But for the flow of $ to Roseville, SCMC has been on the black

Editor:

The Dec 5 Independent article on Mr. Freeman's comments to the City Council contains the statement "Roseville-based Adventist Health…has subsidized $44 million in operating losses by SCMC during its 10-year ownership".

This statement is incorrect and serves to perpetuate the myth that the local hospital has long operated deeply in the red. A "subsidy" would occur if Adventist had been transferring money to SCMC. But the money flow has been in the other direction - from SCMC to Roseville - to the tune of $3 to perhaps $5 million or more each year.

The publicly available tax returns for the medical center (see, e.g. www.guidestar.org which also has returns for the now defunct hospital foundation) roughly indicate that but for the transfer payments from SCMC to Adventist, the local hospital has been operating in the black for several years. Rather than characterizing the payments as a "subsidy," one might properly characterize the transfers as "dividend" payments. Now, there's probably nothing wrong with such transfers, which may be common among related non-profit entities for all I know.

But unfortunately SCMC's tax returns don't describe what, if any goods and services SCMC has received for these "Professional Fees" payments to Adventist. The common expenses of the business - such as wages, salaries, payments to outside contractors, legal and accounting fees and so on - are all reported on other lines of the tax returns.

Indeed, some of the reported salary costs for SCMC include amounts for compensation of named Adventist officers and directors with addresses in Roseville.

One bottom line here is good news for Laguna Beach and surrounding communities. The hospital is quite viable financially and probably always has been. The notion that it might be in danger of closing (which I myself long assumed to be true) seems to be unfounded.

Which brings us to the question of why the SCMC Foundation was terminated on the same day the sale of the hospital was announced. One might expect this step, if necessary, to be done at the closing of the sale to St. Joseph's or at least after the buyer had completed its due diligence reviews.

The timing is curious at best.

That's why it's a good thing that the California AG must closely scrutinize the transaction.

W. Page Montgomery

Laguna Beach