Bottom Line Earnings is a combination of Operating Income and Non-Operating Income, with the latter being due predominantly to Investment Returns.
These 15 large Pennsylvania Non-Profit Hospital Organizations generated Audited Total Bottom Line Profits of $2.203 bil in the most recent fiscal year, which was a very robust 8.6% of their Total Operating Revenues of $25.687 bil.
So what about the smaller Pennsylvania Non-Profit Hospital Organizations? How did they do?
From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 25 Non-Profit Hospital Organizations headquartered in the State of Pennsylvania with Total Operating Revenues of more than $100 mil each in the most recent fiscal year but also with Net Assets of less than $400 mil each.
These 25 smaller Pennsylvania Non-Profit Hospital Organizations generated Total Bottom Line Earnings of $129 mil in the most recent fiscal year, which was a very dismal 1.3% of Total Operating Revenues. In the prior year, it was the same story, with Total Bottom Line Earnings at an even lower 1.1% of Total Operating Revenues.
These Total Bottom Line Earnings were only 1.3% of the related Total Operating Revenues for these 25 smaller Pennsylvania Non-Profit Hospital Organizations as compared with a substantially higher 8.6% for the 15 large ones.
But this story of dismal smaller Pennsylvania Non-Profit Hospital earnings gets even worse. In the most recent fiscal year, the Total Operating Income of these 25 smaller Pennsylvania Hospital was only $4 mil, which rounds to a Total Operating Income Margin of 0.0% of Total Operating Revenues.
Yeah, nearly all of these Total Bottom Line Earnings of these 25 smaller Pennsylvania Non-Profit Hospital Organizations in the most recent year came from Non-Operating items, and predominantly from robust Investment Returns, driven by a stock market which was on fire.
Below here are the Bottom Line Earnings (Losses) and Total Operating Revenues of each of these 25 smaller Pennsylvania Non-Profit Hospital Organizations for each of the most recent two fiscal years:
|mils $s||mils $s||mils $s||mils $s|
|Pennsylvania Smaller Non-Profit Hospital Organizations|
|Summit Health||Chambersburg||Jun 2013||46||1||425||364|
|Conemaugh Health||Johnstown||Jun 2013||33||25||517||510|
|Holy Spirit Hospital Sisters Christian Charity||Camp Hill||Jun 2013||25||18||325||308|
|St. Clair Health||Pittsburgh||Jun 2013||24||17||263||259|
|Holy Redeemer Health||Philadelphia||Jun 2013||20||(1)||359||347|
|Doylestown Hospital||Doylestown||Jun 2013||18||(3)||257||238|
|Evangelical Community Hospital||Lewisburg||Jun 2013||16||14||138||129|
|Crozer-Keystone Health||Springfield||Jun 2013||14||4||807||809|
|Heritage Valley Health||Moon Township||Jun 2012||13||12||437||434|
|Washington HealthCare Services||Washington||Jun 2013||13||1||269||272|
|Hanover Hospital||Hanover||Jun 2013||12||6||141||134|
|Temple University Health||Philadelphia||Jun 2013||8||7||1,356||990|
|Excela Health||Greensburg||Jun 2012||8||38||476||475|
|Pocono Health System||East Stroudsburg||Jun 2013||8||10||263||260|
|Mount Nittany Health||State College||Jun 2013||7||17||318||296|
|Butler Health||Butler||Jun 2013||5||5||253||245|
|Devereux Foundation||Villanova||Jun 2013||4||2||389||394|
|Sacred Heart HealthCare||Allentown||Jun 2012||3||4||120||118|
|Schuykill Health||Pottsville||Jun 2013||1||1||150||150|
|Sharon Regional Health||Sharon||Jun 2012||-||8||179||179|
|Good Samaritan Hospital||Lebanon||Jun 2013||(1)||(8)||168||166|
|Chester County Hospital & Health||West Chester||Jun 2012||(2)||11||279||278|
|Jefferson Regional Medical Center||Jefferson Hills||Jun 2012||(3)||13||269||281|
|Saint Vincent Health||Erie||Jun 2012||(5)||(11)||329||321|
|West Penn Allegheny Health||Pittsburgh||Jun 2013||(138)||(85)||1,488||1,483|
|Total all 25||129||106||9,975||9,440|
|% Increase Over Prior Year||22%||6%|
|Total Bottom Line Profits as % of Total Operating Revenues||1.3%||1.1%|
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 Pennsylvania 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 25 smaller Pennsylvania Non-Profit Hospital Organizations:
|mils $s||mils $s||mils $s||mils $s|
|Pennsylvania Smaller Non-Profit Hospital Organizations|
|Temple University Health||Philadelphia||June 2013||21||153||174||(18)|
|West Penn Allegheny Health||Pittsburgh||June 2012||81||5||86||(115)|
|Summit Health||Chambersburg||June 2013||30||23||53||38|
|Crozer-Keystone Health||Springfield||June 2013||13||26||39||12|
|Pocono Health System||East Stroudsburg||June 2013||31||1||32||4|
|Excela Health||Greensburg||June 2012||27||-||27||3|
|Saint Vincent Health||Erie||June 2012||22||3||25||(4)|
|Heritage Valley Health||Moon Township||June 2012||17||8||25||5|
|Holy Spirit Hosp Sisters Christian Charity||Camp Hill||June 2013||22||2||24||18|
|Devereux Foundation||Villanova||June 2013||2||16||18||1|
|Good Samaritan Hospital||Lebanon||June 2013||15||2||17||(2)|
|Conemaugh Health||Johnstown||June 2013||7||10||17||11|
|Sacred Heart HealthCare||Allentown||June 2012||15||1||16||3|
|Chester County Hosp&Health||West Chester||June 2012||14||1||15||(2)|
|Schuykill Health||Pottsville||June 2013||14||1||15||2|
|Jefferson Regional Medical Ctr||Jefferson Hills||June 2012||13||1||14||(1)|
|Butler Health||Butler||June 2013||10||3||13||4|
|Washington HealthCare Services||Washington||June 2013||11||2||13||3|
|Mount Nittany Health||State College||June 2013||9||2||11||9|
|Holy Redeemer Health||Philadelphia||June 2013||8||2||10||1|
|Sharon Regional Health||Sharon||June 2012||8||1||9||-|
|Doylestown Hospital||Doylestown||June 2013||4||5||9||7|
|Evangelical Community Hospital||Lewisburg||June 2012||9||-||9||6|
|St. Clair Health||Pittsburgh||June 2013||6||2||8||11|
|Hanover Hospital||Hanover||June 2013||5||1||6||8|
|Total all 25||414||271||685||4|
|Provision for Bad Debts||414|
|Estimated Costs of Uncompensated Charity Care||271|
|Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs||689|
So, these 25 smaller Pennsylvania Non-Profit Hospital Organizations generated Audited Total Hospital Operating Income of only $4 mil in the most recent fiscal year. Driving down this $4 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $414 mil and Total Costs of Uncompensated Charity Care of another $271 mil. Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $689 mil, which is $685 mil higher than the reported $4 mil.
Now let me focus on a Bottom Line Profit Margin % basis. For all 25 smaller Pennsylvania Non-Profit Hospital Organizations combined, the Total Bottom Line Profits were $129 mil in the most recent fiscal year and Total Operating Revenues were $9.975 bil in the most recent year resulting in a 1.3% Profit Margin.
Excluding the above $414 mil of Provisions for Bad Debts and the above $271 mil of Uncompensated Charity Care Costs, the Total Bottom Line Profits exclusive of these two charges would be $814 mil, which would yield a Profit Margin of 8.2% in the most recent year for these 25 smaller Pennsylvania Non-Profit Hospital Organizations.....yeah, that's more than 6 times the reported 1.3% 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 Pennsylvania 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 15 large ones in Pennsylvania which generated a Total Bottom Line Profit Margin of 8.6% 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.