Strategic Coordinating Organization and Subsidiaries

Transcription

1 Strategic Coordinating Organization and Subsidiaries Consolidated Financial Statements As of December 31, 2016 and for the Three Months Ended December 31, 2016 (UNAUDITED)

2 TABLE OF CONTENTS Page CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2016: Balance Sheet (Unaudited) 1 Statement of Operations and Changes in Net Assets (Unaudited) 2 Statement of Cash Flows (Unaudited) 3 Utilization Statistics (Unaudited) 4 Gross Patient Charges by Type of Third Party Payor (Unaudited) 5 MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) 6 7 Consolidating Balance Sheet (Unaudited) 8 Consolidating Statement of Operations and Changes in Net Assets (Unaudited) 9

3 BALANCE SHEET (UNAUDITED) DECEMBER 31, 2016 AND SEPTEMBER 30, 2016 (In thousands) 12/31/2016 9/30/2016 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 88,204 $ 35,173 Patient accounts receivable (less allowance for uncollectible accounts of $124,269) 288,136 - Inventories of drugs and supplies 35,023 - Other current assets 35,313 - Estimated third party settlements 26,271 - Current portion of assets with limited use 5,671 - Total current assets 478,618 35,173 Assets with limited use 228, ,448 Less current portion (5,671) - 222, ,448 INVESTMENTS 527, ,685 CAPITAL ASSETS Net 875,778 - INVESTMENTS IN JOINT VENTURES 55,953 - OTHER ASSETS 44,186 - Total assets $ 2,205,202 $ 782,306 LIABILITIES AND NET ASSETS CURRENT LIABILITIES: Accounts payable $ 40,827 $ - Accrued liabilities 171, Current portion of obligations under capital leases 1,010 - Current portion of long-term debt 17,359 - Total current liabilities 230, LONG-TERM DEBT Less current portion 613,462 - OBLIGATIONS UNDER CAPITAL LEASES Less current portion 2,774 - OTHER LONG-TERM LIABILITIES 409,654 - Total liabilities 1,256, NET ASSETS: Unrestricted 911, ,623 Temporarily Restricted 37,114 2,566 Total net assets 948, ,189 Total liabilities and net assets $ 2,205,202 $ 782,306-1-

4 STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (UNAUDITED) FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 (In thousands) UNRESTRICTED REVENUES AND OTHER SUPPORT: NET PATIENT SERVICE REVENUES $ 519,941 OTHER OPERATING REVENUE 39,293 NET ASSETS RELEASED FROM RESTRICTION USED FOR OPERATIONS 1,212 Total revenues 560,446 EXPENSES: Salaries, wages, benefits, and contracted labor 336,316 Supplies and other costs 184,215 Depreciation 27,811 Interest 3,555 Total expenses 551,897 INCOME FROM OPERATIONS 8,549 NONOPERATING ACTIVITIES: Investment loss, net (8,204) Change in fair value of interest rate swap instruments 4,965 Loss on joint ventures (821) Contributions (54,609) Non-operating expenses (289) NONOPERATING ACTIVITIES (58,958) DEFICIT OF REVENUES AND GAINS OVER EXPENSES AND LOSSES (50,409) CAPITAL CONTRIBUTIONS 57 NET ASSETS TRANSFERRED FROM GREENVILLE HEALTH SYSTEM 331,695 CONVERSION FROM GASB TO FASB (149,590) OTHER 86 INCREASE IN UNRESTRICTED NET ASSETS $ 131,839 TEMPORARILY RESTRICTED NET ASSETS: Net assets transferred from Greenville Health System $ 38,619 Investment income, net 105 Contributions, net 522 Transfers to related organizations (867) Other (2,621) Net assets released from restrictions used for operations (1,212) INCREASE IN TEMPORARILY RESTRICTED NET ASSETS 34,546 INCREASE IN NET ASSETS 166,385 NET ASSETS Beginning of period 782,189 NET ASSETS End of period $ 948,574-2-

5 STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED DECEMBER 31, 2016 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Increase in net assets $ 166,385 Adjustments to reconcile increase in net assets to net cash used in operating activities: Provision for uncollectible accounts 68,942 Contribution payable to Greenville Health System 52,341 Transfer from Greenville Health System under lease agreement (359,231) Conversion from GASB to FASB 149,590 Depreciation 27,811 Amortization (176) Change in fair value of interest rate swap instruments (4,965) Unrealized loss on investments 8,164 Unrealized loss on joint ventures 821 Loss on disposal of property and equipment 5 Monetization gain (1,193) Restricted contributions 2,621 Changes in operating assets and liabilities: Patient accounts receivable, net (80,168) Inventories of drugs and supplies (109) Other assets 1,036 Accounts payable 4,446 Estimated third-party settlements (5,418) Accrued liabilities (67,976) Net cash used in operating activities (37,074) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment (20,250) Capital contributions 9 Purchases of investments (475,031) Sales of investments 450,273 Proceeds from sale of CCI 5,600 Net cash used in investing activities (39,399) CASH FLOWS FROM FINANCING ACTIVITIES: Transfer from Greenville Health System, MyHealth First Network, and Auxiliary 131,973 Contribution to Greenville Health System for community fund (4,000) Principal payments on long-term debt (650) Proceeds from long-term debt 64 Payments on obligations under capital leases (449) Net cash provided by financing activities 126,938 NET INCREASE IN CASH AND CASH EQUIVALENTS 50,465 CASH AND CASH EQUIVALENTS: Beginning of period 37,739 End of period -3- $ 88,204

6 UTILIZATION STATISTICS (UNAUDITED) Three Months Ended December 31, Licensed beds** 1,518 1,662 Available beds 1,239 1,381 Average daily census Percent occupancy - licensed beds 54.0% 59.2% Percent occupancy - available beds 66.2% 71.2% Patient days - system total 75,466 90,470 Discharges - system total 13,425 13,217 Average length of stay (in days) - system total Patient days - acute (1) 54,677 56,590 Discharges - acute (1) 12,630 12,250 Average length of stay (in days) - acute (1) Acute Medicare case mix index (1) Newborn deliveries (including C-Sections) 1,761 1,773 Inpatient surgical procedures 4,314 4,315 Outpatient surgical procedures 8,818 8,650 Emergency department visits 63,673 65,744 Outpatient visits (including emergency department visits) 949, ,626 (1) Data includes only Greenville Memorial Hospital, Greer Memorial Hospital, Hillcrest Memorial Hospital, Patewood Memorial Hospital, Laurens County Memorial Hospital, and Oconee Memorial Hospital. ** In September 2016, Greenville Health System and Affiliates sold the facility assets and transferred the business operations of The Cottages at Brushy Creek, a skilled nursing facility, to a third party. This resulted in a 144 bed decrease in licensed beds. -4-

7 GROSS PATIENT CHARGES BY TYPE OF THIRD PARTY PAYOR (UNAUDITED) Three Months Ended December 31, Medicare 40.8% 39.3% Medicaid 16.3% 16.3% Managed Care 32.7% 30.0% Self Pay 2.1% 6.7% Charity 4.5% 4.3% Commercial 2.1% 1.4% Other 1.5% 2.0% Total 100.0% 100.0% The EPIC-Enterprise Electronic Medical Record and Revenue Cycle System conversion that took place during the year ended September 30, 2016 provided an opportunity to refine the self-pay payor mix. Historically, revenue associated with the self-pay balances of insured patients were reclassified from their primary payor to self-pay, which overstated the self-pay percentage. Revenue now remains with the primary payor, resulting in a decline in the self-pay payor mix percentage. -5-

8 STRATEGIC COORDINATING ORGANIZATION AND SUBSIDIARIES MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) Reporting Entity The consolidated financial statements include the accounts and transactions of the Strategic Coordinating Organization ( SCO ), Upstate Affiliate Organization d/b/a Greenville Health System ( GHS ), GHS Partners in Health, Inc. ( Partners ), the Endowment Fund of the Greenville Hospital System, Inc. (the Endowment ), Greenville Health Corporation and Affiliates, MyHealth First Network, and the Auxiliary (collectively, "SCO and Subsidiaries"). Members of the Obligated Group include SCO, GHS, Partners, the Endowment, and Greenville Health System hereinafter referred to as the Greenville Health Authority ( GHA ). The Endowment is inactive. During fiscal year 2016, the investments held by the Endowment were transferred to the SCO. On October 1, 2016, the majority of operations of GHA were transferred to GHS. GHA leased its assets to GHS under a lease and contribution agreement with an initial term of 40 years with three 20- year renewal options. GHS also assumed the liabilities and obligations of GHA. Through the lease agreement, GHS, Partners, the Endowment, Greenville Health Corporation and Affiliates, MyHealth First Network, the Care Coordination Institute ("CCI"), and the Auxiliary became part of SCO. SCO is a private, not-for-profit organization; therefore, the financial statements for SCO and Subsidiaries are now prepared in conformance with Financial Accounting Standards Board ( FASB ) accounting standards. The prior year is not shown since it was reported under the Governmental Accounting Standards Board ( GASB ) accounting standards for governmental entities and therefore not comparable. As a result of the change in accounting from GASB standards to FASB standards, the opening balance sheet was modified and included an increase in the pension and retirement plan liabilities of $149.6 million. In October 2016, SCO sold a 50% ownership interest in CCI to Palmetto Health for approximately $5.6 million. SCO's remaining 50% ownership interest is included as an investment in joint venture on the consolidated balance sheet. Financial Analysis for the Three Months ending December 31, 2016 SCO and Subsidiaries generated net patient service revenues for the three months ended December 31, 2016 of $519.9 million. Discharges were comparable to the prior year and outpatient visits were 8.7% higher. Inpatient and outpatient surgical volumes were comparable to the prior year. Bad debt and charity write-offs were 8.9% of gross patient service revenue at December 31, Total operating expenses were $551.9 million for the three months ended December 31, Income from operations was $8.5 million which generated an operating margin of 1.5%. SCO and Subsidiaries generated a loss from non-operating activities of $59.0 million. The lease and contribution agreement established an $80.0 million community fund to support health-related community initiatives. GHS will pay GHA $4.0 million a year for 20 years to establish this fund. In October 2016, GHS recognized contribution expense as part of non-operating activities of $

9 million, net of a $27.7 million discount to adjust the present value of the contribution fund. $4.0 million was paid to GHA in October Liquidity Cash and cash equivalents, including those held in assets with limited use, increased from $37.7 million at September 30, 2016 to $88.2 million at December 31, This increase is primarily due to cash transferred in from GHA, MyHealth First Network, and the Auxiliary on October 1, This was partially offset by contributions paid to employees retirement savings plan accounts, purchases of investments with maturities greater than 90 days, and purchases of property, plant, and equipment during fiscal year At December 31, 2016, the investment base consists of $690 million in long-term investments and $64 million in short-term investments. The combined actual rate of return was (1.1%) year to date. Capital Expenditures SCO and Subsidiaries committed $130.9 million for capital projects in Fiscal Year These projects include capital expenditures for the Greenville Memorial campus and Patewood Medical campus as well as capital for the physician practices and the implementation of the strategic information system plan which includes the EPIC implementation. As of December 31, 2016, approximately $20.3 million has been expended in fiscal year Consolidating Schedules The consolidating Balance Sheet and Statement of Operations and Changes in Net Assets included on pages 9 through 11 include the accounts and transactions of GHA so that the total accounts and transactions of the Obligated Group can be shown. The accounts and transactions of GHA are then subtracted back out of the Obligated Group total before adding in the accounts and transactions of Greenville Health Corporation and Affiliates, MyHealth First Network, and the Auxiliary to arrive at the consolidated SCO and Subsidiaries balances. -7-

10 CONSOLIDATING BALANCE SHEET (UNAUDITED) FOR THE YEAR TO DATE ENDED DECEMBER 31, 2016 (In Thousands) ASSETS SCO GHS ENTITIES GHA ELIMINATIONS GROUP ELIMINATE GHA GHS NON- ENTITIES ELIMINATIONS CONSOLIDATED 12/31/2016 Current Assets: Cash and Investments 64,800 9,640 23,632-98,072 (23,632) 13,764-88,204 Accounts Receivable, Net - 281, ,456-6, ,136 Inventories of Drugs and Supplies - 29, ,386-5,637-35,023 Other Current Assets 3,806 27,706 4,000 (4,000) 31,512-1,926-33,438 Due from UAO, current portion ,744 (19,744) Due from Affiliates 45,547 (34,332) ,215 - (9,340) - 1,875 Estimated Third Party Settlements - 26, , ,271 Current Portion of Assets with Limited Use - 5, , ,671 Total Current Assets 114, ,798 47,376 (23,744) 483,583 (23,632) 18, ,618 Assets with Limited Use: Internally Designated 213, , ,335 Donor Restricted ,221-15,221 Less Requirements for Current Liabilities - (5,671) - - (5,671) (5,671) Assets with Limited Use 213,335 (5,671) ,664-15, ,885 Other Assets - 42,527 44,341 (44,341) 42,527-1,659-44,186 Due from UAO, net of current portion ,462 (613,462) Other Investments 527, , ,782 Property, Plant and Equipment, Net , ,061 (969) 1, ,778 Investments and Joint Ventures 3, ,911-52,042-55,953 Deferred outflow - loss on refunding of debt, net - - 4,601-4,601 (4,601) Total Assets 859,213 1,256, ,749 (681,547) 2,145,129 (29,202) 89,275-2,205,202 LIABILITIES AND NET ASSETS Current Liabilities: Accounts Payable Salaries, Wages and Accrued Paid Time Off Accrued Expenses Due to Affiliates Estimated Third Party Settlements Current Portion of Obligations Under Capital Lease Current Portion of Long Term Debt Total Current Liabilities - 39, ,684-1,143-40,827-80, ,456 (121) , ,237 2,854 (6,590) 84,834 3,736 2,101-90, ,270-4,270 (4,270) ,030-17,030 (17,030) , , ,010-17,154 17,154 (17,154) 17, , ,420 41,429 (23,744) 244,438 (17,685) 3, ,738 Long Term Debt - Less Current Portion Obligations Under Capital Lease - Less Current Portion Other Long Term Liabilities Total Liabilities Net Assets: Unrestricted Temporarily Restricted Total Net Assets Total Liabilities and Net Assets - 613, ,462 (613,462) 613, ,462-2, , , ,386 3 (44,341) 364,049 44,338 1, , ,251, ,894 (681,547) 1,224,723 26,653 5,252-1,256, ,314 (14,484) 55, ,685 (55,855) 69, ,460 2,565 20, ,721-14,393-37, ,879 5,672 55, ,406 (55,855) 84, , ,213 1,256, ,749 (681,547) 2,145,129 (29,202) 89,275-2,205,202-8-

11 CONSOLIDATING STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS (UNAUDITED) FOR THE YEAR TO DATE ENDED DECEMBER 31, 2016 (In Thousands) SCO GHS ENTITIES GHA ELIMS GROUP ELIMINATE GHA GHS NON- ENTITIES ELIMS CONSOLIDATED 12/31/2016 Unrestricted Revenues and Other Support: Net Patient Service Revenues Other Operating Revenues Net Assets Released from Restrictions Used for Operations Total Operating Revenues - 519,940 4, ,014 (4,074) 1-519, , (4,344) 17,872 4,330 19,447 (2,356) 39,293-1, , , ,835 4,088 (4,344) 543, ,448 (2,356) 560,446 Operating Expenses: Salaries, Wages, Benefits, and Contracted Labor Supplies and Other Costs Depreciation Interest Total Operating Expenses Gain (Loss) from Operations before SCO Allocation SCO Allocation Income (Loss) from Operations 3, ,407 1, ,042 (1,348) 2, ,316 2, ,137 (441) (404) 168, ,171 (2,356) 184, , ,808 (76) 79-27,811-3, ,691 (173) 37-3,555 5, ,791 1,156 (404) 535,099 (752) 19,907 (2,356) 551,897 (5,036) 14,044 2,932 (3,940) 7,999 1,008 (459) - 8,549 (5,035) 5, (1) 9,009 2,932 (3,940) 7,999 1,008 (459) - 8,549 Non-Operating Activities: Investment Income (Loss), net Change in Fair Value of Interest Rate Swap Instruments Loss on Joint Ventures Contributions Non-Operating Income(Expenses) Total Non-Operating Activities Deficit of Revenues & Gains Over Expenses & Losses Capital Contributions Interfund Equity Transfers Net Assets Transferred from Greenville Health System Conversion from GASB to FASB Other Increase (Decrease) in Unrestricted Net Assets (8,098) (69) 31 - (8,136) (31) (37) - (8,204) - 4, , ,965 (888) (888) (821) - (54,266) 48,995 3,940 (1,331) (52,935) (343) - (54,609) (313) (289) (289) (9,299) (49,346) 49,026 3,940 (5,679) (52,966) (313) - (58,958) (9,300) (40,337) 51,958-2,321 (51,958) (772) - (50,409) ,989 (85,989) ,312 (1,105,410) 1,105, ,312-70, ,695 - (149,590) - - (149,590) (149,590) 2 65 (92) - (25) ,691 (14,482) (1,053,544) 1,105, ,075 (51,866) 69, ,839 Temporarily Restricted Net Assets: Net Assets Transferred from Greenville Health System - 23,843 (41,185) 41,185 23,843-14,776-38,619 Investment Income, net (1) (1) Contributions, net Transfers to related organizations - (298) - - (298) - (569) - (867) Other - (2,621) - - (2,621) (2,621) Net Assets Released from Restrictions Used for Operations - (1,212) - - (1,212) (1,212) Increase (Decrease) in Temporarily Restricted Net Assets (1) 20,154 (41,185) 41,185 20,153-14,393-34,546 Increase in net assets 76,690 5,672 (1,094,729) 1,146, ,228 (51,866) 84, ,385 Net assets at beginning of year 782,189-1,150,584 (1,146,595) 786,178 (3,989) - 782,189 Net assets at end of year 858,879 5,672 55, ,406 (55,855) 84, ,574-9-