According to Ephrata Community Hospital (ECH) spokeswoman Joanne Eshelman, “We regularly evaluate our facility needs and have a plan in place to further develop our main hospital campus to meet the needs of this community.”

This fact may come as surprise to the public, considering Lancaster General Hospital’s intention to develop an inpatient hospital and medical center within three miles of ECH’s central facility.

A primary justification for LGH’s proposal is an anticipated five-year population increase of 10,000 in northeast Lancaster County. Yet Eshelman says that Ephrata’s strategic plan accounts for the needs that will come with anticipated population growth.

According to Eshelman, the hospital’s occupancy rate averages 64%, nearly 4% lower than the national average for non-profit hospitals as of 2003.

She said that on an infrequent basis, the Ephrata Community’s emergency department has to “divert” patients to a nearby hospital when no beds are available. Between September 2008 and August 2009 the emergency department averaged a monthly seven hours of “divert mode,” with some months requiring no such admittance.

ECH has already developed plans to expand their emergency department; however, the project was temporarily suspended during the last fiscal year because of the economic downtown, according to the spokesperson.

Eshelman declined to comment directly upon Lancaster General’s plans to expand into nearby West Earl Township.

Can you recall the last time you voted for members of the board of directors / trustees of Lancaster General Hospital? Can you even find who they are on LGH’s web site?

Yet as members of the community, we all pay a health care premium, either directly or through our insurers, to LGH due to its near monopoly position which enables it to be the third most profitable hospital in the state and to annually earn well over a hundred million dollars. LGH’s dominance of local health care generates higher healthcare prices, which is little different than a tax on those using its services.

NewsLanc has reported extensively on the finances of LGH and our research and interpretations have been tacitly confirmed. We do not object to LGH earning vast sums, even when at our expense. We do object to the secretive and self-serving ways that LGH spends its profits because we do not believe they are consistent with the best interests of the public—the owner and supposed beneficiary of this foundation—or consistent with its stated mission: “To advance the health and well-being of the communities we serve.” Note “well-being.”

According to the Sunday News lead article “LGH plows ahead on hospital near Ephrata” of September 6th “LGH spokesman John Lines says an outpatient center probably will be built first, then an inpatient hospital.”

Is a hospital complex in Ephrata indeed the best use of LGH profits? Are the downtown Lancaster hospital and the suburban Women’s Hospital at the suburban ‘campus’ overcrowded? Are there wiser and more economical methods for shortening or eliminating stays to make room for others?  Are there ways to make use of capacities at Lancaster Regional and Heart of Lancaster?

As an example of what LGH could be doing with a tiny fraction of its surpluses: A half a million dollars a year in funding for an expanded Suboxone clinic would turn 500 drug addicts into productive members of the community and strengthen family ties. A one-time two million dollar contribution would enable the Lancaster Public Library to be totally renovated and a hundred thousand dollars a year would go far in sustaining and expanding the downtown library’s services. A quarter of a million a year would help put the Pennsylvania Academy of Music on a solid financial footing.  A larger contribution to the City and School District of Lancaster would benefit everyone in the county, resulting in a more vibrant and healthy downtown and better educated  inner-city youngsters.

But whether you agree with these causes or not, the real issue is: “Who is making the decision on how the public’s money—LGH’s profits—is being spent?”

We cannot even find the names of the directors or trustees on the LGH’s web site. We don’t know how they are appointed or elected.

But NewsLanc intends to find out. And it is time for the thinking public to recognize that what happens at LGH is as important to the community as what occurs a few blocks away at the County Office Building and City Hall.

Less than 500 of the estimated 5,000 to 10,000 heroin addicts in Lancaster County can obtain relief from addiction, in large part because physicians are unwilling to treat them out of greed and indifference.

Until a few years ago, there was no methadone clinic in Lancaster. Today Addiction Recovery Systems treats over 300 clients and enables them to return to near normal life with family, friends and jobs.

A breakthrough with even greater potential came with permission for physicians to prescribe buprenorphine, usually in the form of Suboxone, which is as effective as methadone for most patients and can be obtained with a prescription from pharmacies rather than through a clinic.

According to Wikipedia and confirmed by NewsLanc: “In the United States, a special federal waiver is required to prescribe Subutex and Suboxone for opioid addiction treatment on an outpatient basis. However… an eight-hour course is all that is required. Each approved prescriber is allowed to manage only thirty patients on buprenorphine for opioid addiction as outpatients…”

Hundreds if not thousands of Lancaster addicts are unable to obtain buprenorphine treatment. Why? Addicts are not perceived as attractive patients and often do not have the ability to pay or qualify for third party payment.

Does not the medical profession have an ethical responsibility to provide treatment for all who seek it?

Should not publicly owned Lancaster General Hospital lead the way in providing such services for the hundreds and possibly thousand who desire it?

To what more appropriate use can Lancaster General Hospital put two or three million dollars of its $113 million in earnings?

The irony is that treatment of addicts ultimately saves the public far more than it costs, and even can prove “profitable” for the hospital because it reduces the not fully remunerated high costs of treatment of health problems resulting from addiction.

If a single qualified heroin addict is unable to obtain treatment upon request, it is a disgrace. How much more shameful is depriving hundreds and possibly a thousand of the opportunity!

In the Sunday News May 10 lead article headed “$113 MILLION SURPLUS IS A DECREASE FOR LGH”, the newspaper leans over backwards to paint Lancaster General Hospital as a great benefactor of the city and the community while struggling to minimize the implication of so much public money being directed not necessarily in the public’s interest.

The paper quotes President and CEO Thomas Beeman as saying “Things have changed dramatically in the past year. We’re reflecting the rest of the economy.” For the sake of the national economy and especially the auto industry, would that it were true!

As a series in NewsLanc exposed, LGH has been the second most profitable hospital in the state and has one of the lowest levels of contribution to charity.

As also reported and affirmed by a reliable LGH source, the hospital’s dominant position in the Lancaster market place enables it to negotiate higher fees from insurance companies than is possible elsewhere.

However, when insurance companies have to pay higher costs, they need to charge more for their policies. The companies will make their mark up and thus their profits; but the brunt of the high prices falls upon the policy owners, who are we Lancastrians.  So we aren’t talking about LGH’s money; it’s a non-profit institution. We are talking about our money: the public’s money!

Here is some sycophantic misdirection from the article:

“Lancaster Mayor Rick Gray lauded Beeman and LGH. ‘When I talk to other mayors and tell them how much they contribute, their jaws drop.’” If Gray tells them how much LGH is making due to its dominant health care position, the other mayors would probably keel over!

“More than $25 million of the surplus will go to replacing and upgrading equipment.” When equipment is replaced and upgraded, the costs are depreciated over several years and are deductions from profits.  The $113 million this year is after, not before, the costs of “replacing and upgrading equipment” over the past years.  In future years, LGH will charge off this year’s outlays.

“LGH spent more than $50 million last year on care for low-income and uninsured patients.” That would have been expensed, so the $113 million is after allowing for such services.

“The hospital spent more than $1 million last year on wellness programs targeting, among other things, obesity and smoking.” Commendable, but also treated as an expense; so not out of the $113 million profit.

“The hospital offers financial assistance on a sliding scale.” Again, that is expensed, so the $113 million profit is after providing such services which are typical of all hospitals.

The Sunday News goes on: “Beeman said that pharmaceuticals represent one-third of LGH’s costs and cited unnecessary emergency room visits as an ‘inefficient’ way to seek care.” Absolutely! But those inefficiencies are treated as cost and do not come out of the $113 million profit.

Also reported “The hospital distributed nearly $1.9 million in grants last year, of which more than $100,000 went to United Way of Lancaster County.” Isn’t part of that allowed as an expense?

Alex Henderson III, vice chair, is quoted as saying “All the money we make goes back into the community.” True enough, but the issue is how much is bloated compensations, pensions, perquisites, and spending on plant and equipment which should not have the highest priority?

For example, Rick Kastner, Executive Director of the Lancaster County Drug and Alcohol Commission, reports that less than 500 of the 5000 to 10,000 heroin addicts in the county are able to afford or, even if they have the money, obtain treatment.  Would the community not be better off if LGH only made $110 million but another thousand addicts received health care and were able to become constructive and law abiding members of their families and of the community?

This article is not meant to be a put down of the good people of General Hospital who provide commendable expertise and services. Rather, NewsLanc believes that LGH is the one institution that best reflects the needs of the community and has the potential for relatively selfless leadership in the future.  The other four local titans – Franklin & Marshall College, Fulton Bank, High Industries and the Lancaster Newspapers- are duty bound to stockholders or trustees to best represent their special interests.  And they certainly are so motivated!

NewsLanc does believe that LGH has a responsibility to utilize its earnings for the best overall interests of the community from which its disproportionate profits spring.  It could well afford to donate $25 million to $50 million of the $113 million towards public health and education. Furthermore, over time, the gifts would actually earn profits as a result of a healthier and more prosperous community that would be better able to pay its bills without subsidies and charity.

It’s time for Rick Gray, United Way President Susan Eckert, and the Lancaster Newspapers to stop blowing kisses to LGH (to put it politely) for the crumbs LGH allows to fall from the table and call upon the health care system to do far more for the good of the public, which not only is the source of its revenue, but owns the place!

LETTER:

In your editorial on Lancaster oligarchy, you suggest that the amount of profit Lancaster General Hospital, a not-for-profit entity, routinely posts is more than needed for health care purposes and you suggest that they become philanthropists.

Why doesn’t Lancaster General Hospital reduce its charges to its patients, across the board? Wouldn’t that be the most constructive way to rein in the cost of healthcare to this community?

And if Lancaster General Hospital gouges its patients to such an extreme extent that they are posting profits in excess of $160 million, and can’t build and extend their empire fast enough to use it all up, can they even be called “non-profit” any more?

And, while I am at it, if Lancaster General Hospital begins giving away vast amounts of money to charitable community causes, isn’t it really “We the Patients” who are the true community philanthropists, since it is really our money?

If I overcharge someone for my services, then turn around and give a portion of my ill-gotten gains to the poor, that doesn’t make me a philanthropist. It makes me an unethical businessperson trying to salve my own conscience or make myself look good!

REPLY:
NewsLanc published a series of article about the roots of LGH profitability based on research conducted by an analyst borrowed from a national organization. We received a certain amount of cooperation from LGH at the outset before they clammed up when they saw we were skillful in putting together the jigsaw puzzle.

Some of their profitability stems from efficiency. But much is due to the special circumstances of this local market and their dominant position in it.

Most of their revenue comes from third party sources – insurance companies and government. Lower rates would partially trickle down to those paying directly and through insurance programs since the programs’ costs would be reduced. But, in general, there can be a good argument for LGH charging market rates similar to hospitals throughout the state.

LGH clearly does not need to spend $160 million a year, year after year, on expansion and upgrading. So what it can do is provide a larger ratio of its earning to subsidize worthwhile local causes. In its relatively meager giving (one of the lowest percentages in the state for hospitals), LGH prioritizing public health efforts. Were it to re-think its philanthropic responsibilities, it would be able to do much more for current recipients and expand the scope of its philanthropy to include certain types of educational activities such as schools and libraries.

God bless the Steinman family for all the wonderful things they did during the last century. But with the print media moving to the Internet, the Steinman foundation is unlikely to play so large a role for the betterment of our community.

LGH has no need to try to profit through questionable projects at the public expense. Also it is an institution of highly qualified, sophisticated individuals. Its ethos is consistent with service to the community.

Therefore, NewsLanc encourages LGH to make use of its extraordinary prosperity to assume two roles: Expand the amount and scope of its subsidies to important community activities; and also provide an altruistic anchor against the schemes of those who—despite incompetency and sometimes through greed and bullying—have seized the business leadership of our community.

On September 16, the Intelligencer Journal reported that Lancaster School Board Chairman Patrick Snyder said “…he’s pleased with the proposed $1.5 million payment to the district” by the Lancaster General Hospital in lieu of paying real estate taxes. It represented a $300,000 increase from the year earlier.

Yet at the SD of L’s School Board meeting that evening, a librarian from a grammar school explained patiently to the Board that his library has not received a single dollar over the past three years to replace worn out popular books or to purchase new ones. And it appears his experience is typical throughout the system’s libraries due to financial constraints.

Another member of the audience implored the Board to offer appropriate compensation to attract a competent replacement for the open athletic director position in order to stop the free fall of both the physical fitness and sports programs throughout the District.

A $300,000 increase certainly is welcome but it amounts to less that 1/5th of 1% of LGH’s $160 million in profits in 2007. In short, it is petty cash for LGH!

And it is so unfair for them to give so little. As was shown in NewsLanc’s recent series, LGH’s vast profits, second highest in the state, are not just because of the acknowledged competence of its management and staff, but because of very special demographic conditions and market dominance. So at least $100 million of their profit is coming from the regional public in the form of higher insurance payments, state and federal taxes, or excessive direct payments.

It is NewsLanc’s contention that LGH can and should do much better, contributing at least $20 million to county-wide school districts in a manner that takes into consideration the average incomes of student families, and also donating more for public health efforts and other regional worthy causes that benefit the public at large and are especially important to the unfortunate.

When we go for years without purchasing books for our children to read, we certainly don’t need to plow $160 million of the public’s money into LGH management perks and unending expansion.

In a knowledgeable and insightful letter to the New Era published on Sept. 1 entitled “What can be done to address city’s downside”, contributor Russ Laudenberger recommends in part:

“Address the demand side of illegal drugs, especially chronic users – the top 20 percent that use about 80 percent of the drugs. It’s absurd to believe that illegal drugs go away when dealers are taken down. the demand is just the same, and new dealers take over; licking their chops.”

In general the Lancaster Newspapers and local government leaders have demonstrated a progressive understanding of the need for prevention and treatment. In recent years they were all constructive in permitting the opening of a methadone clinic.

Nor have the newspapers interfered with the operation of the sole and meager church / private donor sponsored public health facility that has over the years helped reduce the spread of HIV/AIDS and encouraged and assisted addicts to seek treatment. However, these efforts have been tiny in scale and conducted in so conservative a manner that prevents achieving near the full potential.

The most cost effective and publicly desirable effort for the improvement of public health, reduction of crime, and solving problems of the homeless would be for Lancaster General Hospital (LGH) to exercise leadership by opening up a full service syringe exchange!

Syringe exchanges are endorsed by the federal government. They have long been supported by the City of Philadelphia and more recently by Pittsburgh. They operate across the United States and throughout the Western World.

By providing clean needles, condoms and public health counseling to addicts, LGH would retard the spread of HIV / AIDS and Hepatitis throughout the general community. And through safe and supportive contact with clients, they would be able to encourage detoxification and enrolment for methadone or Suboxone treatment.

Every dollar spent by LGH would save LGH many dollars in non-reimbursed health care. The syringe exchange would greatly reduce crime and enable current heroine addicts to become productive members of the community. There still would be crime on the streets and social diseases, but the amount would be dramatically lowered.

For LGH to take such a lead requires leadership and courage and the support of vocal members of the community, including the Lancaster Newspapers.

We have the opportunity. Will we seize it?

In a Sunday News “In my opinion” article, Amish shop operator S. S. Stoltzfus states that “…in the past, many folks with large hospital bills, especially those with hospital insurance plans, would meet with the hospital bookkeepers and offer a cash payment; most always the settlement would be 50 to 60 percent of the total bill.”

Stoltzfus observes“Why the big mark up in billings? Doesn’t seem like good business.”

“Good business” it may well be. The question is whether it is “fair business.”

It would appear that one of the reasons is to over charge those of us with co-pay hospital insurance, an observation NewsLanc has made in the past. If the invoice (“Costs”) amounts to $10,000 and the policy calls for the health insurance provider to pay 80% ($8,000) and the individual to pay 20% ($2,000), the insurer receives a 40% to 50% discount on its share and pays say $5,500 instead of $8,000. But the individual is required to pay 100% of his or her share, which amounts to $2,000.

So the so called “Costs” are not shared 80 / 20. In all likelihood, the ratio is 65 / 35 and the individual is paying about $700 too much.

NewsLanc does not mean to impugn the integrity of the managers of LGH. We recognize they are not running an ordinary business. Rather there are valid social and pragmatic issues to be considered.

On the other hand, we don’t think LGH should be pricing like a used car lot!

NewsLanc maintains that LGH, a public and not-for-profit institution, should provide greater transparency concerning its policies and practices and encourage greater public input and overview pertaining to how it operates and what it does with its earnings.

NewsLanc received a letter from an informed source stating “After reading NewsLanc’s LGH Report#2 (as part of your series of financial reporting on the plentiful treasure chest owned by not-for-profit Lancaster General Hospital), I am dismayed at the lack of edge that the NewsLanc.com reporting offered.”

Far be it for the publisher of NewsLanc to be critical of what every red-blooded business person seeks in order to achieve high profits: market dominance!

In the case of for-profit enterprises, public policy may require regulation, such as is done with utility companies.

But LGH is a 501(c)3, not-for-profit corporation. It has no stock holders. Its purpose is to serve the public.

In the situation of Lancaster General Hospital, it is in part already regulated because Medicare and Medicaid referrals are compensated in amounts determined by the federal government. It is the insurance companies (and thus the insured) and cash paying individuals who pay a premium when there is a collapse in competition.

While the citizenry may have to pay higher premiums and fees, the profits earned by LGH can and should be applied to further our community.

What is needed is more candor and transparency on the part of LGH’s management and greater public participation on how it spends its earnings, be they for excessive executive compensation or perks or on unnecessary investment in medical facilities.

LGH already does so in part. As a 501(c)3, it is exempt from real estate taxes. Yet it makes a contribution to the City of an even greater amount than it would otherwise pay. In the same way, it would be suitable for LGH to contribute more to public clinics and other public health efforts.

It might also provide additional funding for regional charities and make donations to the enhancement of public services such as the local libraries and school systems. LGH’s contributions might be somewhat guided by their beneficial impact on public health.

NewsLanc does not fault LGH for competing successfully. But we do insist on transparency and an open process whereby the public participates in deciding on how earnings are to be put to optimal use.

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.

The following is not a definitive list of LGH’s marketing advantages, but only those supported by current data on hand.

1) LGH has a very large—34,000 square foot—emergency department, the biggest in the area. Visits have jumped from 56,287 in 2003 to 93,489 in 2007.

2) LGH has the county’s only Level II trauma center and Level III neonatal intensive care unit. More serious emergency cases are likely to be routed directly to LGH rather than one of the other hospitals in the area. Inpatient admissions originating in LGH’s emergency department rose from 11,425 in 2002 to 16,853 in 2007. In 2002, 36% of admissions originated in the emergency department; by 2007 that had grown to 42%, and it seems to still be trending upward.

3) LGH had been ranked quite highly in annual US News & World Report hospital surveys in some specialties in years past although rankings have slipped recently.

4) LGH markets itself as a “Nursing Magnet Hospital” and claims on its website, “Magnet recognition is a coveted designation to recognize excellence in nursing care.” According to the Center for Nursing Advocacy “Some critics, including the California Nurses Association and the Massachusetts Nurses Association, have argued that the Magnet program is primarily a hospital promotion tool ….”

5) LGH’s affiliate, Lancaster General Medical Group (LGMG), is a “multi-specialty network of physicians and mid-level providers.” Established in 1995, LGMG has “105 physicians and 20 mid-level providers distributed among 16 practices at multiple sites.” Beyond being LGH profit centers themselves, physicians and providers in the Group are also likely to use LGH facilities.

6) LGH established one of the nation’s first residency programs specializing in Family Medicine. This program helps LGH build referral relationships with young physicians who often stay in the Lancaster area—whether or not they work directly for LGH or an LGMG practice.

7) LGH facilities have been redecorated in a tasteful manner. (The entryway on James Streets presents a five star ambience.) As an observer opined “It is like staying at a nice hotel. Even the food isn’t too bad.”

Due to LGH’s growing market dominance, some observers expect both Regional Hospital and Heart of Lancaster cease to be full service hospitals and for a merged LGH / Ephrata Hospital to have a monopoly. Greater transparency and public input will influence LGH, a not for profit corporation, to use its remarkable profitability in the best interests of the community.