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

From a review of the Electronic Municipal Market Access (EMMA), I found 4 Non-Profit Hospital Organizations headquartered in the State of South Dakota with Net Assets at the most recent date reported of more than $100 mil each.  One of these is Sanford Health, which only has one of its four Regional Medical Centers located in South Dakota.  Thus I will focus on Sanford Health separately a bit later in this post.   

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 3 South Dakota Non-Profit Hospital Organizations:

		Most
		Recent
		Annual	Bottom
		Fiscal	Line	Total	Profit
		Year	Net	Operating	Margin
	City	End	Income	Revenues	%
			mils $s	mils $s
South Dakota Non-Profit Hospital Organizations
Avera Health	Sioux Falls	Jun 2013	107	1,380	7.8%
Regional Health	Rapid City	Jun 2013	57	542	10.5%
Prairie Lakes Health	Watertown	May 2013	36	77	46.8%
Total of all 3			200	1,999	10.0%

As you can see in the above chart, the Total Bottom Line Profits for these 3 South Dakota Non-Profit Hospital Organizations was $200 mil in the most recent audited fiscal year reported, which was an extremely robust 10.0% of Total Operating Revenues.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies was a lower 9.6% of their Total Revenues in the most recent year.

When you compare the 10.0% Total Bottom Line Profit Margin of these 3 South Dakota 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 3 South Dakota 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 3 South Dakota Non-Profit Hospital Organizations made in the most recent fiscal year?  From EMMA, these 3 South Dakota Non-Profit Hospital Organizations generated Audited Total Bottom Line Profits of $200 mil in the most recent fiscal year, which was an exceptionally robust 68% 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
		Year	Net	Net	(Decrease)	(Decrease)
	City	End	Income	Income	Amount	%
			mils $s	mils $s	mils $s
South Dakota Non-Profit Hospital Organizations
Avera Health	Sioux Falls	Jun 2013	107	63	44	70%
Regional Health	Rapid City	Jun 2013	57	43	14	33%
Prairie Lakes Health	Watertown	May 2013	36	13	23	177%
Total of all 3			200	119	81	68%

These very strong bottom line profits of these 3 South Dakota 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.

Now  let me focus on Sanford Health.

Sanford Health had very modest Hospital Operating Income in the most recent year ended June 2013.  Several of their Expense lines had growth significantly above its Revenue growth.  To just mention a couple, Salaries and Employee Benefits increased 27% and Supplies increased 35%, both much higher than the 23% Revenue growth.

And Sanford Health's Bottom Line Profits did not benefit from Investment Returns, unlike nearly every other Non-Profit Hospital Organization did due to the extremely robust stock market and low interest rates.

On the positive side, Sanford Health's Hospital Operating Income of $31 mil in the most recent year was severely burdened by Total Provisions for Bad Debts of $130 mil and Total Costs of Uncompensated Charity Care of another $47 mil.  Thus, exclusive of these two earnings charges, its Total Hospital Operating Income would have been $208 mil, which is $177 mil higher than the reported $31 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.  While South Dakota unfortunately is not Expanding Medicaid, the two States where Sanford Health has three of its four Regional Medical Centers located.....North Dakota and Minnesota.....are Expanding Medicaid.