Where Does $100 to the Children’s Hospital in Washington, DC Go?

The Children’s Hospital (CH) in Washington, DC is one of the leading pediatric hospitals in the country. Established in 1870, CH is a non-profit 501 (c) (3) corporation with 7,850 employees that work in the network of hospitals, outpatient clinics – 19 health centers, outpatient centers, and mobile health units – and emergency rooms that collectively fall under CH.

The most recent IRS Form 990 (2015 for the year beginning July 1, 2015 and ending June 30, 2016) reports the following key information:

CH reported $1.062 billion in revenue, most of which ($1.045 billion) came from patients and program services which means the hospital is self-sustaining.  The organization also received $34.4 million from several sources (a grant from the Children’s Hospital Foundation, government grants, contributions, parking fees, investment income and lab fees) which were partially offset by a $17.4 million equity and partnership loss.

Expenses were reported to be $1.037 billion (not including $52.6 million in depreciation)and can be viewed two ways (by broad category:  program and management) and by specific categories (i.e. compensation, fees for services, office, etc) with the later providing more detail.  CH does not do fundraising; instead the Children’s Hospital Foundation is the fundraising arm for CH although CH appears to be a self-sustaining organization whose revenue covers expenses.

Expenses By Broad Category (Program and Management)

$1,062 billion:  Total Revenue

-$  252 million (24% of revenue):  Management Expenses

-$  785 million (74% of revenue):  Program Expenses

-$1,037 billion (98% of revenue):  Total Expenses

$     25 million (2% of revenue):  Amount Remaining

Using the above information, $100 in revenue was spent as follows:

$100:  Revenue

-$ 24:  Management Expense

$ 76:  Amount Remaining

– $74: Program Expenses

$   2:  Amount Remaining

As illustrated above, CH spent $24 out of every $100 in revenue on management expenses and $74 out of every $100 on program services.

Expenses by Specific Categories

$1,062 billion:  Revenue

-$ 603.9 million (or 57% of revenue):  Compensation, Benefits, Pensions, Payroll Taxes

-$ 113.2 million (or 11% of revenue):  Office, Occupancy, IT, Insurance, and Maintenance

-$ 109.2 million (or 10% of revenue):  Loss on Debt and Bad Debt Expense

-$  94.3 million (or 9% of revenue):  Medical Supplies

-$  79.4 million (or 7% of revenue):  Other Fees for Services – no detail provided – and Other Expenses

-$  22.7 million (or 2% of revenue):  Interest Expense

-$   5.6 million (or 1% of revenue):  Advertising and Promotion

-$   4.6 million (or .5% of revenue):  Fees for Services (Legal, Accounting, Lobbying)

-$   4.1 million (or .5% of revenue):  Travel and Conferences

-$1,037 billion (or 98% of revenue):  Total Expenses

$     25 million (2% of revenue):  Amount Remaining

As illustrated above, the single largest expense for CH is compensation for the 7,850 employees.  CH spent $603.9 million on compensation which equates to about $77,000 per individual. However, $1,657 individuals received more than $100,000 in compensation with the most highly compensated individual the President and CEO, Kurt D Newman who received $2.5 million, followed by the Chief of Cardiology, Richard Jonas, MD who was compensated $2.1 million.

CH reports the organization pays for first class or charter travel. Notes indicate the CEO is permitted to fly First Class on trips longer than 4 hours. Hospital policy allows business class travel for international flights.

CH reports the organization pays for companion travel. Notes indicate the CEO may take his spouse up to 7 trips per year and upon the CEO’s approval, companion travel for the wives of executives may be approved.

CH reports that two key employees and one former employee received supplemental retirement benefits which are increased by a tax equalization amount, and are treated as taxable compensation.

CH reports certain executives are reimbursed for health club or social club dues with these costs treated as taxable compensation.

CH reports certain executives are reimbursed for tax, financial, and estate planning and health costs with these costs treated as taxable compensation.

CH reported a severance packaged of $416,822 was provided to Raymond S Szudlo.

CH reports a supplemental non-qualified retirement plan with the 18 individuals receiving a total $1.5 million in deferred compensation:

In closing, what is so telling about the financial information is that the hospital generates enough revenue to cover its expenses (including $109 million in bad debt expense), 57% of which goes to pay staff compensation including the high salaries of the key staff and the benefits that include first class travel, reimbursement for personal services, social and health club dues, pensions, and supplemental retirement benefits.

To read the IRA Form 990 (2015), click here.