Officers Certificate for WVUHS Obligated Group related to the filing of the Obligated Group's Financial Budget for the following financings:

Transcription

1 v. WVUMedicine WVUMedicine.org West Virginia United Health System, Inc. 1 Medical Center Drive, PO Box 8034 Morgantown, WV Phone / Fax/ RE: Officers Certificate for WVUHS Obligated Group related to the filing of the Obligated Group's Financial Budget for the following financings: (1) West Virginia Hospital Finance Authority Hospital (2) 2015 JPMorgan Chase Bank, N.A. Taxable Term Loan Revenue Refunding and Improvement Bonds (West Virginia United Health System Obligated Group) 2016 Series A (3) 2015 JPMorgan Chase Bank, N.A. Term Loan (4) 2015 TD Bank, N.A. Taxable Term Loan (5) 2014 Branch Banking and Trust Company Taxable Term (6) 2014 Branch Banking and Trust Company Business Loan (7) West Virginia Hospital Finance Authority Hospital (8) 2013 Branch Banking and Trust Company Term Loan Revenue Refunding and Improvement Bonds (West Virginia United Health System Obligated Group) 2013 Series A (9) West Virginia Hospital Finance Authority Hospital (10) West Virginia Hospital Finance Authority Hospital Obligated Group) 2012 Series A Loan Obligated Group) 2012 Series B (11) West Virginia Hospital Finance Authority Hospital (12) West Virginia Hospital Finance Authority Hospital Obligated Group) 2012 Series C Obligated Group) 2012 Series D (13) West Virginia Hospital Finance Authority Hospital (14) West Virginia Hospital Finance Authority Hospital Obligated Group) 2012 Series E Revenue Bond (West Virginia United Health System Obligated Group) 2011 Series B (15) West Virginia Hospital Finance Authority Taxable (16) West Virginia Hospital Finance Authority Hospital Hospital Revenue Bond (West Virginia United Health System Obligated Group) 2011 Series C Obligated Group) 2011 Series D (17) West Virginia Hospital Finance Authority Hospital (18) Wells Fargo Bank, N.A. Revolving Line of Credit Obligated Group) 2011 Series E (19) 2009 Branch Banking and Trust Company Term Loan (20) West Virginia Hospital Finance Authority Hospital Auction Rate Certificates Revenue Refunding and Improvement Bonds (Camden-Clark Memorial Hospital Corporation) 2004 Series B, CUSIP Number VX9 (21) West Virginia Hospital Finance Authority Hospital (22) West Virginia Hospital Finance Authority Hospital Auction Rate Certificates Revenue Refunding and Revenue Refunding Bonds (West Virginia University Improvement Bonds (Camden-Clark M emorial Hospital Corporation) 2004 Series c, CUSIP Number VY7 Hospitals, Inc.) 2003 Series B Auction Rat e Certificates, CUSIP Number UQ5 WVU HOSPITALS MORGANTOWN UNITED HOSPITAL CENTER BRIDGEPORT BERKELEY MEDICAL CENTER MARTINSBURG JEFFERSON MEDICAL CENTER RANSON CAMDEN CLARK MEDICAL CENTER PARKERSBURG POTOMAC VALLEY HOSPITAL KEYSER ST. JOSEPH'S HOSPITAL BUCKHANNON

2 ANNUAL COMPLIANCE CERTIFICATE This Compliance Certificate is furnished to applicable parties by West Virginia University Hospital, Inc., as Obligated Group Agent ("Obligated Group Agent") on behalf of City Hospital, Inc. d/b/a Berkeley Medical Center ("Berkeley Medical"), City Hospital Foundation, Inc. d/b/a University Healthcare Foundation, Inc. ("University Healthcare Foundation"), The Charlestown General Hospital d/b/a Jefferson Medical Center ("Jefferson Medical "), United Hospital Center, Inc. ("UHC"), Camden-Clark Memorial Hospital Corporation {"Camden Clark" and together with the Obligated Group Agent, Berkeley Medical, University Healthcare Foundation, Jefferson Medical and UHC, the "Obligated Group"), and West Virginia United Health System, Inc. d/b/a West Virginia University Health System, Inc. The applicable parties are associated with financings by the Obligated Group pursuant to financing documents for the financings listed above. The Undersigned hereby certifies that: 1. I am an Authorized Officer of the Obligated Group Agent. 2. I hereby certify to the best of my knowledge that, as of December 31, 2016, the financial data and computations evidencing the Obligated Group's compliance with certain covenants of the financing documents set forth in Schedule 1 hereto are true, complete and correct and have been made in accordance with the relevant financing documents; 3. I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the applicable Obligated Group Members during the accounting period covered by the attached consolidated audited financial statements for the purpose of determining whether or not the Obligated Group has complied with the financing documents; 4. To the best of my knowledge, the Obligated Group has kept, observed, performed and fulfilled the covenants, provisions and conditions of the financing documents; 5. The examinations described in paragraph 4 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which const itutes a Potential Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below; 6. The Subsidiaries of the Obligated Group Members are Allied Health Services Inc., United Summit Center Inc., United Health Foundation Inc., Potomac Valley Hospital, Reynolds Memo,rial Hospital, United Physicians Care Inc., West Virginia United Insurance Services, Inc., St. Joseph's Hospital of Buckhannon, Camden Clark Physician Corporation, Camden Clark Foundation, and the Family Fitness Center; and

3 7. To the best of my knowledge, the attached financial statements fairly represent the applicable Obligated Group's condition in accordance with GAAP as of the dates and for the periods covered thereby, and the audited financial statements have been prepared on substantially the same basis as the most recent financial statements provided by the Obligated Group. [Remainder of Page Intentionally Left Blank]

4 The foregoing certifications and the FY 2017 Consolidated Annual Budget delivered with this Certificate in support hereof, are made and delivered this December 28, WEST VIRGINIA UNIVERSITY HOSPITALS, INC. as Obligated Group Agent ~~mfl~~ffmf n 'If= Title: Authorized Officer

5 Schedule 1 Consolidated Annual Budget FY 2017

6 WV University Health System, Inc. Statement of Budgeted Revenue and Expenses (in thousands) For the Fiscal Year Ending December 31, 2017 Budget Projected Variance (%) Gross Patient Service Revenue 4,729,660 4,212, % Total Deductions (2,855,265) (2,512,999) 13.6% Net Patient Service Revenue 1,874,395 1,699, % Other Operating Revenue 185, , % Total Operating Revenue 2,060,215 1,849, % Salaries, Wages, and Employee Benefits 954, , % Medical Supplies and Pharmaceuticals 419, , % Depreciation and Interest Expense 177, , % All Other Operating Expenses 466, , % Total Operating Expenses 2,018,346 1,795, % Income From Operations 41,870 53, % Non Operating Income 35,229 (7,265) 584.9% Net Income 77,098 46, %

7 Statement of Budgeted Balance Sheet For the Fiscal Year Ending December 31, 2017 Budget Projected Variance (%) Assets Total Current Assets $ 481,606,254 $ 467,849, % Net Property, Plant, & Equipment 1,325,372,573 1,145,674, % Investments Funded Depreciation 818,267, ,501, % Total Other Assets 161,821, ,103, % Total Assets $ 2,787,067,161 $ 2,487,129, % Liabilities and Fund Balance Total Current Liabilities $ 287,421,079 $ 256,998, % Total Long Term Debt 1,106,122, ,371, % Other Non Current Liabilities 131,466, ,573, % Fund Balance 1,262,057,595 1,172,185, % Total Liabilities & Fund Balance $ 2,787,067,161 $ 2,487,129, % 2017 Budget includes $200M in new borrowing to reimburse WVUH for previously unfinanced portion of new tower project and HVI project.

8 WV University Health System, Inc. Statement of Budgeted Revenue and Expenses For the Fiscal Year Ending December 31, 2017 Benchmark 2015 Budget Projected Desired Moody's A Position S&P A ** Profitability Ratios Operating Margin 2.03% 2.89% Above 3.60% Total Margin 3.69% 2.44% Above 6.70% Operating Cash Flow Margin 10.66% 10.45% Above 11.40% Liquidity Ratios Current ratio Above 2.00 Days Cash on Hand Total Above Cash to Debt % 83.70% 88.30% Above % Capital Structure Ratios Long Term Debt to Capitalization 47.30% 44.90% Below 40.60% Total Debt to Operating Cash Flow Below 2.70

9 Routine Capital Budget (In Thousands) WVUH UHC CCMC UH PVH SJH WVUHS WVUHS IT Total 2016 Budget for Routine Capital $ 48,000 $ 12,600 $ 10,000 $ 11,560 $ 1,793 $ 1,685 $ 500 $ 20,089 $ 106, Projected Spend for Routine Capital $ 45,600 $ 11,888 $ 9,500 $ 11,764 $ 1,683 $ 1,749 $ 1,350 $ 19,600 $ 103, Budget for Routine Capital $ 43,000 $ 14,000 $ 12,500 $ 13,925 $ 1,650 $ 1,650 $ 1,000 $ 20,000 $ 107,725 Routine Capital Budget is generally used for normal replacement/upgrade of existing equipment, replacement/refresh of information technology, and renovation of existing space and facilities within WVUHS.

10 2017 Strategic Capital Budget Description WVUHS Entity Projected Spend SE Tower Construction WVUH 54,100,000 Heart & Vascular Institute WVUH 50,000,000 Procedural/Clinic Master Plan WVUH 25,000,000 Parking Solution WVUH 17,000,000 I 79 Real Estate WVUH 14,500,000 Acquisition of multi physician Pediatric Practice UHC 1,500,000 Womens & Childrens Services Medical Office Building UHC 2,000,000 New Ambulatory/Physician Practice Location I79/Corridor H Interchange UHC 5,000,000 Lab/Pharmacy Space Renovations CCMC 4,500,000 Cardiovascular MOB On Campus CCMC 4,750,000 MOB3 Surgical Space Development UH 2,909,000 Land Purchases & Development UH 1,750,000 JMC OR & Campus Development UH 1,234,000 EPIC Installations and Conversions WVUHS IT 15,000,000 Comment Final amount to complete project. Uses $42.7M carried from 2016 and monies in original 2017 plan. Project to be initiated in 2016 Placeholder Plan to be developed, will require approval before proceeding Will explore 3rd party option Approved at July 2016 meeting. Closing anticipated in 2nd qtr Placeholder Business Plan to be presented Placeholder $25M Spend requested in 2017 is for planning and design. Plan to be developed, will require approval before proceeding. Placeholder Plan to be developed, will require approval before proceeding Placeholder Plan to be developed, will require approval before proceeding Placeholder Plan to be developed, will require approval before proceeding (total project estimated to be $8.7M) Project started & stopped in Final business plan to be completed before proceeding Placeholder Plan to be developed, will require approval before proceeding Placeholder Plan to be developed, will require approval before proceeding Completes conversion of CCMC, UHC, PVH and SJH B New Tower Completion 2016 Budget 98,475, Strategic Budget 8,362,000 Total 106,837, Projected Spend 55,778, Strategic Budget 54,100,000 Total 109,878,000 Total Spend budget for Tower project has not changed since review from WVUH board in December Contingency WVUHS 25,000,000 Will require board approval to access Total 224,243,000 Amount of anticipated New Debt Financing in ,000,000 Amount Paid for via Operating Cash Margin 24,243,000

11 Heart & Vascular Institute Market data indicates there are approximately 6,000 cases in WVUH primary and secondary service area that go elsewhere for Cardiovascular services WVU Medicine has recruited 16 new physician to staff HVI, including national and international leaders Recent volumes are double for same period in Change % July Cardiac Surgery Adult % Vascular Surgery % % August Cardiac Surgery Adult % Vascular Surgery % % WVU Medicine now has cardiac programs in Bridgeport, Parkersburg, Garrett Co, and Davis Memorial Continuing to explore placements at Reynolds, Uniontown, etc. Based on success of physician recruiting and early volume growth results assumptions (capture 35% of cases leaving WVUH service area) used for financial analysis appear solid

12 Cardiovascular Signature Program Financial Projection WVU Medicine FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Projected Projected Projected Projected Projected Projected Projected Inpatient Revenue 184,103, ,286, ,002, ,467, ,046, ,101, ,295, ,712,274 Outpatient Revenue 80,922, ,119, ,393, ,488, ,348, ,656, ,838, ,955,925 UHA Revenue 42,479,427 49,386,885 62,172,009 65,006,342 66,591,061 67,886,840 69,403,301 70,980,275 Total Revenue 307,505, ,792, ,568, ,962, ,986, ,645, ,537, ,648, % 34.39% 9.31% 7.07% 6.87% 6.76% 6.79% Total Deductions 185,135, ,946, ,900, ,264, ,080, ,697, ,538, ,316,524 Net Patient Service Revenue 122,369, ,846, ,668, ,697, ,906, ,947, ,998, ,331, % 37.96% 36.69% 35.47% 34.29% 33.14% 32.04% 30.97% Operating Expenses Salaries & Benefits 48,974,826 59,793,938 68,127,317 71,529,945 74,441,271 77,239,352 80,077,670 82,995,537 New Physician Salaries & Benefits 13,094,720 20,444,601 21,942,774 22,701,057 23,482,089 24,286,551 25,115,148 Medical Supplies 21,687,421 26,392,295 34,390,908 37,807,926 40,698,936 43,483,116 46,394,630 49,441,432 Depreciation 2,408,726 3,448,679 5,341,311 7,233,943 7,233,943 7,233,943 7,233,943 7,233,943 Interest Expense 1,851,313 3,088,646 2,977,472 2,861,769 2,741,351 2,616,028 Other Direct Costs 5,628,680 7,131,501 8,345,447 9,595,810 10,633,684 11,452,695 12,046,276 12,407,664 Total Operating Expenses 78,699, ,861, ,500, ,199, ,686, ,752, ,780, ,809, % 26.1% 9.2% 5.0% 4.5% 4.2% 4.1% Contribution Margin/(Loss) 43,669,424 39,985,198 56,167,384 54,498,939 54,220,479 54,194,995 54,218,225 54,522,197 Requested Capital Investment $80M Construction/Space $50M; Equipment/Technology $30M Average useful life of initial investment is 20.6 years Financing would be included in new borrowing requested for 2017 Assumed 20 year financing at fixed rate of 4.5% in above forecast Financial outcomes level off in 2020 when volumes are assumed to level off at just 2% annual growth