Mich. jolt `not' felt by Bon Secours

West Baltimore hospital still struggling, however

`A very important ministry'

January 31, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

Accounting irregularities in a Michigan hospital system pose no threat to the financial stability of Bon Secours Health System Inc. or its historic West Baltimore hospital, Bon Secours officials said yesterday.

The health system, with headquarters in Marriottsville, disclosed this week that the books of its two-hospital Michigan affiliate had been "intentionally manipulated over a seven-year period through improper journal entries made by or at the direction of the former chief financial officer."

Mike Cottrell, senior vice president and chief financial officer of the health system, said the problems will "absolutely not" affect any Bon Secours operations.

The Baltimore hospital has been subsidized by the system for years, but "Baltimore has always been a very important ministry for Bon Secours," and the Michigan problems don't change "our commitment, past, present and future," he said.

Although no money or other assets were stolen, Cottrell said, the false accounting made the Michigan system appear profitable when it was losing money. The system reduced its reported assets by $81.8 million.

Bon Secours got its start in 1881, when Cardinal James Gibbons, archbishop of Baltimore, invited a small French order of nuns, Sisters of the Congregation of Bon Secours (French for "good help") to provide health care. The order opened its West Baltimore hospital in 1919. The original building, on West Fayette Street, is still in use.

The health system grew and prospered. Besides operating the Baltimore hospital, it operates 23 others in five other states, along with nursing homes and assisted-living complexes. It had earnings of $51.1 million (restated, after correcting for the Michigan problem, from $66.7 million) in 2002, on revenue of $2.3 billion.

The Baltimore hospital has struggled financially. The system doesn't disclose financial results for its separate entities, but filings with state regulators show that the Baltimore hospital lost $3.1 million in the fiscal year that ended June 30.

Robert Murray, executive director of the state's Health Services Cost Review Commission, said the Baltimore hospital has been losing money because it has to pay doctors to treat uninsured patients. "Physician losses have been dragging them down," Murray said, resulting in several straight years with losses of $3 million to $4 million.

"Historically, the Baltimore hospital was always a concern of ours," said Kenneth Rodgers, director or public finance for the credit rating agency Standard and Poor's, which this week put the health system on "negative outlook."

The Baltimore system includes outpatient programs on the Liberty Medical Center campus and several primary care clinics.

Apart from the Michigan problem, Rodgers said, profitability for the national system is down this fiscal year and "the system is clearly under greater financial stress than they have been." Despite the restatement of assets, he said, "the liquidity is adequate, and they have good coverage of debt service."

Rodgers and Cottrell said the Baltimore system's financial performance has improved recently.

"We're feeling positive about the performance improvements in Baltimore," Cottrell said. State-set rates have increased, he said, and "management has improved operations." He said system policy does not permit him to discuss details of the Baltimore hospital's finances.

Cottrell said the Michigan problems turned up in routine audits and that a team of forensic accountants was called in to investigate. The accountants found that the chief financial officer had inflated assets without the top system management's knowledge, Cottrell said.

He said he will report to the system's board and audit committee in March on what steps might be taken to improve financial monitoring.

Closer look

Here's a look at the Bon Secours Health System:

Headquarters: Marriottsville

Owner: Sisters of the Congregation of Bon Secours, an order of Roman Catholic nuns

Hospitals: 24 in Michigan, Pennsylvania, Virginia, South Carolina, Florida and Maryland

Employees: 27,000, with a headquarters staff of 230

Annual revenue: more than $2 billion

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