Marin General Hospital
Sutter's Assets And Profits Soar As
Non-Profit Status Investigated
By Karen Nakamura
The fight between the Marin community and Sutter Healthcare Corporation, which runs Marin General Hospital, continues. One of the main contentions is that Sutter wants to own the hospital rather than "manage" the facility. Sutter is threatening to pull up roots and build a competitive hospital in Marin if it can't take MGH decision-making powers and purse strings away from the Marin County Hospital District Board, a group of elected officials who now hold power. This attempted take-over tactic is a classic Sutter move. Communities across California have experienced similar swallowing up of their medical facilities.
As a "private non-profit", Sutter Healthcare has certainly increased its profits and real estate holdings exponentially in the last ten years, going from one hospital in the 1960s to currently owning or managing over 20 hospitals and more than three times that number of medical, research, senior and rehabilitation centers. It even boasts an insurance company. According to its website, Sutter serves more than 100 communities, mainly in California but including Hawaii."
The latest published figures, found in the Sutter Audited Financial Statement of 2003 show its property, plant and equipment assets registered some $1.98 billion, up nearly $200 million ($1.79 billion) from the year before. With real estate prices hitting the roof and more acquisitions in the works, it'll be interesting to see the 2004 figures. Also interesting is, that without counting depreciation, etc., property, plant and equipment assets reach $3.38 billion.
And all this profit growth has occurred without paying a penny of state or federal taxes. Sutter Health enjoys a 501c non-profit status. An important component of non-profit status is that recipients are required to remain non-profit and to serve the public neeeds. In healthcare, this traditionally means caring for indigent and handicapped citizens. In return, the deal worked out by Congress subsidizes losses suffered by 501c non-profits by allowing them exemption from taxes.
Marin General satisfies their obligatory drainage of funds, for instance, by dumping its uninsured mentally ill in Richmond and other Bay Area cities' facilities. The Lewin Group, a consulting firm hired by the Marin Hospital District Board to evaluate the Board's options in a take-over of Marin General Hospital by Sutter Health, asked Sutter if it planned to continue all services at MGH at appropriate levels for the community. Sutter responded,
"We do not know if all the services currently provided at Marin General Hospital could be continued in any new contractual agreement."
Things have got so bad that uninsured patients filed a class action suit against Sutter Healthcare Corporation for charging exorbitant prices. On Aug. 17, Sutter counter-sued these patients seeking to collect the difference between what uninsured patients paid and, according to some, its inflated charges. Sutter does charge approximately 15% more than the average hospital. Remember, the tax exemption is meant to countermeasure some of these costs.
The president of SEIU United Healthcare Workers West, Sal Rosselli, commented on the situation. "With this suit, Sutter Health is being disingenuous at best, downright malicious at worst. It's an outrageous response to a class action consumer protection lawsuit, and demonstrates that Sutter's announcement last year that it is expanding charity care eligibility and moderating collections policies were cynical PR ploys."
Not to be forgotten in this mess, the Federal and State of California Hospital Accreditation Boards have threatened for nearly two years to decertify Marin General if the 300 Health and Safety violations it has racked up are not rectified. There are other Sutter hospitals with similar violations.
In the meantime, Sutter is responding to criticism from the community about its methods of care by lashing out at its critics. On its web site Sutter Health quotes an Orange County Register article published in August of 2004 which states: "The pattern is easy to identify. When labor unions or other interest groups dislike a particular industry, they mount a shrill public relations campaign to demonize that industry. That's followed by questionable studies that provide the 'evidence' of the evils of that industry, and then the legislators start writing laws to punish said industry."
Further on Sutter argues that while SEIU United Healthcare Workers West say Sutter Health maintains inappropriately large financial reserves. "The truth is the bond rating agencies would like Sutter to keep more cash reserves. According to the Standard & Poor's credit rating agency, Sutter Health's reserves remain 'below AA-' medians, due in part to. . . management's philosophy to intentionally trade off greater investment in the system in the form of technology, plant, property, and equipment while maintaining only moderate levels of cash reserves. Sutter Health prefers to reinvest in health care rather than build the sizable reserves that the rating agencies desire."
Oh, so that's why it has accrued over three billion in building and equipment hard assets. Okay, so Sutter is running down its credit rating, (the City of San Rafael maintains Triple A ratings) and is having trouble addressing its 501c obligations. Okay, so its worse critics are its nurses and workers. Okay, so its hospitals are repeatedly cited for violations of health and safety codes. Okay, so it has put its money into real estate and shorted its staff and patients. It buys touchy-feely ads on TV, doesn't it?
In the middle of all this, Sen. Charles Grassley (R-Iowa), who is chairman of the U.S. Senate Finance Committee, has begun investigating Sutter and other "not-for-profit" healthcares he accuses of abusing their tax-exempt status. And the City of San Francisco's tax assessor has challenged Sutter to show why it doesn't owe $4 million in back taxes, based on its huge profit margins.
"Sutter Health is a major part of the problem of our national healthcare dilemma," Sal Rosselli of SEIU said. "While using its 'nonprofit' status to get tax breaks, it is earning profits of 10 percent, 14 percent, even 33 percent of revenue. This corporation is systematically driving up the cost of health care for everyone."
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