Tennessee Non-Profit Hospital Earnings On Fire Under Obamacare and All Hospital Profits Headed Massively Higher If States Expand Medicaid All Throughout the US.....Part I

From a review of the Electronic Municipal Market Access (EMMA), I found 6 Non-Profit Hospital Organizations headquartered in Tennessee with Net Assets at the most recent date reported of more than $400 mil.  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 6 Tennessee 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
Tennessee Non-Profit Hospital Organizations
Methodist LeBonheur Healthcare	Memphis	Dec 2012	123	1,495	8.2%
St Jude Children's Hospital	Memphis	Jun 2012	76	979	7.8%
Mountain States Health Alliance	Johnson City	Jun 2013	60	1,059	5.7%
Covenant Health	Knoxville	Dec 2012	46	1,051	4.4%
Baptist Memorial Health Care	Memphis	Sep 2012	45	1,824	2.5%
Wellmont Health System	Kingsport	Jun 2013	33	798	4.1%
Total all 6			383	7,206	5.3%

As you can see in the above chart, the Total Bottom Line Profits for these 6 Tennessee Non-Profit Hospital Organizations was $383 mil in the most recent audited fiscal year reported, which was a seemingly very reasonable 5.3% of Total Operating Revenues.

But this was a very low earnings year for these 6 Tennessee Non-Profit Hospital Organizations.  Let me explain.

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.

Since the beginning of the Obama Administration, these 6 Tennessee Non-Profit Hospital Organizations have seen their Total Net Assets grow from $5.248 bil to $7.895 bil at the most recently reported date, or an increase of $2.647 bil, or up a very robust 50% over this 4.04 average years period.

Thus, the Average Annual Earnings of these 6 Tennessee Non-Profit Hospitals during the Obama Administration were roughly $655 mil, or 71% greater than the $383 mil Total Earnings in the most recent year.

Thus over the entire 4.04 years, the Total Earnings for these 6 Tennessee Non-Profit Hospital Organization were significantly north of 10% of Total Operating Revenues over the same period.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies is a much lower 9.6% of their Total Revenues in the most recent year.

When you compare the much higher than 10% Total Bottom Line Profit Margin of these 6 Tennessee 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 Tennessee Non-Profit Hospital Organizations have been on fire during the Obama Administration.

These exceptionally strong bottom line profits of these 6 Tennesee 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 much more to this incredibly positive earnings story.

When the Insurance Exchanges kick in starting in 2014, both Tennessee Non-Profit and Tennessee For-Profit Hospital Organizations should see their profits increase by substantially much more.  And Tennessee is where most of the large For-Profit Hospital Organizations are headquartered 

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.

There are specifically two items which will drive higher Hospital Organization profits due to the ACA.

First, there is the 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 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 Tennessee 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 Tennessee and other US States to elect to Expand Medicaid.  US States with a very high number 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 in Tennessee's case, they are monstrously large when compared to the related Hospital Operating Income.

When you think of the giant HCA, you first think of Tennessee, where it is headquartered.  But you know what?  Only 6% of HCA's combined licensed hospital beds are located in Tennessee.  There are many US States that haven't elected to Expand Medicaid where many of HCA acute hospital beds are located.  Just Florida and Texas combined house a total of 51% of HCA combined hospital beds.  Do you think HCA, as well as its common stockholders, want the States of Florida and Texas to Expand Medicaid?  You better believe it.  And in total, 77% of HCA's hospital beds are located in US States which presently do not expect to Expand Medicaid.

And it's the very same story with very large Tennessee headquartered Community Health System, which only has 7% of its total licensed hospital beds located in Tennessee.  In total, 51% of its total hospital beds are located in US States that presently do not plan to Expand Medicaid.  Just like HCA, Community Health System and its common stockholders also want to see Medicaid Expanded all throughout the US. 

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 5 Tennessee Non-Profit Hospital Organizations which had Net Assets above $400 mil currently.  I excluded below the Memphis-based St Jude Children's Research Hospital.

In addition, I included below the three For-Profit large Tennessee Hospital Organizations.....HCA, Community Health System and LifePoint Hospitals.

Also, I included below a 8.9% allocation of Non-Profit Missouri-based Ascension Health's available acute hospital beds located in Tennessee as well as the 15.5% allocation of Florida-based Health Management Associates' acute hospital beds located in Tennessee:

				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
Tennessee Hospital Organizations
HCA		Dec 2012	3,770	2,381	6,151	2,894
Community Health Systems		Dec 2012	1,959	125	2,084	619
LifePoint Hospitals		Dec 2012	624	31	655	244
Baptist Memorial Health Memphis		Sep 2012	249	55	304	(42)
Methodist LeBonheur Healthcare		Dec 2012	135	88	223	58
TN 15.5% of Health Mgt Assoc		Dec 2012	135	77	212	47
TN 8.9% of Ascension Health		Jun 2013	104	47	151	35
Mountain States Health Alliance		Jun 2013	112	24	136	11
Covenant Health		Dec 2012	86	30	116	-
Wellmont Health System		Jun 2012	55	16	71	13
Total all 10			7,229	2,874	10,103	3,879
Provision for Bad Debts						7,229
Uncompensated Charity Care Costs						2,874
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						13,982

So, these 10 Tennessee Non-Profit  and For-Profit Hospital Organizations had Audited Total Hospital Operating Income of $3.879 bil in the most recent fiscal year audited.  Driving down this $3.879 bil Total Hospital Operating Income were Total Provisions for Bad Debts of a massive $7.229 bil and Total Costs of Uncompensated Charity Care of another massive $2.874 bil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $13.982 bil, which is a massive $10.103 bil higher than the reported $3.879 bil.

Granted these two monstrous 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 Tennessee 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 Tennessee.

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

With these exceptionally strong, ongoing Tennessee 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 Tennessee and other US States eventually see the light and elect 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.  






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