Arizona Hospital Profits Will Sharply Increase Since Arizona Expanded Medicaid

Under the Affordable Care Act (ACA), Hospital Organizations' both future Hospital Operating Income and Bottom Line Income will be bolstered very robustly due to many of the Uninsured getting insurance and also due to the many of the Underinsured getting much better insurance.

And for Hospital Organizations operating hospitals in States electing to Expand Medicaid, this future Profit growth will be exceptionally robust.

There are specifically two items which will drive higher Hospital Organization profits due to the ACA and also especially due to States electing the Expansion of Medicaid.

First, there is the Operating Statement Provision for Bad Debts' earnings charge which will be dramatically reduced due to the substantially better insurance situation of hospital patients.  This Provision for Bad Debts' earnings charge is usually a separate report line on a Hospital Organization's audited Operating Statement.

And second, there is the Operating Statement Uncompensated Charity Care Costs' earnings charge for the amounts hospitals spend on charity care which will also be dramatically reduced.  This Estimated Costs for Uncompensated Charity Care is disclosed in a Hospital Organization's footnotes which accompany its audited financial statements.

So what about the amounts of these two items?  Well, they are very large when compared to the related Hospital Operating Income.

From a review of the Electronic Municipal Market Access (EMMA), below here are the most recent audited year's Provision for Bad Debts and Uncompensated Charity Care Costs for the 3 Arizona Non-Profit Hospital Organizations which had Net Assets above $400 mil currently:

				One Year	One
			One Year	Estimated	Year	One
		Most	Provision	Cost of	Total	Year
		Recent	For	Uncompensated	Earnings	Hospital
		Annual	Bad	Charity	Charge	Operating
		FYE	Debts	Care	of Both	Income
			mils $s	mils $s	mils $s	mils $s
Arizona Hospital Organizations
Banner Health		Dec 2012	488	149	637	290
Scottsdale Healthcare		Sep 2012	95	23	118	28
Nortern Arizona Healthcare		Jun 2013	105	3	108	30
Total all 3			688	175	863	348
Provision for Bad Debts						688
Uncompensated Charity Care Costs						175
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						1,211

So, these 3 Arizona Non-Profit Hospital Organizations had Audited Total Hospital Operating Income of $348 mil in the most recent fiscal year audited.  Driving down this $348 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $688 mil and Total Costs of Uncompensated Charity Care of another $175 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $1.211 bil, which is $863 mil higher than the reported $348 mil.
 
Granted these two earnings charges will not be totally eliminated with the ACA and in combination with States electing to Expand Medicaid, but a substantial amount of these two earnings charges will be eliminated, and especially so if States elect to Expand Medicaid, which is the predominant driver of these two earnings charges being very substantially reduced.

And the above two large earnings charges are just for one year.

I really don't understand how a financially savvy State Governor and financially savvy State Legislatures could possibly vote to not Expand Medicaid.  The US Government is 100% funding the first three years of Medicaid Expansion.

Further, if Medicaid is Expanded, the Hospital Organizations will be getting these just huge increases in their annual earnings in each future year, which will ultimately accrue to the benefit of State citizens when they are hospitalized and will be paying much lower hospital charges.  It will also cut the US Debt markedly since the US Government is paying for a good chunk of these hospitalization charges.

All of the above make the fiscal decision pretty straight forward, and Arizona Governor Jan Brewer did indeed make the right one by Expanding Medicaid.  Arizona citizens should be very pleased with her decision here.

I really can't understand why some other State Governors and State Legislators would want to financially hammer their State Hospital Organizations, their State citizens and the US Government Debt by refusing to Expand Medicaid.

Very financially astute Republican State Governors like Ohio's John Kasich and Florida's Rick Scott, who also has a keen insight on this issue since he was formerly a CEO of a large hospital organization, already have this all figured out.  And so has the perceptive US stock market which has moved up dramatically the market prices of the common stocks of the Publicly-Held Hospital Organizations.