How St. Luke's Spends Its Money
Despite being the smaller hospital system in Duluth, one area St. Luke’s does not skimp on is executive compensation. Former CEO John Strange’s salary increased to over $1M in 2019, despite retiring just two months into the year. His temporary replacement, Eric Lohn (now Co-CEO), received a 30 percent bump the year he was elevated to the top job.[1]
Although St. Luke’s mission is “[t]he Patient. Above All Else,”[2] executives have invested millions to shift key services out of the hospital, a priority of health insurance companies who make millions off of skyrocketing patient costs. In fact, former CEO Kevin Nokels seemed to be excited when he imagined a future in which patients would be “admitted” to stay at home, which would cut costs – which Nokels called a “significant problem”[3] – thus allowing executives to make more money off healthcare services without the level of care patients would receive in-person at a hospital.
A frequent strategy to cut costs and serve the bottom line is to move surgeries off-site. Surgical centers typically represent an opportunity for healthcare companies to prioritize their bottom line, with fewer staff and services than a patient would have access to in a hospital.[4]
St. Luke’s currently operates four off-site surgical centers and is constructing a fifth, costing $5M, in Moose Lake.[5] The result of a partnership between St. Luke’s and Gateway Clinic,[6] executives have left unanswered whether the new venture may be structured as a for-profit company to target more affluent “customers” and bolster revenues. As officials noted to investors, “[competing] surgery centers, which are often for-profit businesses, may not accept indigent patients or low paying programs … [c]onsequently, hospitals are vulnerable to competition.”[7]
Where Isn't St. Luke's Spending?
Source: Author’s calculations from 2012 – 2020 Consolidated Audited Financial Statements
Even as St. Luke’s executives have made the company more profitable seemingly at the expense of patients and workers, the company has given back less and less to the communities it promises to serve as a percentage of total expenses. Despite ending 2020 with larger profits than it earned 10 years ago, executives have decreased in most years the percentage of expenditures on charity care, the dollar value of services provided for which payment was never expected and for which the patient is not pursued.[8]
SOURCES
[1] St. Luke’s Hospital of Duluth, Return of Organization Exempt From Income Tax For the 2019 Calendar Year (filed November 9, 2020), https://projects.propublica.org/nonprofits/organizations/410714079/202023149349301032/full;
St. Luke’s Hospital of Duluth, Return of Organization Exempt From Income Tax For the 2018 Calendar Year (filed October 30, 2019), https://projects.propublica.org/nonprofits/organizations/410714079/201923039349301207/full.
[2] St. Luke’s Hospital of Duluth, “About St. Luke’s,” https://www.slhduluth.com/about-us/.
[3] Kelly Busche, “Rapid Technological Changes in Health Care Drive New Patient Experiences in Northeastern Minnesota,” Duluth News Tribune, September 12, 2020.
[4] Christopher Snowbeck, “Minnesota Nonprofit Hospitals in Tug-of-War with Insurers over Efforts to Rein in Costs,” Star Tribune, January 11, 2020, https://www.startribune.com/nonprofit-hospitals-in-tug-of-war-with-insurers-over-efforts-to-rein-in-costs/566850672/.
[5] Duluth Economic Development Authority, “Health Care Facilities Revenue Bonds (St. Luke’s Hospital of Duluth Obligated Group),” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/P11595638-P11231155-P11653407.pdf.
[6] St. Luke’s Hospital of Duluth, “St. Luke’s and Gateway Clinic Partner to Create New Surgery Center in Moose Lake,” St. Luke’s Hospital of Duluth, October 13, 2021, https://www.slhduluth.com/news/2021/october/st-luke-s-gateway-clinic-partner-to-create-new-s/.
[7] Duluth Economic Development Authority, “Health Care Facilities Revenue Bonds (St. Luke’s Hospital of Duluth Obligated Group),” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/P11595638-P11231155-P11653407.pdf.
[8] St. Luke’s Hospital of Duluth, “4th Quarter, 2021 Certification & Supplementary Information,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/P11571493-P11213183-P11633594.pdf;
St. Luke’s Hospital of Duluth and Affiliates, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2020 and 2019,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/P21463176-P21135436-P21548199.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2019 and 2018,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/RE1339617-RE1042664-RE1450713.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2018 and 2017,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/ES1273226-ES996443-ES1397877.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2017 and 2016,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/ES1159981-ES907074-ES1308308.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2016 and 2015,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/ER1059288-ER829637-ER1230615.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2015 and 2014,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/EP937328-EP727581-EP1129340.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2014 and 2013,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/EP863451-EP668725-EP1070477.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2013 and 2012,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/ER763800-ER594336-ER996368.pdf;
———, “Consolidated Financial Statements and Supplemental Information Years Ended December 31, 2012 and 2011,” Electronic Municipal Market Access (EMMA), https://emma.msrb.org/ES1273226-ES996443-ES1397877.pdf.