Tuesday, April 15, 2014

West Virginia Non-Profit Hospital Organizations Net Income Only 6.8% of Revenues in 2013

From a review of audited annual financial statements shown at Electronic Municipal Market Access (EMMA), I found 2 West Virginia Non-Profit Hospital Organizations with Net Assets above $400 mil each.

These 2 West Virginia Non-Profit Hospital Organizations generated Total Bottom Line Net Income of a modest 6.8% of Total Operating Revenues in 2013 and a bit higher 7.8% in 2012.

It should be pointed out that these are modest Bottom Line Profits of these largest, financially strongest West Virginia 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, West Virginia United Health System posted Total Investment Returns of $114 mil in 2013 included in Non-Operating Income, as compared with its Total Operating Income of only $15 mil also in 2013.

Below are the Bottom Line Net Income and Total Operating Revenues for each of these 2 West Virginia Non-Profit Hospital Organizations for both 2013 and 2012:

Most 2013


Recent  Bottom  2013 2013
 Bottom          2,012 2012

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

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

CAMC Health System Charleston  Dec 13               74            957 7.7%
             87            936 9.3%
West Virginia United Health Fairmont  Dec 13               87         1,419 6.1%
             95         1,387 6.8%

Total of both

           161         2,376 6.8%
           182         2,323 7.8%

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

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