Tuesday, April 15, 2014

Iowa Non-Profit Hospital Organizations Net Income Only 7.1% of Revenues in 2013 and 6.4% in 2012

From a review of audited annual financial statements shown at Electronic Municipal Market Access (EMMA), I found 3 Iowa Non-Profit Hospital Organizations with Net Assets above $400 mil each.

Iowa Health Systems hasn't released its December 2013 financial statements to EMMA yet.  Thus I have included as 2013 operating results below its 9 months ended September 2013 amounts.

These 3 Iowa Non-Profit Hospital Organizations generated Total Bottom Line Net Income of a very respectable 7.1% of Total Operating Revenues in 2013 and a more modest 6.4% in 2012.

It should be pointed out that these are modest Bottom Line Profits of these largest, financially strongest Iowa Hospital Organizations which even include very robust Investment Returns due to the hot stock market in both 2013 and in late 2012, and thus on an Operating Income (Loss) basis, these Profits are substantially lower in both 2013 and in 2012.

To illustrate this latter point, the huge Iowa Health System, now called UnityPoint Health, posted Total Investment Returns of $103 mil in 2013 included in Non-Operating Income, nearly double its Total Operating Income of only $51 mil also in 2013.

Below are the Bottom Line Net Income and Total Operating Revenues for each of these 3 Iowa Non-Profit Hospital Organizations for both 2013 and 2012:

Most          2013


Recent  Bottom  2013 2013
Bottom 2012 2012

Fiscal  Line   Total  Net
Line Total Net
Year  Net   Operating  Income
Net Operating Income
Iowa Hospital Organ City HQs End  Income   Revenues  Margin
Income Revenues Margin

 mil $s   mil $s  %
mil $s mil $s %
Non-Profit Hospitals

UnityPoint Health Des Moines Dec 13            170         2,064 8.2%
           150         2,036 7.4%
Genesis Health System Davenport Jun 13              40            552 7.2%
             16            531 3.0%
Univ Iowa Hospitals & Clinics Iowa City Jun 13              57         1,125 5.1%
             68         1,098 6.2%

Total all 3

           267         3,741 7.1%
           234         3,665 6.4%

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 determining ultimately whether health insurance premiums are fairly priced on the health insurance exchanges.

Well, as you can see from the above very modest profit amounts along with my earlier discussion of them, Iowa is one State whose large Non-Profit Hospital Organizations, for the most part, are not being greedy in generating high profits.

With Iowa Hospitals generating such modest profits, a key beneficiary will be Iowa citizens buying health insurance on the Health Insurance Exchange.  Iowa Hospitals, for the most part, have not been nor will they 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 Health Insurance Exchange. 

Another factor which will help keep insurance premium prices reasonable in the Health Insurance Exchange is that Iowa has wisely elected to effectively expand Medicaid.  This will increase nearly all Iowa Hospital profits substantially and thus permit Iowa Hospitals to be even more reasonable in their negotiations with health insurance companies on pricing for hospital and other health care procedures which ultimately drives what health insurance premiums are set at by health insurers on the Health Insurance Exchange.