SUMMA HEALTH SYSTEM OBLIGATED GROUP CONTINUING DISCLOSURE FOR THE THREE MONTHS ENDED MARCH 31, 2012

Transcription

1 SUMMA HEALTH SYSTEM OBLIGATED GROUP CONTINUING DISCLOSURE FOR THE THREE MONTHS ENDED MARCH 31, 2012

2 MANAGEMENT S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL POSITION SUMMA HEALTH SYSTEM OBLIGATED GROUP The Summa Health System Obligated Group (Obligated Group) includes Summa Health System, Summa Akron City and St Thomas Hospitals, Summa Barberton Hospital, Summa Wadsworth Rittman Hospital, Summa Cuyahoga Falls General Hospital, Summa Akron City and St Thomas Hospitals Foundation, Summa Foundation and Summa Health Network. Payor Mix and Provider Statistics of the Obligated Group Set forth in the table below are the aggregated payor mix and utilization statistics for the members of the Obligated Group, for the three months ended March 31. 3/31/2012 3/31/2011 Payor Mix %: Medicare Traditional & Managed Care 47.0% 47.0% Medicaid Traditional & Managed Care 14.9% 14.7% Commercial & Managed Care 30.8% 31.0% Self Pay and Other 7.3% 7.3% 100.0% 100.0% All Services Available Beds-weighted average Patient Days (excluding newborn) 51,957 56,505 Admissions (excluding newborn) 10,955 11,214 Surgical Cases: Inpatient 1,774 1,760 Outpatient 4,088 3,926 Total Surgical Cases 5,862 5,686 Outpatient billable units 2,030,196 1,945,869 Total Emergency cases 41,024 39,389 Outpatient visits - other 119, ,810 Acute Care Available beds-weighted average Patient days (excluding newborn) 50,607 55,473 Admissions (excluding newborn) 10,834 11,126 Average length of stay Occupancy 70.31% 72.17% Sub-acute Care Available beds Patient days 1,350 1,032 Admissions (excluding newborn) Average length of stay Occupancy 74.18% 57.33% Inpatient volume over the period presented have declined compared to the prior year primarily due to the transfer of inpatient rehab patient services to Summa Rehab Hospital. Summa Rehab Hospital is an inpatient acute rehabilitation hospital which Summa Health System is a 52% owner. The Obligated Group s total admissions at March 31, 2012 compared to March 31, 2011 declined by 2.3%, emergency cases increased 4.2% and outpatient procedures increased by 4.3%. The Payor mix at March 31, 2012 has not significantly changed from March 31, Page 1

3 Obligated Group Operating Results The following Statement of Operations for the Obligated Group for the three months ended March 31, 2012 and 2011 was prepared by management on a consistent basis with the audited consolidated financial statements for Summa Health System. Summa Health System Obligated Group Consolidated Statement of Operations For Three Months Ended March 31, 2012 and 2011 (In thousands of dollars) Unrestricted revenue: Net patient service revenue $ 225, ,220 Provision for doubtful accounts (19,310) (18,809) Net patient service revenue less provision 206, ,411 Other operating revenue 12,931 10,629 Net assets released from restrictions 1,850 1,846 Total revenue, gains, and other support 221, ,886 Expenses: Salaries and wages 80,919 78,492 Employee benefits 23,008 21,775 Materials and supplies 51,793 50,607 Contracts and professional fees 41,549 40,162 Depreciation and amortization 11,426 11,400 Interest 5,296 5,461 Total expenses 213, ,897 Operating income (loss) 7,240 6,989 Other income (expense): Investment income 11,080 5,396 Investment Income Joint Ventures Derivative (loss) 1, Total other income (expense) 12,475 5,815 Excess (Deficiency) of revenue over expenses $ 19,715 12,804 The Obligated Group reported operating income of approximately $7 million in 2012, which is slight increase to the amount reported for Net patient service revenue less bad debt totaled $206 million, an increase of $4 million from the amount reported in The Obligated Group reported operating expenses of $214 million in 2012, an increase of $6 million compared to Expenses increased in the following areas: The combined salary and benefits expense of $104 million reported in 2012 is an increase of $4 million or 4% over the same period in The remaining $2 million increase is a net change in the remaining operating expenses and does not represent a significant change year over year. The Obligated Group reported other income of $12 million for 2012 compared to $6 million reported in Increased returns combined with the change in the value of the derivative accounted for the increase from the previous year. Page 2

4 Obligated Group Financial Ratios Liquidity Position and Cash to Debt Obligated Group The table below sets forth the liquidity position and cash to debt at March 31, 2012 and March 31, Cash and cash equivalents $ 131,185 $ 142,732 Unrestricted investments 127, ,549 Total cash and unrestricted investments $ 258,622 $ 250,281 Total expenses less depreciation and amortization $ 202,565 $ 196,497 Days of cash on hand Cash to debt 58% 54% Maximum Annual Debt Service Coverage Obligated Group 12-month rolling basis The table below sets forth the maximum annual debt service for the rolling 12-month period ending March 31, 2012 and March 31, Excess of revenues over expenses $ 50,190 $ 59,001 Add: Depreciation Expense 42,946 46,106 Interest Expense 20,876 19,759 Unrealized (gains)/losses on investments (5,538) (7,194) Income available for debt service $ 108,474 $ 117,672 Maximum annual debt service $ 34,359 $ 35,210 Debt service coverage ratio Leverage Position Obligated Group The table below sets forth the leverage position at March 31, 2012 and March 31, 2011 Current installments of long-term debt $ 9,941 $ 9,953 Revolving credit borrowing - 7,199 Long-term debt and other non-current obligations less current installments 434, ,172 Total debt $ 444,727 $ 461,324 Unrestricted net assets $ 465,107 $ 446,851 Total unrestricted capitalization $ 909,834 $ 908,175 Debt-to-unrestricted capitalization 48.9% 50.8% Page 3

5 MANAGEMENT S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL POSITION CONSOLIDATED SUMMA HEALTH SYSTEM Consolidated System Operating Results The following Statement of Operations for the Consolidated System for the three months ended March 31, 2012 and 2011 was prepared by management on a consistent basis with the audited consolidated financial statements for the Summa Health System. Summa Health System Consolidated Statement of Operations For the Three Months Ended March 31, 2012 and 2011 (In thousands of dollars) Unrestricted revenue: Net patient service revenue $ 222, ,089 Provision for bad debts (20,974) (20,808) Net patient service revenue less bad debts 201, ,281 Premiums earned 110, ,105 Other operating revenue 17,804 15,731 Net assets released from restrictions 2,211 1,846 Total revenue, gains, and other support 332, ,963 Expenses: Salaries and wages 111, ,886 Employee benefits 22,900 20,983 Healthcare claims 72,668 66,598 Materials and supplies 54,973 52,493 Contracts and professional fees 51,598 49,021 Depreciation and amortization 12,443 12,342 Interest 5,324 5,529 Total expenses 330, ,852 Operating income (loss) 1,398 4,111 Other income (expense): Investment income 11,411 5,526 Derivative (loss) 1, Other Total other income (expense) 13,608 6,054 Excess (Deficiency) of revenue over expenses $ 15,006 10,165 Operating income was $1 million for the three months ended March 31, 2012, compared to $4 million in Total operating revenues of $332 million is an increase of $14 million from Net patient service revenue less bad debt totaled $201 million, a $6 million increase from the $195 million reported in Premiums earned, totaling $111 million in 2012 increased $6 million compared to The change is associated with the net change in the number of subscribers and lives covered by Summa Insurance Company and premium rates. Page 4

6 Operating expenses were $331 million in 2012 a $17 increase compared to Salaries increased $4 million from the prior year. Benefits increased $2 million with hospitalization expense the main reason for the increase. Healthcare claims increased by $6 million over the previous year as Summa Insurance Company has experienced an increase in overall insured memberships. Remaining increases are in Material and Supplies of ($2 million), contract and professional fees ($3 million) and depreciation and interest expense. Other income was $14 million for 2012 compared to $6 million reported in Increased returns combined with the change in the value of derivative accounted the increase from the previous year. Consolidated System s Financial Ratios Liquidity and Cash to Debt Consolidated System The table below sets forth the liquidity position at March 31, 2012 and March 31, Cash and cash equivalents $ 198,799 $ 187,056 Unrestricted investments 212, ,272 Total cash and unrestricted investments $ 410,866 $ 374,328 Total expenses less depreciation and amortization $ 318,483 $ 301,510 Days of cash on hand Cash to debt 89% 79% Leverage Position Consolidated System The table below sets forth the leverage position at March 31, 2012 and March 31, Current installments of long-term debt $ 10,256 $ 10,608 Revolving credit borrowing - 7,199 Long-term debt and other non-current obligations less current installments 450, ,943 Total debt $ 460,454 $ 476,750 Unrestricted net assets $ 462,146 $ 486,485 Total unrestricted capitalization $ 922,600 $ 963,235 Debt-to-unrestricted capitalization 49.9% 49.5% Page 5