The Muskogee Medical Center Authority has filed a lawsuit against Saint Francis Muskogee claiming the hospital has withheld roughly $1 million in required in-kind contributions for the past two years.

As a nonprofit hospital, Saint Francis Muskogee is exempt from paying most taxes to local government, including property tax. Under the 40-year property lease agreement between Saint Francis and the Authority, which began in 2007, Saint Francis was required to make annual in-kind donations to the Authority equal to the amount Muskogee would have collected in property taxes.

Saint Francis paid the in-kind contribution in the amount of approximately $500,000 to $700,000 each year, but earlier this year Saint Francis sent notice that it would no longer make its annual in-kind payments to the Authority.

According to the Muskogee Phoenix, the Authority last received payment from the hospital in 2017. Muskogee County Assessor Ron Dean says Saint Francis failed to pay its in-kind contribution assessment, which totaled $619,080 in 2018.

Muskogee Public Schools Superintendent Jarod Mendenhall emphasized the importance of these funds for public education. “It’s a lifeblood,” he says. “It’s teacher salaries, it affects teaching and learning inside what we do on a daily basis.”

In Saint Francis’ formal reply to the lawsuit, they contend that “because Saint Francis Muskogee is a non-profit, charitable hospital, any property used for a charitable purpose is exempt from ad valorem taxation under Oklahoma law, regardless of the language of the Lease Agreement.”

In their petition, the Muskogee Medical Center Authority claims that the annual in-kind contribution “provides vital funds for county health initiatives…and it’s a material source of funding for Muskogee public schools.”

The petitioners claim Saint Francis Muskogee told the City Council in 2017 that the entity had net assets exceeding $2.4 billion. The Authority argued that Saint Francis “obviously has the ability to meet its obligations under the Lease and also make additional long-term investments into its own healthcare system.”

Saint Francis Muskogee’s parent hospital corporation, Saint Francis Hospital System, has recently garnered negative attention regarding other lawsuits.

Last August, Oklahoma Watch reported the large nonprofit Catholic hospital system, which grossed $4 billion in patient revenue from 2016 to 2019, filed nearly 5,000 lawsuits against patients for unpaid medical bills during the time period—the highest amount among all Oklahoma hospitals.  

According to Oklahoma Watch, “Court filings show the hospital system filed 27 lawsuits a week on average. And in at least a half-dozen cases, Saint Francis sued and garnished wages from its own employees.”

According to the hospital’s latest 990 filing, Saint Francis hospital system’s revenue exceeded $1.175 billion, with net profits totaling $201 million, in fiscal year 2018. Saint Francis’ President and CEO Jake Henry Jr. was paid $5.35 million.

Muskogee County Treasurer Kelly Garrett says the loss of the in-kind funds from Saint Francis Muskogee will adversely affect local entities that rely on the property tax.

“That is a lot of money, and this old county needs that money. You have these big shots move into town and pull these pranks—come on, partner up with the city and join us,” Garrett told the Muskogee Phoenix.   

County Commissioner Ken Doke told the News on 6: “We hope that the lawsuit will settle this quickly and amicably, in a way that it protects healthcare, while at the same time not being a detriment to our public schools.”