One reason US Hospital bills are so high is that many of the larger Hospitals Systems set their pricing for hospital procedures so that they make a lot of money.
Thus, US Hospitals are playing a key role in ultimately determining whether health insurance premiums are fairly priced on the health insurance exchanges.
Other than Vanderbilt University Health Services, large Tennessee Non-Profit Hospital Organizations did not generate high Operating Profits in the most recent year reported.
From a review of audited financial statements in the Electronic Municipal Market Access (EMMA), I found 10 Tennessee Non-Profit Hospital Organizations with Net Assets above $100 mil. After excluding St. Jude's Children's Hospital, that leaves 9.
These 9 large Tennessee Non-Profit Hospital Organizations generated Total Operating Income of $346 mil in the most recent year reported, which was a very modest 3.3% of Total Operating Revenues of $10.491 bil.
Of these 9 Tennessee Non-Profit Hospital Organizations, 8 of them had Operating Income Margins of 5.0% or less, for a Total Operating Income Margin for these 8 of an extremely modest 0.8%.
The Vanderbilt University Health Services amounts below include both Vanderbilt Hospital and Clinics and Vanderbilt Medical Group. Vanderbilt Health Service's Operating Income amount below is the Excess of Total Health Care Services over Total Health Care Expenses included in Vanderbilt University's Operating Statement.
With so many of these Tennessee Hospitals generating Operating Income Margins of 5.0% and below, a key beneficiary of this will be Tennessee citizens buying health insurance on the Federal insurance exchange. These Tennessee 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.
So far, Tennessee has decided to not expand Medicaid. If Tennessee changed its mind and decided to fully Expand Medicaid, then the consequences of this action would be to significantly drive down insurance premium prices for Tennessee residents in the Federal health insurance exchange. This Tennessee Medicaid Expansion would increase Tennessee Hospital profits substantially and thus permit Tennessee 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 Tennessee residents on the Federal Health Insurance Exchange.
So just how much would Tennessee Hospital Profits increase due to the ACA and the Expansion of Medicaid?
Well, these 9 Tennessee Hospital Organization's audited financial statements show it will be huge.
For these 9 Tennessee Hospital Organizations, Total Operating Income was $346 mil in the most recent fiscal year. Driving down these Operating Profits were Provisions for Bad Debts of a huge $884 mil and Uncompensated Charity Care Costs Incurred of another $549 mil. Thus Total Operating Income exclusive of these two Earnings Charges was $1.779 bil, which was more than 5 times the reported Total Operating Income of $346 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.
But there's much more to this Medicaid Expansion story impacting Tennessee. Tennessee is headquarters to the huge HCA and also to the very large Community Health Systems and the smaller LifePoint Hospitals. These 3 Hospital Systems are For-Profit, Publicly-held Corporations with hospitals located all throughout the country.
So far, roughly half of the country's US States have decided to Expand Medicaid. I think you'll see many other US States do likewise in the next year.....the economic impact is just too incredibly favorable to the State, its businesses, its residents and its Hospitals.
These 3 Tennessee Publicly-held Hospital Corporations generated Total Pretax Income of $3.513 bil in 2012. Driving down this Pretax Income were Provisions for Bad Debts of a huge $5.729 bil and Uncompensated Charity Care Costs Incurred of another $2.506 mil. Thus Total Pretax Income exclusive of these two Earnings Charges was $11.748 bil, which was 3.3 times the reported Total Pretax Income of $3.513 mil. Are Hospitals important to Nashville's economy? You better believe it. And thus is Medicaid Expansion, not just in Tennessee, but also all over the country, important to Nashville's economy? Again, you better believe it. If Tennessee doesn't eventually Expand Medicaid, there will be a revolt in the Country Music City. And Memphis just might go along with Nashville in this revolt.
Below here are the Audited Operating Income or Loss, Total Operating Revenues and Operating Income (Loss) Margin Percentage in the most recent year for each of these 9 large Tennessee Non-Profit Hospital Organizations:
| Operating | ||||
| Operating | Total | Income | ||
| City | Income | Operating | (Loss) | |
| HQs | (Loss) | Revenues | Margin | |
| mils $s | mils $s | % | ||
| Tennessee Hospital Organizations | ||||
| Baptist Memorial Health Care | Memphis | (42) | 1,892 | -2.2% |
| Chattanooga-Hamilton Co Hospital Authority | Chattanooga | (7) | 545 | -1.3% |
| Covenant Health | Knoxville | - | 1,051 | 0.0% |
| University Health System | Knoxville | 4 | 575 | 0.7% |
| Mountain States Health Alliance | Johnson City | 11 | 1,059 | 1.0% |
| Wellmont Health System | Kingsport | 13 | 798 | 1.6% |
| Methodist LeBonheur Healthcare | Memphis | 58 | 1,495 | 3.9% |
| West Tennessee Healthcare | Jackson | 31 | 614 | 5.0% |
| Vanderbilt Univ Health Care Services | Nashville | 278 | 2,462 | 11.3% |
| Total all 9 | 346 | 10,491 | 3.3% |
