Friday, October 18, 2013

US Publicly-Held Hospitals Net Assets Up 356% Under Obama and the Affordable Care Act

From a review of SEC filings, I found 15 US Publicly-Held Hospital Organizations with Net Assets above $100 mil at June 30, 2013.  One of them Fresenius Medical Care is a German company but with a massive 70% of its Profits generated in the US.  Its North American Corporate HQs is in Waltham, Massachusetts.

Below here are the audited under US Generally Accepted Accounting Principles Net Assets (Stockholders' Equity) of these 15 at both June 30, 2013 and also at December 31, 2008, at the beginning of the Obama Administration:

Obama Obama


US Fed US Fed

Bump Bump
State 6-30-13 12-31-08 Increase Increase
Hospital Organization HQs Net Assets Net Assets Amount %

mil $s mil $s mil $s

Fresenius Medical Care MA              9,110              6,123              2,987 49%
DaVita Health Partners CO              4,282              1,827              2,455 134%
Universal Health Services PA              3,044              1,771              1,273 72%
Community Health Systems TN              3,022              1,673              1,349 81%
Mednax FL              2,193                 965              1,228 127%
LifePoint Hospitals TN              2,168              1,656                 512 31%
Health Management Associates FL              1,094                 286                 808 283%
Amsurg TN              1,043                 463                 580 125%
Tenet Healthcare TX                 981                 147                 834 567%
Select Medical Holdings PA                 789                (166)                 955 575%
Hanger TX                 533                 267                 266 100%
Acadia Healthcare TN                 451                   16                 435 2719%
Health South AL                 393             (1,087)              1,480 136%
IPC The Hospitalist Co CA                 286                 123                 163 133%
HCA TN             (7,485)             (9,260)              1,775 19%

Total all 15
            21,904              4,804             17,100 356%

As you can see from the above chart, the Total Net Assets or Stockholders' Equity of these 15 US Publicly-Held Hospital Organizations were $21.904 bil at June 30, 2013, up $17.100 bil, or up a massive 356% during the Obama Administration.

Very positively impacting this major increase in the Net Assets (Financial Strength) of all of these hospitals were actions taken by both the Obama Administration and the US Fed to strengthen the US Financial Foundation which was severely damaged from the financial meltdown in late 2008.

In addition, the Affordable Care Act (ACA) has also played a key role in this increase in Net Assets (Financial Strength) of these US Publicly-Held Hospital Organizations.

A remarkable thing is that these robust increases in Net Assets of these Publicly-Held Hospital Organizations occurred when these Hospitals were also able to substantially bend down the Total US Health Care Cost Curve in each of the most recent three years.

With future US Publicly-Held Hospital Organizations' Hospital Operating Income being bolstered by both many of the Uninsured getting insurance and by the many of the Underinsured getting much better insurance, both under the ACA,  future Net Asset growth of these US Publicly-Held Hospital Organizations should be very robust.  And for Publicly-Held Hospital Organization operating hospitals in States electing to expand Medicaid, this future Net Asset growth will be exceptionally robust.

Given HCA's large Deficit in Stockholders' Equity (Net Assets), I think it would be helpful to explain it.

At December 31, 2005, HCA's Total Stockholders' Equity was a positive $5.681 bil.

Then during 2006, HCA was taken private in a leveraged buy-out (LBO) with one of the three large equity investors being Bain Capital.....where have we heard that one before?

HCA borrowed tons of money to finance its buy out of existing common shareholders.

The accounting result of this LBO in 2006 was a massive $21.373 bil in common stock buybacks with Stockholders' Equity being reduced by this same $21.373 bil amount.

So, that is how HCA's positive $5.681 bil of Stockholders' Equity turned into a massive Stockholders' Equity Deficit in all subsequent years.

In addition, HCA got subsequent further reductions in Stockholders' Equity from Distributions to Stockholders totaling $9.451 bil and from additional stock buybacks totaling $2.156 bil from 2006 to June 30, 2013.

Since the beginning of the Obama Administration when HCA had a negative ($9.260) bil of Stockholder' Equity at December 31, 2008, HCA reduced its negative Stockholders' Equity by $1.775 bil in the 4.5 years to June 30, 2013.

But this $1.775 bil improvement in HCA's Stockholders' Equity in the most recent 4.5 years occurred despite Distributions to Stockholders totaling $8.791 bil and common stock buybacks totaling $1.503 bil in the same 4.5 year period.  If these two cash distributions had not occurred, then HCA's Stockholders' Equity improvement over the most recent 4.5 years would have been $12.069 bil, rather than $1.775 bil.  A Non-Profit Hospital Organization cannot make stockholder distributions and stock buybacks.

Also, HCA pays income tax, unlike a Non-Profit Hospital Organization.  Thus HCA's Stockholders' Equity improvement in the most recent 4.5 years occurred despite Total Income Tax Expense of $3.362 bil reducing Stockholders' Equity by a like amount in the most recent 4.5 years. 

All of the other above 14 Publicly-Held Hospitals would have had their Stockholders' Equity improvements in the most recent 4.5 years in like fashion as HCA had they not had income tax expense like Non-Profit Hospital Organizations don't have.

In addition, some of these 14 Publicly-Held Hospitals had their Stockholders' Equity reduced in the most recent 4.5 years by common stock buybacks, which Non-Profit Hospital Organization cannot have.