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.
Pennsylvania 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), in the most recent year, I found 16 Pennsylvania Non-Profit Hospital Organizations with Net Assets above $400 mil. When I exclude Philadelphia Children's Hospital, that leaves 15. These 15 Pennsylvania Non-Profit Hospital Organizations generated Total Operating Income of $1.063 bil in the most recent fiscal year (June 30, 2013 for all of them but one), which was a very modest 3.1% of Total Operating Revenues of $33.800 bil. These modest Operating Margin Percentages were across the board with the highest Operating Income Margin of the 15 being only 7.8%.
With Pennsylvania Hospitals generating such modest profits, a key beneficiary will be Pennsylvania citizens buying health insurance on the Federal insurance exchange. Pennsylvania 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 Pennsylvania residents is that Pennsylvania will probably elect to expand Medicaid. This will increase Pennsylvania Hospital profits substantially and thus permit Pennsylvania 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 Pennsylvania citizens on the Federal Insurance Exchange.
So just how much will Pennsylvania Hospital Profits increase due to the ACA and the Expansion of Medicaid?
Well, these 15 Pennsylvania Hospital Organization's audited financial statements show it will be huge.
For these 15 Pennsylvania Hospital Organizations, Total Operating Income was $1.063 bil in the most recent year. Driving down these Operating Profits were Provisions for Bad Debts of $1.342 bil and Uncompensated Charity Care Costs Incurred of another $815 mil. Thus Total Operating Income exclusive of these two Earnings Charges was $3.220 bil, which was 3 times the reported Total Operating Income of $1.063 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 Pennsylvania Non-Profit Hospital Organizations:
| Operating | ||||
| Operating | Total | Income | ||
| City | Income | Operating | (Loss) | |
| HQs | (Loss) | Revenues | Margin | |
| mils $s | mils $s | % | ||
| Pennsylvania Non-Profit Hospital Organizations | ||||
| Albert Einstein Healthcare | Philadelphia | (27) | 1,057 | -2.6% |
| Susquehanna Health | Williamsport | 6 | 472 | 1.3% |
| UPMC | Pittsburgh | 140 | 10,188 | 1.4% |
| Guthrie Health | Sayre | 12 | 576 | 2.1% |
| Lehigh Valley Health | Allentown | 33 | 1,562 | 2.1% |
| Reading Hospital | West Reading | 21 | 913 | 2.3% |
| St Luke's Univ Health | Bethlehem | 28 | 1,122 | 2.5% |
| Abington Health | Abington | 21 | 784 | 2.7% |
| Catholic Health East | Newtown Square | 118 | 4,235 | 2.8% |
| Lancaster General Health | Lancaster | 28 | 920 | 3.0% |
| WellSpan Health | York | 43 | 1,237 | 3.5% |
| Geisinger Health | Danville | 163 | 3,355 | 4.9% |
| University Penn Health | Philadelphia | 185 | 3,501 | 5.3% |
| Pinnacle Health | Harrisburg | 53 | 831 | 6.4% |
| Jefferson Health | Radnor | 239 | 3,047 | 7.8% |
| Total all 15 | 1,063 | 33,800 | 3.1% | |
