There are six key documents that will help get you started on understanding the economics of local hospitals and unearthing some good stories.
1) Audited Financial Statements: These are the gold standard for assessing a hospital’s overall finances. Hospitals give these documents to banks, bondholders, suppliers and government agencies but rarely to reporters.
WHERE TO GET THEM: You should insist that the hospital give them to you. They may also be available on the SEC site: EMMA, Electronic Municipal Market Access.
DRAWBACKS: You will likely need an expert to help you interpret them.
2) Bond Prospectus: This is the best document to get if budgets scare you. When a nonprofit sells bonds to raise money and modernize its facilities, it gives a prospectus to potential investors. This document summarizes the risks of the hospital repaying those bonds. It discusses a hospital’s market position, financial performance and future prospects, and often discloses major litigation.
HOW TO GET THEM: From the hospital; a well-connected bond/stock broker; sometimes the Bloomberg terminal; And the SEC site: EMMA, Electronic Municipal Market Access. Other sites sell them.
DRAWBACKS: They are issued only when the bonds are to be sold so they may be out of date. They are issued by nonprofits and public hospitals, not for-profits.
3) Bond Rating Reports: Bond ratings evaluate a hospital’s ongoing business and gauge investors’ risk of being repaid.
HOW TO GET THEM: Rating agencies typically give the most recent hospital reports free to media. S&P Media Relations, (firstname.lastname@example.org), 212-438-6667; Moody’s Investors Service: Moody’s Media Relations, (email@example.com), 212 553-0376 or 0377. Moody’s ratings are explained on the California State Treasury site. Lexis Nexis may also have these reports.
DRAWBACKS: The agencies can miss stuff and be lied to. Rating firms are paid by hospitals. They essentially missed the mortgage meltdown of 2008 and had AAA ratings on thousands of near-worthless subprime securities way late in the game.
4) IRS Form 990: Nonprofit hospitals file these public documents annually to justify their tax free status.
They’re useful for salaries, lists of board members, and many leads. The newest 990 is the best ever, representing the first upgrade since 1979. The new Schedule H sets out the first national criteria for disclosing charity care and community benefits. Schedule J indicates if anyone got first-class charter travel, travel for companions, housing allowance, residence for personal use and health or social club dues.
DRAWBACKS: 990s tend to be much older than the most recent financial statements. Guidestar is good for quick looks but doesn’t always capture all the schedules.
5) Medicare Cost Reports: Nearly every hospital files one with Medicare. They are helpful for gauging the performance of nearly all hospitals, including for-profits. Schedule G focuses on finances and shows total profit margin.
HOW TO GET THEM: Get them from the hospital, from the Medicare Fiscal Intermediary; from firms that collect them: American Hospital Directory’s Cost Report Data will give them free to reporters in return for citing them as the source. Many companies collect them, including Solucient and Cleverley & Associates.
6) SEC documents, 8K (unscheduled material events) 10Q(quarterly), 10K (annual report), DEF 14a (proxy statement)
WHERE TO GET THEM: EDGAR – These can help illuminate more aspects of for-profit hospitals. Quarterly earnings calls can helpful if the issues are big enough.
DRAWBACKS: Info on specific institutions may be sparse.