Another Nonprofit Health System Joins the Tax Rolls

A discouraging article from Tacoma, WA where both the city nor two of its largest employers, tax-exempt MultiCare and Franciscan health systems agree that a city imposed business tax is a suboptimal state of affairs. Chief Medical Officer Mark Adams put it eloquently: "I know you don’t have a money tree in City Hall. We don’t have a money tree in our hospital. We are really looking at the same sort of issues. There definitely is a consequence at this point in time to pulling money out of the health care system like this. Either some service has to give – we’re business people, too – or there will be jobs lost." The tax will add an estimated $538,000 to city budgets per year.　Putting emphasis on this trend is a recent article in Forbes which highlights the fact that this trend by local governments will only continue.　If you are a hospital CEO or CFO and you haven’t heard from your local government you might consider a preemptive strike and begin the conversation yourself.
　
The articles can be found here:
http://www.bellinghamherald.com/2012/02/22/2404383/council-votes-to-tax-multicare.html

and here:
http://www.forbes.com/sites/markbergen/2012/02/20/the-tax-bang-after-the-hospital-boom/

Struggling nonprofit hospital considers merger

The San Francisco East Bay city of Hayward California has had its own hospital, St. Rose Hospital, since 1962 when it was originally sponsored by the Sisters of St. Joseph of Wichita, KS. As a relatively rare independent hospital in an area dominated by Sutter Health and Dignity Health (formerly Catholic Healthcare West), the nonprofit hospital has struggled to stay solvent. According to a recent article in the Mercury News, in any given month, 20 to 35 percent of emergency room patients do not have health insurance and about 12 percent to 15 percent of hospital customers using inpatient services are uninsured. This has lead to a loss of $1 million a month. Without significant ancillary activities or other ventures that can generate steady cash flow those metrics are hard to overcome. The hospital is looking to merge with the local healthcare district - which may give it the life support that it needs to maintain its independence. The article can be found here: http://www.mercurynews.com/news/ci_19982791

Investigation into nonprofit hospital captive leads to embarrassing disclosure

Many nonprofit hospitals have offshore captive insurance companies. It is a prudent means of controlling risk and minimizing cost. And, generally speaking, these captive insurance companies require occasional personal attendance by hospital executives to perform the routine corporate maintenance required by any entity. However, the executives at Atlanta based Wellstar Health System may have taken the travel perk to an extreme by spending "tens of thousands of dollars over the last three years on airfare, five-star hotel stays and fancy restaurants in the Caymans, Puerto Rico and the Bahamas" according to local news affiliate WSBTV.


Without additional information it is difficult to know whether this is an abuse of fiscal discretion or simply the ordinary and necessary cost of doing business. Regardless, the real lesson is clear. Presume that your donors, patients and community will ultimately view every transaction - oftentimes without your ability to provde the hospital's side of the story.