Gastroenterology Associates of Lancaster		Michael W. Van Belle High Industries Inc.
	Dennis A. Getz Lancaster Newspapers Inc.		Philip R. Wenger Isaac’s Restaurant & Deli
	James E. Hipolit, Esq. Irex Corporation		Patrick D. Whalen Northwestern Mutual Life Insurance Company
	Joanne B. Ladley Kitchen Kettle Foods Inc.

As of March 19, 2012

At their recent annual meeting, Lancaster General Health took the unprecedented step of eliminating an opportunity for comment while the audience was present.  The good news appears to be that new federal governmental regulations for tax exempt public charities will require discussions with representatives of  the community at large and the submission of an annual public summary and response.  The bad news is that LGH may be able to ignore the regulation by paying a $50,000 fine.

From the Internal Revenue Service:

…This notice addresses the community health needs assessment (“CHNA”) requirements described in section 501(r)(3) of the Internal Revenue Code (“Code”) and related excise tax and reporting obligations, applicable to hospital organizations that are (or seek to be) recognized as described in section 501(c)(3) of the Code. The CHNA requirements are among several new requirements that apply to section 501(c)(3) hospital organizations under section 501(r), which was added to the Code by section 9007(a) of the Patient Protection and Affordable Care Act (“Affordable Care Act”), Pub. L. No. 111-148, 124 Stat. 119, enacted March 23, 2010.1 This notice describes specific provisions related to the CHNA requirements that the Treasury Department (“Treasury”) and the Internal Revenue Service (“IRS”) anticipate will be included in regulations to be proposed under section 501(r). This notice also invites comments from the public regarding the CHNA requirements…

Section 501(r)(3)(A) provides that a hospital organization meets the CHNA requirements with respect to any taxable year only if the organization (i) has
conducted a CHNA that meets the requirements of section 501(r)(3)(B) in such taxable year or in either of the two taxable years immediately preceding such
taxable year, and (ii) has adopted an implementation strategy to meet the community health needs identified through such CHNA. Section 501(r)(3)(B)
requires that a CHNA (i) take into account input from persons who represent the broad interests of the community served by the hospital facility, including those with special knowledge of or expertise in public health, and (ii) be made widely available to the public. Although most of the requirements under section 501(r) are effective for taxable years beginning after March 23, 2010, the CHNA requirements are effective for taxable years beginning after March 23, 2012. See section 9007(f)(2) of the Affordable Care Act….

(3) A description of how the hospital organization took into account input from persons who represent the broad interests of the community served by the hospital facility (as defined in section 3.06 of this notice), including a description of when and how the organization consulted with these persons (whether through meetings, focus groups, interviews, surveys, written correspondence, etc.). If the hospital organization takes into account input from an organization, the written report should identify the organization and provide the name and title of at least one individual in such organization with whom the hospital organization consulted. In addition, the report must identify any individual providing input who has special knowledge of or expertise in public health (as provided in paragraph (1) of section 3.06 of this notice) by name, title, and affiliation and provide a brief description of the individual’s special knowledge or expertise. The report also must identify any individual providing input who is a “leader” or “representative” of populations described in paragraph (3) of section 3.06 of this notice by name and describe the nature of the individual’s leadership or representative role.