Wednesday, October 23, 2013

Florida Hospital Profits Will Massively Increase If Medicaid Is Expanded

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 humongous, especially when compared to the related Hospital Operating Income.

From a review of the Electronic Municipal Market Access (EMMA) and the SEC filings, below here are the most recent audited year's Provision for Bad Debts and Uncompensated Charity Care Costs for the 18 Florida Hospital Organizations which had Net Assets above $400 mil currently.  I excluded the All Children's Hospital at St. Pete and the Miami Children's Hospital:

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
Florida Hospital Organizations

Health Management Associates
Dec 2012              874              497           1,371          301
Adventist Health System
Dec 2012              331              302              633          512
North Broward Hospital District
Jun 2012              396               72              468         (114)
South Broward Hosp District
Apr 2013              348              108              456            88
Baptist Health South Florida
Sep 2012              282               95              377            83
Lee Memorial Health System
Sep 2012              159              164              323            45
Lakeland Regional Medical Center
Sep 2012              135              133              268            41
BayCare Health System
Dec 2012              138               86              224          199
Orlando Health
Sep 2012               60              119              179            27
Baptist Health Jacksonville
Sep 2012              113               35              148            86
Shands Teaching Hospitals&Clinics
Jun 2013               88               60              148          118
Sarasota County Hosp District
Sep 2012               70               54              124             (2)
Halifax Hospital Medical Center
Sep 2012               98                -                 98             (3)
FL Health Science (Tampa Hosp)
Sep 2012               49               38               87            11
NCH Healthcare System
Sep 2012               44               35               79              1
Health First
Sep 2012               26               37               63            24
H. Lee Moffitt Cancer Center
Jun 2013               14               37               51              8
Nemours Foundation
Dec 2012               24               13               37            33

Total all 18

          3,249           1,885           5,134       1,458

Provision for Bad Debts

Uncompensated Charity Care Costs


Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs

So, these 18 Florida Hospital Organizations had Audited Total Hospital Operating Income of $1.458 bil in the most recent fiscal year audited.  Driving down this $1.458 bil Total Hospital Operating Income were Total Provisions for Bad Debts of a massive $3.249 bil and Total Costs of Uncompensated Charity Care of another huge $1.885 bil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $6.592 bil, which is a monstrous $5.134 bil higher than the reported $1.458 bil.
Granted these two gigantic 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 huge 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.

I really can't understand why some State Governors and State Legislators would want to financially hammer their State Hospital Organizations, their State citizens and the US Government Debt load like this.

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 Arizona Republican Governor Jan Brewer.

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.  For instance, Florida-HQed Health Management Associates had its stock price close today at $12.87, which was a 666% increase from the $1.68 it was trading at just before the Obama Administration took office.