From the Massachusetts Nurse Newsletter
September 2004 Edition
By Joe Twarog
Associate Director, Labor Education & Training
Information is power! This statement is particularly true as a bargaining unit prepares for contract negotiations. A key component in any good bargaining plan is research, and this research should include a study of the general economy; an understanding of the current state of the health care industry; and, most importantly, a thorough review of the employer.
Many resources are now available on the Internet. Bargaining Committee members and the general membership have the ability to conduct much of this advance work from their own homes. We will review some of the sites available, with specific reference to the individual facility, in the remainder of this article.
Economic climate
The United States Dept. of Labor, Bureau of Labor Statistics is a good place to begin to get a general idea of economic trends. The web site is www.bls.gov. This site provides a wealth of material, including the consumer price index; unemployment rates; wages by area and occupation; plus productivity, health and safety and unemployment statistics. Many of these statistics are also available by region and state.
Under the section titled "Publications and Research Papers" there is another sub-section titled "Economic Press Releases" which contains some up-to-date data. Unfortunately, the collective bargaining section has little available on-line regarding contract settlements but rather focuses on work stoppages. There are numerous related links that are useful.
The health care industry
General industry data is available from many Web sources free of charge. Generally, the more in-depth reports and financial documents require a fee. Nonetheless, here are some sites worth checking out to get overviews of the industry. Hoovers Online which bills itself as "The Business Information Authority" has a site at www.hoovers.com. They provide company, industry and market information. Some data is free, such as an overview of the company, key people who run the company, and general financials. Tenet Healthcare and Essent Healthcare information is available here.
Other similar sites are: High Beam Research which lists useful articles and links at www.highbeam.com and the Bureau of National Affairs at www.bna.com. The Corporate Research Project is a non-profit group that is designed to be a resource to aid community, environmental and labor research analyze companies and industries. Their site is www.corp-research.org.
There are also numerous sites from university labor schools and other groups that provide material on contract settlements and actual contract language. Cornell University’s site is www.cornell.edu, and the University of California at Berkeley’s is www.iir.berkeley.edu. The Labor Project for Working Families is a national non-profit advocacy and policy organization providing technical assistance, resources and education to unions on specific family issues, work hours and quality of life issues. Its site is www.laborproject.org.
The hospital
Non-profit organizations that are exempt from paying federal income tax under section 501(c) (3) of the tax code are required to file a form called the IRS Form 990. This form is filed by the organization in lieu of an annual income tax return and is basically an information form. Most non-profit hospitals therefore are required to file this form. It is an excellent source for information.
The form 990 is a public form that exempt organizations must share with anyone who requests to see it. This form is available for inspection directly from the employer, upon request, or at the Attorney General’s Office of Public Charities.
However, 990’s are also now available on the Internet, for no charge, by accessing the Web site for Guide Star. The site is www.guidestar.org. Guide Star requires that you register in order to use the site, but there is no charge involved for basic research. Guide Star provides an on-line tutorial that walks you through the form and explains each significant entry. To download a copy of a Form 990, Adobe Acrobat has to be installed on your computer (free versions are available).
In Massachusetts, a form 990 must be filed by every tax exempt organization annually by the 15th day of the 5th month after the organization’s accounting period ends. For example, if a hospital’s fiscal year ends on Sept. 30, the completed form is due the following Feb. 15. However, it is not unusual for extensions to be granted which delay the filing for months. The result is that the most current financial data available from these forms is always dated.
The form is a six-page document containing over 900 different items of information, with other various attachments and schedules. The 990 can be used to find out where an organization gets its money and how it uses it, how well it pays its top employees and whether its financial situation is declining, improving or stable. Guide Star usually maintains five years of these forms, so its possible to compare areas to track any trends.
There are a number of significant items of information on the form, including:
1. Identity and tax status
This item shows the name of the filer and what its fiscal year is, as well as whether it has affiliates and the type of accounting method used. In health care, checking the affiliated organizations can be useful since some have corporate structures that obscure the total financial picture. For instance, there might be affiliated foundations with separate funding or a real estate corporation that provides management services (it might own some buildings that are then rented out to the primary facility). This takes some critical analysis to determine the nature of the relationship.
When "Brigham and Women’s Hospital" is entered as a search, some nine organizations appear including "Brigham and Women’s Hospital, Inc." along with “Brigham Medical Research and Education Foundation, Inc." and "The Friends of the Brigham and Women’s Hospital, Inc." (whose Statement of Program Service Accomplishments is listed as "…purchases needed equipment and supplements department budgets…"). Identifying the correct organization is critical.
2. Income received and from what sources
The form provides information on revenue, expenses and changes in net assets or fund balances, including gifts, grants and other amounts received. Total revenue is listed on Line 12, total expenses is listed on Line 17 and Line 18 lists the excess or deficit for the year. In addition, Part 1 lists 11 different sources of potential income including program service revenue, gifts and grants, government contributions, public support, rents, special events and others.
A quick picture emerges of the size of the organization and of its operation and financial health. For instance, in Brigham and Women’s most recent filing for 2001 (Fiscal Year ending Sept. 30, 2002) it shows total revenues of $1,200,306,926 and Total Expenses of $1,157,752,047. Line 18 shows an excess for that year of $42,554,879.
3. Expenses breakdown among program, management, and fundraising
Lines 13 through 16 provide a clear picture of where expenses are incurred. By dividing a category’s (program services, management, or fundraising) expenses by total expenses, one knows the percentage spent on that category.
4. Net assets
Line 18 again shows the organization’s excess or deficit for that year’s filing. To get a picture of a trend, it is useful to compare this section (Lines 18 through 21) for several successive years. This section provides an idea of what level the organization has for financial resources and what kind of cushion it has, and whether it is operating on what it brings in from year to year without any significant reserves. Line 19 shows the organization’s net worth at the start of the year. Brigham and Women’s 990 for 2001 shows a net asset or fund balance of $418,398,538 to start the fiscal year. Therefore, adding lines 18 and 19 and subtracting the amount from line 20 (changes in net assets), the total net assets for that fiscal year came to $460,005,176.
Part II of the 990 gives a breakdown of functional expenses from compensation of officers and directors, salaries and wages, pension plan contributions, to legal fees and postage and printing expenses.
Part IV is the organization’s balance sheet showing the hospital’s assest and liabilities. This is an important section that indicates whether the hospital has the capacity to raise funds to meet its future operating costs and whether the hospital has sufficient reserves to maintain operations in the future should it encounter a break in its ability to generate income. A hospital cannot survive long if its assets do not exceed its liabilities. Line 73 indicates the amount by which assets exceed or are less than liabilities.
5. Type of program or service provided by the organization
Part III of the form has the organization identify what the primary purpose of the organization is. For hospitals it is generally something like “patient care, teaching and research”. More information often can be found in the attached “statements” which explains that mission. It may include the number of beds; the in-patient admission numbers; ambulatory care visits; neighborhood health center visits; ER visits; days of care for Medicaid patients; and more. It is therefore important to look at the notes, attachments and statements to the basic six-page form.
6. Board members and compensation of top officers/employees
A very interesting section is Part V of the form. This lists the officers, directors, trustees and key employees and the compensation of the five highest paid employees. Sometimes this section is blank and appears in an attachment. Brigham and Women’s 990 for 2001 has the list separately on pages 15 through 18 of its submission. A review of the notes is important once again, since it explains items in more depth. Also note that there have been cases where the CEO of a hospital and other officers have various separate incomes reflected only in some of the interlocking corporate entities.
Comparing these officer compensations from year to year indicates the percentage of a raise the hospital has chosen to give its top employees. Often that number far exceeds what the hospital proposes for increases to staff on the floor.
Part II of Schedule A lists the “compensation of the five highest paid independent contractors for professional services“. In Brigham and Women’s 990 for 2001 $9,171,000 was paid to Brigham and Women’s Physicians Organization, Inc. for physician services, and another $1,914,334 was paid to Cross Country Staffing for medical services.
How this information is used is important to weigh and consider, since it obviously can be potentially explosive.
7. The organization’s new activities
Part VI of the form asks the filer to report any significant changes in its programs and activities which are tax exempt. Examples are: a change in incorporation to allow for a new activity; new by-laws; amending the number of board members and modifications in how it governs itself. If there are changes, attachments will provide the details.
8. Lobbying activities
Line 1 of Part III’s Schedule A will indicate whether the organization engaged in any lobbying. This can be of some interest because of the lobbying itself and the amount spent on lobbying might jeopardize the organization’s tax exempt status.
Other information
There is much more information on these forms that do not fit into any one category. For instance:
- Part IX lists taxable subsidiaries. Guide Star suggests an example of such a legitimate subsidiary. An organization may have considerable printing expenses and decides to establish its own printing operation for efficiency reasons. Then it uses that operation to generate additional money for the exempt organization.
- Line 90B provides the number of employees as of a certain date.
- Schedule B lists donors whose contribution was over $5,000. But since November 2002 the names of the donors have been redacted. Apparently the new policy of the IRS is to only release the full Schedule B document upon specific request.
When reviewing the form 990 it is important to recognize that the form is filed by the institution itself and is not independently audited and some of the information reported is not necessarily complete. The form does not provide a full financial picture of the institution, but is a good place to start. The MNA will periodically update information on how to research your employer on-line in future issues of the Massachusetts Nurse.
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