Thursday, November 7, 2013

Georgia Non-Profit Hospital Earnings On Fire Under Obamacare and Headed Much Higher

From a review of the Electronic Municipal Market Access (EMMA), I found 11 Non-Profit Hospital Organizations headquartered in the State of Georgia with Net Assets at the most recent date reported of more than $400 mil each.  Below here are the Bottom Line Profits, Total Operating Revenues  and the related Profit Margin Percentages in the most recent audited fiscal year reported for each of these 11 Georgia Non-Profit Hospital Organizations:



Annual Bottom

  Fiscal Line Total Profit

City Year Net Operating Margin

HQs End Income Revenues %

mils $s mils $s
Georgia Hospital Organizations

Children's HealthCare Atlanta Atlanta Dec 2012          395             1,135 34.8%
Emory Healthcare Atlanta Aug 2012          124             2,479 5.0%
Piedmont Health Care Atlanta Jun 2012          115             1,492 7.7%
Wellstar Health System Marietta Jun 2012            86             1,463 5.9%
Northeast Georgia Health System Gainesville Sep 2012            76               634 12.0%
Gwinnett Hospital System Duluth Jun 2013            63               587 10.7%
Hamilton Health Care System Duluth Sep 2012            48               265 18.1%
University Health Richmond County Augusta Dec 2012            47               457 10.3%
Central Georgia Health System Macon Sep 2012            42               725 5.8%
Archbold Medical Center Thomasville Sep 2012            31               319 9.7%
Phoebe Putney Health System Albany Jul 2012              7               620 1.1%

Total all 11

      1,034           10,176 10.2%

Note:  In deriving the above Emory Healthcare amounts, I started with the Consolidated Emory University amounts and then backed out the Emory University without Emory Healthcare included amounts.

As you can see in the above chart, the Total Bottom Line Profits for these 11 Georgia Non-Profit Hospital Organizations was $1.034 bil in the most recent audited fiscal year reported, which was an exceptionally robust 10.2% of Total Operating Revenues.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies is a lower 9.6% of their Total Revenues in the most recent year.

When you compare the 10.2% Total Bottom Line Profit Margin of these 11 Georgia Non-Profit Hospital Organizations with the 9.6% Total Bottom Line Profit Margin of the 30 Dow Industrials, which are some of the very best For-Profit US companies, the clear conclusion is that the earnings of these Georgia Hospital Organizations in the most recent year were on fire.

These very strong bottom line profits of these 11 Georgia Non-Profit Hospital Organizations were attributable to superb fiscal measures and much more effective health care delivery adopted by hospital executives and hospital employees, which were initiated in conjunction with Obamacare.  In addition, the strong US stock market and lower interest rates added to investment returns and thus also to bottom line profits of these Hospital Organizations.

But there's even much more to this incredibly positive earnings story.

When the Insurance Exchanges kick in starting in 2014, these Georgia Non-Profit Hospital Organizations should see their profits increase even more......and by quite a bit more.

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

Bottom Line Income is a combination of Hospital Operating Income and Non-Operating Income, with the latter being predominantly Investment Returns on Stocks and Bonds.

There are specifically two items which will drive higher Hospital Organization profits due to the ACA.

First, there is the Hospital Operating Statement Provision for Bad Debts' earnings charge which will be significantly reduced due to the substantially better insurance situation of hospital patients due to the ACA.  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 significantly reduced.  This Estimated Costs for Uncompensated Charity Care is usually disclosed in a Hospital Organization's footnotes which accompany its audited financial statements.

So what about the amounts of these two items.....Provision for Bad Debts and Uncompensated Charity Care Costs?  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 10 Georgia Non-Profit Hospital Organizations which had Net Assets above $400 mil currently.  I excluded below the large Children's HealthCare Atlanta.  And I added below an allocation of 3.8% of For-Profit HCA's consolidated amounts for the 3.8% of HCA's total licensed beds located in Georgia and an allocation of the 9.0% of For-Profit Tenet HealthCare's consolidated amounts for the 9.0% of Tenet HealthCare's total licensed beds located in Georgia:

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
Georgia Hospital Organizations

Wellstar Health System
Jun 2012          185                 99          284            97
Georgia 3.8% Share of HCA
Dec 2012          143                 90          233          110
Emory Healthcare   Aug 2012            99                 72          171            50
Piedmont Health Care
Jun 2012          125                 23          148          127
Gwinett Hospital System
Jun 2012          108                 34          142            33
Georgia 9.0% Share of Tenet HealthCare
Dec 2012            71                 39          110            30
Northeast Georgia Health System
Sep 2012            77                 27          104            44
Central Georgia Health System
Sep 2012            45                 25            70            15
Phoebe Putney Health System
Jul 2012            44                 24            68            15
Archbold Medical Center
Sep 2012            53                 14            67            15
Hamilton Health Care System
Sep 2012            33                 14            47            48
University Health (Richmond County)
Dec 2012            22                 24            46             (6)

Total all 12

      1,005               485       1,490          578

Provision for Bad Debts

Uncompensated Charity Care Costs


Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs


So, these 12 Georgia Hospital Organizations had Audited Total Hospital Operating Income of $578 mil in the most recent fiscal year audited.  Driving down this $578 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $1.005 bil and Total Costs of Uncompensated Charity Care of another $485 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $2.068 bil, which is $1.490 bil higher than the reported $578 mil.
Granted these two earnings charges will not be totally eliminated with the ACA, but a very significant amount of these two earnings charges will be eliminated.  The percentage of these two charges eliminated will not be nearly as high in Georgia since it has chosen not to expand Medicaid as it will be in the States electing to expand Medicaid.  But it will still be a very significant percentage reduction in Georgia.

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

With these very strong, ongoing Georgia Hospital earnings under Obamacare, the ultimate result should be a reduction in hospital patient charges, a bending back of the US Long-term Total Health Care Cost Curve and a reduction in the US Debt.

That's quite a financial Trifecta!

And it also only makes sense that some of these huge past and future bottom line profits of these US Hospital Organizations, both Non-Profit and For-Profit ones, should be used to wisely fund a substantial portion of the elimination of the US Government Sequester Cost Cuts over the next several years which are now being negotiated by 29 US Congressional members of the Bicameral Committee Conference on Budget Negotiations.  Both clear-thinking Republicans and clear-thinking Democrats should be on board with this wise funding vehicle.