Posted by: sweeneyblog | July 11, 2014

Mayor Linville Refuses to Sign Ordinance Taxing St. Joseph

In breaking news, Mayor Linville released a press release today (commonly known as the Friday afternoon news dump) saying she is refusing to sign the ordinance passed by the city council that would tax PeaceHealth St. Joseph Hospital at the standard rate. The ordinance, passed by the council in June 23rd would have added an estimated 1.2 million dollars to the city’s budget.

Mayor Kelli Linville

Mayor Kelli Linville

From the press release, “I’m not signing the ordinance because of the amount of uncompensated care the hospital provides for our community,” Linville said. “I fully recognize the ordinance becomes law 10 days after Council action with or without the Mayor’s signature. However, I am disappointed at the action taken by the majority of the City Council because there was a compromise available that would have achieved my goals of equity and ease of administration while removing the religious exemption and recognizing the care the hospital provides.”

This comes on the heels of a contentious battle between the nurses union and the management of PeaceHealth as they negotiated their latest contract. PeaceHealth St. Joseph’s is one of the largest employers in Whatcom County and in 2012, made more than $112 39 million profit from its Bellingham location. The tax exemption that they long enjoyed as a religious organization, where they paid zero tax, came to an end thanks to City Council action.

PeaceHealth has also drawn significant controversy for their potential merger with an even more conservative catholic company last year that eventually fell through, in part due to the massive public opposition to the merger.

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Responses

  1. As her actions have no impact on the new law it is interesting why she would do this in light of the council’s decision. Perhaps this is some type of Clintonesque triangulation to straddle both sides, or maybe a nod to Big Business that the mayor is not disagreeable to their agenda. Either way this action will be remembered by those here that do not agree with her action, and there are a lot of those here with long memories.

  2. So PeachHealth made $112 million in profits (2011) and they whine about pay a little over 1% to the city that provides them with their customer base? What cheapskates! What hubris! And what a load of crap for Mayor Linville to pretend to take a “principled stand” when she knows it won’t matter. What grandstand is she playing to, I wonder?

  3. What is the source for the statement that PeaceHealth made $112 million from its Bellingham location in 2011?

    • The article linked in this post: http://www.columbian.com/news/2013/may/29/contract-dispute-comes-vancouver-nurses-stage-prot/

      • The reference in that article is to PeaceHealth, not just St. Joseph Hospital in Belingham.

      • Yet, the same paper reported yearly profits of 1.3 billion for all seven hospitals in 2010: http://en.wikipedia.org/wiki/PeaceHealth#cite_note-5

        So I concluded that from the context of the quote the millions article was for the Bellingham hospital – since it was around a seventh and the quote pertained to that facility.

      • I just read the reference. PH had revenue, not profit of 1.3 billion. It is so important to get the facts right. It undermines everything when facts are not correct. Please be careful.

    • We still need a source for the claim that PH in Bellingham had a profit of $112 million. That seems like an absurd statement. I believe Sweeney needs to support that statement or issue an apology. Trust and accuracy are critical when we are talking about such important issues. Give us the source and back it up please.

      • Interesting…but largely tangential to the point under discussion which, if I read it correctly, was Linville’s noble gesture and her justification(s) for so doing.

      • Here is a direct quote from the reference. “At the time, PeaceHealth had annual revenues of approximately $1.3 billion and operated seven hospitals.”

      • I do want to be careful but as this is a volunteer effort reporting on Breaking News, I do not always have to time to fully vet all sources.

        My source is the article linked in the story which cites the SEIU stating that the profit is $112 million – from the context of the quote, I assumed it is the Bellingham facility.

        However, I dug into the financial paperwork every hospital is required to file with the Department of Health and located this budget from 2012 (https://sweeneyblog.files.wordpress.com/2014/07/bellinghamstjoebudget.xls), showing them receiving a respectable $39 million in profit. I’m updating the article now.

      • I looked at the financial information you referred to and if I read it correctly, these are budget projections. Is that not right?

      • I agree, this is not the main story in this post. But I keep hearing lots of figures about the profit at PH St. Joseph. First, as a nonprofit, PH does not make a profit. They do need to have more income than expenses. If not, we probably would not have a hospital. Most of PH expansion came from hospitals with financial problems who had to find a larger group to associate with. And PH has to show a strong financial statement to maintain its good bond rating. We now have a state of the art cancer center here in Bellingham. Where do you think the money came from to build that? It took a lot of fund raising and PH money to provide that for the community. I think unless we can document it, talking about big profits at our nonprofit medical center that provides us such wonderful up to date heath care is not productive and most of it is unsubstantiated rumor. I just think we need to be careful and get the facts right. Sorry if I jumped on the 112 million dollar statement in the blog and I see it has been corrected to 39 million dollar “profit” but I think it should not even be part of the story and I still question the 39 million dollar figure and believe that profit is technically an incorrect term to use. We all have a responsibility to make sure we have correct facts and in today’s internet world this is a never ending battle. And I have seen the executive salary figures and PH executives, considering the size and the critical mission of PH, are not that high.

      • I definitely see your point but I think that when we are talking about a tax bill of 1.2 million, it is important to understand their profit margin. There are hundreds of other organizations in town doing fantastic things – should they not pay their tax bill too? That’s the issue here.

      • I am not commenting about the local city tax bill. That is another issue entirely. I am only saying that when we discuss a “profit” we need to have the facts. This so called profit has been bantered around to make political points for some time and if we want honest and productive discussions, let’s be very careful about our facts. I do not know how much revenue exceeds expenses at St. Joseph but I sure hope it does. And as a nonprofit PH does not pay out stock dividends and the bottom line is still nonprofit. I would expect they need to have some kind of reserve fund for a bad year from time to time. And with all that is happening in health care, making sure you can keep the doors open has to be a financial nightmare.

        And the current city tax law is the law and I am no expert on this.

      • Regardless of the dollar figure of PH and St. Joseph’s profit margin, the salient issue is what’s done with the money. The precise number is, of course, a digression from the Linville maneuver on the Council tax decision which Sweeney was reporting, but note the following for context:
        1) PH (or St Joseph, if you will) pays a significantly above median salary to the hospital CEO (this is a matter of public record; it’s in excess of $600k).
        2) PH (or St Joseph, if you will) raises the apocalyptic scenarios of shuttering various programs and job lay-offs if taxes (which amount to roughly twice the CEO’s annual salary) are demanded, a fact not noted by Linville in her smarmy refusal-to-sign statement.
        3) PH (or St Joseph, if you will) delivers no more (and possibly less) “charity care” than comparably sized facilities, profit or “non”. Again, a matter of public record.
        4) Additionally, with the advent of ACA, less non-compensated (charity) care will be needed to to the higher percentage of insured patients. This last point goes to the crux of Linville’s specious argument.

        In the final analysis, this issue is essentially a “zero sum” game as it involves taxes in the current political climate. Either one party pays more so another can pay less or revenue (taxes) need to be increased. Since the latter isn’t an option these days, if PH (St Joseph, if you will) pays less, Bellingham taxpayers assume the burden for the facility, or government-provided services need to be cut. Why? Because deficit spending in a small community like our own isn’t a generally palatable option over the long term. Framed this way and cutting the emotions and fluff aside, “You pays your money and you takes your choice”. The Council made their choice and Linville hopes for a pyrrhic moral victory by refusing to sign something she knows it was her civil responsibility to accept.

      • Again, I am not arguing about the issues, just trying to get the facts straight.

        I believe that PH St. Joseph no longer has a CEO. There is a system CEO (7 hospitals and lots of clinics.) I believe that St. Joesph Medical Center now has a COO (Chief Operating Officer).

        Here is some data on system CEO salaries from ASC Communications – internet (2013).

        Independent health system CEO (median revenue of system: $864 million)
        Median base salary: $750,000
        Average base salary: $754,400
        Median total cash compensation: $873,800
        Average total cash compensation: $944,300

        This data is for a medium health system with revenue of $864 million. We know that the PH system revenue from earlier posts was 1.3 billion in 2010. No doubt higher now.

        Just some fact checking.

  4. How much has PeaceHealth spent and is planning to spend on uncompensated care,
    if that’s a reason for special treatment it should be in dollars so we all know.
    The ACA promises to put an end to the need for that kind of charity so how does that figure in?
    Is PeaceHealth in any way shape or form, a religious institution that deserves a better break in B&O tax than the state already gives to health care providers?
    PeaceHealth couldn’t operate at all without city infrastructure and so it’s shameful that they don’t step up and willingly pay their share of city B&O tax.
    Normal taxpayers will make up for whatever tax isn’t paid by the city’s businesses, how fair is that?

  5. Here’s a link to a 2013 story about PeaceHealth’s financial situation by the Eugene Register-Guard, a respected daily newspaper in Oregon. It says PeaceHealth had $112 million in profits from $1.53 billion in revenue from all of its operations in three states, not just its Bellingham operations. Since then, its president said, “PeaceHealth, like other health providers across the country, is dealing with flat patient volumes, rising expenses and lower reimbursements from government and insurance companies.” http://www.opb.org/news/article/peacehealth-plans-deep-cuts/

    • Interesting claims by PeaceHealth’s Mr. Yordy. His allegations that PH’s hospitals, “…like other health providers across the country, is dealing with flat patient volumes, rising expenses and lower reimbursements from government and insurance companies” are a series of canards:
      1) Under ACA and for other demographic reasons (e.g., increasing age of the US population and rising prevalence of chronic degenerative diseases) patient volumes are not “flat”. Physician shortages and facilities utilization figures belie those claims.
      2) Reimbursement is negotiated and, as I recall, PH/St Joseph has engaged in considerable brinksmanship with insurance companies on that issue in the recent past. Hospital consolidations have generally lead to increasing costs and profit margins (see the recent NYT article on the Boston area “Partners Healthcare” system as a case in point).
      3) Any business dealing with “rising costs” either needs to increase revenue or decrease expenses. The sub rosa text of the PH claim suggesting that the corporation is somehow unique in this regard is nonsense. Since a significant portion of health care dollars are expended on administrative overhead, PH might consider “draconian” measures. These might include trimming the legions of “Chief Mission Officers” and other pompous, paper-pushing, highly compensated positions from the payroll instead of invoking apocalyptic scenarios like “layoffs” and program curtailment.

      Finally, unlike formal debaters, PH does not need to define operative terms such as “charity care”. At least in the vernacular, that phrase implies altruism combined with lack of financial compensation. That’s hardly the case here, despite the sanctimonious veneer applied by PH “Mission Officers”. When alternately grovelling for and demanding tax breaks, “charity care”, at least in this instance, is simply cost shifting from the PH balance sheet to the taxpayers’.

  6. A purely symbolic gesture as it affects nothing other than who may back her and who may not if she has an opponent in her next race for mayor. Maybe the hospital could cut its bloated administrator and Board member salaries. NOT. They will try to make it up by screwing the non-nursing employees with whom they are still negotiating. I stand with the workers at Peace Health, not the wealthy people who the Mayor will seek financial support from in her next campaign.

  7. Kelly Linville’s posturing on this issue verges on melodrama. She was present during the hearings on this topic (as was I) and she uttered nary a syllable on the topic. Since she has chosen this symbolic and bathetic mode of expression without a cogent explanation of her motives (the one offered has been completely demolished), one can only speculate on her motives. Clearly, they differ from the Council and those of most voters. Perhaps she serves another constituency. Whichever one that it, be it corporate/religious/theocratic, she had best hope that it/they offer sinecures to mayors who bravely and symbolically cast themselves on their sword for the cause. This action is sheer buffoonery. Next up for Mayor Linville: a noble self-sacrifice for GPT and oil trains.

    • YEAH!

    • Ah-ha! We are back to “I will support a coal terminal if you call it a grain terminal.”

    • I also sat through those meetings, and I agree she seems to have sprung an ambush here by raising objections she did not raise through council’s deliberative process. Had she voiced them, council likely would have been responsive to them.

  8. Politics………..strange to see a federal-style symbolic gesture at a local level but I suppose B’ham is getting bigger in the world………

  9. Everybody seems to be arguing the merits of PeaceHealth and why or if they should be able to keep their profits. I believe that a more important question that needs to be asked is, “does the CoB need another $1.2 million?” On board positions I have had city staff tell me, of certain programs of course, that they have, and I’m saying this verbatim from some staffers, “more money than we know how to appropriately spend”. There is a budgeting and allocation problem here. CoB has no right to tax, especially when the do not have their house in order.

    • The way municipal taxation works is that the mill rate is adjusted annually based on the budget. If your house valuation goes up, but the budget stays the same, your mill rate will go down and your taxes will stay the same. SImilarly, the addition of the tax revenue from PH should lower everyone else’s taxes.

      SO Peace Health getting a free ride for years has caused all of our taxes to go up; now that they are paying more like their fair share, all of our taxes should go back down.

      • So, how does the city decide on taxing nonprofits? Is there a standard deduction or exemption or something for nonprofits in the city?

        It is a bit hard to believe that the City Council sets tax rates individually for nonprofits.

        I feel sure that money that PH has to pay in taxes comes out of the PH budget and PH has to replace it with higher costs for medical care (if PH can raise their reimbursement levels) or more likely cuts in services. I know a number of administrative positions have become vacant in the past two years at St. Joseph Medical Center and the positions were eliminated and the duties assigned to others who are already overloaded. I doubt if there is much more that can be cut without further impacting services.

        It sort of seems like if we get personal tax cuts, the sick and injured will have to pay for it in higher costs or reductions in service. Should nonprofits who provide community service be taxed by the community?

      • All entities in the City that have commercial revenue are taxed. Peace Health had a specific exemption granted to recognize their key social function. However, Peace Health has used this exemption to turn tax-paying entities they acquire, such as Madrone medical, into part of Peace Health and therefore no longer required to pay taxes under the exemption. You can see where this will lead, as it gives Peace Health an unfair business advantage over private corporations. And if Peace Health keeps getting bigger and bigger through acquisitions, it will raise the tax burden on everyone else as they take private taxpayers into their tax-free fold.

        I applaud City Council for their action in resuming taxation on Peace Health. IMHO Mayor Linville’s purely symbolic action is political rather than having any practical effect.

    • “Your line of reasoning leads ineluctably to negation of any form of taxation.” Well, duh! Nicholas Kunkel is the Libertarian candidate in the 42nd District after all.

      • It’s my understanding that they do at least on part of their revenues. Here are the relevent sections of the WA code:

        a) Public or nonprofit hospitals. The gross income of public or nonprofit hospitals derived from providing personal or professional services to inpatients, is subject to B&O tax under the public or nonprofit hospitals classification. RCW 82.04.260. For the purpose of this section, “public or nonprofit hospitals” are hospitals, as defined in RCW 70.41.020, operated as nonprofit corporations, operated by political subdivisions of the state (e.g., a hospital district operated by a county government), or operated by but not owned by the state.
        Gross income of public or nonprofit hospitals derived from providing personal or professional services for persons other than inpatients is generally subject to B&O tax under the service and other activities classification. RCW 82.04.290. Thus, for example, amounts received for services provided to outpatients, income received for providing nonmedical services, interest received on patient accounts receivable, and amounts received for providing transcribing services to physicians are subject to service and other activities B&O tax; and…….

        (b) Other hospitals, nursing homes, and similar health care facilities. The gross income derived from personal and professional services of hospitals, clinics, nursing homes, and similar health care facilities, other than public or nonprofit hospitals described above in (a) of this subsection and hospitals owned by the state, is subject to service and other activities B&O tax. The gross income received by the state of Washington from operating a hospital or other health care facility, whether or not the hospital or other facility is owned by the state, is not subject to B&O tax. Nursing homes should refer to subsection (6) of this section for information regarding the quality maintenance fee imposed under chapter 82.71 RCW.

        Here’s a link to the whole section: http://apps.leg.wa.gov/WAC/default.aspx?cite=458-20-168

      • Maybe I am simple minded but it seems to me that PH should pay its B&O taxes just like other nonprofits under the same rules. Can I properly assume that is what the City Council approved?

    • I’m not a “button pusher” the way that the media portrays libertarians. I understand that the government needs revenue. Does the government need as many programs as it has? No. Does the county or CoB need a “Taj Mahal” jail? Yes, only because we have so many criminals. Let’s try wiping from the books the laws that incriminate victimless offenses to society, then see if we still need a Taj Mahal jail… If government needs money it can have lotteries, levies, tolls, and tariffs. At least these are much more voluntary than sales, business, and income tax.

  10. And to your point about the hardship this will cause Peace Health – their senior management is higher-paid than WWU’s, for example. Perhaps they can take a cut in their huge salaries to cover the tax bill. No more free ride!

    • Can anyone verify if Planned Parenthood pays the B&O tax?

      St.Joseph is supported by a robust corporate network but it is nonprofit. My understanding is that the IRS strictly monitors nonprofits. Any revenue in excess of expenses goes back into the business, not to “share holders” or owners of the corporation.

      In the case of healthcare, we are seeing an epidemic of mergers all over the country that seem to be needed to survive in the every changing healthcare system in the United States. Many hospitals are “hardship” cases and are merging because of that. And a hospital that is doing ok this year may be in big trouble the next year.

      There is a lot of talk about overpaid executives. You saw in today’s Herald that PH is the largest employer in Bellingham by a wide margin. And the PH system of 7 hospitals and many, many clinics and other services is probably one of the largest corporations in Washington State.

      I posted above some salary information for similar organizations and I believe that PH executives are not overpaid for the size and the scope of what PH is and does.

      Can anyone provide facts that show that PH executives are overpaid?

      • Great information. Not sure what year data you have but Nancy Steiger is no longer the CEO at St. Josephs. I believe she is a NW regional CEO covering multiple hospitals and clinics and other services. I believe that now St. Joseph is headed by a COO.

        Anyway, I tend to think that corporations, for profit or non profit, need the best executives they can find. There is a lot riding on the efficient operation of PH with the many hospitals and clinics and other services. I am not sure that WWU executives have the life and death responsibility and complex operations that hospital systems have. Also from this mornings paper, St Joseph has 2,672 employees and WWU has 1,462. I worked in a hospital in the east and before that experience, I did not realize what a complex and difficult operation a hospital is. And the finances with all the insurance and government payment systems is staggering. Then there is the question of standards of care, quality control and liability, etc, etc. I just do not think WWU is a fair comparison.

        And to run all of this efficiently requires a larger administrative force than a lot of businesses. There is just so much complexity. If it is not done right, patient care suffers.

        As you say, it is in the eye of the beholder and each has to evaluate these questions. We have gotten off on a tangent but it is appropriate, My experience is that PH is a well run (not perfect) giant institution with a dedicated staff of doctors and nurses and an asset to our community.

        Thanks for the discussion. Learning the facts and sharing knowledge is so important.

      • Karl – COO or CEO (even CFO, CIO, or any VP) at Peace Health are no doubt big jobs, and you want the best person for the job. But maybe the best person isn’t the greediest, and would do the job from a sense of service and accept less than $1,2 million (!!!!) per year. This is an obscene salary IMHO for a government-supported non-profit. Peace Health cries poverty and threatens to cut medical care if they have to pay taxes like everybody else – perhaps they should look rather at executive compensation for cuts instead of cutting what PH is paid by the government to do. Consider this: the City of B’ham estimates that PH will pay about $1.2 million in taxes now instead of $Zero. Remarkably similar number to the salary of just one executive, eh?

    • See my reply above to Karl’s question regarding B&O tax.

      As to whether PH’s executives are overpaid, they are certainly paid more than WWU executives, which was my initial point. I think it’s debatable whether a registered not-for-profit, subsidized by the federal government, should be paying its executives over $600,000 per year. This seems rather greedy, at probably 20 times the compensation of the lowest paid worker. It seems to me that top people should be paid no more than 10 times the pay of the least paid worker, as in Japan and Germany. Not for profit should mean not for profit, i.e. no greedy compensation packages.

  11. Riley – Who is KAC? I am not hip to all the Bellinghamser politics so the initials escape me.

    • Me too – I thought the new rule was no anonymous posting.

    • I just got ahold of KAC and he promises to use his name moving forward.

  12. […] Their Whatcom branch generated over $39 million in profit in 2012 and their hospitals throughout the region show similar results. […]

  13. […] Kari Henderson, Senior Lab Assistant, discovered that PeaceHealth’s insurance for employees was not up to par when she had her first child last year. “An unexpected three day stay in the hospital yielded a mountain of unexpected bills. Better health coverage would help us keep our qualified and compassionate caregivers at St. Joseph’s Medical Center.” By comparison, PeaceHealth St. Joseph’s made $39 million in profit last year. […]

  14. […] but also some sharp criticism over her struggles with the Roosevelt neighborhood, her support for Peacehealth’s $1.2 million tax exemption, and most recently, her proposed ordinances to address the homelessness in our downtown […]


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