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

From a review of the Electronic Municipal Market Access (EMMA), I found 8 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 updated Bottom Line Profits, Total Operating Revenues and the related Profit Margin Percentages in the most recent audited fiscal year reported for each of these 8 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 Hospital Organizations
St Jude Children's Hospital	Memphis	Jun 2013	355	1,291	27.5%
Vanderbilt Univ Health Care Services	Nashville	Jun 2012	278	2,462	11.3%
Methodist LeBonheur Healthcare	Memphis	Dec 2012	123	1,495	8.2%
Mountain States Health Alliance	Johnson City	Jun 2013	60	1,059	5.7%
Covenant Health	Knoxville	Dec 2012	46	1,051	4.4%
Wellmont Health System	Kingsport	Jun 2013	33	798	4.1%
West Tennessee Healthcare	Jackson	Jun 2013	30	614	4.9%
Baptist Memorial Health Care	Memphis	Sep 2013	18	1,892	1.0%
Total all 8			943	10,662	8.8%

Vanderbilt University Health Care Services includes both Vanderbilt Hospitals and Clinics and Vanderbilt Medical Group.  Vanderbilt's faculty members practice through Vanderbilt Medical Group.  Vanderbilt's above Profit amounts are its Health Care Operating Income, or its Excess of Total Health Care Services Revenues over Total Health Care Services Expenses.

As you can see in the above chart, the Total Bottom Line Profits for these 8 Tennessee Non-Profit Hospital Organizations was $943 mil in the most recent audited fiscal year reported, which was a very robust 8.8% of Total Operating Revenues.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies was just a little bit higher 9.6% of their Total Revenues in the most recent year.  CEOs and CFOs of the 30 Dow Industrial companies keenly aware of how difficult it is for them to generate profit margin percentages must be in utter disbelief at how Non-Profit Hospitals can possibly be doing so well on the profit margin percentage front.

When you compare the 8.8% Total Bottom Line Profit Margin of these 8 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 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 Tennessee Non-Profit Hospital Organizations made in the most recent fiscal year?  From EMMA, these 8 Tennessee Non-Profit Hospital Organizations generated Audited Total Bottom Line Profits of $943 mil in the most recent fiscal year, which was an exceptionally robust 86% 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
	City	Year	Net	Net	(Decrease)	(Decrease)
	HQs	End	Income	Income	Amount	%
			mils $s	mils $s	mils $s
Tennessee Hospital Organizations
St Jude Children's Hospital	Memphis	Jun 2013	355	76	279	367%
Vanderbilt Univ Health Care Services	Nashville	Jun 2012	278	246	32	13%
Methodist LeBonheur Healthcare	Memphis	Dec 2012	123	7	116	1657%
Mountain States Health Alliance	Johnson City	Jun 2013	60	28	32	114%
Covenant Health	Knoxville	Dec 2012	46	57	(11)	-19%
Wellmont Health System	Kingsport	Jun 2013	33	41	(8)	-20%
West Tennessee Healthcare	Jackson	Jun 2013	30	8	22	275%
Baptist Memorial Health Care	Memphis	Sep 2013	18	45	(27)	-60%
Total all 8			943	508	435	86%

These very strong bottom line profits of these Tennessee 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 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 7 of the above 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.

West Tennessee Healthcare did not report the amount of its Provisions for Bad Debts.  And its Uncompensated Charity amount below is its Charity Care Charges Foregone.

				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)
Vanderbilt Univ Health Care Services		Jun 2012	112	120	232	278
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	-
West Tennessee Healthcare		Jun 2013		104	104	31
Wellmont Health System		Jun 2012	55	16	71	13
Total all 12			7,341	3,098	10,439	4,188
Provision for Bad Debts						7,341
Uncompensated Charity Care Costs						3,098
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						14,627

So, these 12 Tennessee Non-Profit  and For-Profit Hospital Organizations had Audited Total Hospital Operating Income of $4.188 bil in the most recent fiscal year audited.  Driving down this $4.188 bil Total Hospital Operating Income were Total Provisions for Bad Debts of a massive $7.341 bil and Total Costs of Uncompensated Charity Care of another massive $3.098 bil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $14.627 bil, which is a massive $10.439 bil higher than the reported $4.188 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.  

Also, in a quick review of EMMA, I found two Non-Profit Hospital Organizations headquartered in Tennessee with Net Assets of more than $100 mil but also less 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 both of these 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 Smaller Hospital Organizations
University Health Systems	Knoxville	Dec 2012	19	575	3.3%
Chattanooga-Hamilton County Hosp Authority	Chattanooga	Jun 2013	(14)	545	-2.6%
Total of both			5	1,120	0.4%

As you can see, these two somewhat smaller Tennessee Non-Profitable Organizations aren't doing too well financially, especially the Chattanooga-Hamilton County Hospital Authority.

These two Hospital Organizations' Total Bottom Line Profits of a very modest $5 mil are extremely burdened by a huge $135 mil of Bad Debts Earnings Charges.  In addition, there are substantial earnings charges for Uncompensated Charity Care.  If Tennessee expanded Medicaid, both of these Hospital Organizations would have their Bottom Line Earnings substantially bolstered.