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

From a review of the Electronic Municipal Market Access (EMMA), I found 5 Non-Profit Hospital Organizations headquartered in the State of Kansas with Net Assets at the most recent date reported of more than $200 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 the other 5 Kansas 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
Kansas Non-Profit Hospital Organizations
Via Christi Health	Wichita	Sep 2012	131	1,136	11.5%
Stormont-Vail Health Care	Topeka	Sep 2012	57	533	10.7%
University Kansas Hospital	Kansas City	Jun 2013	49	1,163	4.2%
Olathe Medical Center	Olathe	Dec 2012	47	272	17.3%
Salina Regional Health Care	Salina	Sep 2012	20	164	12.2%
Total all 5			304	3,268	9.3%

As you can see in the above chart, the Total Bottom Line Profits for these 5 Kansas Non-Profit Hospital Organizations was $304 mil in the most recent audited fiscal year reported, which was a very robust 9.3% of Total Operating Revenues.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies was just a little bit higher 9.6% of their Total Revenues in the most recent year.  CEOs and CFOs of the 30 Dow Industrial companies keenly aware of how difficult it is for them to generate profit margin percentages must be in utter disbelief at how Non-Profit Hospitals can possibly be doing so well on the profit margin percentage front.

When you compare the 9.3% Total Bottom Line Profit Margin of these 5 Kansas 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 Kansas Non-Profit Hospital Organizations in the most recent year were on fire.

But it also reveals a main reason why the US Health Care Costs are so much out of control.....Hospitals charge way too much and retain these excess charges in their Bottom Line Profits which get added to their massive treasure chest of Investments in Stocks and Bonds.  And the US Congress, both Republicans and Democrats, nearly all 100% subservient to Hospitals, just sits there and twiddles its thumbs and refuses to work together for the common good of the country.  With this complete lack of governance, coupled with consistently choosing Hospitals over People, it's no wonder why the approval rating of the US Congress is now less than 10%.

OK, so how much earnings progress have these Kansas Non-Profit Hospital Organizations made in the most recent fiscal year?  From EMMA, these 5 Kansas Non-Profit Hospital Organizations generated Audited Total Bottom Line Profits of $304 mil in the most recent fiscal year, which was an exceptionally robust 107% 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
Kansas Non-Profit Hospital Organizations
Via Christi Health	Wichita	Sep 2012	131	20	111	555%
Stormont-Vail Health Care	Topeka	Sep 2012	57	28	29	104%
University Kansas Hospital	Kansas City	Jun 2013	49	76	(27)	-36%
Olathe Medical Center	Olathe	Dec 2012	47	5	42	840%
Salina Regional Health Care	Salina	Sep 2012	20	18	2	11%
Total all 5			304	147	157	107%

These very strong bottom line profits of these Kansas 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 more to this incredibly positive earnings story.

When the Insurance Exchanges kick in starting in 2014, these Kansas Non-Profit Hospital Organizations should see their profits increase even 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.  And if Kansas decides to Expand Medicaid in its State, the profits of all Kansas Hospitals will increase by quite a bit more, by substantially reducing the huge earnings charges related to both Bad Debts and Charity Care.

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 large when compared to the related Hospital Operating Income.

Below here are the most recent audited year's Provision for Bad Debts and Uncompensated Charity Care Costs for each of these 5 Kansas Non-Profit Hospital Organizations with Net Assets above $200 mil:

				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
Kansas Non-Profit Hospital Organizations
University Kansas Hospital	Kansas City	Jun 2013	21	161	182	46
Via Christi Health	Wichita	Sep 2012	55	47	102	32
Stormont-Vail Health Care	Topeka	Sep 2012	34	34	68	33
Salina Regional Health Care	Salina	Sep 2012	19	7	26	14
Olathe Medical Center	Olathe	Dec 2012	17	4	21	11
Total all 5			146	253	399	136
Provision for Bad Debts						146
Uncompensated Charity Care Costs						253
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						535

Note:  The above Uncompensated Charity Care Amounts for both the University of Kansas Hospital and Stormont-Vail Health are Charity Care Charges Foregone since the related Charity Care Costs weren't disclosed. 

So, these 5 Kansas Non-Profit Hospital Organizations had Audited Total Hospital Operating Income of $136 mil in the most recent fiscal year audited.  Severely burdening this $136 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $146 mil and Total Costs of Uncompensated Charity Care of another $253 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $535 mil, which is $399 mil higher than the reported $136 mil Hospital Operating Income.
 
Granted these two earnings charges will not be totally eliminated with the full rollout of the ACA, but a substantial amount of these two earnings charges will be eliminated, and especially so for States electing to Expand Medicaid, which is the predominant driver of these two earnings charges being very substantially reduced.

With these very strong, ongoing Kansas 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 say 3 to 4 years which are now being negotiated by 29 US Congressional members of the Bilateral and Bicameral Committee Conference on Budget Negotiations.  Both clear-thinking Republicans and clear-thinking Democrats should be on board with this wise funding vehicle.