Saturday, April 22, 2017

My Billing Nightmare With SCL Health

By Michael Hooper

In August 2013, my daughter went to the emergency room at St. Francis Health Center with terrible pains in her lower back. She was in the waiting room at the ER with some friends from high school when I arrived. When doctors finally examined my daughter, they discovered she was moving a kidney stone, this was causing all of her pain. 

About three hours after arriving, my daughter and I were sent home. Medical staff gave us the name of a St. Francis doctor who could treat her kidney stone issue. She was treated very well. Her doctor advised her to drink gallons of lemonade and water. She moved the kidney stone and never had another kidney stone moving through her since then. 

My insurance deductible was $6,000 per person. I received a bill for $4,248 from SCL Health.  I complained to SCL Health that I was overcharged $2,275 for a CT scan that was not needed. But SCL officials refused to change the bill. I talked to a patient representative. Then a director examined my daughter’s case file and wrote a letter to me saying he had reviewed the care given to my daughter and agreed we were overcharged. “We understand your concerns and will make an adjustment on your account of removing $2,275.48 for the CT scan," he wrote.

Wonderful. So then I sent a copy of his letter to SCL Health, asking them to lower my bill. You need to remove $2,275 from my bill, but the person I talked to said she was not authorized to remove that charge. Why not, I have proof that I was overcharged. I said if you don’t lower my bill I am going to the Kansas Attorney General's Consumer Protection Division with a complaint. She still refused. I wrote a letter to the AG, which wrote a letter to SCL Health asking for an explanation. Suddenly, SCL Health officials called me and got very cooperative and apologetic and lowered my bill.

But that is not the end of the story. I had agreed from the very beginning of the process to send $200 per month to SCL Health until my bill was paid off. SCL Health cashed one of my $200 checks but did not credit my account. Then I received a delinquent notice from SCL Health saying I missed a payment. The letter said, “If your account is not brought current by your next payment due date, the payment plan may be deactivated and your account is at risk of placement with a collection agency.”

So I called SCL Health to get this straightened out. I said I had actually sent a check, SCL Health cashed it but did not credit my account. An SCL Health official said I must prove I made payment by getting a bank statement or cancelled check. You mean, I am responsible for correcting your mistake? Yes, she said. So I went to the bank and gathered up evidence showing SCL Health took $200 from my account. This actually happened a second time while I was trying to pay off the debt.

In the end, I paid off the bill. The St. Francis medical professionals who treated my daughter did a fabulous job. But without the Kansas Attorney General, I would have been screwed by SCL Health. I finally wrote a letter to the AG thanking them for being there, and that the problem was resolved.

During this entire time, I was lucky to be self-employed with flexible hours so I could devote many hours per day to solving this financial crisis with my daughter’s stay in the Emergency Room at St. Francis. Just imagine, though, a person going through this process without the knowledge of the Consumer Protection Act and The Kansas Attorney General?

I’ve heard from several employees of St. Francis saying the billing problems with SCL Health in Denver continue. One person said his wife had a baby but didn’t get a bill for the medical services for four months. If bills go out too late, payments are delayed and this hurts cash-flow. The faster bills go out, the sooner you get money in the bank.

St. Francis paid $42.7 million in System Allocation expense to SCL Health in 2015. From 2013 to 2015, St. Francis paid a total of $102 million for services like billing and payroll and IT. That seems like an awful lot of money being paid to SCL Health for sub par services.




Friday, April 21, 2017

St. Francis Pays $102 Million to SCL Health

Tax returns show St. Francis Health Center paid $102 million to SCL Health for services such as billing and payroll from 2013 to 2015.

The 2015 Form 990 tax return for St. Francis Health Center shows $42.7 million expense for “System Allocation” to SCL Health.


Line 24b shows $42.7 million for System Allocation.



The 2014 Form 990 tax return shows $33.6 million to System Allocation to SCL Health.

The 2013 tax return shows $26 million for System Office Management Fees. There is no such expense in the 2012 tax return.

If you add up three years of System Allocation expenses, you come up with $102 million sent by St. Francis to SCL Health.

Brian Newsome, spokesman for SCL Health, said system allocation is the budgetary way SCL Health accounts for the services to the hospitals that they don't provide independently on their own, ranging from human resources to IT to payroll and billing, compliance, quality and marketing.

“I want to emphasize again what I shared yesterday that St. Francis dollars are being ‘taken’ from Kansas and used elsewhere is simply not true,” Newsome said. “I think part of the confusion is that people seem to think that these are separate entities and operations.”

A St. Francis Health Center employee said St. Francis used to handle all of its own billing, IT, payroll but several years ago, those operations were moved to Denver. The employee said $42.7 million for those services from SCL Health seems very high.

The 2015 tax return shows a $12 million loss.

If $42 million for system allocation were cut in half, St. Francis would have posted a profit in 2015, the employee said.

David Tangeman, accountant, says some employees were let go in Topeka and the positions were moved to Denver. But $42.7 million for services like billing and payroll seems high.

$42.7 million out of $278 million in revenue in 2015 is 15% of revenue. If someone takes 15% right off the top of a business, that business would be lucky to survive. Health care is not a high margin business.

Think about this. You could hire 200 people at $50,000 gross expense per employee for $10 million annual payroll. Yet St. Francis has been paying up to $42.7 million annually for these office functions?

The $42.7 million for System Allocation Does Not include wages and salaries for employees in Topeka. That's right there is a separate line item for wages on the expenses sheet in the Form 990. In 2015, St. Francis paid $2.9 million to officers, directors, trustees and key employees. Another $95.5 million was spent on other salaries and wages for a total of $98.4 million.

If System Allocation expenses were $42.7 million again in 2016 and again 2017, that would mean St. Francis has paid or owes $187 million in five years to SCL Health.

That is how it appears SCL Health bled St. Francis.



Thursday, April 20, 2017

SCL Health: St. Francis Has Negative Cash Balance

An official with SCL Health says St. Francis Health Center had a negative cash balance of $51.6 million as of March 31, 2017.
What happened to the $289 million in investments reported at the beginning of the year on the 2013 tax return? I asked. Later reported as $248 million in intercompany receivables on the 2015 tax return?
“There is not like a big cash reserve,” said Brian Newsome, spokesman for SCL Health. “What you saw has been used to keep the hospital going. It didn’t leave the market.”
Newsome said a change on the balance sheet for the reporting of investments in the 2013 Form 990 was not a material change to the organization. Reporting on the tax return changed that year to be consistent with health care reporting standards, he said. Nothing material changed.
Newsome said any implication that money was taken from St. Francis and transferred to the parent company is not true. He said assets did not leave the Kansas market. Some of the hospital’s reserves were used to keep the hospital going, cover losses and expenditures on electronic medical records, pensions and debt.
 “We’ve paid off debt associated with the hospital,” he said. That is not reflected in the 2015 tax return. He said St. Francis has lost $117 million over the last five years.

Wednesday, April 19, 2017

KCC Rejects Sale Of Westar Energy To Great Plains Energy

The Kansas Corporation Commission today issued an order rejecting the sale of Westar Energy to Great Plains Energy, citing a failure to meet its merger standards.

"The Joint Application is denied," The 51-page order says. "The Commission finds the proposed transaction is not in the public interest and rejects Great Plains' application to acquire Westar. Both Parties have 15 days from the date of electronic service of this Order to petition for reconsideration."

The order also said, "Great Plains Energy does not dispute that they will incur a large amount of debt to acquire Westar. Nor does it dispute it has no written plan to de-leverage. The Joint Application is deficient. It does not include plans showing which generation plants will be retired early. There are no examples of reduced spending through procurement savings and no evidence that customers will see any savings. The Joint Application simply does not give the Commission any assurances that it will be able to service the newly-incurred debt without raising rates or reducing services. Therefore, the Commission has no choice but to find the proposed transaction is not in the public interest. Accordingly, the Commission denies GPE's application to acquire Westar."

The order also says, "While the Joint Applicants argue "the repetition of the same arguments by multiple parties does not make them deserving of more weight, true, reasonable, or supportive of the public interest," the Commission cannot ignore the substantial, competent evidence in opposition to the proposed transaction. As the Joint Applicants admit, of the 28 parties to the Docket, only the Joint Applicants are in favor of the merger. All of the other parties are aligned in opposition to the merger. The Joint Applicants try to discredit the opposition by claiming "most of the intervenors in this case intervened to pursue private individual interests" rather than representing the public interest the Commission is charged to protect. But the Joint Applicants are also pursuing their own interests in advocating for the transaction. As Westar's CEO Mark Ruelle testified, "[i]dentifying risk is not the stopping point for an analysis; it's the starting point for an analysis." The threshold question facing the Commission is how much financial risk can be accepted before the proposed transaction does not serve the public interest. In its detailed review of an extensive record, the Commission found the proposed transaction to be too risky. GPE's market capitalization is only $4.8 billion, yet it proposes to pay Westar a $4.9 billion acquisition premium. The size of the acquisition premium calls into question GPE's ability to service the transaction-incurred debt."



SCL Health Reclassified $289 Million In Investments From St. Francis Health Center

By Michael Hooper

Tax returns show SCL Health reclassified $289 million in investments on the balance sheet of St. Francis Health Center in 2013. SCL Health reclassified the investments as "other assets” or “intercompany receivables”  in subsequent tax returns for St. Francis.

If you look at the 2013 St. Francis Health Center tax return Form 990, it says there was $289 million in investments at the beginning of the year, but by the end of the year, the investment total was $9.1 million, with the bulk of the assets -- $266 million -- transferred to “other assets.”




The 2015 Form 990, the latest available tax return for St. Francis Health Center, lists $248 million as “intercompany receivables.”

Attorney General Derek Schmidt said in a statement he would launch an inquiry aimed at ensuring charitable assets of St. Francis remained in Kansas.

The statement from Schmidt said, "The hospital’s parent company maintains over $2 billion dollars in assets, yet is seeking to “divest” St. Francis, possibly leading to its closure. The Kansas roots of St. Francis trace back to 1858 and the founding of Sisters of Charity of Leavenworth which remains organized as a non-profit corporation under the laws of the State of Kansas. The actions by Governor Brownback and Attorney General Schmidt seek to protect Kansas-based charitable assets from being improperly transferred from the state leading to the closure of St. Francis.

“St. Francis has benefitted from its status as a Kansas charity for many years, and it is important to make certain that such charitable assets are properly managed and remain in Kansas,” said Governor Brownback.  “The charitable assets should stay here for the benefit of Kansans, to serve their stated mission of improving the health of those who are poor and vulnerable. Northeast Kansas needs the medical services St. Francis provides.”

The office of the Attorney General has the authority to safeguard Kansas charities.

“Any decision by its out-of-state owners that would fail to maintain full operations of Saint Francis Hospital would be deeply troubling,” Schmidt said. “The absence of meaningful consultation with local leaders compounds the concern, particularly in light of the considerable benefits the people of Kansas have bestowed on this charitable operation over the years.”

Topeka Mayor Larry Wolgast emphasized the importance of St. Francis to the health and economy of Topeka and surrounding communities.

“I share Governor Brownback and the Attorney General’s deep concern that the charitable assets of St. Francis Hospital, a hospital that met the health care needs of our community for so long, will be improperly removed from the people it serves,” Wolgast said. “I welcome the action the Attorney General is taking. St. Francis has been a vital part of this city and northeast Kansas for 159 years and has benefitted by the non-profit status the citizens of Kansas granted."

I believe SCL Health does not really own St. Francis, SCL Health only controls it. St. Francis Health Center is a nonprofit corporation without stock holders. An argument can be made that the owner is the state of Kansas.


SCL Health plans to sell/give away St. Francis Health Center by summer or risk closing the hospital. Stormont-Vail Health is looking at acquiring St. Francis, the newspaper reported.

SCL Health says, “St. Francis has struggled financially, losing $117 million over the last five years. Physician clinics lost $31 million in 2016 alone. All of this has come as the number of patients has dramatically decreased. Additionally without expanded Medicaid coverage and other challenges related to public programs, St. Francis experienced added pressure. Uncompensated and charity care more than doubled from 2012 to 2016.”

David Tangeman, an accountant, recently reviewed the 2015 Form 990 Tax Return. 

“In reviewing the 2015 St Francis tax returns it shows a $12.5 million loss,” he said.  “The buildings, land and equipment are carried on the books at $67.7 million after depreciation is deducted. Total assets are carried at $368.3 million in assets less $19.2 million in liabilities.”

“It is worth noting that $248 million of assets is listed as “Intercompany receivables. About $21 million is supposed to be bad debt or accounts receivable that is likely to be unrecovered. Still the Equity is $349 million so if you take that out you still have $328 million at the end of 2015," Tangeman said.

If you include all those assets, the picture does not look so dire. 

“This hardly seems like a entity that would go out of business on the face of it, but losing $12.5 million a year isn't sustainable either over the long term.” Tangeman said.

Tangeman wonders if the $289 million in investments was the charitable assets that transferred to the parent company?

Tangeman said the $248 million in intercompany receivables should be paid back to the hospital, it belongs to St. Francis Health Center.

The hospital and its staff were able to generate a modest profit over time and invest proceeds wisely and grow them into a quarter billion dollars. For many years, the hospital had a very strong balance sheet, with around $200 million investments in 2006. By 2013, those investments had grown to $289 million.

Brian Newsome, of SCL Health, said he would prepare a response to a list of questions that I gave him regarding the charitable assets of St. Francis Health Center. Several hours later this is what he had to say, "I connected with our finance folks this a.m., and I am now waiting for them to get out of a meeting this afternoon to confirm that what I’m pulling together for you is accurate. In the meantime, I wanted to let you know sooner rather than later that what you’ve reported thus far does not appear to be accurate. I’ll work on getting you correct info as soon as possible."


Newsome of SCL Health says St. Francis Health Center had a negative cash balance of $51.6 million as of March 31, 2017.

What happened to the $289 million in investments reported at the beginning of the year on the 2013 tax return? I asked. Later reported as $248 million in intercompany receivables on the 2015 tax return?

“There is not like a big cash reserve,” said Newsome, spokesman for SCL Health. “What you saw has been used to keep the hospital going. It didn’t leave the market.”

Newsome said a change on the balance sheet for the reporting of investments in the 2013 Form 990 was not a material change to the organization. Reporting on the tax return changed that year to be consistent with health care reporting standards, he said. Nothing material changed.

Newsome said any implication that money was taken from St. Francis and transferred to the parent company is not true. He said assets did not leave the Kansas market. Some of the hospital’s reserves were used to keep the hospital going, cover losses and expenditures on electronic medical records, pensions and debt.

 “We’ve paid off debt associated with the hospital,” he said. That is not reflected in the 2015 tax return. He said St. Francis has lost $117 million over the last five years.





Tuesday, April 18, 2017

Gov. Brownback Says St. Francis Health Center Not Closing Today

“Yesterday, I had a meeting with Mike Slubowski, the CEO of SCL Health, about the status of St. Francis Hospital. He committed to me that they would not announce a closure of St. Francis on Tuesday, and that they would work with us to find a solution that keeps St. Francis open.
“I intend to hold Mr. Slubowski to his commitment and anticipate further negotiations in the coming days and weeks. As I have said previously, St. Francis is an important local and regional health care provider, and a significant Kansas charitable asset that has long served its stated mission of improving the health of those who are poor and vulnerable.”

Monday, April 17, 2017

Hundreds Rally For St. Francis Health Center

More than 500 people attended a candlelight vigil tonight, April 17, 2017, in support of St. Francis Health Center. Many employes of the hospital in Topeka held candles and sang Amazing Grace and walked around the hospital.



About 1,600 work for St. Francis. There are rumors circulating that SCL Health is considering closing the hospital.

Michael Hooper said St. Francis is not a failure but has successfully served the community for over 100 years. The hospital lost $12 million in 2015 but is still strong financially with over $248 million in reserves, according to the 2015 Form 990 Tax Return for St. Francis.