Tuesday, April 15, 2014

Kansas Non-Profit Hospital Organizations Net Income 9.2% of Revenues in 2012

From a review of audited annual financial statements shown at Electronic Municipal Market Access (EMMA), I found 2 Kansas Non-Profit Hospital Organizations with Net Assets above $400 mil each and which have or will have shortly audited financial statements for each of the most recent 4 years.

These 2 Kansas Non-Profit Hospital Organizations generated Total Bottom Line Net Income of a very robust 9.2% of Total Operating Revenues in 2012 and also a lower but still solid 6.7% in 2013.

This exceptional 9.2% Bottom Line Profit Margin in 2012 is really just about one Non-Profit Hospital Organization.....Olathe Medical Center (OMC), which posted a Net Income Margin of an off-the-charts 17.3% in 2012 and an even better 20.3% for the 9 months ended September 30, 2013.

When you analyze OMC's 17.3% Net Income Margin in 2012, OMC's Operating Income was only $8 mil.  However OMC's Investment Returns were an incredibly higher $34 mil in 2012.  Thus OMC's Investment Returns are accounting for over 80% of OMC's 17.3% Bottom Line Profit Margin in 2012.

The only problem with these exceptional operating results of OMC in 2012 and 2013 was that instead of taking the high road and responsibly reducing their Patient Service Pricing, OMC elected to retain these excessively high Bottom Line Profits, which also added to both their Net Assets and their treasure chest of Investments in Stocks and Bonds.

Below are the Bottom Line Net Income and Total Operating Revenues for these 2 Kansas Non-Profit Hospital Organizations for 2013 and for 2012:

Most 2013


Recent  Bottom  2013 2013
Bottom 2012 2012

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

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

University Kansas Hospital Kansas City Jun 13              49         1,163 4.2%
             76         1,062 7.2%
Olathe Medical Center Olathe Sep 13              42            202 20.8%
             47            272 17.3%

Total of both

             91         1,365 6.7%
           123         1,334 9.2%

Clearly OMC is the exception but Kansas has so many struggling Hospitals especially its many rural ones.  The only good way this situation changes is for the State of Kansas to fully expand Medicaid.

And there's a substantial side benefit if Kansas were to fully expand Medicaid.  It would drive down Health Insurance Premiums for Kansas citizens on the Health Insurance Exchange.  Full Medicaid expansion increases nearly every Hospital's profits so much that Hospitals just have to reduce their Hospital charges very substantially and they also will be much more reasonable in negotiating Hospital Charges with Health Insurance Companies.  Thus it is only logical that this will also result in much lower Health Insurance Premiums on the Health Insurance Exchange.