Summary of the Financial Reports for Hospital Corporation of America (HCA)

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1 Summary of the Financial Reports for Hospital Corporation of America (HCA) By David Belk MD Definitions: Gross Patient Revenue is the total amount all hospitals issue in billed changes each year. Most hospital bill far more than they expect in reimbursement for a bill. Only three of the seven for profit hospital corporations listed their gross patient revenues in any of their financial reports. Net Revenue is the combined actual revenue for all of the hospitals. It includes patient revenue (revenue collected from paid medical bills) as well as revenues from other sources like the cafeteria or the gift shop. Net Income is profits. Census is the number of patients admitted to all the hospitals in a year times the number of days each patient was hospitalized. Discharges: Hospitals record Discharges not admissions because obstetrics wards often admit one patient but discharge two. Bad Debt is usually listed as Provision for doubtful accounts. This includes uncollected billed charges that are considered uncollectible for whatever reason. It s important to note that doubtful accounts are always calculated in billed charges Charity is the proportion of billed charges that are completely forgiven. As with bad debt, all charity is calculated in billed charges (gross patient revenue). The table below illustrates this. This Table is taken from the 213 financial report for Hospital Corporation of America (P. 19) and shows that $ billion was listed in uncompensated care in 213 but, since the costto-charges ratio (gross patient revenue/operating costs) was only 16.3%, the actual cost of uncompensated care (charity, doubtful accounts and uninsured discounts) was only $2.537 billion. 1

2 Hospital Corporation of America (HCA) HCA is the largest hospital corporation in the US. HCA has owned and operated as many as 319 hospitals in the mid nineties but now only owns 166 hospitals. In 1997 HCA had the dubious distinction of being convicted of the largest health care fraud case in US history and was forced to pay $631 million in fines from that conviction. Their CEO at the time; Rick Scott, was forced to step down as well. Total Executive pay for HCA was $35.6 million in 214 with $14.63 million going to their CEO R. Milton Johnson Number of Hospitals Run by HCA Each Year 24 Number of Hospitals Figure 1: After being convicted of health care fraud in 1997 HCA sold several of their hospitals and 23 of them broke away to form another for profit hospital corporation called LifePoint. Since 25 the number of hospitals run by HCA has ranged from

3 22 Annual Gross Patient Revenues compared with Net Revenues for HCA Gross Patient Revenue Net Revenue Figure 2: HCA bills many times their expected reimbursement rate for medical services. In 214 HCA issued over $2 billion in billed charges but only collected about $37 billion in actual (Net) revenue. Billing 4-6 times the expected reimbursement rate is very common for all hospitals in the US. 22 Annual Gross Patient Revenues Compared with Charity and Bad Debt for HCA Gross Patient Revenue Charity Bad Debt Figure 3: Uncompensated care is not a major problem for HCA. Bad debt is usually no more than 24% of their billed charges and charity 1-2% of GPR. All uncompensated care reported by hospitals is calculated in billed charges. Prior to 27 HCA did not list charity. 3

4 3 Annual Net Income (Profits) for HCA Figure 3: Collecting only about 16% of what they bill doesn t prevent HCA from making a profit. Their profit margin has averaged about 5% since Proportion of Revenue from Private Insurance vs Medicare per Admission of Each 1.2 Proportion Medicare InPt. Rev./Medicare InPt Private Insurance InPt. Rev./Private Insurance InPt. Figure 4: This figure is somewhat complicated and derived from HCA s accounts. HCA has kept track of the proportion of revenue they collected from each source (Medicare, Medicaid and Private Insurance) as well as the proportion of their total discharges that were covered by each of these sources. By taking the ratio of proportional revenues from Medicare and private insurance and dividing this by the proportion of discharges in each category, figure 4 shows that 4

5 private insurance has been paying hospitals an increasing proportion of hospital revenue when compared to Medicare. Put another way, Private insurance companies have been increasingly more generous each year than Medicare since at least Annual Admissions per Hospital Bed for HCA 33 Admissions per Bed Figures 5 & 6 Show that Census and discharges per hospital bed have been stable for HCA since Annual Inpatient Census per Hospital Bed for HCA Patient Days per Bed