Becker's Hospital Review

21 CFO / FINANCE Pennsylvania Hospital Loses Tax-Exempt Status: 4 Things to Know By Ayla Ellison S pringfield (Pa.) Hospital has held tax-ex- empt status since it was founded in 1960. However, it should have lost its tax-ex- empt status when it was acquired by a for-profit company in 2016, according to a recent decision by Pennsylvania's Commonwealth Court, the Delaware County Daily Times reported. Here are four things to know. 1. Springfield Hospital was part of Spring- field-based Crozer-Keystone Health System when the system was sold to for-profit Prospect Medical Holdings in July 2016. Aer the deal closed, the local taxing district issued Prospect a $433,956.15 real estate tax bill dated July 1, 2016, according to the Delaware County Daily Times. 2. Prospect disputed the bill, but the Delaware County (Pa.) Common Pleas Court sided with the local taxing authority, ruling the property could be taxed beginning July 1, 2016. Prospect appealed the decision, and the Commonwealth Court affirmed the lower court's ruling. 3. In the majority opinion, Commonwealth Court Senior Judge Dan Pellegrini wrote that under a 1994 agreement between Springfield Hospital, the Springfield School District and Springfield Township, a property must be owned and operated by an entity "exempt from federal taxation" to be tax-exempt. 4. Although Crozer-Keystone is pleased taxes on its hospitals help support local communities, the system disagrees with the court's ruling. "We disagree with the court's 2-1 ruling that Springfield Hospital's tax status should change effective July 1, 2016," a Crozer-Keystone spokesperson told the Delaware County Daily Times. "Under existing law, the hospital should become taxable at the start of the taxing author- ities' next fiscal year and not at the time of the acquisition. We are evaluating whether to appeal this decision." n Partners HealthCare Sees Net Income Soar 51% in Q1 By Ayla Ellison B oston-based Partners HealthCare saw its fi- nancial picture improve in the first quarter of fiscal year 2018, according to financial docu- ments released Feb. 15. Partners saw operating revenue increase 6 percent year over year to $3.4 billion in the first quarter of 2018. After accounting for a 2 percent increase in expenses, Partners ended the first quarter of fiscal year 2018 with operating income of $114.8 million. That's compared to the first quarter of fiscal year 2017, when the health system posted an operating loss of $17.4 million. Partners' nonoperating gains fell year over year, but the system's net surplus still grew. The health system ended the first quarter of fiscal year 2018 with net income of $242.2 million, up 51 percent from $159.9 million in the same period of the year prior. "We experienced strong first quarter results, driv- en by volume growth, new efficiencies realized through our Partners 2.0 initiative, and greatly improved performance at Neighborhood Health Plan," said Peter K. Markell, CFO and treasurer of Partners HealthCare. "Our challenge through the fiscal year will be to continue executing on our growth and efficiency plans so that we are able to make investments in patient care, research and teaching on behalf of our patients." n Tufts Medical Center Swings Into Black in Q1 By Morgan Haefner B oston-based Tufts Medical Center, an affiliate of Burlington, Mass.-based Wellforce, ended the first quarter of fiscal year 2018 with net income of $7.6 million, turning around a $1.5 million net loss reported in the same period a year prior. Here are four things to know about Tufts' first quarter results, ac- cording to bondholder documents. 1. A Tufts spokesperson told Becker's Hospital Review "strong in- vestment markets have significantly improved our nonoperating gains, year over year, with almost $8 million of additional invest- ment earnings recorded in December 2017 versus December 2016." 2. While net income increased, Tufts saw its operating income fall to $272,000 in the three months ended Dec. 31, 2017. That's a 67.8 percent drop from $844,000 posted in the same period a year prior. Tufts said the $572,000 decrease is minimal for the first quarter of the fiscal year and is driven by salary and wage increases related to overtime and contract labor. 3. At the same time, Tufts saw operating expenses creep up 8.9 percent to $268.1 million in the first quarter of 2018, compared to $246.2 million in the same period a year before. Tufts attributed the increase to salaries and wages and more medical and surgical supplies used for higher acuity cases. 4. Year over year, Tufts recorded an 8.7 percent increase in oper- ating revenue to $268.4 million. Tufts said the change was due to continued patient volume growth, as well as a rising case mix in the first quarter. n

• Cover