| Most | |||||
| Recent | |||||
| Annual | Bottom | ||||
| Fiscal | Line | Total | Profit | ||
| City | Year | Net | Operating | Margin | |
| HQs | End | Income | Revenues | % | |
| mils $s | mils $s | ||||
| North Carolina Hospital Organizations | |||||
| Duke University Health System | Durham | Jun 2013 | 440 | 2,539 | 17.3% |
| Carolinas Health Care System | Charlotte | Dec 2012 | 375 | 4,194 | 8.9% |
| Novant Health | Winston-Salem | Dec 2012 | 274 | 3,555 | 7.7% |
| University North Carolina Hospitals | Chapel Hill | Jun 2013 | 152 | 1,212 | 12.5% |
| Vidant Health | Greenville | Sep 2012 | 125 | 1,551 | 8.1% |
| WakeMed Health | Raleigh | Sep 2012 | 88 | 1,089 | 8.1% |
| Cone Health | Greensboro | Sep 2012 | 83 | 1,022 | 8.1% |
| Mission Health System | Asheville | Sep 2012 | 81 | 1,054 | 7.7% |
| CaroMont Health | Gastonia | Jun 2013 | 66 | 484 | 13.6% |
| Rex Healthcare | Raleigh | Jun 2013 | 46 | 731 | 6.3% |
| Cape Fear Valley Health | Fayetteville | Sep 2012 | 46 | 703 | 6.5% |
| New Hanover | Wilmington | Sep 2012 | 40 | 667 | 6.0% |
| FirstHealth of the Carolinas | Pinehurst | Sep 2012 | 29 | 525 | 5.5% |
| Wake Forest Baptist Hospital | Winston-Salem | Jun 2013 | (5) | 1,895 | -0.3% |
| Total all 14 | 1,840 | 21,221 | 8.7% |
As you can see in the above chart, the Total Bottom Line Profits for these 14 North Carolina Non-Profit Hospital Organizations was $1.840 bil in the most recent audited fiscal year reported, which was a very robust 8.7% of Total Operating Revenues. As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies is just a little bit higher 9.6% of their Total Revenues in the most recent year.
When you compare the 8.7% Total Bottom Line Profit Margin of these 14 North Carolina 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 North Carolina Hospital Organizations in the most recent year were on fire.
These very strong bottom line profits of these 14 North Carolina 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 much more to this incredibly positive earnings story.
When the Insurance Exchanges kick in starting in 2014, these North Carolina 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.
But to supercharge the Hospital Profit improvement, the key is to maximize the number of North Carolina 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 North Carolina to elect to Expand Medicaid. US States like North Carolina with a 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 items.....Provision for Bad Debts and Uncompensated Charity Care Costs? Well, they are very large when compared to the related Hospital Operating Income, especially in a State with a high percentage of both uninsured and underinsured like North Carolina.
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 14 North Carolina Non-Profit Hospital Organizations which had Net Assets above $400 mil currently:
| 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 | |||
| North Carolina Hospital Organizations | ||||||
| Carolina's Health Care System | Dec 2012 | 356 | 153 | 509 | 168 | |
| Novant Health | Dec 2012 | 180 | 123 | 303 | 185 | |
| Univ North Carolina Hospitals | Jun 2013 | 70 | 174 | 244 | 114 | |
| Wake Forest Baptist Hospital | Jun 2013 | 122 | 93 | 215 | (57) | |
| Vidant Health | Sep 2012 | 138 | 47 | 185 | 112 | |
| Duke University Health System | Jun 2013 | 75 | 78 | 153 | 184 | |
| Cone Health | Sep 2012 | 74 | 61 | 135 | 21 | |
| Cape Fear Valley Health | Sep 2012 | 113 | 22 | 135 | 14 | |
| WakeMed Health | Sep 2012 | 47 | 79 | 126 | 55 | |
| New Hanover | Sep 2012 | 79 | 44 | 123 | 29 | |
| Mission Health System | Sep 2012 | 94 | 22 | 116 | 56 | |
| Rex Healthcare | Jun 2013 | 27 | 89 | 116 | 45 | |
| CaroMont Health | Jun 2013 | 43 | 18 | 61 | 17 | |
| FirstHealth of the Carolinas | Sep 2012 | 38 | 14 | 52 | 25 | |
| Total all 14 | 1,456 | 1,017 | 2,473 | 968 | ||
| Provision for Bad Debts | 1,456 | |||||
| Uncompensated Charity Care Costs | 1,017 | |||||
| Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs | 3,441 | |||||
Note: University of North Carolina Hospitals, Rex Healthcare and New Hanover did not disclose their Uncompensated Charity Care Costs numbers. Thus the above amounts for these three are the Charity Care Charges Foregone in the current fiscal year.
So, these 14 North Carolina Hospital Organizations had Audited Total Hospital Operating Income of $968 mil in the most recent fiscal year audited. Driving down this $968 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $1.456 bil and Total Costs of Uncompensated Charity Care of another $1.017 bil. Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $3.441 bil, which is $2.473 bil higher than the reported $968 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 North Carolina 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 North Carolina.
And the above two earnings charges are just for one year.
With these very strong, ongoing North Carolina 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. And if North Carolina 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.
