I have no inside information relative to these negotiations but decades of senior executive healthcare experience in a teaching system much larger than anything here in Chattanooga gives me some insight to these issues.
1. It is a fact that CHI Memorial and its parent, CommonSpirit has lost exorbitant sums of money in recent years. My data comes from the Tax Form 990 that all non-profit organizations must file and is available for public review . . . by anyone.
2. The last Tax Form 990 available on www.guidestar.org report CHI Memorial losing $29 million in 2021. I suspect the losses have continued and that will likely be confirmed when subsequent Tax Form 990's are published on this aforementioned website. CHI Memorial lost $16 million through June 2023 according to American Hospital Directory.
3. The parent company has experienced several years of enormous losses. Their annual report indicate $1.3 billion and $1.4 billion respectively the last two full fiscal years. It is reasonable to ask how many million is being sent annually by CHI Memorial to its parent, CommonSpirit over and above what they get in return. The parent has gone on record (Beckers Hospital Review) saying it is going to be pushing the insurers hard to improve reimbursement and cover a greater share of inflationary costs. That's understandable and I can support that.
4. If I were a negotiator for a healthcare insurer, comparative data would be a major influence to my position and decision. How does CHI Memorial's unit costs (general and administrative, support and clinical) compare with similar organizations? Let's compare patient staffing ratios, nurse staffing ratios, salaried physician compensation, acuity case mix index, contributions to research, literature, medical education, technology resources, accreditation results, protection of patient data from cyber attacks, patient safety, criminal events on campus, et al. A "best in class" organization will have all this data and more available and ready to present to insurer negotiators. If there are "outliers," especially in clinical outcomes and overall cost structure; they have to be resolved and the lead hospital negotiator should have a strong performance plan ready to share.
5. The "devil is in the details" and I did a basic comparison of parent organizations; those being for-profit organizations HCA, Tenet, Community Health System, UHS, non-profit organizations of Mayo Clinic, Cleveland Clinic and of course, CommonSpirit. CHI Memorial is a wonderful community hospital but is not a world-class organization like the Mayo or Cleveland Clinics. The results are ugly for CommonSpirit. Their "trainwreck" began several years ago with the merger of Dignity Health (California based system) and Catholic Health Initiatives (Colorado based system). Both organizations were losing breathtaking sums of money and in my entire life, I have never witnessed the merger of two major organizations in situations like this turn it around and become successful. If CommonSpirit was a "for-profit" system, I would not invest in it. A review of Tax Form 990's and annual reports cause deep concern with executive compensation for CommonSpirit executives, entirely too shocking to mention for a non-profit organization. My very deep concern is whether the parent is sucking life out of CHI Memorial more than the issue with an insurer.
6. Anyway, an agreement will likely be reached within four weeks after expiration of current agreement. BCBST and CHI Memorial need each other. CHI Memorial needs to prove they have their costs under control and are achieving clinical outcome excellence without many "show-stopping outliers." I vote for CHI Memorial to find a way to exit from CommonSpirit.
D. E. Klasing
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Thank you, D. E. Klasing, for the information you supplied in your opinion letter regarding BCBS of Tennessee and CHI Memorial needing each other. I will add that both Form 990 and Form 1040 are available to the pubic. Having dealt with ERISA via Multi Employer Trust, this information was a must for me.
CHI Memorial is under the CommonSpirit Health Organization, which is a nonprofit Catholic health system. I’m not a Catholic, but I can assure you that the Catholic Organization do more charity work than any other organization world wide. Of course they are going to lose money in their charities, whether hospitals, school, retirement centers or feeding the homeless. It’s their mission.
There are two trust funds held by the United States Department of the Treasury that supply the money for Medicare payments, the Hospital Insurance Trust Fund and the Supplemental Medical Insurance Trust fund.
These funds set the usual and customary rates of reimbursements on a local basis. The payer, in this instance being BCBS of Tennessee, is paid to handle claim payments. If they can pay less to a hospital or medical provider, their margin of profit is increased. You didn’t mention the multi billions of dollars BCBS of Tennessee have accumulate, but, you may not have researched that.
CHI Memorial has received more awards and accreditations than any other hospital in this region. They are a top 15 health care organization, nationwide, and that is just one award. I won’t take the time to list all of their awards, but they are available to the public on the CHI Memorial website. Please look it up, as it will blow your mind. They are dedicated to advancing health for all people.
I am a client of BCBS of Tennessee as well as a patient of CHI Memorial, and have discussed the situation with both, as I am greatly affected. The two don’t really need each other, but I need for them to need each other. There are thousands of people in the same predicament that I find myself in.
These are all verifiable facts. If I’m forced to choose between the two, the health care I receive is infinitely more important than who pays my claims.
J. Pat Williams
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In a follow up to D. E. Klasing's recent letter, one can access the Tennessee Department of Health's Joint Annual Report of Hospital - CHI Memorial specifically, and learn some true facts.
For the 2022 report which is the most current, CHI Memorial's Total Revenue (Net) (which basically translates to the amount which can be spent) was $485,850,552. Total expenses were $542,555,895 resulting in a loss of $56,695,343. A staggering loss, in my opinion.
I suspect if the truth were really known, CommonSpirit, CHI's parent company, has attempted to strong arm Blue Cross Blue Shield to pay a greater reimbursement to cover what may truly be bad management. I was told by another reliable source that the total compensation of the CEO of CommonSpirit exceeded $35,000,000. Additionally, something like 40 percent of CommonSpirit's hospitals are in California. Does this suggest that multi-facility ownership may not provide a true reduction in operating expenses as is often touted.
The Adventist system went nationwide a number of years ago and then restructured ownership into smaller regional systems which accomplished its goal of controlling costs and providing service aimed at its local communities.
During my nearly three year chief financial officer tenure of Memorial from 1988-1991, I can attest to the truth that its focus was only community oriented, which also applied to each facility in the old Sisters of Nazareth Hospital Corporation system. Readers can decide if that remains today's focus and who is really the culprit in the negotiations with Blue Cross.
Ron Peterson