Intermountain maintains fiscal responsibility in its financial practices. As a not-for-profit organization, Intermountain often receives questions regarding its financial practices in relationship to the communities we serve.
Q. Why does Intermountain have an operating margin, and how is it used?
A. Any organization, whether for-profit or not-for-profit, needs to take in more money than is spent, so the organization can continue to meet future needs (improving facilities, enhancing services, self-insuring, etc.). The difference between money collected and money spent is called an “operating margin.” Each year, Intermountain sets aside a portion of revenue as an investment in future needs, such as replacing or modernizing Intermountain facilities.
In 2014, our budgeted operating margin was approximately 3.8% of our net revenue. The entire margin is used for the future needs of the organization and is thus returned to the community in the form of improved facilities and services or in lower rates.
Q. How does Intermountain contribute to the health of local economies?
A. Here are some of the benefits Intermountain provides to communities in our service area:
- Total economic impact. In 2005 (the most recent data available), Intermountain’s economic impact on Utah was an estimated $4.5 billion.
- Jobs. At the beginning of 2014, Intermountain directly employed about 34,000 people, more than 28,000 of whom were eligible for benefits. About 70% of Intermountain employees were employed full-time. Many other jobs in the community are also supported by Intermountain’s presence.
- Payroll. In 2013, Intermountain distributed more than $2.25 billion in payroll and related benefits to employees.
- Capital improvements. Intermountain is approaching the end of a $3.9 billion capital building program to replace aging facilities and to provide enhanced services. Since Intermountain was founded in 1975, more than $7.5 billion (inflation adjusted) has been invested in capital improvements, including the building of new hospital facilities.
- Taxes. Even though Intermountain is not-for-profit and exempt from property taxes, it does contribute significantly to Utah’s tax base in a variety of ways:
- State income taxes. Every year, Intermountain remits more than $65 million to the state of Utah for state income taxes on behalf of Intermountain employees.
- State sales taxes. In 2013, Intermountain collected and remitted more than $1.6 million in Utah sales taxes.
- Property taxes. Every year, Intermountain pays property taxes on health clinics and on facilities that are not directly related to patient care (such as the SelectHealth offices). Intermountain paid more than $9.1 million in property taxes in 2013.
- Business development. Intermountain’s healthcare services in urban and rural areas help support business development and tourism in Utah.
Q. Does Intermountain maintain reasonable reserve funds?
A. Yes, Intermountain’s reserve levels are maintained at an adequate level for future operating and capital expenditure needs.
Intermountain had on reserve (at the end of 2014) about a year's cash on hand (a financial ratio used to measure reserves). Intermountain reserve funds are targeted at appropriate levels, taking into consideration capital needs, market fluctuations, industry uncertainty, and bond ratings. Our favorable bond rating allows Intermountain to borrow money at low rates. These savings allow us to offer care that’s more affordable.
To put Intermountain’s reserve funds in perspective, it’s important to remember that our organization also carries significant debt (about $1.8 billion at the end of 2014). Furthermore, our reserve funds are allocated to specific purposes (e.g., for insurance), and some of these fund types and levels are required by law.
The amount allocated to reserves increases or decreases based on projections of future needs. Reserve contributions were higher in recent years to help compensate for the $3.7 billion in capital improvements invested and planned for 2005-2015.
Q. What are some of the initiatives Intermountain has launched that help optimize work processes and operational effectiveness?
A. Intermountain has a number of initiatives based on our commitment to be fiscally responsible, and these are just a few examples:
- Supply Chain Organization. This group within Intermountain is charged with finding cost-savings in our non-labor expenses. The group has transformed the way Intermountain contracts and purchases supplies and services. Since 2005, the Supply Chain Organization has saved Intermountain more than $200 million. That is money Intermountain no longer has to obtain through patient charges or financing.
- Revenue Cycle Organization. This area was redesigned to enhance the way Intermountain collects revenue, offers charity care, and distinguishes charity care from bad debts. Our Revenue Cycle Organization works with patients in advance to help them understand their financial obligations for the care they will receive. It helps many patients qualify for financial assistance from Intermountain and other sources. It also helps Intermountain manage its bad debt and decrease the time it takes to receive payments.
- Patient Flow initiative. This effort helps Intermountain optimize the way patients move through our facilities and the different stages of care they receive. By making this process more efficient, we have freed-up additional capacity in our hospitals: “virtual beds” that did not have to be added through capital spending.
- Staffing Best Practices. This initiative provides tools for managing the way Intermountain staffs, so that we can optimize efficiency and better achieve our mission.
Q. What does Intermountain's bond rating mean and why is it important?
A. Intermountain has a AA+ bond rating from Standard & Poor's and a Aa1 rating from Moody's. Because Intermountain maintains an excellent bond rating, we're able to borrow money in the bond at favorable interest rates. These lower rates permit Intermountain to offer lower charges to its communities.
Construction and other major capital expenditures are financed through a number of mechanisms, including the issuance of municipal bonds, earnings from operations and investments, donations, and drawing from Intermountain's reserves.
As a not-for-profit organization, Intermountain uses municipal bond funding in addition to internal funds for its capital needs. Intermountain municipal bonds do not put issuing cities at risk. Law requires Intermountain to have a local municipal “sponsor” for our bonds, but we maintain full responsibility for the security of those bonds.
Q. What are Intermountain's efforts toward fair billing and collection practices?
A. Intermountain has charitable assistance programs and billing policies that help patients focus on getting well rather than worrying about how they will pay for care.
- Charity care policy. Intermountain offers financial assistance on a sliding scale to families and individuals with incomes up to 500% of the federal poverty level. At 2014 poverty levels, a family of four with an income of less than $119,250 per year may be eligible for some level of assistance, depending on the size of the bill and the family’s debt load.
- Low interest rate. For patients who need to make payments on their bill, Intermountain’s interest rate is 8% —significantly less than typical rates for unsecured loans. Patients with a demonstrated financial need can set up a zero-interest payment plan. Patients who are willing and able to have their monthly payments automatically debited from their account can qualify for a reduced interest rate of 4%.
- Uninsured discounts (hospitals only). Uninsured patients receive an “automatic” discount of 25% without having to apply for charity care. Patients who are able to pay in full at the time of service can qualify for an additional 15% discount. Otherwise, patients can also receive an additional 5% discount for timely payment post-discharge. Furthermore, because Intermountain’s average charges are significantly lower than the charges of its competitors, these patients in effect receive an additional “automatic” discount.
- Collection practices. Intermountain does not use the courts to collect an unpaid medical bill unless there is evidence of fraud or an indication of ability to pay coupled with refusal to pay.
- Assistance policy widely publicized. Intermountain informs patients and the community that charitable financial assistance is available through a variety of means, including:
- Signs in facilities.
- Brochures in facilities.
- Counselors in facilities.
- Information about charity care on billing statements.
- Information about charitable assistance on the outside of billing envelopes.
- Intermountain website.
- Intermountain publications.