What wasn’t stated in the recent Lancaster Newspapers headline about the local hospital’s relatively poor financials this past year is that the whole story was not printed? Are you not surprised? NewsLanc.com has repeatedly described Lancaster County’s monopolistic power of “The Big Five”, namely The High Group, Fulton Bank, Lancaster Newspapers, Lancaster General Hospital and Franklin & Marshall. I am frankly not surprised that LNP would acquiesce to LGH with a creative article. And by the title of this article’s use of the word “creative” I am denouncing the lack of quality accounting in determining LGH’s annual profits.
It has been reported for the last several years that LGH had profited more than $100 million annually — ranking second in Pennsylvania just behind the University of Pittsburgh Medical Center. At the same time, there has been considerable negative press focused toward LGH in that minimal payments are made to the city and County of Lancaster as a not-for-profit hospital…
So where does the creative accounting come from that is lacking in the LNP front-page article? In accounting, the main tenet that is followed is known as “Generally Accepted Accounting Principles” or “G.A.A.P.” — I contend that LGH has creatively finessed their spreadsheets to only show a $75 million profit for this past year.
The article did not take into account the slush fund of millions of dollars that were taken from the column of post-expense profits and transferred to the various LGH pension funds. Additionally, it is apparent that LGH has spent millions more in healthcare facilities along Good Drive, the Urgent Care Center on Rohrerstown Road, and considerable monies spent on improvements to the main facility on Duke Street. In accounting, the transfer of revenue to existing as well as new building ventures is applied to a line item known as Net Property, Plant & Equipment. This letter to NewsLanc.com will not serve as an introduction or overview of accounting, but just know that Depreciation and Amortization Expense are forecasted as a percent of Net Property, Plant, and Equipment (PP&E).
This nifty accounting line item can create an entity that appears to show a lack of bottom-line profits in an annual report. When in reality that entity’s annual profits are considerably higher that reported. Just from the transfer of profits to the various pension funds as well as the millions of dollars applied to PP&E, it can be more truthfully reported that LGH had another year of greater than $100 million.
And as citizens of this county, what do we continue to do? We continue to seek the care of Lancaster General Hospital – increasing their monopolistic reality. While the other three county hospitals (Ephrata, LRMC and Heart) continue to financially flounder.
Be wary Lancaster County that there will be a day when Lancaster General is the only healthcare option that you will have. Like John Lines, LGH spokesman, has stated over numerous occasions “Lancaster General will have a treatment facility within ten minutes of every person in Lancaster”. This will come true as the other three hospitals will be forced out of business by the monopolistic LGH.
And as the only healthcare provider in the county, I can guarantee that LGH’s “G.A.A.P.” and creative accounting will only make matters and spreadsheets worse.
As conspiracy theories go, this one takes the cake. Non-profits all complete a standard IRS form. You don’t fudge a federal form that asks specific questions like a tax form. Surely they’re independently audited. If you could fudge the numbers, why wouldn’t the two for-profit hospitals show positive returns? Seriously, investors in HMA are not happy its Lancaster hospitals are performing this poorly. As an accountant, I’m sure you know pension contributions are required annually by companies. Just because you dumped hundreds of big words on this doesn’t make you any more correct. Wrong, wrong, wrong.