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'Not-for-profit' hospitals still making money

JANESVILLE — Existing and soon-to-be health care providers in Rock County are making money.

Their combined balance sheets for their most recent fiscal year show an excess of revenues over expenses of nearly $90 million.

How is it, then, that Mercy Health System, SSM Health Care of Wisconsin, Beloit Health System and Edgerton Hospital and Health Services are all referred to as "not-for-profit" entities?

Clearly, the four are making profits.

So, too, is Dean Health System, which is partnering with SSM on the St. Mary's Janesville Hospital/Dean Clinic-Janesville East project that will open Jan. 9.

Dean, however, is a for-profit entity, and its finances are not open to the public.

But the other four are 501(c)(3) charitable organizations, so their filings are open.

As not-for-profits, Mercy, SSM and the others often are mistakenly referred to as "nonprofits." While the two terms often are used interchangeably, they are different.

Generally, nonprofit implies that an organization cannot make a profit and must have a zero balance at the end of the fiscal year. The term typically is used for church and community groups.

Not-for-profits do make profits, at least in good years, and it's important to do so. Because it's not disbursed to shareholders, profit goes toward fund balances that help replace equipment, build new buildings and provide more services.

Not-for-profit hospitals are exempt from most income and property taxes, and their tax status is based, in part, on a requirement that they provide charity health care and other services for which they often aren't compensated.

That's referred to as "uncompensated health care" and includes charity care and bad debt.

In 2010, the four hospital systems that either are operating or soon will be in Rock County reported that the uncompensated care they provided in 2010 ranged from 3.7 percent to 5.4 percent of total patient revenues.

According to the Wisconsin Hospital Association, uncompensated health care in 2010 totaled:

-- Beloit Health System: $22.9 million.

-- Mercy Health System: $16.7 million.

-- Edgerton Hospital and Health Services: $1.2 million.

-- St. Mary's, Madison: $35.5 million.