Texas 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, I found 17 Texas Hospital Organization with Net Assets above $400 mil currently.  When I remove the three large Children's Hospitals as well as the four large County District Hospitals, that leaves 10.  Below here are the most recent audited year's Provision for Bad Debts and Uncompensated Charity Care Costs for these 10 Texas Hospital Organizations:

				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
Texas Hospital Organizations
Tenet Healthcare		Dec 2012	785	437	1,222	334
Memorial Hermann Healthcare		Jun 2013	634	136	770	166
Texas Health Resources		Dec 2012	279	184	463	289
Christus Health		Jun 2013	239	196	435	73
Baylor Health Care System		Jun 2012	240	152	392	264
The Methodist Hospital System		Dec 2012	137	178	315	144
Scott & White Healthcare		Aug 2012	215	65	280	65
Methodist Health System Dallas		Sep 2012	67	125	192	116
St Luke's Episcopal Health		Dec 2012	80	35	115	60
Baylor College of Medicine		Jun 2013	13	93	106	(16)
Total all 10			2,689	1,601	4,290	1,495
Provision for Bad Debts						2,689
Uncompensated Charity Care Costs						1,601
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						5,785

So, these 10 Texas Hospital Organizations had Audited Total Hospital Operating Income of $1.495 bil in the most recent fiscal year audited.  Driving down this $1.495 bil Total Hospital Operating Income were Total Provisions for Bad Debts of a massive $2.689 bil and Total Costs of Uncompensated Charity Care of another huge $1.601 bil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $5.785 bil, which is an incredibly large $4.290 bil higher than the reported $1.495 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 have other Republican Governors.

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, Texas-HQed Tenet Healthcare had its stock price close today at $45.27, which was an 851% increase from the $4.76 it was trading at just before the Obama Administration took office.