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.
Minnesota is one State whose Non-Profit Hospital Organizations are generally not being greedy in generating high operating profits.
From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 8 Minnesota Non-Profit Hospital Organizations with Net Assets above $400 mil. When I exclude Children's Health Care of Minnesota, that leaves 7. These 7 Minnesota Hospital Organizations generated Total Operating Income of only $964 mil in the most recent year, which was a modest 4.2% of Total Operating Revenues of $23.136 bil. These modest Operating Margin Percentages were widespread, with the highest of the 8 Hospitals having a 5.2% Operating Margin.
With Minnesota Hospitals generating such modest profits, a key beneficiary will be Minnesota citizens buying health insurance on the insurance exchange. Minnesota 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 Minnesota health insurance exchange is that Minnesota has wisely elected to expand Medicaid. This will increase Minnesota Hospital profits very significantly and thus permit Minnesota 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 Minnesota State Insurance Exchange.
So just how much will Minnesota Hospital Profits increase due to the ACA and the Expansion of Medicaid?
Well, these 7 Minnesota Hospital Organization's audited financial statements show it will be significant.
For these 7 Minnesota Hospital Organizations, Total Operating Income was $964 mil in the most recent year. Driving down these Operating Profits were Provisions for Bad Debts of $460 mil and Uncompensated Charity Care Costs Incurred of another $189 mil. Thus Total Operating Income exclusive of these two Earnings Charges was $1.613 mil, which was 67% higher than the reported Total Operating Income of $964 mil.
Granted not all of these two huge Earnings Charges will be eliminated with ACA and Medicaid Expansion, but a very significant 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 7 Minnesota Non-Profit Hospital Organizations:
| Operating | ||||
| Operating | Total | Income | ||
| City | Income | Operating | (Loss) | |
| HQs | (Loss) | Revenues | Margin | |
| mils $s | mils $s | % | ||
| Minnesota Non-Profit Hosptal Organization | ||||
| Essentia Health | Minneapolis | 29 | 1,648 | 1.8% |
| Fairview Health | Minneapolis | 108 | 3,218 | 3.4% |
| Allina Health | Minneapolis | 128 | 3,278 | 3.9% |
| Park Nicollet Health | St Louis Park | 51 | 1,235 | 4.1% |
| Mayo Clinic | Rochester | 395 | 8,844 | 4.5% |
| CentraCare Health | St Cloud | 47 | 938 | 5.0% |
| Health Partners | Bloomington | 206 | 3,975 | 5.2% |
| Total all 7 | 964 | 23,136 | 4.2% | |
