Lancaster General Hospital ended its 2005-06 financial year with a record surplus of $98 million.

The money, which is what is left after the hospital pays its bills, belongs to Lancaster County residents, said Thomas E. Beeman, president and chief executive officer of the $1.5 billion not-for-profit operation.

The board of directors of Lancaster General, the parent company, has committed to spending the majority of the excess funds on improved patient care, including state-of-the-art technology and equipment and upgraded facilities.

Beeman, who joined Lancaster General two years ago, said the hospital's recently minted goal is to "create a new patient experience" and to "care for the health and well-being of all Lancaster Countians."

Besides a commitment to spend $75 million a year for the next three years on improvements, part of the hospital's changed strategy includes a new openness, said hospital officials.

"Transparency is very important to the board," said Ken Stoudt, Lancaster General board chairman. "We want to show the community what we are doing with their money."

'New level'
As the county approaches 500,000 residents and fuels the demand for health care, Lancaster General's board wants to take the operation to a "whole new level of transparency," Stoudt said.

To that end, Stoudt, Beeman and other Lancaster General executives gathered at 555 N. Duke St. Wednesday to discuss two annual financial reports: the IRS Form 990 and the Pennsylvania Health Care Cost Containment Council's financial effectiveness study.

The reports cover the 510-bed Lancaster General Hospital and the 79-bed Women & Babies Hospital. Lancaster General is the hospitals' parent company, which also is the umbrella for other operations such as Visiting Nurse Association, Lancaster General Health Campus in East Hempfield Township and health care-related businesses.

The IRS form is not a tax return, said F. Joseph Byorick, senior vice president and chief financial officer of Lancaster General. Rather, it shows what the hospital is doing outside the scope of its tax-exempt status, he said.

It also shows executives' salaries, which range from $684,000 to $46,000 a year.

The Form 990 submitted for fiscal July 1, 2005, to June 30, 2006, shows a surplus of $70 million.

The Pennsylvania Health Care Cost Containment Council report, which should be released at the end of June, will show the financial health of Lancaster General Hospital and Women & Babies Hospital through a different formula of numbers. That surplus for the same fiscal year will be $98 million.

Although each report is a gauge of the hospitals' financial success, Byorick said, the latter figure is the one to count on.

The Cost Containment Council report shows a significant increase in revenue over the past two years.

The $98 million is a 22 percent increase in net operating income over the $76 million netted in fiscal 2004-05.

That fiscal year saw a 69 percent increase from the $45 million reported in 2003-04.

John Lines, spokesman for Lancaster General, gives several reasons for the increased revenue: growth in the number of patients treated; better control of costs and more efficiency in operations; and renegotiated contracts with insurance payers.

"More patient volume leads to greater efficiencies," Lines said, "and it continues to pay dividends in the end, financially speaking."

At the end of its fiscal year on June 30, 2006, the number of inpatients discharged from Lancaster General and Women & Babies was 38,500, Lines reported.

That was a 4.5 percent increase over the number of patients discharged the year before. For the past several years, the number has increased each year by nearly the same amount, Lines said.

Reinvestments
Lines said the hospital wants to spend its surplus on improvements rather than lowering room rates or other costs. "We need the money to meet current and future demand," he said.

Reinvesting the surplus is "a wise business practice," he said, "Not just for today, but especially for the future with the growth we are demonstrating."

Lancaster General's plan to spend at least $75 million a year on improvements began last year. Lines said the surplus went toward expanding the hospital's critical-care units and a five-story addition to the downtown building.

This fiscal year, which began July 1, 2006, and will end June 30, Lancaster General committed to building a $50 million parking garage at its North Duke Street facility.

And it plans to invest $60 million to $100 million in electronic medical records, another step toward transparency.

Marion A. McGowan, executive vice president and chief operating officer of Lancaster General, said electronic medical records are a vital step toward giving patients more control over their care. Primary care physicians would be able to access the information during office visits, and the patients themselves can see their information from their home computers.

Today's health-care consumers expect nothing less, Lines said.

"We want to address patient care given over a lifetime," McGowan said, rather than a fractured system in which doctors are not aware of a patient's medical history.

McGowan said the goal is lofty.

 "We believe there is a better way to treat patients," she said.

"We are charting a new course."

Jan L. Bergen, executive vice president for strategic implementation and chief mission officer of the parent company, said the board has a new 15-member committee that will help identify the company's new priorities, as well as hold the local health-care giant accountable for what it's doing to build a healthy community.

Bergen said a healthy community goes beyond doctors, buildings and equipment and can include safe neighborhoods and homes, as well as improvement of a site such as the Armstrong World Industries plant in the city's Northwest. "We do a lot of market research" before adopting a program, Bergen said.

Last year, Lancaster General Hospital paid $750,000 in lieu of taxes to the city, covering 90 percent of the amount nonprofits gave the city. The hospital also gave $686,000 in payments in lieu of taxes and services to the School District of Lancaster.

Beeman said, in the true nature of its mission, Lancaster General Hospital will continue to provide quality health care to all people regardless of their financial or insurance status.

Last year, the hospital provided more than $40 million in care to uninsured or underinsured patients. "Offering quality care to an under-served population is a substantial challenge," Beeman said, adding that quality care is right, not a privilege, of Americans.

"It all boils down to the personal level," he said.

For each visitor, "it comes down to 'My day at the hospital.' "

---

Judy A. Strausbaugh is a political writer for the Sunday News. She can be reached at 291-8689 or jstrausbaugh@lnpnews.com.