Pacific Northwest healthcare giant PeaceHealth ended its 2016 fiscal year with a $115.6 million deficit, but things were looking up in the first quarter of 2017, when assets climbed by $40.05 million, according to an in-depth Lund Report examination of the Vancouver, Washington-based nonprofit’s financial situation.
Piecing together PeaceHealth’s story from public records can be a jumbled process.
Corporate financial statements disclosed to bond regulators show the nonprofit’s bottom line for the year that ended June 30, 2016, as well as the first quarter of fiscal year 2017, which ran June 30 through Sept. 30, 2016. PeaceHealth’s available tax filings are the best source of information about the nonprofit’s executives and independent contractors, but these documents are only available up through the year that ended on June 30, 2015 – and quite a lot has changed since then.
Corporate Finances
PeaceHealth, which operates four hospitals in Oregon, five in Washington state and one in Alaska, in addition to its network of clinics, labs and other medical operations, ended its 2016 fiscal year with $3.59 billion in assets, down slightly from $3.68 billion at the end of FY 2015.
Net patient service revenue was essentially flat from FY 2015 to FY 2016, at about $2.3 billion system- wide each year. In FY 2016, net patient revenue came from: 38 percent Medicare, 14 percent Medicaid, 47 percent commercial insurance and other payers and 1 percent self-pay. In FY 2015, it came from 33 percent Medicare, 15 percent Medicaid, 51 percent commercial insurance and other payers and 1 percent self-pay.
Disclosures to bond regulators give a partial look at Oregon’s provider tax, which the state uses to qualify for additional Medicaid funds. The amount each hospital pays is not a matter of public record. In addition to Oregon’s provider tax, Washington assesses a similar tax on its hospitals. In 2016, PeaceHealth paid $68.9 million toward these Medicaid-boosting taxes on hospitals. It received $82.2 million in supplemental payments for participating in these programs.
System-wide, PeaceHealth estimates it spent $14.7 million on services and supplies under its charity care policy in FY 2016, down from $20.3 million in FY 2015. Charity care spending has been falling at nearly every hospital as a result of the Affordable Care Act’s vast expansion of health insurance rolls.
Unions appear to play a growing role at PeaceHealth operations. On June 30, 2016, about 41 percent of its employees were covered under collective bargaining agreements, including nurses, professional employees and service workers. That's up from a year earlier, when 34 percent of PeaceHealth employees were covered by such agreements.
PeaceHealth also disclosed that during fiscal year 2016, it sold the Medicaid assets of its subsidiary, Columbia United Providers, to Molina Health Care of Washington, at a gain of $16.1 million. Excluding that sale, CUP's loss from operations would have been $20.2 million in 2016. CUP, which operated in Washington, ran into trouble in 2012 after that state’s health authority cut its direct Medicaid contract. The contract was reinstated in 2015. CUP filed articles of dissolution with the Washington Office of the Insurance Commissioner in April 2016, and is no longer in operation.
PeaceHealth's total system-wide employment grew from 13,320 people in FY 2015 to 13,748 in FY 2016. Its Oregon employment grew from 3,462 to 3,532.
In the first three months of PeaceHealth’s 2017 fiscal year, the nonprofit disclosed lower expenses and higher revenues than at the start of the previous fiscal year. Net patient service revenue climbed 4.3 percent, to $596.9 million. Salaries, wages and contract labor expenses declined 4.7 percent, to $295.6 million. Overall, unrestricted net assets climbed by $40 million – after falling by $102.3 million in the first quarter of FY 2016.
Executive pay
High turnover in the executive ranks at PeaceHealth makes it nearly impossible to discern what current leaders at the organization are earning. Though executive compensation – which includes base pay, bonuses, benefit costs and retirement earnings – is public record at nonprofits, there’s a long lag before it must be disclosed. The most recent compensation figures available for PeaceHealth are from fiscal year 2015, when 18 top PeaceHealth executives received $12.1 million. Of those leaders, only five still remain with the nonprofit – Stuart Hennessy, Carol Aaron, Ran Whitehead, Rand O’Leary and Dan Hein.
Here’s the total compensation for each of these remaining executives received in 2015:
- Stuart Hennessy - $1.2 million, up from $729,630 in 2014.
- Carol Aaron - $758,315, up from $670,782.
- Ran Whitehead - $430,498, up from $366,482.
- Rand O’Leary - $165,036, in his first partial year on the job.
- Dan Hein - $313,271, who was not yet on the executive team in 2014.
Beth O’Brien, who many have credited for the layoffs, has herself departed PeaceHealth since 2015. That year, her base compensation was $249,043, her bonuses and incentive pay added up to $200,000, she received $2,344 in nontaxable benefits and other compensation of $21,643 – bringing her total compensation for the year to $473,030.
Alan Yordy, who retired in June 2015, received 2015 total compensation of $1.5 million, up from $1.3 million in 2014.
Click here to see how much of that compensation was in pay, and how much in retirement and other benefits – and to see how other top executives at PeaceHealth were paid.
On its 2015 tax filing, PeaceHealth also disclosed that it worked with 236 distinct independent contractors that received more than $100,000 each.
The largest of these payments were:
- $10.5 million to Huron Consulting Services of Chicago for consulting work.
- $8.1 million to Nursefinders LLC of Texas for healthcare staffing.
- $7.5 million to McKesson Technologies Inc of Georgia for software implementation
- $4.2 million to Cogent Healthcare of Washington for hospitalist and intensivist services
- $4 million to Comphealth Inc of Utah for healthcare staffing.
PeaceHealth’s Oregon hospitals
Data reported to Oregon officials provides a snapshot look at PeaceHealth’s four Oregon hospitals. Here are key data points for the first half of 2016.
PeaceHealth Cottage Grove Community Medical Center, first half of 2016:
- Charity Care: $193,435, down 24.5 percent from the first half of 2015.
- Facility Payroll Amount: $3,882,208, up 5.8 percent from the first half of 2015.
- Physician Payroll Amount: $2,215,534, up 7.4 percent from the first half of 2015.
- Operating Margin: negative $1,399,647, down from $801,799 in the first half of 2015.
- Total Margin: negative $1,176,673, down from $895,936 in the first half of 2015.
- Total Charges: $21,509,250 – 51 percent to Medicare; 27 percent Medicaid; 2.1 percent self pay; 19.8 percent insurance and other payers.
PeaceHealth Peace Harbor Medical Center, first half of 2016:
- Charity Care: $411,211, down 23.5 percent from the first half of 2015.
- Facility Payroll Amount: $12,447,203, up 1.7 percent from the first half of 2015.
- Physician Payroll Amount: $4,457,441, up 14.5 percent from the first half of 2015.
- Operating Margin: $96,432, down 96.3 percent from the first half of 2015.
- Total Margin: $339,608, down 87.6 percent from the first half of 2015.
- Total Charges: $53,852,091 – 61.9 percent Medicare; 19.2 percent Medicaid; 1 percent self pay; 18 percent insurance and other payers.
PeaceHealth Sacred Heart Medical Center at RiverBend, first half of 2016:
- Charity Care: $4,738,950, up 11.5 percent from the first half of 2015.
- Facility Payroll Amount: $85,604,366, up 2.9 percent from the first half of 2015.
- Physician Payroll Amount: $4,224,646, up 4 percent from the first half of 2015.
- Operating Margin: $38,044,164, down 45.5 percent from the first half of 2015.
- Total Margin: $40,354,608, down 43 percent from the first half of 2015.
- Total Charges: $731,682,060: 49.5 percent Medicare; 21.7 percent Medicaid; 2.1 percent self pay; 26.7 percent insurance and other payers.
PeaceHealth Sacred Heart Medical Center University District, first half of 2016:
- Charity Care: $1,323,173, up 82.6 percent from the first half of 2015.
- Facility Payroll Amount: $22,248,641, up 3.4 percent from the first half of 2015.
- Physician Payroll Amount: $517,637, up 54.4 percent from the first half of 2015.
- Operating Margin: negative $7,024,643, down from $4,576, 270 in the first half of 2015.
- Total Margin: negative $6,310,928, down from $4,790,473 in the first half of 2015.
- Total Charges: $113,294,597 – Medicare 44.1 percent; Medicaid 29.9 percent; self pay 3.2 percent; insurance and other payers 22.9 percent.
Courtney Sherwood can be reached at [email protected]. Follow her on Twitter at @csherwood.
