More of St. Vincent’s profits ‘ascending’ to its owner

When Hoosiers and their health plans pay hospital bills, they are already paying higher prices than in other states.

But for Hoosier customers of the St. Vincent Health hospital system, nearly 5 percent of their bills are going to the hospital system’s owner, St. Louis-based Ascension Health.

The amount of money St. Vincent transfers to Ascension has nearly tripled over the past three fiscal years, rising to $134.1 million in the year ended June 30, 2014. Those results were filed this month with the Indiana State Department of Health.

Some of those funds go for services Ascension provides all its hospitals. And some of that money even flows back to Indiana. For example, Ascension employs more than 500 workers in Indianapolis to provide human resources, purchasing, bill payment and supply chain management for all of Ascension’s hospitals and hundreds of its other health care facilities.

“As a member of Ascension, St. Vincent Health allocates an amount each year for shared services and other support provided by Ascension,” wrote St. Vincent spokeswoman Jen Dial in an email.

But a good chunk of it goes to help Ascension prop up some of the less lucrative facilities in its 77-hospital chain, according to multiple people both inside and outside the St. Vincent organization.

St. Vincent’s payments to Ascension equaled nearly half of the profits it earned from its operations in the most recent fiscal year. And it was an especially profitable year.

The 22-hospital, not-for-profit system saw its profits from operations spike 72 percent during the 12 months ended June 30, 2014, rising to $287.2 million. That excludes investment gains as well as $15.7 million St. Vincent spent as part of a mass layoff in June 2013, most likely in severance costs.

St. Vincent’s finances were clearly helped by its decision to lay off about 865 people. It saved $92.3 million on salaries, wages and benefits, or about 7 percent over the previous year. That’s even higher than the 5 percent St. Vincent said its layoffs would save.

Those factors helped push St. Vincent’s profit margin from operations to a healthy 10.3 percent, up from 6.1 percent the year before.

As a percentage of operating profits, St. Vincent’s payments to Ascension have risen from 24 percent in 2012 to 41 percent in 2013 to 47 percent in 2014.

Revenue from patients rose only 1 percent to $2.8 billion. And that total was even boosted by extra payments from an Indiana Medicaid program that pushed up revenue at all Indiana hospitals.

St. Vincent’s payments—that $134.1 million figure—to Ascension last year were equal to 4.8 percent of its revenue from patients.

Using profits from one facility to subsidize others is common among all hospital systems. It’s just that the other hospital systems in central Indiana don’t have an out-of-state owner to which they send money.

Also, the timing could be tricky for St. Vincent because it is currently asking donors for $8.6 million to build a new facility at its Peyton Manning Children’s Hospital in Indianapolis.

One reason Ascension does this is because it is a highly “mission-driven” organization. It believes in operating health care facilities in areas that can’t financially support a hospital, and uses healthy profits from places like Indiana, Nashville, Tennessee, and Austin, Texas, to prop them up.

Also, it appears Ascension factors in gains from investments when it calculates the payments it wants from its subsidiaries.

When investment gains (or losses) are added to its profits from operations St. Vincent’s payments to Ascension have been fairly consistent. On that basis, St. Vincent’s payments to Ascension were 23 percent of total gains in 2012, 22 percent in 2013 and 24 percent last year.

But the dollars flowing to St. Louis have ballooned because St. Vincent’s investment results have swung from a $50.4 million loss in 2012 to a $310 million gain last year.