St. Mark’s: A 5-Year Financial Review
This article is a recurring column sharing public information and insight on St Mark’s Medical Center, the needs for health care in Fayette County, and a path forward.
Each year St. Mark’s Medical Center (SMMC) is required to file an IRS Form 990 which reports in some detail the financial results of their fiscal year, which runs from July to June. SMMC also has a third party conduct a financial audit and provide an opinion on the financial record keeping and reporting. As a not-for-profit 501(c)(3) hospital (and any other 501(c) (3) organization for that matter), the 990s filings, going back to 2016 are available on the IRS website https://www. irs.gov/charities-non-profits/ search-for-tax-exempt-organizations, EIN 74-3019849. All of the reported information is a matter of public record, and the 990 information along with information from the latest available audited financial statement is the source for the numbers provided in this article. The 2016 Form 990 has prior year data availing an eight-year review. Not all data is available from the 2015 prior year reporting, or the audited financial statement, however the 2016(2017) through year 2020(2021) 990s provide a consistent year-to-year view.
From mid-2016 to mid-2021, admissions to the hospital fell 41.2 percent, patient days fell 33.9 percent, ER visits fell 20.9 percent, inpatient surgeries fell 62.0 percent, and outpatient surgeries fell 51.9 percent. Staff also declined from 325 to 242, a corresponding reduction of 25.5 percent. These startling statistics demand introspective along with detail analysis and understanding. Why would hospital usage fall across the board to roughly two-thirds of its 2016 volume, when no significant competition has been introduced in the county, and the population has grown slightly with a combined Fayette and Lee County population over the same period increasing by 138 to almost 42,000 people? The community health needs assessment did not suggest a reduction in need. And over a 54 percent reduction in surgeries for a hospital serving a steady population has to say something?
Shifting to revenues, on both ends of a seven-year period, the hospital had gross revenues of $34.9 million in 2015, and revenues of $29.1 million in June of 2021, a 16.7 percent reduction. On the expense side, the hospital saw expenses of $33.7 million in 2015 with corresponding expenses of $27.8 in 2021, a 17.5% reduction. SMMC made $1.3 million net income (profit) in 2021 and $1,187,285 net income in 2015. On the surface, the hospital had good revenues in 2015, and was able to maintain revenues high at a rate roughly two times the percentage reduction in patients, while bringing expenses down by only 17.5 percent with roughly two-thirds of the patient load. The most interesting thing is that in the 2016(2017) tax year, the hospital lost $6.2 million net revenue in a single year with no apparent explanation for the loss? That one year had a crippling effect, why?
On the balance sheet, the Net Fund Balance took the $6.2 million loss in 2017 reducing the balance from $11.8 million to $5.6 million, with two subsequent years of declines; however, 2020 and 2021 saw two years of increases bringing the Net Fund Balance to $4.4 million in 2021. Receipt of federal Provider Relief Funds (PRF) of approximately $2.1 million in 2020 and $2.2 million in 2021 have helped. There are multiple intricacies that can and should provide additional color on these numbers, but are not apparent in financial statement notes.
Three reasons often given publicly for the losses are increasing staff costs, low Medicare reimbursement, and the high mortgage debt. Let’s look at staff costs, as they have gone up, but not as one might think. Comparing the 2015 all in Program Services staff costs, which include salaries and wages, pension and 401k, employee benefits and payroll taxes, the 2015 expense fell 34 percent from to $14.2 million to $9.4 million. This 34 percent reduction roughly corresponds to the aforementioned reduction in patient volumes. The 2021 staff cost did increase 5.7 percent over the 2020 cost, however the Full Time Equivalent (FTE) staff also increased by 13 positions or 5.7 percent. which would of course be expected as these are the COVID years. The Management and General Expense (MG&A) category tells a different story that warrants explanation by the SMMC leadership and board of directors. In 2015 the MG&A salary related costs were $912,421 and they witnessed a decline of roughly 21 percent during the years 2015 to June of 2019. Yet in 2020, all in MG&A salary cost jumped to $3.2 million, an over four times (442%) increase in one single year, a year that followed three years of net losses totaling over $8.8 million. These MG&A salaries saw a subsequent increase of $345,122 in 2021 to almost $3.5 million annually. The CEO and the CFO salaries are not included in these figures as they are actually employed by related organization CFC and paid by that organization.