Louisiana Non-Profit Hospital Earnings Improve Nicely With Obamacare and Massively With Medicaid Expansion

From a review of the Electronic Municipal Market Access (EMMA), I found 3 Non-Profit Hospital Organizations headquartered in the State of Louisiana 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 3 Louisiana 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
Louisiana Hospital Organizations
Franciscan Missionaries Our Lady Health	Baton Rouge	Jun 2013	92	1,416	6.5%
Willis-Knighton Medical Center	Shreveport	Sep 2012	83	862	9.6%
Ochsner Health System	Jefferson	Dec 2012	11	1,842	0.6%
Total all 3			186	4,120	4.5%

As you can see in the above chart, the Total Bottom Line Profits for these 3 Louisiana Non-Profit Hospital Organizations was $186 mil in the most recent audited fiscal year reported, which was a very reasonable 4.5% of Total Operating Revenues over the same period.

So how have these 3 Louisiana Non-Profit Hospital Organizations done on the Bottom Line Earnings front for the entire period of the Obama Administration so far?

A Non-Profit Hospital Organization's Net Assets, or its Excess of Total Assets over Total Liabilities, results overwhelmingly from the accumulated Tax-free Bottom Line Profits over time.

These 3 Louisiana Non-Profit Hospital Organizations had their Total Net Assets increase from $1.581 bil at the beginning of the Obama Administration to $2.325 bil at the most recent date reported, an increase of $744 mil or up 47% over this average 3.83 year period.  Thus for this 3.83 year period, these 3 Louisiana Non-Profit Hospital Organizations generated a Total Average Annual Bottom Line Income of roughly $194 mil, a bit higher than the comparable Total Bottom Line Income just in the current year of $186 bil.

As compared with nearly all other US States, Louisiana Non-Profit Hospital Organizations' Profit Margin as a Percentage of its Total Operating Revenues is being severely pressured by a very high percentage of uninsured, underinsured and Medicaid recipients.....the triple financial whammy.

But on the plus side, Obamacare should substantially improve Louisiana's very high uninsured and very high underinsured problems.  When the Insurance Exchanges kick in starting in 2014, these Louisiana Non-Profit Hospital Organizations should see their profits increase very nicely.

There are specifically two items which will drive higher Hospital Organization profits due to the Affordable Care Act (ACA).

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

But to supercharge the Hospital Profit improvement, the key is to maximize the number of Louisiana residents who will switch from being uninsured to insured and who will switch from being underinsured to much better insured.  And the best supercharged fuel here to make this happen is for the State of Louisiana to elect to Expand Medicaid.  US States like Louisiana with a very high percentage of uninsured and underinsured are the ones whose future Hospital Earnings have the best shot of exploding upwardly if Medicaid is Expanded.


So what about the amounts of these two earnings charge items.....the Provision for Bad Debts and the Uncompensated Charity Care Costs?  Well, they are very large when compared to the related Hospital Operating Income and particularly so in US States with a high percentage of uninsured and underinsured.

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 above 3 Louisiana Non-Profit Hospital Organizations which had Net Assets above $400 mil currently.

In order to reach a more valid conclusion, I added to these 3 the 7 additional Louisiana Non-Profit Hospital Organizations I found which had current year Revenues above $250 mil, but with current Net Assets below $400 bil.

And I was able to find the precise amounts of Christus Health's Hospital Operating Income, Total Operating Revenues and Provision for Bad Debts generated by its Hospitals located in the State of Louisiana, and I estimated the Uncompensated Charity Care Cost in Louisiana by applying the 14.9% ratio of Christus Health's Revenues generated by its Louisiana Hospitals.

I retrieved the Hospital Operating Income and Provision for Bad Debts for Baton Rouge-based LSU Health by reviewing its very detailed financial statements at its website.  LSU Health disclosed the amount of its Uncompensated Charity Charges Foregone and I brought that down to an estimated cost basis by applying a comparable cost to Charges Foregone ratio of several other Louisiana Hospital Organizations.

Lastly, I added below an allocation of 3.0% of For-Profit HCA's consolidated amounts for the 3.0% of HCA's total licensed beds located in Louisiana:

				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
Louisiana Hospital Organizations
LSU Health Care Services Division		Jun 2012	214	185	399	(43)
Louisiana 3.0% Share of HCA		Dec 2012	113	71	184	87
Franciscan Missionaries Our Lady		Jun 2013	124	11	135	38
Ochsner Health System		Dec 2012	74	53	127	(35)
Willis-Knighton Medical Center		Sep 2012	67	44	111	81
Tangipahoa Parish District #1		Jun 2012	64	7	71	3
Christus Health Hospitals in Louisiana		Jun 2013	29	29	58	(67)
West Jefferson Hospital		Dec 2012	10	27	37	6
Lafayette General Health System		Sep 2012	31	3	34	9
East Jefferson General Hospital		Dec 2012	18	2	20	(14)
Touro Infirmary		Dec 2012	8	5	13	15
Total all 11			752	437	1,189	80
Provision for Bad Debts						752
Uncompensated Charity Care Costs						437
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						1,269

So, these 11 Louisiana Hospital Organizations had Audited Total Hospital Operating Income of only $80 mil in the most recent fiscal year audited.  Driving down this $80 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $752 mil and Total Costs of Uncompensated Charity Care of another $437 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $1.269 bil, which is a massive $1.189 bil higher than the reported $80 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 Louisiana 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 these two earnings charges in Louisiana Hospital Organizations.

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

With the exceptionally strong, ongoing Louisiana Hospital earnings under Obamacare, the ultimate result should be a significant reduction in hospital patient charges, a significant bending back of the US Long-term Total Health Care Cost Curve and a significant reduction in the US Debt.  And if Louisiana eventually sees the light and elects to Expand Medicaid, after all there is virtually no cost to the State for Expanding Medicaid, the ultimate result should be a substantial reduction in hospital patient charges, a very significant bending back of the US Long-term Total Health Care Cost Curve and a substantial 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.