Although Lancaster General Hospital is legally a Public Foundation, there is little opportunity for public scrutiny, input and none concerning how it spends its vast profits.
NewsLanc has linked together past research and articles starting at https://newslanc.com/category/lgh-series/. The link is also displayed at the bottom right hand side of NewsLanc.com.
Posted below are two especially important reports from the summer of 2008 which were the result of weeks of research. We believe they shed much light on why LGH earns so much profit, and that they raise important questions of how consistent LGH’s practices are with its stated mission.
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.
This is the first of a series of articles that will delve into issues of profitability, fairness, and how earnings are utilized by Lancaster General Hospital. Greater transparency will influence LGH, a Public Corporation, to use its remarkable profitability in the best interests of the community.
Report #2: Reasons for LGH’s market dominance
Posted on August 5th, 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.
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.
What is the source of your profitability information on Lancaster General Health? How does it compare to other hospitals?
Who says that LGH is not using its allegedly “remarkable profitability” in the best interests of the community? LGH does a lot for the community. Are you implying that they don’t?
LGH cannot refuse care to the increasing number of people who show up in the emergency room. In many cases, the bills are never actually paid.
That LGH facilities have been “redecorated in a ‘tasteful’ manner” and “the food isn’t too bad” is a reason for its market dominance?
Who are these “observers”? Stop schizophrenically quoting yourself or your friends. It’s obnoxious and it’s bad journalism.