Monday, November 11, 2013

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

From a review of the Electronic Municipal Market Access (EMMA), I found 7 Non-Profit Hospital Organizations headquartered in the State of Virginia with Net Assets at the most recent date reported of more than $400 mil each and which also had their current year financial statements disclosed in EMMA.  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 7 Virginia Non-Profit Hospital Organizations:



Annual Bottom

Fiscal Line Total Profit

City Year Net Operating Margin

HQs End Income Revenues %

mils $s mils $s
Virginia Hospital Organizations

Sentara HealthCare Norfolk Dec 2012          431             4,068 10.6%
Inova Health Falls Church Dec 2012          363             2,362 15.4%
VCU Health Richmond Jun 2013          192             1,189 16.1%
Carilion Clinic Roanoke Sep 2012          107             1,193 9.0%
Virginia Hospital Center Arlington Arlington Dec 2012            83               388 21.4%
Centra Health Lynchburg Dec 2012            48               667 7.2%
Valley Health System Winchester Dec 2012            44               742 5.9%

Total all 7

      1,268           10,609 12.0%

As you can see in the above chart, the Total Bottom Line Profits for these 7 Virginia Non-Profit Hospital Organizations was $1.268 bil in the most recent audited fiscal year reported, which was an exceptionally robust 12.0% of Total Operating Revenues.  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 12.0% Total Bottom Line Profit Margin of these 7 Virginia 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 Virginia 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, 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 7 Virginia 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 Virginia 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' 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 on Stocks and Bonds.

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

First, there is the Hospital Operating Statement 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 Operating Statement 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.

So what about the amounts of these two items.....Provision for Bad Debts and Uncompensated Charity Care Costs?  Well, they are very large when compared to the related Hospital Operating Income.

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 these 7 Virginia Non-Profit Hospital Organizations which had Net Assets above $400 mil currently.  I also included below one Virginia Hospital Organization with only older financial statements disclosed in EMMA and another one with both Tennessee and Virginia hospital operations.  In addition, I added below an allocation of 7.5% of For-Profit HCA's consolidated amounts based on the 7.5% of HCA's total licensed beds located in Virginia:

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
Virginia Hospital Organizations

Virginia 7.5% Share of HCA
Dec 2012          283               179        462          217
Sentara HealthCare
Dec 2012          249               136        385          264
Inova Health System
Dec 2012            93               120        213          206
Carilion Clinic
Sep 2012            75                 63        138            57
Mountain States Health
Jun 2013          112                 24        136            11
Riverside Healthcare
Dec 2010            81                 18          99           (12)
Valley Health System
Dec 2012            42                 42          84            11
Centra Health
Dec 2012            39                 26          65            24
VCU Health
Jun 2012            13                 13          26          133
Virginia Hospital Arlington
Dec 2012            12                   8          20            20

Total all 10

         999               629      1,628          931

Provision for Bad Debts

Estimated Costs of Uncompensated Charity Care


Operating Income Excluding Bad Debts and Uncompensated Charity Care Costs

So, these 10 Virginia Hospital Organizations had Audited Total Hospital Operating Income of $931 mil in the most recent fiscal year audited.  Driving down this $931 mil Total Hospital Operating Income were Total Provisions for Bad Debts of $999 mil and Total Costs of Uncompensated Charity Care of another $629 mil.  Thus, exclusive of these two earnings charges, Total Hospital Operating Income would have been $2.559 bil, which is $1.628 bil higher than the reported $931 mil.

Granted these two earnings charges will not be totally eliminated with the ACA, but a very significant amount of these two earnings charges will be eliminated.  And if Virginia wisely elects to expand Medicaid, the amount of this elimination of these two charges will be substantial.

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

With these very exceptionally strong, ongoing Virginia 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 ideally over the next 3 to 4 years which are now being negotiated by 29 US Congressional members of the Bilateral and Bicameral Committee Conference on Budget Negotiations.  Both clear-thinking Republicans and clear-thinking Democrats should be on board with this wise funding vehicle.  Let's pray that the US Congress governs for a change on this critical issue.  
And lastly, it is just incredible how much the financial strength of these Virginia Non-Profit Hospitals has been enhanced during the Obama Administration.

From EMMA, below here are the Net Assets of these 7 Virginia Non-Profit Hospital Organizations at the most recent date and also at the beginning of the Obama Administration:

2008 2008 Obama

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

Inova Health System Falls Church VA  Sep 13      3,941
Dec 08     1,885 109%
Sentara HealthCare Norfolk VA  Sep 13      3,169
Dec 08     1,489 113%
Virginia Commonwealth Univ Health Richmond VA  Sep 13      1,443
Jun 09        756 91%
Virginia Hospital Center Arlington Arlington VA  Sep 13         691
Dec 08        351 97%
Valley Health System Winchester VA  Sep 13         653
Dec 08        434 50%
Carilion Clinic Roanoke VA Jun 13        484
Sep 09        357 36%
Centra Health Lynchburg VA  Sep 13         451
Dec 08        233 94%

Total all 7


    5,505 97%

Yeah, these 7 Virginia Non-Profit Hospital Organizations had their Total Net Assets increase by a massive $5.327 bil to $10.832 bil, an increase of a huge 97% during the Obama Administration so far.  This $5.327 bil Net Asset increase comes predominantly from the tax-free cumulative earnings of these Virginia Hospitals during the Obama Administration.