Hospital Finances: Profits Drop at Three Legacy Hospitals

Yet ex-CEO Robert Pallari, who resigned in 2005, received $6.3 million in fiscal 2012, according to documents obtained from the Oregon Department of Justice
The Lund Report

April 2, 2013 -- This is the third in a series by The Lund Report that is exploring the state of Oregon hospitals. Part one in the series examined Providence Health Systems. Part two reviewed Oregon hospitals in the PeaceHealth and Salem Health chains. Today, the Lund Report looks at Legacy Health.

Legacy Health

Formed in 1989, Legacy Health combined Episcopal and Lutheran medical groups into a single chain. Today the system is home to five hospitals – four in Oregon, plus Legacy Salmon Creek in Vancouver, Wash. – plus clinics, a hospice, and other health services sites. System-wide, Legacy Health employs more than 9,700 people. In 2011, its net operating revenue was $1.2 billion; profits were roughly $87.2 million, down from $125.3 million in 2010. Profits also dropped at three out of Legacy’s four Oregon hospitals, with Legacy Mt. Hood Medical Center bucking the trend. The Lund Report did not review the financial data from Salmon Creek in southwest Washington because our analysis is limited to Oregon hospitals.

Dr. George J. Brown, CEO of Legacy Health, had official base pay of $766,346 during the nonprofit’s 2010-2011 fiscal year, but add in bonuses and other sources of income and his compensation was much higher. According to Legacy tax returns, Brown received $181,121 in deferred compensation – usually pay an executive collects later, when his or her tax rates are lower. Add in benefits and other forms of compensation, and he received $1,053,951.

In Legacy’s 2012 fiscal year, Brown made even more: $827,692 in base pay, $71,740 in bonuses, $166,329 in deferred compensation, $59,587 in nontaxable benefits and $122,722 in other compensation not defined by the health care group. Total reported compensation: $1,248,070, an 18.4 percent increase.

Robert Pallari, who resigned as Legacy’s president and CEO in 2005, continued to receive pay from his former employer in 2011 as well. He was paid $460,485 in what Legacy told the IRS was “other compensation,” plus $25,878 in benefits that are not taxes. In previous interviews, Legacy officials have told The Lund Report that Pallari’s continued compensation reflected a mix of non-compete payments and deferred compensation –pay earned while in the workforce but received after retirement, often to reduce the recipient’s tax burden.

His compensation climbed even more rapidly than Brown’s, even though Pallari has been retired for years. In fiscal year 2012, Pallari received $6,320,550 from Legacy through what the company referred to as a “supplemental nonqualified retirement plan, plus another $28,576 in deferred compensation.

Brown’s and Pallari’s fiscal year compensation figures are the only 2012 figures included in this story. Most sources of hospital information that are currently publicly available are for the years 2011 and earlier, but The Lund Report obtained IRS compensation information for Legacy Health for 2012 as well.

Legacy Emanuel Hospital

First established in 1912, the hospital now known as Legacy Emanuel has been through numerous expansions over the years. Most recently, in February 2012 it opened the nine-story Randall Children’s Hospital. Emanuel and OHSU are Oregon’s only Level 1 trauma centers, capable of providing top-level surgical care to trauma patients. Chief Administrative Officer Lori Morgan, who runs the hospital, was paid $384,281 in base compensation in 2011, plus $75,972 in deferred compensation, $25,603 in nontaxable benefits and $11,738 in other compensation – adding up to $497,544.

Finances, year 2011:

  • Profit: $11 million, down 18.6 percent from a year earlier.

  • Net patient revenue: $541.9 million, up by 5.2 percent.

  • Reported charity care charges: $85.9 million, up by 16.8 percent.

  • Profit margin: 1.97 percent, compared to 2.5 percent in 2010.

Size and scope, as of 2011:

  • Staffed beds: 406.

  • Inpatient days: 26,135.

  • Emergency department visits: 47,215.

  • Outpatient visits: 225,498.

Legacy Good Samaritan Hospital

Located in a bustling neighborhood of Northwest Portland, Legacy Good Samaritan is known within the hospital chain for its specialty programs, rehabilitation, and da Vinci surgical robot. Fewer patients visited Good Sam in 2011 than the year before – inpatient days were down 1.9 percent, emergency department visits down 2.5 percent and outpatient visits down 8.3 percent. Profits fell by half over the same period. Chief Administrative Officer Tony Malaragno, who runs the hospital, was paid $342,041 in base compensation in 2011, plus $91,601 in deferred compensation, $25,750 in nontaxable benefits, and $12,438 in other compensation – adding up to $471,830.

Finances, year 2011:

  • Profit: $14.2 million, just half the previous year’s profit.

  • Net patient revenue: $275.8 million, down 2.4 percent from 2010.

  • Reported charity care charges: $35.2 million, up 2.6 percent.

  • Profit margin: 5.1 percent, compared to 9.8 percent in 2010.

Size and scope, as of 2011:

  • Staffed beds: 250.

  • Inpatient days: 53,303.

  • Emergency department visits: 24,940.

  • Outpatient visits: 152,410.

Legacy Meridian Park Medical Center

Size isn’t everything. Though Meridian Park is smaller than two other acute-care Legacy hospitals (Emanuel and Good Samaritan), it is the most profitable of the bunch. And 2011’s 20 percent profit margin was actually smaller than Legacy Meridian Park’s margin the year before. It is Tualatin’s largest private employer. Chief Administrative Officer Allyson Anderson, who runs the hospital, was paid $267,023 in base compensation in 2011, plus $86,016 in deferred compensation and $27,021 in nontaxable benefits. She was charged $1,668 by her employer, with details of that charge not made clear. Subtracting that out, her total compensation was $378,392.

Finances, year 2011:

  • Profit: $31.9 million, down 21 percent from 2010.

  • Net patient revenue: $159 million, up 2.7 percent.

  • Reported charity care charges: $16.8 million, up 23 percent.

  • Profit margin: 19.9 percent, compared to 25.9 percent a year earlier.

Size and scope, as of 2011:

  • Staffed beds: 130.

  • Inpatient days: 130.

  • Emergency department visits: 28,886.

  • Outpatient visits: 100,337.

Legacy Mt. Hood Medical Center

Mt. Hood Medical Center is the smallest acute-care hospital in the Legacy system, and the smallest profits. Only three of Oregon’s 26 acute-care hospitals report fewer outpatient visits. Mt. Hood is also profitable, with profits climbing in 2011 while profits declined at other Legacy hospitals. Chief Administrative Officer Gretchen Nichols, who runs the hospital, was paid $232,491 in base compensation in 2011, plus $49,191 in deferred compensation, $18,116 in nontaxable benefits. She was charged $545 by her employer, with details of that charge not made clear. Subtracting that out, her total compensation was $299,253.

Finances, year 2011:

  • Profit: $7.3 million, up 16.9 percent from the previous year.

  • Net patient revenue: $102 million, up 6 percent.

  • Reported charity care charges: $24.6 million, up 17.7 percent.

  • Profit margin: 7.2 percent, compared to 6.5 percent in 2010.

Size and scope, as of 2011:

  • Staffed beds: 90.

  • Inpatient days: 18,379.

  • Emergency department visits: 42,763.

  • Outpatient visits: 78,509.

FOR MORE INFORMATION

To review the financial data for Legacy Health hospitals, click here.   

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Comments

Based on my experience at Legacy, it should be shut down and Dr. Brown should be fired. It was the worst traumatic experience I have ever been through in my life. My rights were ignored and laws were broken. The doctor blatantly lied in my chart (and knows it), and Dr. Brown could not have cared less. He had a moral, legal and professional obligation to correct his staff's wrong, and did not. This was not the first heinous experience at a Legacy hospital either. Even cab drivers warned me, "Anywhere but Emanuel." I hope to move far from that hospital so I will never be subjected to such cruelty, discrimination and incompetence again.

Sarah F