Utah Non-Profit Hospital Earnings On Fire Under Obamacare and Headed Much Higher

From a review of the Electronic Municipal Market Access (EMMA), I found 2 Non-Profit Hospital Organizations headquartered in the State of Utah with Net Assets at the most recent date reported of more than $400 mil each.  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 2 Utah 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
Utah Hospital Organizations
IHC Health Services	Salt Lake City	Dec 2012	589	4,056	14.5%
University Utah Hospitals & Clinics	Salt Lake City	Jun 2012	45	1,007	4.5%
Total of both			634	5,063	12.5%

As you can see in the above chart, the Total Bottom Line Profits for these 2 Utah Non-Profit Hospital Organizations was $634 mil in the most recent audited fiscal year reported, which was an exceptionally robust 12.5% of Total Operating Revenues.  As a comparison, the Combined Bottom Line Profit Margin of the prestigious 30 Dow Industrial companies was a substantially lower 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 12.5% Total Bottom Line Profit Margin of these 2 Utah 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 Utah 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%.

These very strong bottom line profits of these 2 Utah 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 massive earnings story.

When the Insurance Exchanges kick in starting in 2014, these Utah 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' future Hospital Operating 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.

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

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 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 large when compared to the related Hospital Operating Income.

Below here are the most recent audited year's disclosure of the Provision for Bad Debts and Uncompensated Charity Care Costs for these 2 Utah Non-Profit Hospital Organizations:

				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
Utah Hospital Organizations
IHC Health Services	Salt Lake City	Dec 2012	207	119	326	397
University Utah Hospitals & Clinics	Salt Lake City	Jun 2012	59	19	78	55
Total of both			266	138	404	452
Provision for Bad Debts						266
Estimated Costs of Uncompensated Charity Care						138
Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs						856

So, these 2 Utah Non-Profit Hospital Organizations had Audited Total Hospital Operating Income of $452 mil in the most recent fiscal year audited.  Burdening this $452 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $266 mil and Total Costs of Uncompensated Charity Care of another $138 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $856 mil, which is $404 mil higher than the reported $452 mil Hospital Operating Income.
 
Granted these two earnings charges will not be totally eliminated with the full rollout of the ACA, but a significant amount of these two earnings charges will be eliminated.  Unfortunately, Utah has decided to not Expand Medicaid, which would very substantially reduce these two earnings charges.

Frankly, I really don't understand how a financially savvy State Governor and financially savvy State Legislatures could possibly vote to not Expand Medicaid.  The US Government is 100% funding the first three years of Medicaid Expansion.

Further, if Medicaid is Expanded, the Hospital Organizations will be getting these just huge increases in their annual earnings in each future year, which will ultimately accrue to the benefit of State citizens when they are hospitalized and will be paying much lower hospital charges.  It will also cut the US Debt markedly since the US Government is paying for a good chunk of these hospitalization charges.  

With these very exceptionally strong, ongoing Utah 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.

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.     

And lastly, it is just incredible how much the financial strength of these Utah Non-Profit Hospitals has been enhanced during the Obama Administration.

From EMMA, below here are the Net Assets of these 2 Utah Non-Profit Hospital Organizations at the most recent date and also at the beginning of the Obama Administration:

						2008	2008	Obama
				Most		or	or	ACA
			Most	Recent		2009	2009	and
			Recent	Balance		FYE	Balance	US Fed
			Balance	Sheet		Balance	Sheet	Bump
	City	State	Sheet	Net		Sheet	Net	%
Hospital Organization	HQs	HQs	Date	Assets		Date	Assets	Change
				mil $s			mil $s
IHC Health Services	Salt Lake City	UT	Sep 13	4,370		Dec 08	1,582	176%
University Utah Hospitals & Clinics	Salt Lake City	UT	Jun 12	434		Jun 09	341	27%
Total of both				4,804			1,923	150%

Yeah, these 2 Utah Non-Profit Hospital Organizations had their Total Net Assets increase by a massive $2.881 bil to $4.804 bil, an increase of a huge 150% during the Obama Administration so far.  This $2.881 bil Net Asset increase comes predominantly from the tax-free cumulative earnings of these Utah Hospitals during the Obama Administration.