Idaho Hospital Profits Will Increase Nicely With Full Rollout of Obamacare

From a review of the Electronic Municipal Market Access (EMMA), I found 2 Non-Profit Hospital Organizations headquartered in the State of Idaho 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 these 2 Idaho Non-Profit Hospital Organizations:

		Most
		Recent
		Annual	Bottom
		Fiscal	Line	Total	Profit
	City	Year	Net	Operating	Margin
	HQs	End	Income	Revenues	%
			mils $s	mils $s
Idaho Non-Profit Hospital Organizations
St Luke's Health	Boise	Sep 2012	73	1,370	5.3%
Alphonsus Health	Boise	Jun 2013	52	691	7.5%
Total of both			125	2,061	6.1%

As you can see in the above chart, the Total Bottom Line Profits for these 2 Idaho Non-Profit Hospital Organizations was $125 mil in the most recent audited fiscal year reported, which was a robust 6.1% of Total Operating Revenues.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 For-Profit Dow Industrial companies was just a little bit higher 9.6% of their Total Revenues in the most recent year.

Also from EMMA, these 2 Idaho Non-Profit Hospital Organizations generated Audited Total Bottom Line Profits of $125 mil in the most recent fiscal year, which was 5% above the prior fiscal year, as you can see in the following chart:

			Most
		Most	Recent	Prior
		Recent	Year	Year
		Annual	Bottom	Bottom
		Fiscal	Line	Line	Increase	Increase
	City	Year	Net	Net	(Decrease)	(Decrease)
	HQs	End	Income	Income	Amount	%
			mils $s	mils $s	mils $s
Idaho Non-Profit Hospital Organizations
St Luke's Health	Boise	Sep 2012	73	91	(18)	-20%
Alphonsus Health	Boise	Jun 2013	52	28	24	86%
Total of both			125	119	6	5%

But on the downside, St. Luke's Health hospital operating results since September 2012 have been modest, burdened by a very high level of Expenses.

There's more to this earnings story.

Under the Affordable Care Act (ACA), Hospital Organizations' future Hospital Operating 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.

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

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 large when compared to the related Hospital Operating Income.

Below here are the most recent audited year's disclosure of the Provision for Bad Debts and Uncompensated Charity Care Costs for these 2 Idaho Non-Profit Hospital Organizations:

				One Year	One
			One Year	Estimated	Year	One
		Most	Provision	Cost of	Total	Year
		Recent	For	Uncompensated	Earnings	Hospital
	City	Annual	Bad	Charity	Charge	Operating
	HQs	FYE	Debts	Care	of Both	Income
			mils $s	mils $s	mils $s	mils $s
Idaho Non-Profit Hospital Organizations
St Luke's Health	Boise	Sep 2012	67	22	89	67
Alphonsus Health	Boise	Jun 2012	47		47	32
Total of both			114	22	136	99
Provision for Bad Debts						114
Uncompensated Charity Care Costs						22
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						235

So, these 2 Idaho Non-Profit Hospital Organizations had Audited Total Hospital Operating Income of $99 mil in the most recent fiscal year audited.  Severely burdening this $99 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $114 mil and Total Costs of Uncompensated Charity Care of another $22 mil (Trinity Health's Alphonsus Health did not disclose its Uncompensated Charity Care Costs).  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $235 mil, which is $136 mil higher than the reported $99 mil Hospital Operating Income.
 
Granted these two earnings charges will not be totally eliminated with the full rollout of the ACA, but a significant amount of these two earnings charges will be eliminated.  Unfortunately, Idaho has decided to not Expand Medicaid, which would very substantially reduce these two earnings charges.

Frankly, 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.