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Hospital expenses soar after merger

In 1990, the finances of Brooksville Regional Hospital and PineBrook Regional Medical Center were merged, and Brooksville Regional came out the loser.

The next year, Hernando Healthcare, parent company to the two facilities, recorded a 79 percent increase in professional fees, 120 percent in utilities and 165 percent in "other direct expenses."

The company reported those increases to the Internal Revenue Service on Aug. 11, in a document that outlines some of the company's expenses for its 1991 fiscal year.

According to company spokeswoman Beth Varn, the increases in company expenses are attributable to the merging of PineBrook's dollars and debts with Brooksville Regional's.

"There is an increase in a lot of expense areas due to the PineBrook operation," Varn said.

"In October of 1990, we opened the surgery center at PineBrook, which would be one contributing factor (to the increased expenses). Also, we went to a full-time MRI service; where we had a once a week MRI, we went to five days a week." The MRI is a magnetic resonance imager, a sophisticated piece of diagnostic equipment.

Varn declined to elaborate on other increases in expenses.

"I don't have the further detail on some of those," she said. "The detail wasn't required in the reporting (to the IRS) and it's just not available to me. . . . This (information) is not really benefiting your report or our report."

Here is other data about Hernando Healthcare and its parent company, Regional Healthcare Inc., which was provided to the IRS:

Former vice president Dave McReynolds received salary and benefits totaling nearly $240,000 in 1991, an increase of 51 percent over the previous year. Varn said McReynolds left the company in mid-1991 and Healthcare had to buy out his three-year employment contract. That's why his compensation skyrocketed that year, she said.

The compensation and benefits of company president Steve Wenzel totaled $211,356. That amount is slightly less than Wenzel earned the previous year, because the company's contribution to his insurance went down, Varn said.

This past year, Wenzel "did receive an increase when there was an annual wage and salary increase," Varn said. "But since then, he has taken a decrease that brought him below the number reported in this report."

Varn would not say how much his 1992 salary increase was or how much he returned to the company.

Other wages included in the 1991 IRS report include vice president Ken Thompson's compensation package of $176,676 and vice president David "Bo" Wolfe's package of $109,120.

Hernando Healthcare paid the accounting firm of Ernst and Young $614,959 in 1991, an increase of 363 percent more than the previous year. The company paid William Mercer Inc. of Tampa $105,070 for additional accounting services.

Varn said Ernst and Young provided additional services to the company "related to the financial condition at Brooksville Regional Hospital."

One of those services was a report prepared last year for CNA of Chicago, the company that bought the bulk of a 1990 bond issue of $57-million.

In that report, Ernst and Young listed for CNA the unexpected problems faced by the company since the sale of the bond issue and how those problems had deteriorated the company's financial position.

The accounting firm provided three scenarios for CNA, showing the state of the company's finances in the best light and in the worst light.

Hernando Healthcare paid Mica Imaging $362,445 for the use of a piece of diagnostic equipment, called an MRI, at PineBrook. The fee paid in 1991 was 143 percent higher than the previous year, when the company used a portable MRI, rather than the permanently installed one.

Varn said last week that the MRI wasn't being used enough to justify the fees being paid, so it was being removed. Company officials are discussing whether to again use a portable MRI, and whether to use it at PineBrook or at either of the hospitals, she said.