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Hospital Vendors Earn Millions for ServicesLock Icon

3 min read

Tax forms filed by nonprofit hospitals in Arkansas provide a peek into the millions of dollars the hospitals spend on their vendors.

A review of the most recent Internal Revenue Service Form 990s filed by 35 nonprofit hospitals in Arkansas showed that a total of $301.7 million was paid to their largest independent contractors, an increase of 11.46 percent compared with the 990s from the previous fiscal year. The most recent data for the hospitals or medical centers was from 2016 or 2015. The comparison was made by using the collective total of each of the most recent contract amounts and then comparing it to the previous year’s available aggregate amount.

Most of the contractors supplied physician coverage to the hospitals, according to the public tax records, which were used to create a list of the highest-paid independent contractors as disclosed by nonprofit hospitals. For-profit and government-owned hospitals are not required to file 990 forms with the IRS and weren’t included on the list.

Across the country, hospitals are facing a physician shortage and it is expected to get worse. A study released last year reported nearly 47 percent of the 17,200 doctors surveyed said they plan to accelerate their retirement plans. The study was commissioned by the Physicians Foundation, a Boston nonprofit that focuses on physician issues. Merritt Hawkins, a physician search and consulting firm based in Dallas, also worked on the study.

The contractor that received the most money from a single hospital was the University of Arkansas for Medical Sciences of Little Rock. It was paid $66.3 million to provide medical services to Arkansas Children’s Hospital in Little Rock in the fiscal year that ended June 30, 2015, an increase of 9.3 percent from the previous fiscal year.

JE Dunn Construction of Kansas City, Missouri, was the second-highest paid independent contractor on the list. Mercy Hospital Fort Smith paid the construction company $21.9 million for services provided in the fiscal year that ended June 30, 2015. In the previous fiscal year, Mercy had paid JE Dunn $3.8 million.

Hospitals also are spending money on other services not tied to patient care. Ashley County Medical Center in Crossett paid $318,615 to American Cleaning Systems of Crossett for cleaning services in the fiscal year that ended Sept. 30, 2015. The Crossett company also was paid $279,498 by Chicot Memorial Medical Center in Lake Village for the fiscal year that ended March 31, 2016.

GET THE LIST: Download a free copy of the Highest-Paid Independent Contractors in Arkansas (PDF, 22.3MB).

Every nonprofit hospital that is required to file a Form 990 only has to list the top five contractors that were paid at least $100,000 during the fiscal year. That means the filing doesn’t list all of the vendors that received more than $100,000.

The hospital, however, is required to report the total number of independent contractors that received more than $100,000. Nineteen of the 35 hospitals on the list had more than five such vendors.

The tax filings are available online at GuideStar.org, a nonprofit organization that compiles nonprofit IRS reports and publishes them online. Some of the hospitals may have filed more recent 990s that are not yet available from GuideStar.

“I think it’s interesting to see who people have their big contracts with,” said Chuck McLean, senior research fellow at GuideStar. “It’s about transparency.”

He said that some businesses that use GuideStar look at that independent contractors section as a prospecting tool.

“They will use that as a way of finding out who’s spending a lot of money on telecommunications or conventions or any of those sorts of things just to see who might be a useful business prospect for them,” McLean said.

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