Lancaster County's largest health care provider has never been healthier financially.

For the fiscal year that ended June 30, Lancaster General Hospital posted another record surplus, $136,771,421, according to its 990 tax form.

That sum topped last year's mark and previous record of $106,007,739 million, and represents a 156 percent rise over four years.

The $136 million represents the surplus of just the hospital, and doesn't include profits of parent company Lancaster General's affiliates, such as the Women & Babies Hospital. The Pennsylvania Health Care Cost Containment Council, an independant state agency that surveys hospital earnings, will issue a report later this week stating the profit for Lancaster General health system as a whole.

Last year, the surplus from Lancaster General entities other than the hospital was $28 million.

Speaking to whether $136 million is excessive profit, LGH Chief Financial Officer Joe Byorick said, "It's not our money; it's our business."

When someone arrives at the hospital who needs care, "the last thing we would care about is whether he had health coverage," Byorick said.

LGH provided almost $10 million in care to those without health insurance last year. To care for those with insufficient coverage, LGH spent nearly $50 million.

Executive Vice President Jan Bergen explained further: "Not-for-profit isn't no-profit and it's difficult to convey that message. If we didn't make a profit, we'd be setting ourselves up for failure"

Jeff Lehman, chairman of the Lancaster General board of trustees, finished the thought: "The untold story is that the community votes with their feet. They have a choice of what hospital to use."

Most Lancastrians choose LGH.

"Is the quality of care excellent? Is it an outstanding facility?" Lancaster Mayor Rick Gray asked rhetorically.

"I can't say anything negative about Lancaster General. On a personal, professional, and civic level, I can't say enough good about them," he said.

Neighborly
LGH, like all not-for-profit hospitals, is tax-exempt. However, except for the main Duke Street building and the Women & Babies Hospital in East Hempfield Township, Lancaster General pays property taxes on its other city and county buildings.

Those taxes amount to almost $1.5 million per year to municipalities and school districts throughout the county.

In addition, LGH gives Lancaster city government and the School District of Lancaster $100,000 a month each as a payment in lieu of taxes.

In 2007 and 2008, these voluntary offerings will total $4.8 million, said city business administrator Patrick Hopkins.

"They recognize they're a huge presence in Lancaster," he said.

"A large part of their community impact is that their main complex ... is tax-exempt and that affects the city."

"But they've really stepped up."

The hospital's contribution of $100,000 per month began in 2006 when Gray met with Lancaster General health system President and Chief Executive Officer Tom Beeman and other hospital officials to discuss "what they were paying and what the city's needs were," said Gray.

"They suggested an amount, I suggested a higher amount, and they came back a couple days later with a number that was higher than what I had asked for."

Choosing that figure was one of the first decisions Beeman made after coming to Lancaster General; he just needed the board to approve it.

"It was very wise," said Lehman, board chairman. "The board applauded it and then we said, 'Why didn't we think of that?' "

"I don't know that surprise would be an adequate description for what I was," said Gray, stressing that LGH's annual payment lightens the tax burden on the city as a whole.

"If we had to raise taxes a million and a quarter, we'd all feel it," he said.

"We're a big user of resources," said Bergen. "With all our [tax-exempt] facilities, in the city or the county, we look at their tax value and figure how much we can give back.

"We want to support and strengthen the community," she said.

Gray added that while the hospital itself is tax-exempt, many of its city and county facilities aren't. He pointed to LGH's new parking garage as an example of a facility that will appear on city tax rolls. The hospital estimates that taxes on the garage will come to more than $250,000 for the city and School District of Lancaster.

"They pay a lot of taxes," Gray said. "And they make a contribution to health and well-being of the people of the community and the community as a whole.

"They're as good a corporate citizen as anyone could ask for," Gray said.

Charitable
The $1.2 million the hospital gives to the School District of Lancaster in lieu of taxes doesn't include the thousands of dollars of grants LGH also gives the district.

In the last fiscal year, LGH gave $978,370 in grants to various city and county groups, including $163,400 to the United Way, $50,000 to the Water Street Rescue Mission, and $150,000 to the James Street Improvement District.

LGH has given more than $900,000 to the James Street Improvement District since its 2003 inception and offers incentives for employees who want to move into the hospital's neighborhood.

That organization was created by Lancaster General and Franklin & Marshall College to tackle quality-of-life issues. Their efforts include a bicycle-riding safety patrol and installing trash cans to help keep garbage off the street.

So far, LGH has helped 37 employees buy homes in the city and have more than twice that number on a waiting list.

"When we launched the program [in 2006], we said we'd be happy if 15 people signed up," Lehman said. "The response is amazing."

"We want to be a good citizen," said Bergen. "If we can make the area more attractive to move into, it makes it easier for us to lure the kind of talented people we need."

Gray described the program as "enlightened self-interest," but added, "so what? Even if it's aimed at recruitment and retention, it's improved the aesthetics of the neighborhood."

The hospital is also using its profits to improve itself; it will reinvest half of its earnings and continue to upgrade facilities and equipment, said Byorick, LGH's chief financial officer.

Healthy salaries
The good corporate citizens who run Lancaster General are well-rewarded: CEO Tom Beeman's total compensation last year was $1.27 million; senior vice presidents Bruce Pokorney and Edward Albee reached $3,058,993 and $1,082,276, respectively.

However, Pokorney and Albee's numbers are misleading. Both retired this year and those figures include retirement benefits to be paid out over 15 years and taxes paid on those benefits. Their actual salaries were $472,428 and $313,330, respectively.

Regina Mingle, senior vice president of human resources for Lancaster General, explained that compensation comes from a very simple need: "to be competitive."

In Beeman's case, his base salary, $554,618 (without incentives), represents the 50th percentile of executives' salaries at comparable institutions.

The remainder (not including benefits and expenses) comes from an "incentive payment," a variable bonus that requires board approval and rises or falls according to Lancaster General's corporate performance.

With health care costs rising 6.9 percent last year — twice the rate of inflation, according to the nonpartisan National Coalition on Health Care in Washington, D.C. — how does a not-for-profit company like Lancaster General justify its salaries?

"We have to pay people enough to stay," Mingle said.

Gray offered this opinion on LGH profits:

"How can you expect to attract the top professionals if you don't have a top-notch facility?"

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Michael Schwartz is a staff writer for the Sunday News. His e-mail address is mschwartz@lnpnews.com.