One reason US Hospital bills are so high is that many of the larger Non-Profit Hospitals Systems set their pricing for hospital procedures so that they make a lot of money and retain it tax free, further increasing their already massive treasure chest of Investments in Equity and Debt Securities, which also grow tax free.
Thus, US Hospitals are playing a key role in ultimately determining whether health insurance premiums are fairly priced on the health insurance exchanges.
Well, California has some Non-Profit Hospital Organizations that are very greedy in generating very high operating profits. But California also has many more which are not generating high operating profits.
From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 34 California Non-Profit Hospital Organizations with Net Assets above $400 mil. Included in these 34 are 5 which are Charitable Hospitals like Children's Hospitals and really aren't relevant to the California Insurance Exchange and thus have been excluded below.
The remaining 28 large California Hospital Organizations have Operating Income Margins ranging from a low of a negative 4.7% to a high of 12.4%.
To get a better handle here, I stratified them by Operating Margin Percentage.
There were 10 of them with Operating Income Margins below 5.0%. These Low Operating Income Margin Hospitals had a Total Operating Margin of a very modest 3.0%.
There were 9 of them with Operating Income Margins above 8.0%. These High Operating Income Margin Hospitals had a Total Operating Margin of a very steep 10.3%.
And there were another 9 of them in the middle, with Operating Income Margins between 5.0% to 8.0%. These Middle Operating Income Margin Hospitals had a Total Operating Margin of not unreasonable 6.1%.
With the California Hospitals generating Low Operating Margins and even most of them generating Middle Operating Margins, a key beneficiary will be California citizens buying health insurance on the insurance exchange. These California Hospitals, for the most part, will not be baking in excessive Hospital profits demands in their negotiations with health insurance companies on pricing for hospital procedures which ultimately determines what insurance premiums are set by health insurance companies on the insurance exchange.
Another factor which will help keep insurance premium prices reasonable in the California health insurance exchange is that California has wisely elected to expand Medicaid. This will increase California Hospital profits substantially and thus permit California Hospitals to be even more reasonable in their negotiations with health insurance companies on pricing for hospital procedures which ultimately drives what health insurance premiums are set at by health insurers on the California State Insurance Exchange.
So just how much will California Hospital Profits increase due to the ACA and the Expansion of Medicaid?
Well, these 28 California Hospital Organization's audited financial statements show it will be huge.
In an earlier study, the Total Operating Income of 27 of these California Hospital Organizations (all but Kaiser Permanente) was $3.046 bil, Total Provision for Bad Debts were $3.260 bil and the Total Uncompensated Charity Costs Incurred were another $931 mil. Thus, Total Operating Income exclusive of these two Earnings Charges were $7.237 bil, which was 2.4 times the reported Total Operating Income of $3.046 bil.
Granted not all of these two huge Earnings Charges will be eliminated with ACA and Medicaid Expansion, but a substantial portion of them will.
Below here are Audited Operating Income, Total Operating Revenues and Operating Income Profit Margin Percentage in the most recent year for each of these 28 large California Non-Profit Hospital Organizations, sorted by increasing Operating Income Margin Percentage:
| Operating | ||||
| Operating | Total | Income | ||
| City | Income | Operating | (Loss) | |
| HQs | (Loss) | Revenues | Margin | |
| mils $s | mils $s | % | ||
| Low Profit Margins (Under 5.0%) | ||||
| Eisenhower Medical Center | Rancho Mirage | (24) | 510 | -4.7% |
| Washington Township Hospital | Fremont | 1 | 476 | 0.2% |
| St. Joseph Health System | Orange | 50 | 4,956 | 1.0% |
| Torrance Memorial Medical Center | Torrance | 7 | 515 | 1.4% |
| Huntington Memorial Hospital | Pasadena | 9 | 543 | 1.7% |
| Dignity Health | San Francisco | 284 | 10,412 | 2.7% |
| Kaiser Permanente | Oakland | 1,671 | 50,631 | 3.3% |
| Cottage Health System | Santa Barbara | 21 | 629 | 3.3% |
| Adventist Health West | Roseville | 133 | 2,926 | 4.5% |
| Fremont-Rideout Health | Yuba City | 15 | 327 | 4.6% |
| Total all 10 With Low Profit Margins | 2,167 | 71,925 | 3.0% | |
| Middle Profit Margins (5.0%-8.0%) | ||||
| PIH Health | Whittier | 33 | 585 | 5.6% |
| U Cal, San Fran Medical Center | San Francisco | 123 | 2,164 | 5.7% |
| Loma Linda University Medical Center | Loma Linda | 71 | 1,241 | 5.7% |
| Sutter Health | Sacramento | 549 | 9,560 | 5.7% |
| U Cal, Davis Medical Center | Sacramento | 86 | 1,476 | 5.8% |
| Hoag Memorial Hospital | Newport Beach | 56 | 932 | 6.0% |
| Memorial Health Services | Fountain Valley | 139 | 2,094 | 6.6% |
| Community Hospital Foundation | Monterey | 29 | 431 | 6.7% |
| Scripps Health | San Diego | 191 | 2,609 | 7.3% |
| Total all 9 With Middle Profit Margins | 1,277 | 21,092 | 6.1% | |
| High Profit Margins (Above 8.0%) | ||||
| U Cal, Irvine Medical Center | Orange | 73 | 826 | 8.8% |
| John Muir Health | Walnut Creek | 129 | 1,459 | 8.8% |
| Sharp HealthCare | San Diego | 242 | 2,711 | 8.9% |
| El Camino Healthcare | Mountain View | 65 | 713 | 9.1% |
| Stanford Hospitals and Clinics | Stanford | 237 | 2,430 | 9.8% |
| U Cal, LA Medical Center | Los Angeles | 209 | 1,914 | 10.9% |
| Community Medical Centers Fresno | Fresno | 132 | 1,185 | 11.1% |
| Cedars-Sinai Medical Center | West Hollywood | 350 | 2,884 | 12.1% |
| U Cal, San Diego Medical Center | San Diego | 141 | 1,137 | 12.4% |
| Total all 9 With High Profit Margins | 1,578 | 15,259 | 10.3% |
