Utah-based Intermountain Health Care Inc. is the 17th largest non-profit health-care organization in the country, according to the new Forbes Non-profit 500 list published in the Nov. 26 issue of Forbes Magazine.
With assets of $762.1 million and excess revenue last year of $34 million, IHC's abundance ranked 17 out of the 98 non-profit health-care organizations listed on Forbes Non-profit 500. The list was drawn from a catalog of all non-profit organizations registered with the Internal Revenue Service that showed annual revenues exceeding $50 million.Forbes broke its Non-profit 500 into five groups: conventional charities, membership organizations, labor unions, tax-exempt funds and health care. Included in the health-care sector were hospitals and hospital systems, health-maintenance organizations, medical schools and nursing homes.
IHC Vice President William H. Nelson expressed pleasure over IHC's ranking on the health-care list, calling it a compliment to the corporation's excellent management of its resources.
Nelson said IHC's $34 million in excess revenue - 5.6 percent of its total 1988 revenue - is "a little under average if you look at all the health-care providers with $500 million or more in revenues."
The $34 million was put into IHC's $207 million financial reserve.
The article accompanying the Forbes list did not flatter non-profit corporations. Forbes' headline called non-profit organizations "a group that turns out to be not so non-profit afterall." The article cited mounting criticism against the organizations that could prompt Congress to take a new, harder look at their exemption from federal taxation.
Non-profit organizations account for more than $750 billion in annual revenues, about 15 percent of the gross national product. "Beyond showing the breadth and depth of the sector, the lists show that the non-profits are good at making money," Forbes reported. "With very few exceptions, revenues handily exceed expenses. Even among those enterprises that give most of their services away, in fact, there is usually plenty of retained excess."
For instance, the article shows Farmland Industries, an agricultural cooperative, netting $99 million last year, the Mayo Foundation, $167 million, and the American Red Cross, $35 million.
The growing complaint is that many non-profits compete head-to-head with for-profit organizations in selling goods and services to the public - but pay no taxes, Forbes said. Ocean Spray Cranberries and Land O'Lakes companies are non-profit and do not pay taxes. Kraft and Del Monte, for instance, are designated for-profit companies and do pay taxes.
The Forbes article said, "In practice, if not in theory, Congress has tended to view the tax exemption as a sort of for-profit incubator. It uses the exemption to encourage the development of services that the for-profit economy is incapable of producing."
But critics complain that tax-exempt status gives non-profit organizations an unfair edge over for-profit competitors. "Allowing non-profits to compete on the backs of for-profit business is not where our economy is best served," John Satagaj told Forbes. Satagaj is president of the Small Business Legislative Council in Washington, D.C.
The article noted that non-profits receive other economic perks because of their status. "Many non-profits are able to use the mails at two-thirds of what it costs their for-profit counterparts," Forbes said.
Congress ended tax exemptions on mutual life insurance companies in 1942 and on savings and loans in 1951. Congress began taxing unrelated business income in 1950 and began taxing large mutual fire and casualty insurance companies in 1986.
Many non-profit organizations - including credit unions, hospitals and electric cooperatives - may be next, Forbes said.
The threat of taxation isn't new to IHC. Three Utah counties have denied local property tax exemption to some IHC hospitals, contending the hospitals don't provide enough charity care to warrant the exemption. IHC has appealed those decisions to the Utah Supreme Court.
The IRS recently completed an extensive audit of IHC to see if it meets the federal standards of charity it must meet to keep its federal tax-exempt status.
IHC officials say they expect a clean bill of health from the IRS.
Some of the critics cited by Forbes have already complained about IHC.
"Hearing-aid retailers are up in arms against the hospitals and clinics," the article said. Hearing-aid retailers testified against IHC and other Utah non-profit hospitals at a recent hearing before the Utah Tax Commission, complaining that the hospitals' tax-exempt status allowed them to sell equipment for much less than retailers could.
Non-profit organizations do not answer to stockholders or owners, Forbes noted, and their excess revenues have nowhere to go but back into the company. As a result, non-profit revenues often result in elaborate headquarters and staff benefits like high salaries and generous travel allowances.