Shannon Trust & Health Deform?

How would the Baucus Plan impact safety net hospitals like Shannon Medical Center? The plan is intended to address America's embarrassing numbers of uninsured. Texas is the blight in this area, with the highest uninsured rate in the nation.

Shannon's service area includes almost 34,000 uninsureds (according to 2006 Census estimates) The Baucus plan is expected to cut America's uninsured by 54% in 2019. The Congressional Budget Office (CBO) estimates 29 million would have coverage, while 25 million remain uninsured, including undocumented immigrants. If San Angelo approximates national projections, the region would have 19,500 uninsureds come 2019. This population will look to Shannon for crisis specialty care and Esperanza for primary care services.

Nonprofit community and safety net hospitals benefit from disproportionate share payments. CBO scoring shows DSH dollars dropping nearly $50 billion. Medicaid DSH would decline $24.9 billion, with Medicare cuts amounting to $22.9 billion.

Other hospital savings amount to $95 billion. These would apply to all hospitals, nonprofit, for-profit and governmental. That's a $142.8 billion total haircut, with Shannon taking their share.

In December 2008 Fitch Ratings reported Shannon Medical Center suffered a multi-year operating loss.

For the third consecutive year, Shannon has recorded a loss from operations, which resulted in the system losing approximately $9 million (negative 3.2% margin) through the September 2008 period.

The Shannon Trust contributed large sums to benefit the Shannon Health System. In 2007 that amounted to $12.2 million. The system has since been dismantled, thus Shannon Medical Center remains the sole beneficiary. SMC garnered $7.2 million from the Trust in 2008. If not for the generosity of the Shannon Trust, the hospital would face serious financial stress in meeting its mission.

Senate Finance Committee Chairman Max showed his disdain for nonprofit safety net hospitals. His Mark Up calls such hospitals "private tax exempt facilities." This lingo originated in the late 1990's when Tom Scully was the head of the for-profit hospital lobby. Scully is now a private equity underwriter (PEU), like White House Health Czar Nancy-Ann DeParle.

How might the Shannon Trust react to an ever stressful political and economic environment? Three years ago they inked a deal with Triad Hospitals, effectively placing Shannon Medical Center in for-profit hands. Triad CEO Denny Shelton sold the deal,which later fell through. He's still shopping for partners under a new corporate umbrella. Plano based Legacy Hospital Partners sounds eerily similar to Shannon's recently shuttered health insurance division.

The Shannon Trust's most recent 990 filing shows four interesting features. One, it reflects the early hammering of investments with last fall's financial implosion. Realized losses on publicly traded securities were $1.7 million, while unrealized investment losses were $9.5 million as of 9-30-08. Investments have made a partial comeback since the September swoon. Unfortunately, the trust owned a big chunk of Goldman Sachs Structured Product, $9.4 million worth. Structured Products imploded with the fall of banks, hedge funds and Lehman Brothers. It's not clear how much it's recovered.

Two, oil royalties were huge, over $22 million for the year. They may not be as high in 2009. Oil prices fell precipitously through December 2008, but recovered nicely since.

Three, the Trust deducted the assets of Shannon Medical Center from their books. This is the first time SMC's facilities have not been listed as part of the trust. Accounting change or precursor to a sale?

The fourth unusual element of the Trust's 990 is the sale of 524.46 acres of Crockett County land. It was sold on 2-20-08 but the seller isn't listed. Was it productive oil producing land? Who got it for $210,576 and why? This is the second sale of estate land. The first occurred on 2-11-05. It didn't specify acreage or the purchaser (who paid $911,881). Might it be compensation for the managing trustee?

Max Baucus positions the for-profit health industry for big gains. Will Shannon change stripes to benefit? Time will tell.

(The Trust's 990 is available on Guidestar or The Foundation Center. Guidestar requires registration to access nonprofit 990's filed with the IRS. )