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University of Pittsburgh Medical Center Moves to Simplify Financial Red Tape

Posted on: Wednesday, 17 May 2006, 21:04 CDT

By Christopher Snowbeck, Pittsburgh Post-Gazette

May 18--To get a sense of the complexity of the University of Pittsburgh Medical Center, just page through the stack of filings the health system makes every year with the Internal Revenue Service for the 45 nonprofit entities it controls.

Released this week, the filings detail the financial activities of the parent UPMC health system -- as well as large hospitals such as UPMC Presbyterian Shadyside and Magee-Womens Hospital. But there are less prominent entities as well, including nursing homes, real estate companies and even the Southwestern Pennsylvania Lithotriptic Institute -- a group dedicated to improving kidney stone treatment.

The IRS forms provide an unwieldy view of UPMC's operations compared with a for-profit company's consolidated financial statements, which are subject to more stringent regulations. The differences between the two explains why it can be difficult to determine the bottom line of the finances of large, nonprofit hospital companies.

"By looking at nearly 50 individual [forms], you really get no perspective on UPMC as a system," said Robert DeMichiei, the system's chief financial officer. "We're a single organization, but you really can't see that by the way things are filed today."

UPMC voluntarily has moved to simplify its financial reporting through annual consolidated statements posted on its Web site and other measures in line with the federal Sarbanes-Oxley Act, which applies primarily to for-profit companies.

Even with regard to the IRS forms, UPMC is looking to consolidate some filings in future years, Mr. DeMichiei said. UPMC is seeking IRS permission to file one consolidated form for its hospitals, cancer centers and a few other related health care entities.

Such a move would reduce the number of "Form 990" filings UPMC makes to the IRS from 45 to about 20, but Mr. DeMichiei contends that the information will be better.

Reducing the number of filings also would save time and money, he added.

The 45 separate filings released by UPMC this week easily number more than 1,000 pages in length. They include, among other things, salary information about top executives at all of UPMC's hospitals, nursing homes and other entities.

On Tuesday, UPMC's Children's Hospital of Pittsburgh released its annual IRS filing with word that former chief executive officer Ronald L. Violi received more than $4.6 million in compensation. The filing for the University of Pittsburgh Physicians practice plan lists Dr. James Dong-Jin Kang, an orthopedic spine surgeon, as the highest-paid employee at a little more than $1 million for fiscal 2005.

The Children's filing also disclosed $393,416 in lobbying expenses during fiscal 2005 -- an increase of more than $100,000 over fiscal 2004. A spokesman said the extra money was for lobbying on better hospital reimbursement rates from Medicaid, as well as efforts to secure state funding for the new Children's Hospital of Pittsburgh.

For the second year in a row, UPMC Presbyterian Shadyside's filing disclosed expenditures on lobbying. The lobbying total for fiscal 2005 was more than $1.2 million, up $400,000 from the previous year.

The filing for Seneca Creek, one of six nursing homes operated by UPMC, notes that the Verona facility received a $15 million loan from Highmark Inc. during 2003. A spokesman for Highmark said the loan was part of a broad agreement struck during 2002 in which Highmark agreed to invest $70 million in business ventures and technology projects initiated by UPMC.

UPMC's volume of liver transplants has been increasing in recent years, and the IRS form shows the impact on expenses for UPMC Presbyterian Shadyside. Payments to the O'Hara-based Center for Organ Recovery and Education for procuring organs were $8 million during fiscal 2005, up from $2.64 million during fiscal 2004.

"Our volume, CORE's organ acquisition charges and the cost of aircraft fuel [used to transport organs] all increased," said Jane Duffield, the spokeswoman for UPMC.

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Source: Pittsburgh Post-Gazette

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