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.

US Big Hospitals Should Be Major Contributors in Solving Fiscal Cliff 

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.