Nonprofit Hospitals Operating under a Haze of Financial Shenanigans
By Guest Writer Lynn M. Petrovich
Four months ago, I was told I’m going blind in both eyes.
As the victim of aggressive posterior cataracts (unlike anterior, front, or normally talked about cataracts which are decades in the making from exposure to the sun and other exterior elements), a cloudy substance was quickly taking over the back of each of my optical lenses.
The prognosis: Within a year, my vision would be so impaired, I’d see only shadows.
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A month before this shocking diagnosis, thinking I just needed a change in my eyeglass prescription, I made an appointment for what I thought would be a routine examination. The attendants in the optometrist’s office fumbled nervously trying to secure something called a depth perception in my left eye (that’s the machine with the puff of air), a reading to determine distance between the retina and a known object. The doctor, annoyed at her staff’s inability to perform this simple task, gave me the usual vision tests, seemed perplexed, and then practically crawled into my left eye, peeking around every nook and cranny, using tools I’d never seen, before finally asking: “When was the last time you had a physical exam?”
What? “What’s the problem?” I asked.
“You have a posterior cataract in your left eye covering almost one third [which wasn’t there at my exam a year ago]. We only see this type of cataract in long-term steroid use or diabetes.”
Neither were considerations in my case.
Three weeks later, at a follow up appointment, I sat while an eye surgeon crawled into my right eye.
“I don’t know why you’re looking at my right eye.” I said “The problem is my left eye.”
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“Oh no.” said the surgeon “Your right eye is as bad, if not worse, than your left eye.”
Cataracts are the leading cause of blindness in the world. And they are easily treatable. Of course, in America, that’s only if you can afford it. No less than 30 other industrialized countries have universal health care. But not us; no sir. Instead, we have something called the Patient Protection and Affordable Care Act (PPACA) handing the reins of our health care system over to the profit-first health insurers (the so-called free market system where corporate competition, despite decades of gross inability to do so, is yet again allowed to fight for health care cost containment while maintaining (a) profit first (b) unconscionable executive salaries, pensions, and perks and (c) corporate jets, hedge funds, and gold plated china patterns, all prioritized over paying for health care of its insured).
Make no mistake, PPACA is not universal care; but it is a universal mandate for consumers to buy a defective product, like giving bubble gum to a starving child and saying “Here’s something you can chew on.”
Medicare covers cataract treatment. But coverage for Medicare isn’t automatic. Unless you’re disabled, enrollment isn’t until age 65, and monthly premiums have more than doubled between 1999 ($45.50) and 2012 ($99.90), annual deductibles have increased by almost 45% – 1999 ($798) versus 2010 ($1,132); and copayments have remained at 20% (of course, that’s the big “sell” for AARP supplemental health care policies, insured by the profit-first behemoth United Health Group who doled out $49 million in compensation to their CEO last year).
According to the Social Security Administration, of the 55 million 2012 Social Security recipients, average monthly benefit was $1,230 (so on average, premium, deductible, and copay costs can run someone living on less than $15,000 per year, almost 20 percent).
At age 55, I was ineligible for Medicare, but I did have a private health insurance policy with an annual premium of $7,000, a $2,000 deductible, and another $10,000 out of pocket cap (private health insurers seem to like dealing with gargantuan numbers).
After securing a second (and unsolicited – yet professionally curious – third and fourth) opinion from doctors at a well-respected eye care institute in Philadelphia, and with constant prodding on my part as to how this happened, the surgeons finally admitted cataracts like mine (absent long-term steroid use or diabetes) are normally seen in someone exposed to severe radiation poisoning.
Again, to my knowledge, radiation poisoning was not a consideration, unless someone’s been contaminating my Maypo.
Oh, yes, and another cause is nuclear fallout.
Oh boy. (Geographically, I’m caught between two nuclear power plants: Oyster Creek in Lacey Township (38 miles to the south) and Indian Point in New York (69 miles to the north), and while I’ve no doubt the Nuclear Regulatory Commission’s truthfulness about leakage is suspect, I’ve trouble wrapping my head around the fact nuclear fallout might be the perpetrator of my particular type of blindness.)
By mid-October, I was unable to drive (and informed it was illegal anyway). So, now I am totally dependent on others for transportation.
Each of my cataracts was unique. My right eye was what they called “nuclear” and was like peering through fog and confetti. My left eye was non-nuclear, like looking through three slices of pizza. Lights were a bitch. Computer screens, televisions, and the sun were brutal enough to cause immediate tearing and blindness. Something as simple as a single car headlight translated into a horseshoe-shaped disco light.
I needed relief.
Surgery on my right eye (doctors don’t operate on both at the same time – and my right eye was “dominant”), was scheduled for November 14 (during and after super storm Sandy cleanup). My surgeon was contracted with only one hospital, Riverview Medical Center, so that’s where the procedure was scheduled. I had absolutely no freedom with regard to choice of facility. It was whatever insurance, doctor, or profit center dictated. That will not change under PPACA.
A few weeks after the successful surgery, the hospital bombarded me with slick, elaborate, full color mailings from their marketing, specifically-designated gift, and fundraising departments asking me to (1) rate the quality of their facility, (2) consider a monetary donation, and (3) remember them in my “estate” planning.
Several of these notices implored me to “support” their nonprofit foundation by relating medical stories like that of a senior citizen who was saved within nanoseconds from the jaws of death by the hospital’s state sanctioned and specifically designated Chest Pain Center, “where our experts recognize and treat heart attacks”. (The hospital actually promoted their specifically designated Chest Pain Center as staffed with professionals able to recognize a heart attack? Am I missing something?)
In the heat of my eye surgery recovery, I almost started to discard these examples of uniquely American health care letters but then thought better of it: OK, I’ll bite.
I wanted to peek behind this campaign for more of my money so I called Riverview Medical Center Foundation to find out more.
Riverview Medical Center Foundation, a nonprofit 501(c)(3) entity, and like Riverview Medical Center, is a member of the Meridian Health Care System, Inc., a conglomerate of hospitals, diagnostic, treatment, rehabilitative, and foundations at the Jersey Shore.
It is important to note that in order for an organization to be nonprofit they must make application to and get approval by the Internal Revenue Service. The process for preferred IRS tax status involves an in-depth, articulated mission statement, dedicated corporate organizational structure, and specialized accounting policies and procedures. The entity’s purpose cannot discriminate and must fulfill a community need, advancing the welfare of the public. Earnings (not referred to as profits, but as “surplus”) shall not benefit any individual or stakeholder and must be retained by the organization and used to further their stated purpose.
When determination is approved by the IRS, these organizations are known as 501(c)(3) entities, donations made are tax deductible, and strict adherence to guidelines must be followed. This is because 501(c)(3)s pay no income, sales, or property taxes. They can issue bonds for capital improvements or equipment purchases, and the bonds are desirable because interest on them has tax exempt advantages to bond holders. When a nonprofit’s annual gross revenue (receipts) over a 3 year period averages more than $50,000, they must file Form 990, reconciling the accounting activities of the year and providing specific administrative information.
I received the most recent Form 990 directly from the Executive Director at Riverview Medical Center Foundation (although Form 990s, which are public information, are also available at www.guidestar.org).
Disclaimer: Reader beware. The following information obtained from Form 990 filed by Meridian Health Systems Inc. contains obscene financial transactions (allowed abuses) which are normal policies and procedures, predominant in most American nonprofit hospital communities.
For the last decade, Meridian Health System Inc. has filed consolidated Form 990s, which means financial activities of umbrella or owned and operated entities under the control of Meridian Health System are totaled as one and reported on a single form. Consolidation is antithetical to transparency. When consolidated returns are submitted, it is impossible to determine how one subsidiary performed compared to another.
Meridian Health System’s most recently filed Form 990, over 200 pages, was for period ended 12/31/2010. Gross program service revenue (that is money paid to them for their stated purpose “improving the health and wellbeing of the residents of New Jersey” included income from Medicare, Medicaid, Charity Care, private insurance, VA, workers’ compensation, auto insurance, to name a few) was $1.2 billion ($1,238,262,832, page 1, line 9). Direct program expenses were $988 million ($988,662,276, page 2, line 4c), which means they had net surplus of $249,600,556, almost a quarter of a billion dollars in just one year for health care services rendered. Overall, this nonprofit health care conglomerate is not losing money on services provided.
But there’s more evidence:
Cumulative surplus as of 12/30/2010 was $730 million (page 1, line 22). Cumulative surplus reported 12/30/2009 was $479 million; surplus reported 12/31/2008 was $360 million.
Translation: In the last 3 years, Meridian Health System’s cumulative surplus (money left over which must be used to further their stated purpose) more than doubled.
Compensation to the top three employees totaled $4.5 million; the next 10 were paid in excess of $6.1 million. On average the top 13 executives were paid $825,000. Annual salary for rank and file workers averaged $45,000 or less than 6% of the top 13. Bonuses to 25 listed employees (ranging from $16,000 to $540,000 – 9 of which were six figures) totaled $2.6 million. Average bonus was $103,800, more than twice average salary of other employees. Bonuses doled out in 2009 totaled $2.2 million.
In 2009, severance payment to one employee was $404,000.
Schedule J, Part III, page 3 “The amount reflected in column B(III) for the following individuals includes participation in a Supplemental Executive Retirement Plan (SERP). The amounts outlined herein were included in each individual’s 2010 Form W-2.”
SERP income to five executives ranged from $91,846 to $1,015,352, and totaled $1.5 million.
I point this out because Form 990, Schedule D, Part X, Other Liabilities shows the single largest liability (i.e not yet funded obligation) of this nonprofit at $82 million is “Accrued Pension and Retirement”.
Fundraising income was $1.3 million (page 9, line 1c). Fundraising expenses $4.3 million (page 10, line 25), for a net loss of $3 million. Included costs went to professional fundraisers to conduct telephone campaigns to “increase the community’s awareness of Meridian’s charitable purpose” (Schedule G, Part IV, page 3). One of the highest paid independent contractors is a firm which received over $3.2 million for advertising.
Office and Other Expenses
Total cost for office expenses ($234 million) and “other” ($97 million) was $332 million or 27% of total annual expenses (page 10, Line 10g and 13).
Office expenses are items like coffee and office blinds. “Other” could be anything. Is it logical to consider the entities spent hundreds of millions of dollars on items like desk lamps? This is an area screaming for an independent audit.
Riverview Medical Center Foundation
As stated earlier, Riverview Medical Center Foundation’s financial activity is consolidated with all other owned entities of Meridian Health System making it virtually impossible to ascertain the specific results of the foundation. However, Schedule D, Part VIII – notes net investment (surplus) in (all) foundations at $57.7 million.
I’ve only scratched the surface of the 200-plus pages of Form 990 of Meridian Health System and the kind of financial shenanigans which go on every single day in this country at our nonprofit hospitals who are supposed to be treating everyone without discrimination (always claiming poverty, to boot announcing layoffs at every opportunity) yet aggressively pursuing the poor, under- and un-insured patients for grossly inflated hospital bills.
As of 12/31/2010, Meridian Health System had over three-quarters of a billion dollars in surplus (and that’s after grossly wasteful financial practices). In 2011, the state of NJ’s annual charity care budget was $675 million less than what this one nonprofit entity, Meridian, had in surplus.
So the question is: Since taxpayers are already funding charity care, and taxpayers are also supplementing budgets to make up the shortfall to communities not receiving sales, income, or property taxes from these nonprofit hospitals, isn’t this a double, triple, and quadruple burden on the taxpayers?
More specifically: Why can’t hospitals’ surplus balances be used to fund charity care instead of a separate taxpayer-funded state budget for this purpose?
Nothing in PPACA does anything to address these abuses. In fact, new laws usually benefit those who paid, those who wrote, and those who passed the laws.
In 2013, I am on my way to a clearer vision, literally, and thankfully (although I’m still waiting for my insurer to approve the payment for the first surgery, and I’ve not a good feeling about that).
In 2013, if Americans were able to obtain a clearer vision of the waste, abuse, redundancy, and corresponding burden nonprofit hospitals place on communities in delivering health care, by obtaining Form 990s (www.guidestar.org), reviewing, making a list of questionable or outright abusive practices, and demanding change, then 2013 will be proven to be the start of a very Happy New Year.
Lynn M. Petrovich, copyright 2013
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