I earlier performed an extensive review of the financial statements, mostly audited ones, of 25 Big Catholic Non-Profit Hospital Organizations and 136 Big Non-Catholic Non-Profit Hospital Organizations, whose Total Operating Revenues in fiscal year ended (FYE) 2010 totaled $427.1 bil. My best estimate is that these 161 Big Non-Profit US Hospitals comprised 38% of the Total Operating Revenues of all US Non-Profit Hospitals in 2010.
These 161 Big Non-Profit Hospital Organizations generated $17.2 bil of Hospital Operating Income in FYE 2010. When I project that over all US Non-Profit Hospitals, my best estimate is that Total Hospital Operating Income of all Non-Profit Hospitals in FYE 2010 totaled $45.2 bil.
This Hospital Operating Income includes as deductions Depreciation Expense, Bad Debt Expense, and for the most part, Interest Expense on all Debt. There is very little Investment Income included in Hospital Operating Income. The predominant portion of Investment Return Income and Losses is shown by these Hospital Organizations below Hospital Operating Income, as Non-Operating Income.
Also, from this research, my best estimate is that the Total Net Assets (i.e. Excess of Total Assets over Total Liabilities) of all Non-Profit Hospital Organizations presently is a bit above $700 bil, and that their Total Investments in Debt and in Equity Securities are just short of $600 bil.
From my extensive sample of these 25 Big Catholic and 136 Big Non-Catholic, Non-Profit Hospital Organizations, here are the most recent percentage increases in Total Hospital Operating Income over the immediately preceding year:
……………………………...........Catholic………......Non-Catholic
Annual FYE 2009…………......19%........................34%
Annual FYE 2010…………......27%........................19%
Year to Date FYE 2011…….....14%........................25%
Three Year Annual Average..20%.......................26%
The Affordable Health Care Plan results in a substantial portion of the uninsured, getting insurance, and also results in many of the underinsured, getting better insurance.
Thus, Hospital Operating Income of all Hospital Organizations should increase sharply starting in 2014, due to the elimination of a good chunk of the Bad Debt Expense, and the addition of presently unrecorded Charity Care Income.
Anyway, I gave my best shot at estimating the future income of all Non-Profit Hospitals, assuming a conservative annual earnings growth rate of 12%, much lower than the actual average annual growth rate of 20% to 26% shown above. I also assume that the annual return on the massive Investments of these Non-Profit Hospitals was 6% per year. Further, I assumed that after the Affordable Health Care Plan totally kicks in, Bad Debt Expense of the Hospitals will decrease by 60%, and previously unrecorded Charity Care Income will increase by 40%.
Based on the above assumptions, my best estimate is that all of these Non-Profit Hospitals will generate Total Net Income of $13.4 trillion over the next 20 years, and not a dime of it taxed.
And when I ran the numbers, starting in 2014, the key Hospital Operating Income as a Percentage of Total Operating Revenue ratio for Non-Profit Hospitals in the aggregate, on an after-tax basis, will be higher than that of the majority of the companies in the 30 Dow Industrials.
Granted, the optimal answer here is that Non-Profit Hospitals just have to substantially reduce their stiff patient fees, not just to Medicare and Medicaid patients, but to everyone.
With the opportunity to massively reduce hospital patient fees, there is an enormous opportunity to reduce the US Debt.
Given these extremely high projected profits by Non-Profit Hospitals, my recommendation here is for the US Government to apply an income tax in any year that a Non-Profit Hospital Organization generates extremely high profits. After all, these are Non-Profit Organizations.
Below here are my recommended US federal income tax rates I would institute for each year, all applied just to the Non-Profit Hospital Organizations generating an excessively high Hospital Operating Margin Percentage (i.e. Hospital Operating Income as a Percentage of Total Operating Revenues).
Hospital Operating.........................US Federal Income
.......Margin %....................................Tax Rate
.....Up to 5%............................0%
.....5% to 10%.........................35% on the excess profit above 5%
....10% to 15%.......................70% on the excess profit above 10%
....Above 15%........................90% on the excess profit above 15%
All of the tax proceeds raised here should be used to reduce the US Deficit.
