Tuesday, April 15, 2014

Massachusetts Non-Profit Hospital Organizations Net Income Only 6.3% of Revenues in 2013 and 4.9% in 2012

From a review of audited annual financial statements shown at Electronic Municipal Market Access (EMMA), I found 11 Massachusetts Non-Profit Hospital Organizations with Net Assets above $400 mil each and which have or will have soon audited financial statements in each of the most recent 4 years.

These 11 Massachusetts Non-Profit Hospital Organizations generated Total Bottom Line Net Income of a modest 6.3% of Total Operating Revenues in 2013 and an even more modest 4.9% in 2012.

Ten of the 11 Massachusetts Non-Profit Hospital Organizations posted a Bottom Line Profit Margin of below 6.0% each in 2013.

It should be pointed out that these are modest Bottom Line Profits of these largest, financially strongest Massachusetts 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 point, by far the largest of these Massachusetts Hospital Organizations is the very prestigious Partners HealthCare System, which had Total Investment Returns of $195 mil in 2013 included in Non-Operating Income, which was higher than its Total Operating Income of $158 mil also in 2013.

And to further illustrate this point, Boston-based Children's Medical Center posted Total Investment Returns of $324 mil in 2013 included in Non-Operating Income, which was more than triple the Total Operating Income of $84 mil also in 2013.

Partners HealthCare System's 2013 Bottom Line Net Income included a $254 mil economic gain from new affiliations.

Below are the Bottom Line Net Income and Total Operating Revenues for each of these 11 Massachusetts Non-Profit Hospital Organizations for both 2013 and 2012:
 

Most 2013


2012



Recent  Bottom  2013 2013
Bottom 2012 2012


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



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








Children's Med Ctr&Hospital Boston Sep 13            382         1,790 21.3%
           229         1,769 12.9%
Lahey Clinic Medical Center Burlington Sep 13              62         1,047 5.9%
             55         1,036 5.3%
Partners Healthcare System Boston Sep 13            600       10,346 5.8%
           352         8,981 3.9%
CareGroup Healthcare System Boston Sep 13            137         2,462 5.6%
           144         2,390 6.0%
Cape Cod Healthcare Hyannis Sep 13              37            674 5.5%
             53            680 7.8%
Dana-Farber Cancer Institute Boston Sep 13              56         1,034 5.4%
             23            987 2.3%
Covenant Health Systems Lexington Dec 13              30            581 5.2%
             27            585 4.6%
Baystate Medical Center Springfield Sep 13              71         1,716 4.1%
             93         1,634 5.7%
UMass Memorial HealthCare Worchester Sep 13              75         2,186 3.4%
             54         2,228 2.4%
Boston Medical Center Boston Sep 13              20         1,012 2.0%
               9            975 0.9%
SouthCoast Health System New Medford Sep 13              12            834 1.4%
             35            790 4.4%










Total all 11

        1,482       23,682 6.3%
        1,074       22,055 4.9%

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, Massachusetts clearly is one State whose large Non-Profit Hospital Organizations are not being greedy in generating high profits.

With Massachusetts Hospitals generating such modest profits, a key beneficiary will be Massachusetts citizens buying health insurance on the Health Insurance Exchange.  Massachusetts 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 Massachusetts has wisely elected to expand Medicaid.  This will increase nearly all Massachusetts Hospital profits substantially and thus permit Massachusetts 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.