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.