Wednesday, October 23, 2013

Indiana Hospital Profits Will Sharply 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 very large, especially when compared to the related Hospital Operating Income.

From a review of the Electronic Municipal Market Access (EMMA) and the Indiana State Dept of Health website, below here are the 26 Indiana Non-Profit Hospital Organizations which had the Total of their Provisions for Bad Debts and Costs of their Uncompensated Charity Care exceed $10 mil for one year in their most recent audited financial statements:

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
Indiana Hospital Organizations

IU Health   Dec 2012 285 204 489              549
St Vincent Health
Jun 2013 115 86 201              156
Franciscan Alliance
Dec 2012 107 84 191               80
Community Health Network
Dec 2012 76 58 134               48
Parkview Health System
Dec 2012 105 23 128              116
Deaconess Health System
Sep 2012 42 31 73               40
Community Healthcare Syst
Jun 2013 42 21 63               37
Beacon Health System
Dec 2012 52 9 61              120
Union Hospital
Aug 2012 41 13 54               26
Reid Hospital&Health Svcs
Dec 2012 31 10 41                 6
Clark Memorial Hospital
Dec 2012 32
32                (1)
The Methodist Hospitals
Dec 2012 15 15 30               27
Floyd Memorial Hospital
Dec 2012 26
26               12
St Mary's Health
Jun 2012 1 23 24               62
Hendricks Regional Health
Dec 2012 21 2 23               26
Marion General Hospital
Jun 2012 15 8 23               13
Good Samaritan
Dec 2012 17 5 22                 5
Columbus Regional Hospital
Dec 2012 15 6 21                 8
Jackson County Schneck
Dec 2012 18 2 20               14
Howard Regional Health
Dec 2011 13 4 17                 2
Witham Health Services
Dec 2012 13 3 16               29
Riverview Hospital
Dec 2011 13 3 16                 6
Major Health Partners
Dec 2012 11 3 14                 6
Hancock Regional Hospital
Dec 2012 10 2 12                 7
Henry County Hospital
Dec 2012 10 2 12                -  
Dearborn County Hospital
Dec 2012 9 1 10                 5

Total all 26

          1,135              618           1,753           1,399

Provision for Bad Debts

Estimated Costs of Uncompensated Charity Care


Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs           3,152

So, these 26 Indiana Non-Profit Hospital Organizations had Audited Total Hospital Operating Income of $1.399 bil in the most recent fiscal year.  Driving down this $1.399 bil Total Hospital Operating Income were Total Provisions for Bad Debts of a massive $1.135 bil and Total Costs of Uncompensated Charity Care of another $0.618 bil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $3.152 bil, which is $1.753 bil higher than the reported $1.399 bil.
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.

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.