Tuesday, December 24, 2013

Most Illinois Hospitals Facilitating Reasonable Health Insurance Premium Prices on Insurance Exchange

More than anything, Hospital Patient Charges drive US Health Care Costs.  When you view a typical US Hospital bill for patient services, it is easy to understand why US Health Care Costs are so much higher than that in any other major country.

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, some Illinois large Non-Profit Hospital Organizations are very greedy in generating very high operating profits.  But most of them are not generating high operating profits.

From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 16 Illinois Non-Profit Hospital Organizations with Net Assets above $400 mil.  Excluding the Chicago Children's Hospital, that leaves 15.

The remaining 15 large Illinois Non-Profit Hospital Organizations generated Total Operating Income of $1.074 bil in the most recent fiscal year, which was a very reasonable 4.8% of Total Operating Revenues of $22.438 bil.

These 15 large Non-Profit Illinois Hospital Organizations have Operating Income Margins ranging from a low of a negative 3.0% to a high of 12.3%.  There were 9 of the 15 with Operating Income Margins below 5.0%, 4 of them with Operating Income Margins between 5.0% and 8.0%, and 2 of them with very steep double-digit Operating Income Margins.

With the majority of these large Illinois Non-Profit Hospitals generating Operating Income Margins below 5.0% and even a couple more just above 5.0%, a key beneficiary of this will be Illinois citizens buying health insurance on the insurance exchange.  These Illinois 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 health insurance exchange is that Illinois has wisely elected to expand Medicaid.  This will increase Illinois Hospital profits substantially and thus permit Illinois 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 Insurance Exchange.

So just how much will Illinois Hospital Profits increase due to the ACA and the Expansion of Medicaid?

Well, these 15 Illinois Hospital Organization's audited financial statements show it will be huge.

For these 15 Illinois Hospital Organizations, Total Operating Income was $1.074 bil in the most recent year.  Driving down these Operating Profits were Provisions for Bad Debts of $1.023 bil and Uncompensated Charity Care Costs Incurred of another $539 mil.  Thus Total Operating Income exclusive of these two Earnings Charges was $2.636 bil, which was 2.5 times the reported Total Operating Income of $1.074 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 15 large Illinois Non-Profit Hospital Organizations:




Operating

Operating Total Income

City Income Operating (Loss)

HQs (Loss) Revenues Margin


mils $s mils $s %
Illinois Hospital Organizations








Little Company Mary Hosps&Health Care Evergreen                (6)              199 -3.0%
Hospital Sisters Health System Springfield               22           2,008 1.1%
Presence Health Chicago               48           2,740 1.8%
Northwest Community Healthcare Arlington Heights               12              493 2.4%
OSF Healthcare System Peoria               51           1,909 2.7%
Alexian Brothers Health System Arlington Heights               41              994 4.1%
Rush University Medical Center Chicago               76           1,838 4.1%
Edward Health Services Naperville               28              593 4.7%
NorthShore University Health System Evanston               83           1,756 4.7%
Memorial Health System Springfield               41              760 5.4%
University Chicago Medical Center Chicago               79           1,337 5.9%
Advocate Health Care Oak Brook              298           4,599 6.5%
Northwestern Memorial Health Care Chicago              131           1,710 7.7%
Cadence Health Winfield              124           1,127 11.0%
St George Palos Heights               46              375 12.3%





Total all 15
          1,074         22,438 4.8%