March 2, 2012 – The Oregon Department of Justice makes it quite clear – nonprofit entities such as hospitals are required to provide audited financial statements every year that show their net worth, the salaries of their top executives and the benefits they provide the community in order to remain tax exempt.
Salem Health – which runs Salem Hospital and West Valley Hospital – not only did they fail to submit the financial data for their most recent fiscal year – 2010 – (known as the 990), but, as of March 1, they hadn’t even asked for an extension, which most hospitals do when they need more time. Their filing was due February 15 based on their fiscal year which ended last September 30.
“Almost all hospitals seek and obtain an extension because the forms are so complicated to fill out,” said Elizabeth Grant, assistant attorney general with the Oregon Department of Justice.
As it stands now, Salem Health is in violation of the law, and is being assessed a $20 fine and sent a warning letter.
“We try to make the rules match with the IRS, and there are more significant penalties after six months,” added Grant.
The Lund Report contacted Norman Gruber, president of Salem Health and his public relations spokesperson, Sheryll Hoar, asking them when they planned to comply with the law and why they hadn’t requested an extension, but neither of them responded by press time.
Norman Gruber Announces $30 million in Cutbacks
About the same time Salem Hospital should have filed its financial reports with the Justice Department, its president, Norman Gruber, announced $30 million in cutbacks – citing a budget gap. He also indicated he planned to eliminate 30 full and part-time positions, and announced reductions in contracts, pharmaceuticals, devices and department overhead.
Yet that hasn’t stopped Gruber from purchasing the primary care clinic run by Dr. Michelle Rasmussen in Salem, giving 15 percent bonuses to his top management, and spending thousands of dollars on travel and training expenses to send his executives to Japan .
“Our future as a premier healthcare provider depends on how we react to the challenges around us, how we prepare for what may happen, and the actions we take,” he told employees in a memo dated February 21. “Those challenges include lower patient volume, a significant gap between our budget and actual revenues, and the upcoming changes related to healthcare reform at state and national levels. The financial reality: lower volume = budget gap.”
“The key financial problem we face is that our inpatient volume in the first quarter was down 16 percent. This decline is happening all over Oregon, with hospitals on the coast and I-5 corridor hit the hardest. As a result, Salem Hospital’s budget is currently short $8.5 million for the first four months of our budget year. We project the shortage will grow to $24 million for the remainder of the budget year. West Valley Hospital is on budget. Willamette Health Partners continues to demonstrate improved financial performance which is being accelerated by the consolidation of obstetrical services.”
Salem Hospital Performed Well in 2010
Salem Hospital did quite well financially in 2010, according to the latest Community Hospital Profile report prepared by Apprise Health Insights, the for-profit arm of the Oregon Association of Hospitals and Health Systems. Interestingly, the data shown in this report was the same data required by the Department of Justice.
Salem Hospital ended fiscal 2010 with the highest total margin in the past five years – 6.97 percent -- having rebounded from 2009 when that margin stood at 1.54 percent.
In fact, Salem Hospital outshone the statewide average among all Oregon hospitals that year – which had an overall margin of 6.63 percent.
However it must be pointed out that the operating margin of Salem Hospital was also lower that year than the average of other hospitals – standing at 3.91 percent – up from 0.57 percent in 2009 – the statewide average that year was 4.55 percent
In other financial details:
Salem Hospital’s gross patient revenue in 2010\stood at $1,006,911,085, while its non-operating income was the highest in five years-- $18,229,228 compared to 4,835,166 in 2009, and total operating expenses in 2010 were $533,032,049, and net patient revenue was $536,769,909
Salem Hospital’s 452 bed occupancy rate in 2010 held steady at 62.23 percent, while its Medicare payer mix increased to 47.08 percent (+0.51 percent), commercial payments saw a 0.82 percent decrease representing 34.28 percent and Medicaid revenue increased by 0.41 percent to 12.36 percent. The remainder -- self pay -- accounted for 6.29 percent, representing a 0.10 decrease
Uncompensated care at Salem Hospital nearly doubled since 2006 – bad debt and charity care represented close to $83 million in 2010; $47 million five years earlier.
West Valley Hospital, a 6-bed facility in Dallas, ended up with a total margin of 5.23 percent in 2010 – doubling its margin in 2006, while its most recent operating margin reached the same level.
A hospital’s total margin measures its profitability from all sources of reporting income while the operating margin only reflects profitability from its operations and doesn’t take into account any non-operating income.
Photo for this story appears courtesy of The Oregonian.