Attorney General should investigate LGH for ‘private inurement’ violation; each director subject to a $100,000 fine

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.