Monday, December 31, 2012

Keep Sequester In and Make Hagel Defense Secretary in Short Order

In the current fiscal cliff negotiations, the most important items are the impact on the US economy, on US full-time job creation, on the US Debt, and on US National Security.

Thus, the country needs a wise Grand Bargain immediately.  That can't be done because the negotiators, being nearly all men, are too stubborn.....more concerned about winning than doing what is best for the country.

Since we can't get a wise Grand Bargain now, then it is critical that the Sequester remains in place.

The country has over $16 trillion of Debt.  But in real economic terms, it is much higher than that because the huge pension and other post-retirement health care benefit and other liabilities related to US government employees, and particularly so related to US military veterans, are not computed by the US Government in the same manner as they are by private companies.

And by using much too rosy US Real GDP annual average growth rate projections in the next ten years, the US Government is substantially understating the projected level of US Debt ten years out. 

Given the huge amount of US Debt, which negatively impacts US National Security, it is clear that there should be steps taken to dramatically reduce it.

One of the most important steps to take as soon as possible is to make Chuck Hagel US Secretary of Defense.

In addition to his broad US defense and foreign affairs experience, Hagel was also an infantry soldier in Vietnam.  Thus he has observed first-hand the military from the lower ranks.  Having served in the US Army also at the bottom levels, I think you get a much better view of how to properly fix the US Army, than from above as a high-level, isolated General, spending all your time with other Generals and with US Defense Contractors.

And unlike nearly anyone else, Hagel won't knuckle under to unreasonable demands made by the Pentagon Brass.  

So, I think that Hagel could do a great job of strengthening US National Security by wisely and substantially reducing US Defense Spending, and doing so without harming the US Defense mission by one iota.

And taking wise steps to reduce pensions and other post-retirement health care benefits and other benefits are just one of many steps needed. 

In addition, many military bases are not needed. 

And US Defense Contractor Spending must be dramatically cut. 

Also, you don't need so many military support personnel. 

And you don't need so many high-level military officers. 

And the many extravagant economic benefits received by high-level military officers need to be sharply curtailed. 

And lastly, we should depart from Afghanistan more quickly than is now planned.

Also, there needs to be a dramatic cut in non-defense spending, not just a dramatic reduction in pension and other post-retirement health care and other benefits, but also a substantial reduction in regular health care insurance costs, and also a significant reduction in the number of US government employees.  There needs to be outside independent studies performed, which focus on what the number of US government personnel are needed to successfully fulfill the mission of each US government sub-section.

And the widely used US Government employee practice of "Use it or Lose it".....all of your annual budget, that is..... must be stopped.

And on the non-discretionary front, there should be dramatic reductions in Medicare Costs.  All you have to do is to view the detail of charges in a hospital bill to realize that there is something awful that has happened to the country's health care system.

And you have to start with the hospital that has these unbelievable charges.

Non-profit Hospitals make a substantial amount of profit.  This isn't right.....not even close to being right.

And starting in 2014, when the Affordable Care Act totally kicks in, these Non-profit Hospitals will be making even substantially more profit.  And when I do the math, their average After-tax Profit Margin as a Percentage of Revenues will be higher than that of nearly half of the 30 Dow Industrial Companies.  This is crazy.

These excessive profits of Non-profit Hospitals need to be used to reduce patient service fees charged, and the US Government should be a major economic beneficiary here.

And many of these Non-profit Hospitals give out enormous pensions, which need to be dramatically reduced.  The ultimate payers of these extravagant pensions are the patients given unbelievably high hospital bills.

So that's my case for why it is so important to keep the Sequester going now, and for the US government to take steps to wisely reduce spending.

OK, so what about the rest of the US fiscal cliff negotiations.

I think there is too much focus on the income threshold.....$250,000 or $450,000 or $550,000.  To get a deal done quickly, I would just use $550,000 for now.  When the Grand Bargain is debated later on, you still have a chance to bring this $550,000 income threshold down some.

There needs to be some middle ground on the estate tax.  The Clinton exemption amount is too low and the Clinton tax rate is too high.

And the Bush exemption is too high and the Bush tax rate is too low.

Just pick something somewhere in between for now to just close this deal.  It can be debated further later when the Grand Bargain is negotiated.

You have to have Unemployment Benefits extended.  So the US government continually refuses to stimulate the US economy which would change the status of many of the unemployed to employed status, and it's the unemployed's fault for being unemployed?  Give me a break!  What's going on here on this issue is a morale outrage.

And why is it that doctors shouldn't also sacrifice for the good of the country?  Why not just give Docs something like half of a Doc-fix, instead of a whole fix.  What kind of a country in a desperate financial condition gives already financially well-heeled doctors a 100% fix on Medicare fees, but at the same time, is quick to reduce Medicare benefits of the lower and middle income elderly?

And the Alternative Minimum Tax should be fairly patched.  The US Government incompetently set this up in the first place.  But then, for the good of the country, why not give a permanent patch which is below 100%?  Everyone should be contributing to help solving the complete financial mess the country is in, even including the taxpayers unfortunately hit by the Alternative Minimum Tax.  I can think of so many other US tax items which are unfair.  Why just single out the Alternative Minimum Tax?

Tuesday, December 18, 2012

US Fiscal Cliff Trade-off #28: School Security Construction Fixups in Exchange For Stiff Excise Tax on Firearms and Ammunition and Gross Receipts Tax on Lobbying Firms Like the NRA

In the President’s previously proposed American Jobs Act, which didn’t pass the US Congress, were $30 bil of School Contruction Fixups.  This was part of the President’s much needed job-creating US Infrastructure Investments.

My recommendation here is to invest in a substantial amount of School Security Construction Fixups.  The purpose here is to make it extremely difficult for someone armed to be able to break into a School.

My definition of Schools, both Public and Private ones, would include not just K-12 Schools, but also large facilities holding many even younger children.

And my definition of School here would also include Community Colleges, Public Universities, and Private Universities.

And then there should be very healthy grants for a portion of other School Construction Fixups, including energy efficiency investments, which both save future energy costs and help us on climate change.

So, how to pay for these substantial job-creating School infrastructure investments?

Well, the energy efficiency investments should be designed so that they do not cost the US Government a dime, in the long run.  How?  By having the US Government share in a portion of the subsequent years’ energy cost savings.

And the remaining of the School Infrastructure Investments, including the Security Construction Investments, should be paid for by a very stiff US Federal Excise Tax on both the purchaser and on the seller of every firearm and on all ammunition.  And this US Federal Excise Tax should be a progressive one, where the percentage increases as the total purchase price increases.

Also, there should be a continuing annual very healthy US Federal License Fee paid for each firearm held by US citizens.

And lastly, there should be a hefty, very progressive US Federal Gross Receipts Tax on all receipts of non-profit organizations, like the National Rifle Association, the American Petroleum Institute, the Business Roundtable, the Chamber of Commerce, the American Hospital Association, America’s Health Insurance Plans, and the American Pharmaceutical Association, all involved heavily in lobbying for industry special interests.

When you think about all of the above non-profit organizations, they have all, without exception, severely damaged one or more of the following:  the nation’s security, the US economy, full-time US job creation at a livable wage, economic fairness between the wealthy and everyone else, and the US Debt level.   

And also any political non-profit organization should pay this stiff US Federal Gross Receipts Tax.

It should be easy to design this overall multi-faceted package such that there ends up being a substantial US Debt reduction, which can be used to help solve the US Fiscal Cliff.

Thursday, December 13, 2012

US Fiscal Cliff Trade-off #27: Non-Profit Hospitals Must Adopt Sounder, Fairer Fiscal Measures or Pay Health Care Fees

Probably more than anything else, the long-term financial status of US Non-Profit Hospitals will determine ultimately how successful the Affordable Care Act will be.

The key single measure of the financial strength of a Non-Profit Hospital Organization is its Net Assets, the excess of its Total Assets over its Total Liabilities.

The Net Assets of Non-Profit Hospitals were very dismal after the 2008 financial meltdown.  Since then, with much stronger stock and bond markets, as well as the new Affordable Care Act, both under the Obama Administration, the Net Assets of Non-Profit Hospital Organizations have grown dramatically as you can see in a previous post I made on Non-Profit Hospitals.


What drives the buildup of a Non-Profit Hospital’s Net Assets are mainly its Hospital Operating Income and its Investment Returns, both shown in its Operating Statement.

I did a quick review of the most recent audited financial statements of 53 of the largest Non-Profit Hospital Organizations.  Below here is some key information related to the 37 of these that had Net Assets of more than $2 bil each.
















Current Current
Current



Year Year Current Year



Net Total Year Total


Date Assets Investments PPE, net Assets



mil $s mil $s mil $s mil $s
Ascension Health MO Jun 2012 12,923 10,685 6,604 23,776
Kaiser Permanente CA Dec 2011 12,495 21,707 19,753 46,699
Catholic Health Initiatives CO Jun 2012 7,308 5,938 5,347 15,012
Sutter Health CA Dec 2011 6,528 4,047 5,668 11,820
Partners HealthCare Systems MA Sep 2011 5,454 5,477 3,945 11,505
Providence Health & Services WA Dec 2011 5,401 3,402 4,679 10,180
Trinity Health MI Jun 2012 4,869 4,664 4,222 11,676
Mayo Clinic MN Dec 2011 4,729 4,171 3,499 10,129
Dignity Health CA Jun 2012 4,729 5,656 4,217 13,544
Adventist Health System* FL Dec 2011 4,677 3,592 4,168 9,003
Cleveland Clinic OH Dec 2011 4,361 4,279 3,399 9,100
UPMC PA Jun 2012 4,175 4,051 3,596 9,481
BJC Health System MO Dec 2011 4,031 3,566 1,860 6,537
Memorial Sloan-Kettering Cancer Center NY Dec 2011 3,941 3,391 2,147 6,790
Advocate HealthCare Network IL Dec 2011 3,560 3,752 1,674 6,979
The Methodist Hospital System TX Dec 2011 3,406 2,615 2,467 5,558
NY & Presbyterian Hospital NY Dec 2011 3,228 2,606 1,795 5,359
Catholic Health East PA Dec 2011 3,142 1,237 2,071 6,857
Inova Health System VA Dec 2011 3,078 2,889 1,155 4,682
Carolinas Health Care System NC Dec 2011 2,911 2,322 2,276 5,595
Banner Health AZ Dec 2011 2,897 3,115 2,441 6,717
Baylor HealthCare System TX Jun 2011 2,881 1,980 1,941 5,172
Johns Hopkins Health System MD Jun 2012 2,872 2,010 2,853 6,180
Indiana University Health IN Dec 2011 2,859 1,684 2,705 5,835
Texas Health Resources TX Dec 2011 2,757 1,907 1,665 4,609
Northwestern Memorial Healthcare IL Aug 2012 2,619 2,632 1,358 4,702
Baycare Health System FL Dec 2011 2,417 1,964 1,437 4,014
Sentara Health Care VA Dec 2011 2,406 1,820 1,520 4,845
Jefferson Health System PA Jun 2012 2,400 2,131 1,458 4,343
Christus Health TX Jun 2012 2,305 1,495 1,719 4,608
Catholic Health Care Partners OH Dec 2011 2,261 2,241 1,994 5,358
Scripps Health CA Sep 2012 2,243 1,579 1,040 3,636
North Shore-Long Island Jewish Health System NY Dec 2011 2,190 1,999 3,104 7,263
OhioHealth OH Dec 2011 2,162 2,153 803 3,543
Duke University Health System NC Jun 2012 2,069 2,197 1,285 4,166
Cedars-Sinai Medical Center CA Jun 2012 2,058 1,304 1,569 3,893
Baptist Health South Florida FL Sep 2011 2,001 2,098 1,092 3,632







Total all 37

146,343 134,356 114,526 312,798







Net Assets/Total Assets

47%







Percentage of Total Assets


43% 37%

* Adventist Health System's Total Investments include Cash of $3,491. 

How are these large Non-Profit Hospitals doing from a financial strength standpoint?

Well, when their Total Net Assets of $146 bil are 47% of their Total Assets, and thus their Total Liabilities are only 53% of their Total Assets, I call that exceptional financial strength.

And this incredible financial strength was enhanced dramatically during the Obama Administration, with the very strong stock and bond markets, and the positive impact of much lower interest rates due to Fed Action.

Further, the Affordable Care Act also helped much here.  The very thorough intellectual discourse on health care delivery by many bright people outside the US Government working in the Health Care industry, as well as by US Government personnel, resulted in fiscal measures adopted that added significantly to the financial strength of Non-Profit Hospital Organizations.

But still, much, much more needs to be done to drive down total health care costs.  And the hospitals are where this huge opportunity exists to dramatically further bring down the total health care costs.  There needs to be an all-out assault on the elimination of all extravagant and unnecessary costs incurred by Non-Profit Hospital Organizations.

So, just what kinds of Assets do Non-Profit Hospitals have?

When you think of Hospital assets, what quickly comes to mind are huge Buildings, Land, and Hospital Equipment.

But as you can see from the above chart, as a surprise to many, Total Investments of Non-Profit Hospital Organizations comprise 43% of Total Assets, higher than Total Property, Plant and Equipment, which comprises 37% of Total Assets.

Why is this the case?

Well, the decades of tax-free hospital profits and tax-free investment returns are by far the predominant driver of the growth in the treasure chest of Non-Profit Hospital Organizations' Investments in equity and debt securities.

So, what's the downside to these huge buildups in both Investments and in Net Assets?

Well, they don't reduce health care costs.  What has to happen is that when Net Assets become so huge, the Non-Profit Hospital must return much of this excess to hospital patients and to the US Government through substantial reductions in fees charged the patient by the hospital.

Now let me turn my attention to one specific area where there is an incredible opportunity to reduce total health care costs.....retirement plans of Non-Profit Hospital Organizations.

From a quick review of audited footnotes, below here are 42 of these 53 Non-Profit Hospital Organizations with more than $100 mil each of Total Pension and Post-Retirement Liabilities at the most recent audited financial statement date.






Other




Post



Retirement Physician Total



Pension Benefits Retirement Retirement


Date Liability Liability Liability Liability



mil $s mil $s mil $s mil $s







Kaiser Permanente CA Dec 2011 10,392 7,101 3,943 21,436
Ascension Health MO Jun 2012 6,437 12
6,449
Mayo Clinic MN Dec 2011 5,292 1,028
6,320
Trinity Health MI Jun 2012 5,161 117
5,278
Dignity Health CA Jun 2012 3,724 123
3,847
Catholic Health Initiatives CO Jun 2012 3,601

3,601
Partners HealthCare Systems MA Sep 2011 3,347 114
3,461
Sutter Health CA Dec 2011 2,216 200
2,416
Providence Health & Services WA Dec 2011 1,884

1,884
BJC Healthcare MO Dec 2011 1,627

1,627
University Pennsylvania Health System PA Jun 2012 1,434 167
1,601
Cleveland Clinic OH Dec 2011 1,438 127
1,565
Catholic Health Care Partners OH Dec 2011 1,530 25
1,555
North Shore-Long Island Jewish Health System NY Dec 2011 1,475 78
1,553
Johns Hopkins Health System MD Jun 2012 1,466

1,466
Catholic Health East PA Dec 2011 1,362

1,362
Jefferson Health System PA Jun 2012 1,356

1,356
Sentara Health Care VA Dec 2011 1,295

1,295
UPMC PA Jun 2012 1,240

1,240
Memorial Sloan-Kettering Cancer Center NY Dec 2011 946 189
1,135
Adventist Health System FL Dec 2011 995

995
Christus Health TX Jun 2012 901 19
920
NY & Presbyterian Hospital NY Dec 2011 878 35
913
Duke University Health System NC Jun 2012 810 77
887
Loma Linda University Medical Center CA Dec 2011 863

863
Carolinas Health Care System NC Dec 2011 806

806
Advocate HealthCare Network IL Dec 2011 762

762
Shands Teaching Hospital & Clinics FL Jun 2012 678 2
680
Inova Health System VA Dec 2011 653 11
664
Northwestern Memorial Healthcare IL Aug 2012 662

662
Iowa Health System IA Dec 2011 618

618
ProMedica Health Care OH Dec 2011 588 16
604
OhioHealth OH Dec 2011 534

534
NYU Hospitals Center NY Aug 2012 416 70
486
Allina Health System MN Dec 2011 445

445
Indiana University Health IN Dec 2011 439

439
John Muir Health CA Dec 2011 383 47
430
Cedars-Sinai Medical Center CA Jun 2012 328

328
Stanford Hospital & Clinic CA Aug 2011 206 88
294
Sharp Healthcare CA Sep 2012 291

291
Banner Health AZ Dec 2011 197

197
Baycare Health System FL Dec 2011 162

162







Total all 42

69,838 9,646 3,943 83,427

Yeah, that's Total Retirement Liabilities, mostly Pension Obligations, of $83.4 bil just for these 42 Non-Profit Hospital Organizations.

And from a quick review of audited footnotes, below here are just 32 Non-Profit Hospital Organizations with more than $100 mil each of Total Unfunded Pension Benefits and Unfunded Other Post-retirement Benefits at the most recent audited financial statement date.  This Unfunded amount is the excess of the related Liabilities for these Retirement Benefits over the current Fair Market Value of Assets that have been set aside to be used to ultimately pay for these Retirement Benefits.






Under





Funded Under Total



Under Other Funded Under



Funded Post Physician Funded



Pension Retirement Retirement Retirement


Date Plans Plans Plans Plans



mil $s mil $s mil $s mil $s
Kaiser Permanente CA Dec 2011 5,240 7,101 3,943 16,284
Mayo Clinic MN Dec 2011 639 1,028
1,667
Dignity Health CA Jun 2012 1,284 123
1,407
Trinity Health MI Jun 2012 1,020 38
1,058
Partners HealthCare Systems MA Sep 2011 978 80
1,058
Catholic Health Initiatives CO Jun 2012 893

893
Providence Health & Services WA Dec 2011 777

777
University Pennsylvania Health System PA Jun 2012 575 167
742
Cleveland Clinic OH Dec 2011 522 127
649
Memorial Sloan-Kettering Cancer Center NY Dec 2011 369 189
558
Johns Hopkins Health System MD Jun 2012 546

546
North Shore-Long Island Jewish Health System NY Dec 2011 439 78
517
Jefferson Health System PA Jun 2012 479

479
BJC Health System MO Dec 2011 474

474
Ascension Health MO Jun 2012 445 12
457
Catholic Health East PA Dec 2011 439

439
NY & Presbyterian Hospital NY Dec 2011 262 35
297
Sentara Health Care VA Dec 2011 291
291
Catholic Health Care Partners OH Dec 2011 241 25
266
UPMC PA Jun 2012 240

240
Christus Health TX Jun 2012 194 19
213
Duke University Health System NC Jun 2012 126 77
203
OhioHealth OH Dec 2011 164

164
Indiana University Health IN Dec 2011 139

139
Sutter Health CA Dec 2011 2 116
118
Advocate HealthCare Network IL Dec 2011 108

108







Total all 26

16,886 9,215 3,943 30,044


Late Additions












NYU Hospitals Center NY Aug 2012 142 70
212
Carolinas Health Care System NC Dec 2011 161

161
Iowa Health System IA Dec 2011 155

155
ProMedica Health Care OH Dec 2011 135 16
151
Stanford Hospital & Clinics CA Aug 2011 52 88
140
John Muir Health CA Dec 2011 86 47
133







Total all 32

17,617 9,436 3,943 30,996


Yeah, that's $31 bil of Total Unfunded Retirement Liabilities for just these 32 Non-Profit Hospital Organizations, and just one of them, Kaiser Permanente, had $16.3 bil, or 53% of the Total.

My hunch is that when hospitals granted these retirement benefits to many of their employees, and particularly the enormous ones to their highly-compensated employees, they didn't give the proper amount of thought to just who ultimately has to pay for these huge amounts of retirement benefits.

Well, it's the patient treated at the hospital, and thus the total health care costs of the entire US health care system.

And thus it's also the US Government.

And thus it's also US businesses.

When you review these hospital footnotes on not just the Pension Plan benefits and the Other Post-retirement benefits, but also on the Defined Contribution Plan benefits, you just have to shake your head as to how these Non-profit hospitals have already, and will continue to, just massively balloon up the country's health care costs, particularly so by giving out such enormous retirement benefits to their many already financially well-heeled, highly-compensated employees.

When the country faces such a huge US Debt problem, which has so negatively impacted our National Security, it only makes sense that these monstrously extravagant retirement benefit plans of Non-Profit Hospital Organizations, especially those benefiting the highly-compensated employees, have to be dramatically cut back.

As a starting point, to get a better handle on the amount of the extravagant abuse here, all US Non-Profit Hospitals should be required to disclose publicly, for all US citizens to see, all of dollar amounts of the retirement benefits each of their top 5 executives receive each year.....something very similar to what is now shown in the publicly-held company Proxy Statements filed with the SEC.

And the most important retirement benefit disclosure here is the Increase in the Pension Value in just the current year for each of these 5 top executives.  And also a quantification of the dollar benefit of all of the other retirement benefits they have received in the current year, including  Post-retirement Benefits and Profit Sharing Benefits.
 
Since US citizens are the ones that ultimately pay for these enormous retirement benefits, it is only fair that they can see on the front end, just what kinds of retirement benefits are accruing each year to each of the top 5 executives of each Non-Profit Hospital Organization.

Now let me focus on some audited operating results of these 53 large Non-Profit Hospital Organizations.  

First, below here are the Hospital Operating Income and the Total Operating Revenues for each of these 53 Hospital Organizations in the most recent two years.




Hospital Hospital


Total Total


Current Prior Operating Operating
Current Prior Operating Operating


Year Year Income Income
Year Year Revenues Revenues


Hospital Hospital Increase Increase
Total Total Increase Increase


Operating Operating (Decrease) (Decrease)
Operating Operating (Decrease) (Decrease)


Income Income Amount %
Revenues Revenues Amount %


mil $s mil $s


mil $s mil $s

Kaiser Permanente CA 1,587 1,202 385 32%
47,870 44,227 3,643 8%
Ascension Health MO 934 422 512 121%
16,611 15,407 1,204 8%
Sutter Health CA 697 685 12 2%
9,079 8,784 295 3%
Mayo Clinic MN 630 540 90 17%
8,495 7,965 530 7%
Adventist Health System FL 386 313 73 23%
6,623 5,930 693 12%
UPMC PA 351 406 (55) -14%
9,637 8,803 834 9%
Catholic Health Initiatives CO 312 319 (7) -2%
9,844 8,836 1,008 11%
Cleveland Clinic OH 301 251 50 20%
5,827 5,600 227 4%
Advocate HealthCare Network IL 301 335 (34) -10%
4,440 4,293 147 3%
Baylor HealthCare System TX 286 305 (19) -6%
4,028 3,826 202 5%
UCLA Medical Center CA 274 224 50 22%
1,720 1,587 133 8%
Trinity Health MI 270 225 45 20%
8,901 7,351 1,550 21%
NYU Hospitals Center NY 249 186 63 34%
1,989 1,732 257 15%
Sentara Health Care VA 245 190 55 29%
3,930 3,386 544 16%
Banner Health AZ 242 281 (39) -14%
4,741 4,616 125 3%
Sharp Healthcare CA 242 206 36 17%
2,711 2,494 217 9%
Providence Health & Services WA 239 330 (91) -28%
8,739 8,082 657 8%
Duke University Health System NC 238 189 49 26%
2,478 2,278 200 9%
Partners HealthCare Systems MA 233 195 38 19%
8,481 8,008 473 6%
Scripps Health CA 233 218 15 7%
2,564 2,451 113 5%
OhioHealth OH 229 195 34 17%
2,471 2,328 143 6%
Jefferson Health System PA 223 166 57 34%
3,102 2,951 151 5%
University Pennsylvania Health System PA 217 236 (19) -8%
3,564 3,367 197 6%
Inova Health System VA 216 199 17 9%
2,391 2,325 66 3%
Baptist Health South Florida FL 213 150 63 42%
2,304 2,176 128 6%
Memorial Sloan-Kettering Cancer Center NY 212 89 123 138%
2,740 2,414 326 14%
Johns Hopkins Health System MD 208 216 (8) -4%
4,761 4,097 664 16%
BJC Health System MO 189 206 (17) -8%
3,626 3,466 160 5%
Indiana University Health IN 186 202 (16) -8%
4,578 4,329 249 6%
Geisinger Health System PA 181 204 (23) -11%
2,919 2,613 306 12%
NY & Presbyterian Hospital NY 180 115 65 57%
3,679 3,461 218 6%
The Methodist Hospital System TX 174 167 7 4%
2,285 2,116 169 8%
University California San Francisco CA 174 151 23 15%
1,889 1,788 101 6%
Stanford Hospital & Clinics CA 173 100 73 73%
2,191 1,967 224 11%
Allina Health System MN 172 189 (17) -9%
3,238 3,079 159 5%
Baycare Health System FL 165 130 35 27%
2,426 2,284 142 6%
Texas Health Resources TX 163 193 (30) -16%
3,438 2,954 484 16%
Carolinas Health Care System NC 154 129 25 19%
3,673 3,368 305 9%
North Shore-Long Island Jewish Health System NY 134 141 (7) -5%
6,322 5,610 712 13%
University North Carolina Hospital Chapel Hill NC 121 98 23 23%
1,185 1,048 137 13%
Catholic Health Care Partners OH 120 100 20 20%
3,587 3,401 186 5%
University Chicago Medical Center IL 119 75 44 59%
1,290 1,182 108 9%
Shands Teaching Hospital & Clinics FL 114 39 75 192%
1,086 977 109 11%
Cedars-Sinai Medical Center CA 112 183 (71) -39%
2,860 2,728 132 5%
Adventist Health West CA 97 163 (66) -40%
2,653 2,563 90 4%
Northwestern Memorial Healthcare IL 88 92 (4) -4%
1,702 1,684 18 1%
ProMedica Health Care OH 80 76 4 5%
1,435 1,266 169 13%
Loma Linda University Medical Center CA 77 91 (14) -15%
1,201 1,152 49 4%
John Muir Health CA 73 132 (59) -45%
1,449 1,462 (13) -1%
Iowa Health System IA 70 58 12 21%
2,380 2,145 235 11%
Dignity Health CA 59 243 (184) -76%
10,522 10,283 239 2%
Christus Health TX 50 100 (50) -50%
3,802 3,781 21 1%
Catholic Health East PA 48 37 11 30%
4,341 4,042 299 7%







Total all 53
13,041 11,687 1,354 12%
269,798 250,063 19,735 8%











Hospital Operating Income/Total Operating Revenues








..All 53
4.83% 4.67%






..All but Kaiser Permanente
5.16% 5.09%







So clearly, these Non-Profit Hospital Organizations are continuing to do exceptionally well in operating results, with Total Operating Revenues up 8% and Total Hospital Operating Income up 12% in the most recent year.

And generating Total Hospital Operating Income as a Percentage of Total Operating Revenues of 4.83% is indeed superb.  After all, making $4.83 of tax-free Profit for every $100.00 of Revenues is frankly obscene for organizations that are supposed to be Non-Profits.
 
Second, below here are the highest to lowest Hospital Operating Income as a Percentage of Total Operating Revenues for these 53 large Non-Profit Hospital Organizations.




Current


Year


Hospital


Operating


Income


Divided By


Total


Operating


Revenues



UCLA Medical Center CA 15.93%
NYU Hospitals Center NY 12.52%
Shands Teaching Hospital & Clinics FL 10.50%
University North Carolina Hospital Chapel Hill NC 10.21%
Duke University Health System NC 9.60%
OhioHealth OH 9.27%
Baptist Health South Florida FL 9.24%
University Chicago Medical Center IL 9.22%
University California San Francisco CA 9.21%
Scripps Health CA 9.09%
Inova Health System VA 9.03%
Sharp Healthcare CA 8.93%
Stanford Hospital & Clinics CA 7.90%
Memorial Sloan-Kettering Cancer Center NY 7.74%
Sutter Health CA 7.68%
The Methodist Hospital System TX 7.61%
Mayo Clinic MN 7.42%
Jefferson Health System PA 7.19%
Baylor HealthCare System TX 7.10%
Baycare Health System FL 6.80%
Advocate HealthCare Network IL 6.78%
Loma Linda University Medical Center CA 6.41%
Sentara Health Care VA 6.23%
Geisinger Health System PA 6.20%
University Pennsylvania Health System PA 6.09%
Adventist Health System FL 5.83%
Ascension Health MO 5.62%
ProMedica Health Care OH 5.57%
Allina Health System MN 5.31%
BJC Health System MO 5.21%
Northwestern Memorial Healthcare IL 5.17%
Cleveland Clinic OH 5.17%
Banner Health AZ 5.10%
John Muir Health CA 5.04%
NY & Presbyterian Hospital NY 4.89%
Texas Health Resources TX 4.74%
Johns Hopkins Health System MD 4.37%
Carolinas Health Care System NC 4.19%
Indiana University Health IN 4.06%
Cedars-Sinai Medical Center CA 3.92%
Adventist Health West CA 3.66%
UPMC PA 3.64%
Catholic Health Care Partners OH 3.35%
Kaiser Permanente CA 3.32%
Catholic Health Initiatives CO 3.17%
Trinity Health MI 3.03%
Iowa Health System IA 2.94%
Partners HealthCare Systems MA 2.75%
Providence Health & Services WA 2.73%
North Shore-Long Island Jewish Health System NY 2.12%
Christus Health TX 1.32%
Catholic Health East PA 1.11%
Dignity Health CA 0.56%


Total all 53
4.83%

And yeah, 34 of these 53, or 64% of them, have Hospital Operating Profits as a Percentage of Total Operating Revenues which are north of 5.00%.....again, frankly obscene Profits for what are supposed to be Non-Profits.  

Third, below here are the Bad Debts Expense and Hospital Operating Income, which already includes Bad Debts Expense as a reduction, of the 43 of these large Non-Profit Hospital Organizations which disclosed their Bad Debts Expense.



Current Current


Year Year


Bad Hospital


Debts Operating


Expense Income Ratio


mil $s mil $s
Catholic Hospitals



Ascension Health MO 1,006 934 1.08
Dignity Health CA 891 59 15.10
Catholic Health Initiatives CO 709 312 2.27
Trinity Health MI 431 270 1.60
Providence Health & Services WA 320 239 1.34
Catholic Health East PA 249 48 5.19
Catholic Health Care Partners OH 212 120 1.77
Christus Health TX 206 50 4.12





Total 8 Catholic Hospitals
4,024 2,032 1.98





Non-Catholic Hospitals



Sutter Health CA 375 697 0.54
Cleveland Clinic OH 350 301 1.16
Banner Health AZ 316 242 1.31
Texas Health Resources TX 307 163 1.88
Baylor HealthCare System TX 284 286 0.99
Cedars-Sinai Medical Center CA 284 112 2.54
Baptist Health South Florida FL 281 213 1.32
Carolinas Health Care System NC 272 154 1.77
Indiana University Health IN 256 186 1.38
Adventist Health System FL 251 386 0.65
UPMC PA 234 351 0.67
Sentara Health Care VA 225 245 0.92
Advocate HealthCare Network IL 212 301 0.70
University Pennsylvania Health System PA 182 217 0.84
Mayo Clinic MN 160 630 0.25
Baycare Health System FL 143 165 0.87
BJC Health System MO 133 189 0.70
The Methodist Hospital System TX 119 174 0.68
Johns Hopkins Health System MD 116 208 0.56
Adventist Health West CA 113 97 1.16
Partners HealthCare Systems MA 101 233 0.43
OhioHealth OH 99 229 0.43
North Shore-Long Island Jewish Health System NY 99 134 0.74
Iowa Health System IA 94 70 1.34
Jefferson Health System PA 84 223 0.38
Inova Health System VA 83 216 0.38
Duke University Health System NC 83 238 0.35
Stanford Hospital & Clinics CA 82 173 0.47
Allina Health System MN 78 172 0.45
Scripps Health CA 72 233 0.31
University Chicago Medical Center IL 45 119 0.38
Geisinger Health System PA 42 181 0.23
Northwestern Memorial Healthcare IL 32 88 0.36
Sharp Healthcare CA 30 242 0.12
Memorial Sloan-Kettering Cancer Center NY 18 212 0.08





Total 35 Non-Catholic Hospitals
5,655 8,080 0.70




Total all 43 Hospitals
9,679 10,112 0.96

The Total Bad Debts Expense of these 43 Non-Profit Hospital Organizations in the most recent year were up 8% over the previous year.

With the Affordable Care Act, starting in 2014, many of the uninsured will now be insured, and many of the underinsured will now be better insured.  Thus, the Bad Debts Expense included in the Operating Statements of these Non-Profit Hospital Organizations should drop very significantly.

And yeah, these 43 Hospitals had Total Bad Debts Expense which was nearly identical with the amount of their Total Hospital Operating Income in the most recent year. 

And yeah, the 8 largest Catholic Hospitals have Total Bad Debts Expense which were nearly double the amount of their Total Hospital Operating Income in the most recent year.

And fourth, below here are the Costs of Charity Care and Hospital Operating Income, which already includes these Costs of Charity Care as a reduction, of 36 of the largest Non-Profit Hospital Organizations which disclosed their Costs of Charity Care.



Current


Year Current


Cost of Year


Charity Hospital


Care Operating


Provided Income Ratio


mil $s mil $s
Catholic Hospitals



Ascension Health MO 469 934 0.50
Catholic Health Initiatives CO 249 312 0.80
Providence Health & Services WA 204 239 0.85
Dignity Health CA 188 59 3.19
Trinity Health MI 178 270 0.66
Christus Health TX 169 50 3.38
Catholic Health Care Partners OH 151 120 1.26
Catholic Health East PA 59 48 1.23



Total 8 Catholic Hospitals
1,667 2,032 0.82





Non-Catholic Hospitals



Adventist Health System FL 276 386 0.72
Partners HealthCare Systems MA 159 233 0.68
Texas Health Resources TX 158 163 0.97
Indiana University Health IN 149 186 0.80
Cleveland Clinic OH 145 301 0.48
Sutter Health CA 140 697 0.20
Carolinas Health Care System NC 132 154 0.86
North Shore-Long Island Jewish Health System NY 128 134 0.96
Baylor HealthCare System TX 120 286 0.42
Banner Health AZ 110 242 0.45
Inova Health System VA 108 216 0.50
BJC Health System MO 104 189 0.55
UPMC PA 96 351 0.27
Baycare Health System FL 78 165 0.47
Advocate HealthCare Network IL 76 301 0.25
Duke University Health System NC 69 238 0.29
Mayo Clinic MN 62 630 0.10
Northwestern Memorial Healthcare IL 58 88 0.66
Adventist Health West CA 57 97 0.59
Cedars-Sinai Medical Center CA 43 112 0.38
Scripps Health CA 39 233 0.17
Iowa Health System IA 39 70 0.56
Allina Health System MN 35 172 0.20
Stanford Hospital & Clinics CA 22 173 0.13
Geisinger Health System PA 22 181 0.12
Memorial Sloan-Kettering Cancer Center NY 20 212 0.09
University Chicago Medical Center IL 20 119 0.17
Jefferson Health System PA 16 223 0.07





Total all 28 Non-Catholic Hospitals
2,481 6,552 0.38





Total all 36 Hospitals
4,148 8,584 0.48





Charity Care Revenue Foregone at Average Charity Care Cost of 28%  

…Catholic Hospitals
5,954 2,032 2.93
…Non-Catholic Hospitals
8,861 6,552 1.35
…All Hospitals
14,814 8,584 1.73

The Total Charity Costs of these 36 Non-Profit Hospital Organizations in the current year were up 10% over the prior year.

With the Affordable Care Act, starting in 2014, many of the uninsured will now be insured, and many of the underinsured will now be better insured.  Thus, much of the previously Foregone Revenues from Charity Care will now be included in Hospital Operating Income in the Operating Statements of these Non-Profit Hospital Organizations.

And yeah, the Total Costs of Charity Care for all 36 Hospitals was 48% of the Total Hospital Operating Income in the most recent year.  And when you gross up the Charity Care Costs based on the overall 28% average Charity Care Costs to Revenue Ratio, the Estimated Total Charity Care Revenue Now Foregone is a very hefty 1.73 times the Total Hospital Operating Income.
 
And yeah, the Total Costs of Charity Care for all 8 Catholic Hospitals was 82% of the Total Hospital Operating Income in the most recent year.  And when you gross up the Charity Care Costs based on the overall 28% average Charity Care Costs to Revenue Ratio, the Estimated Total Charity Care Revenue Now Foregone is an even much more hefty 2.93 times the Total Hospital Operating Income.

Most of these Non-Profit Hospital Organizations are already making very robust Hospital Operating Profits.

In addition, they are now generating very nice investment returns, from their huge treasure chest of Investments in debt and equity securities, which are not included in their Hospital Operating Income.

And the overwhelming majority of these Non-Profit Hospital Organizations will be making just extravagantly obscene Hospital Operating Profits, starting in 2014, given the huge earnings increases which will result from both lower Bad Debt Expense and the previously Foregone Revenues from Charity Care Patient Services, due to the Affordable Care Act totally kicking in then.

For the US Congress to reduce Medicare and Medicaid benefits on lower and middle income citizens in order to reach a Grand Bargain on US Debt, when at the same time, these Non-Profit Hospital Organizations will be making such extravagantly obscene profits, would take US Congressional mean-spiritedness and ineptitude to a completely different level.

Rather than reducing the US Debt by reducing Medicare and Medicaid benefits the elderly receive, a far better way is by cutting Medicare and Medicaid costs resulting from the substantial financial strengthening of Non-Profit Hospital Organizations, which will give them the financial flexibility to reduce markedly their Patient Service Fees charged.

Not only will this substantially reduce Medicare and Medicaid costs in the long run, but it will also cut health care costs of businesses and of individuals.  Thus, it will also bend down sharply the long-term health care cost curve.

In this light, below here are a handful of quick recommendations that come to mind that will either substantially strengthen the financial status of Non-Profit Hospital Organizations, or highly incentivize them to reduce patient service fees they charge, thereby allowing huge reductions in Medicare and Medicaid costs, and thus reducing the US Debt.

First, the US Government should set a reasonable standard for maximum "Audited under US generally accepted accounting principles (GAAP)" annual Hospital Operating Income as a percentage of Total Revenues. 

If a Non-Profit Hospital Organization exceeds this percentage in a given year, it should pay a Health Care Fee to the US Government Medicare and Medicaid Trust Fund of 35% of this excess Hospital Operating Income. 

Perhaps a reasonable maximum percentage here is 5%.  After all, these are Non-Profit Organizations, thus in all fairness, they shouldn't be earnings too much profit.  Thus if a Non-Profit Hospital Organization generates Audited GAAP Hospital Operating Income of $90 mil and Total Revenues of $1 bil in a given year, then it would pay a Health Care Fee of ($90 mil – 5% X $1 bil), or of $40 mil in the given year.

What the maximum percentage here should also do is to highly incentivize the Non-Profit Hospital Organization to decrease its Hospital Operating Income, ideally by reducing its patient service fees it charges.

Second, the US Government should set a reasonable standard for maximum Audited GAAP Net Asset accumulation. 

And if a Non-Profit Hospital Organization exceeds this maximum, it will pay a stiff Health Care Fee to the US Government Medicare and Medicaid Trust of a percentage in excess of the maximum.

Thus, let’s assume that the annual Health Care Fee percentage set by the US Government is 25%, and let’s also assume that the US Government sets a maximum dollar amount, which factors in the size of the Non-Profit Hospital Organization, that ends up being $500 mil for a given Non-Profit Hospital Organization.

If this Non-Profit Hospital Organization has an Audited GAAP Net Asset balance of $700 mil at the end of the current year, then it will pay an Excess Hoarding of Net Assets Health Care Fee of 25% X ($700 mil - $500 mil), or of $50 mil in the current year.

This fairly penalizes the Non-Profit Hospital Organization which excessively hoards Net Assets, instead of reducing its patient service fees it charges.

Third, the US Government should set maximum total base salaries and total incentive salaries for all upper echelon Non-Profit Hospital Organization executives, after factoring in size and responsibility. 

If a Hospital Organization pays in excess of this maximum in a given year, it pays a stiff 25% Health Care Fee on this Total Excess Compensation to the US Government Medicare and Medicaid Trust Fund.

Fourth, after analyzing footnotes of many Non-Profit Hospitals, it amazes me just how horrible the financial status of the Pension Plans of these hospitals are, even after Obama Administration actions, with the resultant very robust stock and bond markets, has dramatically helped the financial status of these Pension Funds. 

After giving due consideration to the severe health care cost crisis the country is facing, my recommendation here is for the US Government to set substantially lower maximum annual compensation amounts that are used in both defined benefit pension plan measurements and in defined contribution plans of Non-Profit Hospital Organizations.  

Thus, highly compensated hospital employees, especially the very highest compensated ones, will be accruing substantially lower pension and defined contribution benefits. 

What this also does is to substantially strengthen the devastated Pension Funds of Non-Profit Hospital Organizations. 

And it also significantly increases Hospital Operating Income, and thus also increases the key Net Asset amount.

If a Non-Profit Hospital Organization exceeds these maximum annual compensation amounts, it will pay a stiff 25% Excess Pension and/or Profit Sharing Health Care Fee to the US Government Medicare and Medicaid Trust Fund.

Fifth, the US Government should set annual maximums for each of the All Other Employee Benefits.  If a Hospital employee receives an Employee Benefit above this annual maximum, the Non-Profit Hospital Organization pays a stiff 25% Excess Other Employee Benefit Health Care Fee to the US Government Medicare and Medicaid Trust Fund.  Included in these Other Employee Benefits are Post-retirement Health Care Benefits.

Sixth, the US Government should establish much more rigid Community Benefit tests for Non-Profit Hospital Organizations.  If they aren’t met, the Hospital Organization should pay a stiff Health Care Fee to the US Government Medicare and Medicaid Trust Fund.

Seventh, the US Government should consider granting very nice incentive awards on some objective basis to US Non-Profit Hospital employees who determine wise ways to very significantly reduce their hospital's costs above a certain amount.

Eighth, all US acute-care hospitals above a certain size, including all Non-profit ones, all state and local government ones, and all for-profit Proprietary ones, should be required to submit audited annual financial statements, including related footnotes, annually to the US Dept of Health and Human Services, which would make them all readily available online for review by all US citizens. Included as part of these audited financial statements should be a Standard Executive Compensation Table for the top five highest paid hospital organization executives, similar to what is disclosed in proxy statements of US publicly-held companies.  Thus in addition to Salary and Incentive Compensation, there will also be separate disclosure of the dollar amount of the Increase in Pension Values of each of the top 5 executives.  In addition, there will be detail provided of the dollar amount of all Other Executive Compensation, including all of the Employee Benefits received by the top 5 executives.

Ninth, any hospital that provides key operating data to the US Dept of Health and Human Services, such as Patient Service Revenues, Total Revenues, Provision for Bad Debts Expense, Hospital Operating Income, Investment Income, Excess of Revenues Over Expenses, Charity Care Information, and Net Assets, which is inconsistent with the Audited under GAAP amounts shown in the Audited Financial Statements and footnotes will be assessed a stiff fine payable to the US Government Medicare and Medicaid Trust Fund, with such fines increasing significantly as the number of these deceptions increase.  The country shouldn't be condoning two different sets of hospital books.....with the more favorable numbers now going to the investment community and the less favorable numbers now going to the US Government.

And tenth, Non-Profit Hospitals should pay Medicare Taxes on all of the Employee Benefits which are received by its higher paid employees.  Included in these Employee Benefits, among many others, are Pension, Profit-Sharing, Other Post-retirement Benefits, and Health Insurance.

The money raised here by the US Government due to the above recommendations should be very substantial in amount and also should be able to be scored by the CBO.  All of it should be used to reduce the US Debt.  And the US Government Medicare and Medicaid Trust Fund should not ever be raided.  It can only be used by the US Government to pay for qualified health care services and products of individuals eligible for Medicare or Medicaid.