Georgia Smaller Non-Profit Hospitals Very Weak Profits Show Need For Medicaid Expansion

In an earlier recent post Georgia Non-Profit Hospital Earnings On Fire, I showed that the 11 large Georgia Non-Profit Hospital Organizations with Net Assets above $400 mil each experienced earnings in the most recent year which were on fire.

Bottom Line Earnings is a combination of Operating Income and Non-Operating Income, with the latter being due predominantly to Investment Returns.

These 11 large Georgia Non-Profit Hospital Organizations generated Audited Total Bottom Line Profits of $1.034 bil in the most recent fiscal year, which was an exceptionally robust 10.2% of their Total Operating Revenues of $10.176 bil.

So what about the smaller Georgia Non-Profit Hospital Organizations?  How did they do?

From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 12 Non-Profit Hospital Organizations headquartered in the State of Georgia with Total Operating Revenues of more than $10 mil each in the most recent fiscal year but also with Net Assets of less than $400 mil each.

These 12 smaller Georgia Non-Profit Hospital Organizations generated Total Bottom Line Earnings of $93.2 mil in the most recent fiscal year, which was a very weak 2.5% of Total Operating Revenues.  And this $93.2 mil of Earnings was substantially overstated in real terms since Grady Memorial Hospital's Bottom Line Earnings of $46.3 mil included $63.3 mil of Contributions from Fulton and DeKalb Counties.  Absent these $63.3 mil of County Contributions, the Total Bottom Line Earnings of these 12 smaller Georgia Hospital Organizations drops to a dismal $29.9 mil, or only 0.8% of Total Operating Revenues.

The two very positive earnings performing hospitals.....in Tifton and in Valdosta.....are both just off of I-75 on the way to Florida.

But this story of dismal smaller Georgia Non-Profit Hospital earnings gets even worse.  In the most recent fiscal year, the Total Operating Loss of these 12 smaller Georgia Hospitals was $41 mil.

Below here are the Bottom Line Earnings (Losses) and Total Operating Revenues of each of these 12 smaller Georgia Non-Profit Hospital Organizations for the most recent fiscal year:

		Most	Bottom
		Recent	Line	Total	Bottom
		Annual	Net	Operating	Line
		Fiscal	Income	Revenues	Profit
	City	Year	Current	Current	Margin
	HQs	End	Year	Year	%
			mils $s	mils $s
Smaller Georgia Non-Profit Hospital Organizations
Hosp Authority Futon-DeKalb County (Grady Memorial Hosp)	Atlanta	Dec 2012	46.3	705	6.6%
Hosp Authority Tift County	Tifton	Sep 2012	41.5	268	15.5%
Hosp Authority Valdosta&Lowndes County	Valdosta	Sep 2012	28.4	316	9.0%
Floyd Healthcare	Rome	Jun 2013	6.7	328	2.0%
Crisp Regional Health	Cordele	Jun 2012	4.4	66	6.7%
Bacon County Health	Alma	Jun 2012	2.0	32	6.3%
Memorial Health	Savannah	Dec 2012	(0.7)	534	-0.1%
Columbus Regional Healthcare	Columbus	Jun 2013	(1.0)	424	-0.2%
Hosp Authority Wilkes County	Washington	Apr 2013	(1.8)	15	-12.0%
Athens Regional Health	Athens	Sep 2012	(2.2)	421	-0.5%
Southern Regional Health	Riverdale	Jun 2012	(13.4)	202	-6.6%
DeKalb Regional Health	Decatur	Jun 2013	(17.0)	415	-4.1%
Total all 12			93.2	3,726	2.5%

So, the country's huge and continually expanding income inequality is not just related to very wealthy individuals and everyone else.  It also clearly exists in the Non-Profit Hospital arena.

The solution to this massive income inequality in the Non-Profit Hospital arena really isn't that difficult.  It's a two-step process.

The first step of the solution is simply for every State to Expand Medicaid.  And there shouldn't be a problem with some States being permitted to do a creative disguised Expansion of Medicaid.

Let me show the relevant amounts related to the financial impact of Georgia Expanding Medicaid.

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 usually 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 EMMA, below here are the Provisions for Bad Debts and Costs of their Uncompensated Charity Care disclosed in their most recent audited financial statements of each of these 12 smaller Georgia Non-Profit Hospital Organizations:

		Most		One Year	One	One
		Recent	One Year	Estimated	Year	Year
		Annual	Provision	Cost of	Total	Hospital
		Fiscal	For	Uncompensated	Earnings	Operating
	City	Year	Bad	Charity	Charge	Income
	HQs	End	Debts	Care	of Both	(Loss)
			mils $s	mils $s	mils $s	mils $s
Smaller Georgia Non-Profit Hospital Organizations
Hosp Auth Fulton-DeKalb County (Grady Mem Hosp)	Atlanta	Dec 2012	263	107	370	(30)
DeKalb Regional Health	Decatur	Jun 2013	105	9	114	(27)
Hosp Authority Tift County	Tifton	Sep 2012	33	59	92	22
Memorial Health	Savannah	Dec 2012	44	34	78	-
Southern Regional Health	Riverdale	Jun 2012	55	8	63	(14)
Floyd Healthcare	Rome	Jun 2013	38	23	61	2
Hosp Authority Valdosta&Lowndes County	Valdosta	Sep 2012	43	12	55	19
Columbus Regional Healthcare	Columbus	Jun 2013	39	12	51	(17)
Athens Regional Health	Athens	Sep 2012	29	19	48	(1)
Crisp Regional Health	Cordele	Jun 2012	15	1	16	4
Bacon County Health	Alma	Jun 2012	5	1	6	2
Hosp Authority Wilkes County	Washington	Apr 2013	1	-	1	(1)
Total all 12			670	285	955	(41)
Provision for Bad Debts						670
Estimated Costs of Uncompensated Charity Care						285
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						914

So, these 12 smaller Georgia Non-Profit Hospital Organizations generated Audited Total Hospital Operating Loss of $41 mil in the most recent fiscal year.  Causing this $41 mil Total Hospital Operating Loss were Total Provisions for Bad Debts of $670 mil and Total Costs of Uncompensated Charity Care of another $285 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $914 mil, which is $955 mil higher than the reported $41 mil Hospital Operating Loss.

Now let me focus on a Bottom Line Profit Margin % basis.  For all 12 smaller Georgia Non-Profit Hospital Organizations combined, the Total Bottom Line Profits were $93 mil in the most recent fiscal year and Total Operating Revenues were $3.726 bil in the most recent year resulting in a 2.5% Profit Margin.

Excluding the above $670 mil of Provisions for Bad Debts and the above $285 mil of Uncompensated Charity Care Costs, the Total Bottom Line Profits exclusive of these two charges would be $1.048 bil, which would yield a Profit Margin of 28.1% in the most recent year for these 12 smaller Georgia Non-Profit Hospital Organizations.....yeah, that's more than 11 times the reported 2.5% Profit Margin.

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 Georgia wisely elects to Expand Medicaid, which is the predominant driver of these two earnings charges being very substantially reduced.

Which takes me to the second step of this solution.

There are so many extremely profitable Non-Profit Hospital Organizations all over the country, like the 11 large ones in Georgia which generated a Total Bottom Line Profit Margin of 10.2% of Total Operating Revenues in the most recent fiscal year.

These excessive profits have been going on, and compounding, for many years, particularly during the entire period of the Obama Administration, where interest rates have been extremely low and the stock market appreciation extremely high.

Further, these highly profitable large Non-Profit Hospital Organizations will also have their already sky-high annual earnings get an additional huge dose of profits from the ACA and especially from the Expansion of Medicaid.

Thus it only makes sense that the clearly excessive past and future profits of these large Non-Profit Hospital Organizations be used in wisely-designed, creative ways to grow the US economy and bring down US unemployment and US underemployment.  For instance, a wisely designed, creative removal of these excess profits could be used to finance a substantial portion of the 3 or 4 years elimination of the US sequester budget cuts.  And this removal of excess profits could also be used to finance US infrastructure investments.

The end result of this two-step solution process will be to increase US real GDP growth, to decrease US unemployment and US underemployment, to substantially enhance the financial strength of severely struggling smaller hospitals, to reduce the debt load of both US and State Governments, and to simultaneously substantially bend back the long-term US Total Health Care Cost Curve.