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.
Michigan is one State whose large Non-Profit Hospital Organizations are not being greedy in generating high operating profits.
From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 11 Michigan Non-Profit Hospital Organizations with Net Assets above $400 mil. These 11 Michigan Non-Profit Hospital Organizations generated Total Operating Income of $816 mil in the most recent year, which was a very modest 3.1% of Total Operating Revenues of $26.637 bil. These modest Operating Margin Percentages were across the board with the highest Operating Income Margin of the 11 being only 6.5%.
With Michigan Hospitals generating such modest profits, a key beneficiary will be Michigan citizens buying health insurance on the Federal insurance exchange. Michigan 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 Federal insurance exchange.
Another factor which will help keep insurance premium prices reasonable in the health insurance exchange for Michigan residents is that Michigan has wisely elected to expand Medicaid. This will increase Michigan Hospital profits substantially and thus permit Michigan 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 for Michigan citizens on the Federal Insurance Exchange.
So just how much will Michigan Hospital Profits increase due to the ACA and the Expansion of Medicaid?
Well, these 11 Michigan Hospital Organization's audited financial statements show it will be huge.
For these 11 Michigan Hospital Organizations, Total Operating Income was $816 mil in the most recent year. Driving down these Operating Profits were Provisions for Bad Debts of $1.189 bil and Uncompensated Charity Care Costs Incurred of another $372 mil. Thus Total Operating Income exclusive of these two Earnings Charges was $2.377 bil, which was nearly 3 times the reported Total Operating Income of $816 mil.
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 11 large Michigan Non-Profit Hospital Organizations:
| Operating | ||||
| Operating | Total | Income | ||
| City | Income | Operating | (Loss) | |
| HQs | (Loss) | Revenues | Margin | |
| mils $s | mils $s | % | ||
| Michigan Non-Profit Hospital Organizations | ||||
| MidMichigan Health | Midland | 5 | 571 | 0.9% |
| Henry Ford Health | Detroit | 55 | 4,463 | 1.2% |
| Oakwood Healthcare | Dearborn | 21 | 1,194 | 1.8% |
| McLaren Health | Flint | 60 | 2,337 | 2.6% |
| Beaumont Hospital | Royal Oak | 58 | 2,243 | 2.6% |
| Sparrow Health | Lansing | 31 | 1,125 | 2.8% |
| Bronson Healthcare | Kalamazoo | 26 | 902 | 2.9% |
| Trinity Health | Livonia | 305 | 8,978 | 3.4% |
| Munson Healthcare | Traverse City | 22 | 564 | 3.9% |
| Spectrum Health | Grand Rapids | 212 | 3,937 | 5.4% |
| Lakeland Hospitals | St Joseph | 21 | 323 | 6.5% |
| Total all 11 | 816 | 26,637 | 3.1% | |
