Tuesday, April 15, 2014

Tennessee Non-Profit Hospital Organizations Net Income Only 4.8% of Revenues in 2013 and 4.1% in 2012

From a review of audited annual financial statements shown at Electronic Municipal Market Access (EMMA), I found 6 Tennessee Non-Profit Hospital Organizations with Net Assets above $400 mil each and which have audited financial statements in each of the most recent 4 years.

These 6 Tennessee Non-Profit Hospital Organizations generated Total Bottom Line Net Income of a very modest 4.8% of Total Operating Revenues in 2013 and an even more very modest 4.1% in 2012.

It should be pointed out that these are modest Bottom Line Profits of these largest, financially strongest Tennessee 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, by far the most profitable of these 6 Tennessee Hospital Organizations is Methodist Le Bonheur Healthcare, which had Total Investment Income of $115 mil in 2013 included in Non-Operating Income, almost double its Total Operating Income of $59 mil also in 2013.

Below are the Bottom Line Net Income and Total Operating Revenues for each of these 6 Tennessee 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
Tennessee Hospital Organ City HQs End  Income   Revenues  Margin
 Income   Revenues  Margin

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

Methodist Le Bonheur Healthcare Memphis Dec 13            173         1,582 10.9%
           123         1,495 8.2%
Mountain States Health Johnson City Jun 13              60         1,059 5.7%
             28         1,014 2.8%
West Tennessee Healthcare Jackson Dec 13              30            614 4.9%
               8            594 1.3%
Wellmont Health System Kingsport Dec 13              35            798 4.4%
             42            788 5.3%
Baptist Memorial Health Care Memphis Aug 13              20         1,884 1.1%
             45         1,824 2.5%
Covenant Health Knoxville Dec 13                5            789 0.6%
             32         1,051 3.0%

Total all 6

           323         6,726 4.8%
           278         6,766 4.1%

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, Tennessee is clearly one State whose large Non-Profit Hospital Organizations, for the most part, are not being greedy in generating high profits.

With Tennessee Hospitals generating such modest profits, a key beneficiary will be Tennessee citizens buying health insurance on the Health Insurance Exchange.  Tennessee 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.