Teton County Hospital District d/b/a St. John s Medical Center

Transcription

1 Auditor s Reports and Financial Statements June 30, 2016 and 2015

2 June 30, 2016 and 2015 Contents Independent Auditor s Report on Financial Statements and Supplementary Information... 1 Management s Discussion and Analysis... 3 Financial Statements Balance Sheets Statements of Financial Position St. John s Medical Center Foundation Statements of Revenues, Expenses and Changes in Net Position Statement of Activities St. John s Medical Center Foundation Statement of Activities St. John s Medical Center Foundation Statements of Cash Flows Notes to Financial Statements Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Schedule of Findings and Responses... 45

3 Independent Auditor s Report on Financial Statements and Supplementary Information Board of Trustees Teton County Hospital District Jackson, Wyoming Report on the Financial Statements We have audited the accompanying basic financial statements of Teton County Hospital District d/b/a St. John s Medical Center (the District), and its discretely presented component, as listed in the table of contents, as of and for the years ended June 30, 2016 and 2015, and the related notes to the basic financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The financial statements of St. John s Medical Center Foundation, the discretely presented component unit, were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

4 Board of Trustees Teton County Hospital District We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of Teton County Hospital District, and the discretely presented component unit as of June 30, 2016 and 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 27, 2016, on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. Colorado Springs, Colorado October 27,

5 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 Introduction This management s discussion and analysis of Teton County Hospital District d/b/a St. John s Medical Center s (the District) financial performance provides an overview of the District s financial activities for the fiscal years ended June 30, 2016 and The District operates under a July 1 to June 30 fiscal year. Please read this analysis in conjunction with the District s financial statements. Unless otherwise noted, the information and financial data included in management s discussion and analysis relates solely to the District. Financial Highlights The District s net position increased in 2016 from $131 million to $141 million and increased in 2015 from $120 million to $131 million. The increases are 7.4% and 9.4%, respectively. The District s cash and cash equivalents (included in current assets) increased in 2016 by $1.3 million, or 3.0%, and decreased in 2015 by $8.1 million, or 15.8%. The District s cash and cash equivalents were $44,173,634 for 2016 and $42,881,759 for The District reported operating income of $6,616,751 in fiscal year 2016 and operating income of $8,304,100 in fiscal year Operating revenues increased by approximately $5,193,126 and $11,878,354, or 5.2%, and 13.6% in fiscal years 2016 and 2015, respectively. Operating expenses increased in 2016 by 7.6% and 2015 by 10.8%. Capital contributions were $245,917 and $476,125 during 2015 and 2014, respectively. Property tax revenues received per year in 2016 and 2015 were $4.2 million and $3.8 million, respectively. Using this Annual Report The District s financial statements consist of three statements balance sheet; statement of revenues, expenses and changes in net position; and statement of cash flows. These statements provide the reader with information about the financial activities of the District, including resources held by the District but restricted for specific purposes by creditors, contributors, grantors or enabling legislation. The District is accounted for as a business-type activity and presents its financial statements using the economic resources measurement focus and the accrual basis of accounting. 3

6 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 The Balance Sheet and Statement of Revenues, Expenses and Changes in Net Position One of the most important questions to ask about the District s financial health or stability is, Is the District, as a whole, in a better financial position as a result of the current fiscal year s activities? The balance sheets and the statements of revenues, expenses and changes in net position report information about the District s resources and its activities in a way that helps answer this question. These statements include all restricted and unrestricted assets and all liabilities using the accrual basis of accounting. All of the current year s revenue and expense activities are taken into account or recorded regardless of when cash is received or paid. These two statements report the District s net position and all associated changes. You can think of the net position the difference between assets and liabilities as one way to measure the District s financial health or financial position. Over time, increases or decreases in the net position are one indicator of whether the District s financial health is improving or deteriorating. You will also need to consider other nonfinancial factors, such as changes in the patient service volume, payer mix, and measures of the quality of service provided to the community, as well as local economic factors to assess the overall health of the District. The Statement of Cash Flows The final required statement is the statements of cash flows. The statements of cash flows reports cash receipts, cash payments and net changes in cash and cash equivalents resulting from operations, investing activities, noncapital financing activities and capital and related financing activities. The statement provides information on sources of cash, what the cash was cash used for, and what the change in cash balance was during the reporting period. The District s Net Position The District s net position is the difference between its assets and liabilities reported in the balance sheets. As mentioned above, the District s net position was $141 million in 2016, a 7.4% increase over Net position was $131 million in 2015, a 9.4% increase over The increase for 2016 and 2015 represents a 16.8% increase overall compared to total net position as of June 30, 2014, as shown in Table 1. 4

7 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 Table 1: Assets, Deferred Outflows of Resources, Liabilities and Net Position Assets and Deferred Outflows of Resources Cash and cash equivalents $ 44,173,634 $ 42,881,759 $ 50,945,339 Patient accounts receivable, net 10,911,781 10,521,285 9,583,164 Other current assets 8,306,240 7,015,819 8,131,750 Noncurrent cash and investments 20,943,411 14,727,834 2,208,768 Capital assets, net 88,755,324 89,329,282 84,510,886 Total assets 173,090, ,475, ,379,907 Deferred Outflows of Resources Loss on refunding of debt 376, , ,790 Total assets and deferred outflows of resources $ 173,466,746 $ 164,919,813 $ 155,893,697 Liabilities Other current liabilities $ 9,514,422 $ 9,343,153 $ 10,293,348 Long-term debt outstanding 21,997,040 23,334,223 24,689,507 Other long-term liabilities 790, , ,000 Total liabilities 32,301,462 33,467,376 35,772,855 Net Position Net investment in capital assets 69,613,517 68,374,472 62,110,390 Unrestricted 71,551,767 63,077,965 58,010,452 Total net position 141,165, ,452, ,120,842 Total liabilities and net position $ 173,466,746 $ 164,919,813 $ 155,893,697 5

8 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 Significant Changes In completing a review of Table 1, the reader will see fluctuations in cash and cash equivalents. These fluctuations are primarily due to investment activity resulting in an increase in noncurrent cash and investments. Other notable changes were the growth in fiscal year 2015 net capital assets and the increase in net position. The District s current cash has fluctuated from year to year with a notable decrease from fiscal year 2014 to fiscal year Towards the end of fiscal year 2014, the District's five-year certificate of deposit (CD) matured and was thus reclassified from noncurrent cash and investments to current cash and cash equivalents. During fiscal year 2015, the District reinvested that cash, as well as additional available funds (in both fiscal years 2015 and 2016), in CD s, treasury notes, and government agency securities. This resulted in the majority of fiscal year 2015 s decrease to current cash and the growth in fiscal year 2016 and 2015 s noncurrent cash and investments. Capital assets increased during fiscal year 2015 due to the completion of the OB, Oncology, Operating Room, and Central Utility Plant Project (the Project). The funding related to this upgrade contributed to the decrease in cash in fiscal year Capital assets remained consistent from 2015 to The growth of total net position is the result of positive operating income and property tax revenue. See the discussion on the change of the District s net position after Table 2 for more details. 6

9 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 Table 2: Operating Results and Changes in Net Position Operating Revenues Net patient service revenues, net of provision for uncollectible accounts; $3,109,558, $3,045,472 and $3,678,172 $ 101,312,510 $ 95,890,511 $ 83,869,798 Other operating revenues 3,315,626 3,544,499 3,686,858 Total operating revenues 104,628,136 99,435,010 87,556,656 Operating Expenses Salaries and benefits 52,217,138 47,670,404 42,592,889 Purchased services and physician fees 14,250,581 13,286,639 13,512,295 Supplies 16,314,727 16,168,332 14,026,926 Other expenses 8,586,364 7,468,690 6,590,889 Depreciation and amortization 6,642,575 6,536,845 5,534,291 Total operating expenses 98,011,385 91,130,910 82,257,290 Operating Income 6,616,751 8,304,100 5,299,366 Nonoperating Expenses Interest expense 1,294,102 1,329, ,770 Total nonoperating expenses 1,294,102 1,329, ,770 Income after Interest Expense and Before Other Nonoperating Revenues (Expenses) 5,322,649 6,974,230 4,411,596 Other Nonoperating Revenues (Expenses) Property taxes 4,159,240 3,843,348 3,666,725 Interest income 475, , ,350 Investment losses in community programs (186,567) (186,806) (201,500) Gain (loss) on disposal of capital assets (350,391) 17,503 (851,663) Net nonoperating revenues (expenses) 4,098,238 3,898,922 2,841,912 Excess of Revenues Over Expenses Before Capital Contributions and Specific Purpose Excise Tax 9,420,887 10,873,152 7,253,508 7

10 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and Excess of Revenues Over Expenses Before Capital Contributions and Specific Purpose Excise Tax 9,420,887 10,873,152 7,253,508 Capital Contributions 245, , ,236 Specific Purpose Excise Tax - - 3,171,604 Unrealized Gain (Loss) on Investments 46,043 (17,682) (3,017) Increase in Net Position 9,712,847 11,331,595 11,390,331 Net Position, Beginning of Year 131,452, ,120, ,730,511 Net Position, End of Year $ 141,165,284 $ 131,452,437 $ 120,120,842 Operating Results and Changes in the District s Net Position The District has recently been recognized for their focus on quality and patient experience by receiving the CMS four star rating which ranks the District among the top 22% of hospitals / hospital groups nationwide. The overall star rating includes quality measures such as readmissions, mortality, effectiveness of care, timeliness of care and patient experience scores. This coincides with the District s focus on successful outcomes and patient-centered concepts coupled with enhancement of the community s awareness of these objectives, which have all contributed to the District s favorable operating results and increase in net position year over year. In 2016, the District s increase in net position was $9,712,847, as shown in Table 2. The material increase in net position is made up of the following components: Operating Income The first component of the overall change in the District s net position is its operating income or loss, generally, the difference between net patient service revenue and the expenses incurred to perform those services. The District had operating income of $6,616,751 and $8,304,100 for fiscal years 2016 and 2015, respectively. The District s increase of operating revenue was a significant contributor to the gain. o Consistent with the nationwide trend, the District is continuing to see volume transition from inpatient to outpatient. The 2016 growth and approximately 80% of the fiscal year 2015 growth came from outpatient visitation. 8

11 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 o o During fiscal years 2016 and 2015, the District had several new service lines that were either newly added to St. John s Medical Group or had recently been started towards the end of fiscal year General surgery, an internal medicine practice, plastic surgery, gastroenterology, cardiology and community outreach programs are all examples of fiscal year 2016 and 2015 expansion. These additional lines of service made up approximately 20% of the outpatient revenue growth for the last two fiscal years. As a result of service line development and improved communication, the District has been able to provide more services locally. Specifically, volume has increased in oncology, ancillary services, surgery, cardiology, and medical group services. The increase in District expenses are due to the District keeping up with the evolving healthcare environment and are primarily concentrated in the following areas: o o o o Salaries and benefits increased by $4.5 million (10%) and $5 million (12%) in fiscal year 2016 and 2015, respectively. Of this increase, salary growth of $3.4 million in fiscal year 2016 and $3.6 million in fiscal year 2015 is the combination of COLA, merit adjustments, market alignment, additional customer service positions (providing for both internal and external customers), and an expansion of service lines that includes the employment of physicians and physician group support staff. Correlating to this expansion of employees and a rise in the cost of healthcare, the District, which is selfinsured, experienced a 9% increase in the cost of health insurance as well as a proportionate rise in FICA and pension benefit expense. Maintenance contracts (in Other Expenses) have grown as the District has effectively installed newer software and equipment to meet the demands of the rapidly changing healthcare climate. Professional insurance and employee education (in Other Expenses) are increasing with inflation and the number of providers / employees. Depreciation and amortization has risen over the last couple of years as the central energy plant and the Project have been completed. In an effort to maintain costs despite the demands of the developing healthcare setting, the District s management has been working on cost control measures such as changing the District s group purchasing organization, increasing their buying partnership with St. Luke s Health System in Idaho, and working with local vendors in order to support the community as well as promote sustainability. In addition, the District was recognized by the American Hospital Association for its successful and innovative Worksite Wellness program. It is anticipated this program will decrease the District s health insurance costs as well as promote wellness throughout the community. 9

12 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 Nonoperating Revenues and Expenses Nonoperating revenues and expenses consist primarily of tax district revenue, interest income, interest expense, investment income, and gain or loss on disposal of capital assets. Interest expense was relatively consistent during 2016 after a significant increase during fiscal year 2015 due to the 2011 bonds issued to partially fund the Project. The related interest was properly capitalized during the construction phase of the Project however, towards the end of fiscal year 2014, when the first stage of the Project was completed; the associated bond interest was expensed as incurred. Property tax revenue is levied on behalf of the District for general purposes. Due to increased property values, which do not change in real time, this amount increased 8% during fiscal year 2016 and 5% during fiscal year Capital Contributions For the fiscal years ended 2016 and 2015, the District received $245,917 and $476,125, respectively, in capital contributions from the St. John s Hospital Foundation (the Foundation). The primary purposes for these resources in fiscal years 2016 and 2015 was to fund hospice visits, the new pediatric sound booth, lab equipment, a new vehicle for the Living Center, and planning costs for the lobby area renovation, whereas, in fiscal year 2014 most of the donations were designated for the Project. The Foundation has already pledged additional funds for fiscal year 2017 to complete the lobby renovation and support the purchase of tomosynthesis equipment. Additional distributions that benefit the District are not included in the District s financial statements as they are paid directly from the Foundation. These disbursements are accounted for in the St. John s Hospital Foundation Statement of Activities, found on page 17 of the Financial Statements, and include, but are not limited to, contributions for community wellness, nursing education, oncology, diabetes education, the Living Center, prenatal, women s health care, hospice and grief support. The total amount disbursed by the Foundation during fiscal year 2016, inclusive of the capital contributions, was $923,916 and $1,287,424 in fiscal year Special Purpose Excise Tax Several years ago, the District started planning for improvements to its operating rooms, oncology services, and obstetric services (the Project mentioned in previous sections). The Project was financed by a combination of voter approved Special Purpose Excise Tax (SPET), existing cash resources, and proceeds from the Series 2011B Hospital Revenue Refunding Bonds. By fiscal year 2014, the District had received its approved total of $11,750,000 in SPET funds that were used solely for the Project, therefore, no additional revenues were recognized during fiscal year 2016 or

13 Management s Discussion and Analysis (Unaudited) Years Ended June 30, 2016 and 2015 The District s Cash Flows Changes in the District s operating cash flows are consistent with changes in operating income and nonoperating revenues and expenses, discussed earlier. Although the cash and cash equivalents figure at June 30, 2016 shows just a 3% increase and the June 30, 2015 amount shows a decrease from 2014, this is primarily due to the increased investment strategies that mature in over three months. Due to the District s strong operating results for fiscal year 2016, community support in the form of tax dollars, and the continued improvement in the collection process, the District had an overall positive cash flow during fiscal years 2016 and Capital Asset and Debt Administration Capital Assets At year-end June 30, 2016 and 2015, the District had $88.8 million and $89.3 million, respectively, net investment in capital assets, as detailed in Note 6 to the financial statements. The District had $6.8 million of additions during The fiscal year 2016 capital expenditures were primarily related to the new daycare building, employee housing and remodels of the lab draw room and physician office space. The rest were routine in nature. Debt Administration At fiscal year-end 2016, the District had $23 million of outstanding debt. The majority of this debt is related to the outstanding 2011A and 2011B Hospital Revenue Bonds. At June 30, 2016, the bond debt outstanding was $890,000 at a 2.24% interest rate and $21.9 million at a % interest rate for the 2011A and 2011B Series Hospital Revenue Bonds, respectively. On May 1, 2013, the District entered into two new capital lease obligations in order to finance the purchase of the MRI and refinance the CT scanner. The outstanding MRI balance at June 30, 2016 was $862,000; the CT scanner was paid off during fiscal year Please refer to Note 7 of the financial statements for a summary of long-term debt. Contacting the District s Financial Management This financial report is designed to provide our patients, suppliers, investors and creditors with a general overview of the District s finances and to the District s accountability for the money it receives. If you have questions about this report or need additional financial information, please contact the Vice President of Finance and Administration. Contact information: jkren@tetonhospital.org Phone: (307) Address: P.O. Box 428, 625 East Broadway, Jackson, Wyoming

14 Balance Sheets June 30, 2016 and 2015 Assets and Deferred Outflows of Resources Current Assets Cash and cash equivalents $ 44,173,634 $ 42,881,759 Assets held by trustee for debt service - current 1,356,450 1,374,896 Patient accounts receivable, net of allowance for contractuals and uncollectible accounts; $10,296,370 and $9,961,705 10,911,781 10,521,285 Other receivables 3,091,858 2,907,379 Supplies 1,779,865 1,257,254 Prepaid expenses and other 2,078,067 1,476,290 Total current assets 63,391,655 60,418,863 Noncurrent Cash and Investments Assets held by trustee for debt service 2,204,371 2,189,498 Board-restricted cash - Rainy Day Fund 2,007,312 2,004,707 4,211,683 4,194,205 Less amount required to meet current obligations 1,356,450 1,374,896 2,855,233 2,819,309 Long-term investments 18,088,178 11,908,525 Total noncurrent cash and investments 20,943,411 14,727,834 Capital Assets, Net 88,755,324 89,329,282 Total assets 173,090, ,475,979 Deferred Outflows of Resources Loss on refunding of debt 376, ,834 Total assets and deferred outflows of resources $ 173,466,746 $ 164,919,813 See Notes to Financial Statements 12

15 Balance Sheets (continued) June 30, 2016 and 2015 Liabilities and Net Position Current Liabilities Current maturities of long-term debt $ 1,356,450 $ 1,374,896 Accounts payable 2,842,957 2,928,629 Accrued compensation, related taxes and benefits 4,533,155 4,074,927 Accrued interest payable 102, ,519 Estimated amounts due to Medicare 357, ,682 Other current liabilities 322, ,500 Total current liabilities 9,514,422 9,343,153 Long-term Debt Hospital revenue bonds 21,581,952 22,472,686 Capital lease obligations 415, ,537 Total long-term debt 21,997,040 23,334,223 Other Long-term Liabilities 790, ,000 Total liabilities 32,301,462 33,467,376 Net Position Net investment in capital assets 69,613,517 68,374,472 Unrestricted 71,551,767 63,077,965 Total net position 141,165, ,452,437 Total liabilities and net position $ 173,466,746 $ 164,919,813 See Notes to Financial Statements 13

16 St. John s Medical Center Foundation A Component Unit of Teton County Hospital District Statements of Financial Position June 30, 2016 and 2015 Assets Current Assets Cash and cash equivalents $ 5,234,983 $ 3,408,823 Pledges receivable - current - 400,000 Due from related party 1,767 1,749 Total current assets 5,236,750 3,810,572 Other Assets Cash and cash equivalents held for endowment fund 565, ,480 Investment in real estate 2,290,000 2,290,000 Beneficial interest in Community Foundation of Jackson Hole 1,922,191 1,995,745 Art collection 195, ,190 Other asset 20,000 20,000 Total other assets 4,992,861 5,066,415 Total assets $ 10,229,611 $ 8,876,987 Net Assets Net Assets Unrestricted $ 2,955,243 $ 2,427,314 Temporarily restricted 6,708,888 5,884,193 Permanently restricted 565, ,480 Total net assets $ 10,229,611 $ 8,876,987 See Notes to Financial Statements 14

17 Statements of Revenues, Expenses and Changes in Net Position Years Ended June 30, 2016 and Operating Revenues Net patient service revenue, net of provision for uncollectible $ 101,312,510 $ 95,890,511 accounts; $3,109,558 and $3,045,472 Other operating income 3,315,626 3,544,499 Total operating revenues 104,628,136 99,435,010 Operating Expenses Salaries and wages 39,300,039 35,910,485 Employee benefits 12,917,099 11,759,919 Supplies 16,314,727 16,168,332 Purchased services 9,579,286 8,712,624 Physician fees 4,671,295 4,574,015 Repairs and maintenance 2,936,850 2,598,988 Utilities 1,331,175 1,393,617 Insurance 1,376,519 1,163,770 Lease and rental 1,037, ,585 Other expenses 1,904,672 1,399,730 Amortization 67,477 69,956 Depreciation 6,575,098 6,466,889 Total operating expenses 98,011,385 91,130,910 Operating Income 6,616,751 8,304,100 Nonoperating Expenses Interest expense 1,294,102 1,329,870 Income after Interest Expense Before Other Nonoperating Revenues (Expenses) 5,322,649 6,974,230 Other Nonoperating Revenues (Expenses) Property taxes 4,159,240 3,843,348 Interest income 475, ,877 Investment losses in community programs (186,567) (186,806) Gain (loss) on disposal of capital assets (350,391) 17,503 Net other nonoperating revenues (expenses) 4,098,238 3,898,922 Excess of Revenues Over Expenses Before Capital Contributions 9,420,887 10,873,152 See Notes to Financial Statements 15

18 Statements of Revenues, Expenses and Changes in Net Position (continued) Years Ended June 30, 2016 and Excess of Revenues Over Expenses Before Capital Contributions 9,420,887 10,873,152 Capital Contributions 245, ,125 Unrealized Gain (Loss) on Investments 46,043 (17,682) Increase in Net Position 9,712,847 11,331,595 Net Position, Beginning of Year 131,452, ,120,842 Net Position, End of Year $ 141,165,284 $ 131,452,437 See Notes to Financial Statements 16

19 St. John s Medical Center Foundation A Component Unit of Teton County Hospital District Statement of Activities Year Ended June 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Totals Revenues, Gains and Other Support Major gifts $ 342,471 $ 876,891 $ - $ 1,219,362 Annual appeal 102,605 44, ,405 Old Bill s Fun Run 120, , ,185 Employee contributions 75 2,912-2,987 Lobby personal solicitations - 61,489-61,489 Memorials/hospice/honorariums 4,550 41,507-46,057 Grants/service clubs 6,000 27,000-33,000 Special events/auxiliary , ,641 Grateful Patients 1, ,600 Transfers from St. John's 348, ,560 Unsolicited individuals 2,514 22,959-25,473 Net assets released from restrictions 906,942 (906,942) - - Total revenues, gains and other support 1,836, ,086-2,660,759 Expenses Program expenses 923, ,916 Administrative expenses 142, ,025 Fundraising expenses 206, ,535 Total expenses 1,272, ,272,476 Other Income Interest income 2, ,481 Unrealized loss on investments and real estate (65,218) - - (65,218) Other income 26, ,078 Total other income (36,268) (35,659) Change in Net Assets 527, ,695-1,352,624 Net Assets, Beginning of Year 2,427,314 5,884, ,480 8,876,987 Net Assets, End of Year $ 2,955,243 $ 6,708,888 $ 565,480 $ 10,229,611 See Notes to Financial Statements 17

20 St. John s Medical Center Foundation A Component Unit of Teton County Hospital District Statement of Activities Year Ended June 30, 2015 Temporarily Permanently Unrestricted Restricted Restricted Totals Revenues, Gains and Other Support Major gifts $ 335,044 $ 720,500 $ - $ 1,055,544 Annual appeal 145,481 24, ,006 Old Bill s Fun Run 115,769 55, ,919 Employee contributions - 3,486-3,486 Memorials/hospice/honorariums 2,570 13,583-16,153 Grants/service clubs 1,275 22,131-23,406 Special events/auxiliary 1, , ,213 Grateful Patients 1,977 1,700-3,677 Transfer from St. John's - 1,749-1,749 Unsolicited individuals 8,777 13,398-22,175 Net assets released from restrictions 1,018,979 (1,018,979) - - Total revenues, gains and other support 1,631, ,064-1,768,328 Expenses Program expenses 1,287, ,287,424 Total expenses 1,287, ,287,424 Other Income Interest income 5, ,121 Unrealized gain (loss) on investments and real estate (5,580) 100,000-94,420 Other income 29, ,031 Total other income 28, , ,572 Change in Net Assets 372, , ,476 Net Assets, Beginning of Year 2,054,663 5,646, ,480 8,266,511 Net Assets, End of Year $ 2,427,314 $ 5,884,193 $ 565,480 $ 8,876,987 See Notes to Financial Statements 18

21 Statements of Cash Flows Years Ended June 30, Operating Activities Receipts from and on behalf of patients $ 100,679,431 $ 95,020,136 Payments to suppliers and contractors (36,867,874) (34,211,709) Payments to employees (52,217,138) (47,669,774) Other receipts and payments, net 121,850 1,320,796 Net cash provided by operating activities 11,716,269 14,459,449 Noncapital Financing Activities Property taxes supporting operations 4,159,240 3,843,348 Net cash provided by noncapital financing activities 4,159,240 3,843,348 Capital and Related Financing Activities Proceeds from contributions restricted for investment in equipment 245, ,125 Principal paid on long-term debt (1,374,895) (2,159,430) Interest paid on long-term debt (1,274,836) (1,310,257) Purchase of capital assets (6,707,868) (11,721,958) Proceeds from sale of capital assets 389,747 63,287 Net cash used in capital and related financing activities (8,721,935) (14,652,233) Investing Activities Purchase of investments (16,194,274) (15,908,415) Proceeds from the disposition of investments 10,014,621 4,000,000 Change in value of assets held by trustee for debt service and capital acquisitions (17,478) 173,882 Investment loss in community programs (186,567) (186,806) Unrealized gain (loss) on investments 46,043 (17,682) Interest income 475, ,877 Net cash used in investing activities (5,861,699) (11,714,144) Increase (Decrease) in Cash and Cash Equivalents 1,291,875 (8,063,580) Cash and Cash Equivalents, Beginning of Year 42,881,759 50,945,339 Cash and Cash Equivalents, End of Year $ 44,173,634 $ 42,881,759 See Notes to Financial Statements 19

22 Statements of Cash Flows (continued) Years Ended June 30, Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income $ 6,616,751 $ 8,304,100 Items not requiring cash Amortization 67,477 69,956 Depreciation 6,575,098 6,466,889 Provision for uncollectible accounts 3,109,558 3,045,472 Changes in Patient accounts receivable (3,500,054) (3,983,593) Other receivables (184,479) 245,364 Supplies (522,611) 318,053 Accounts payable and accrued expenses 338, ,420 Estimated amounts due to Medicare (242,583) 67,746 Other current assets and liabilities (541,776) (342,958) Net cash provided by operating activities $ 11,716,269 $ 14,459,449 Supplemental Cash Flow Information Capital asset acquisition included in accounts payable $ 87,889 $ 54,479 See Notes to Financial Statements 20

23 Notes to Financial Statements June 30, 2016 Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations and Reporting Entity St. John s Hospital was established in 1916 by the citizens of Jackson, Wyoming, with the backing of the Episcopal Church. It was originally a private, not-for-profit institution. On July 1, 1976, St. John s Hospital became Teton County Hospital District (the District). In June 2001, the Board of Trustees voted unanimously to refer to the District as St. John s Medical Center. The District s facility has 48 acute care beds and the nursing facility has 60 skilled nursing beds. The District is located in Jackson, Wyoming and is operated and controlled by a seven-member, publicly elected Board of Trustees. In accordance with accounting principles generally accepted in the United States of America, the financial statements present the District and its component unit, St. John s Medical Center Foundation a/k/a St. John s Hospital Foundation (the Foundation). The component unit is included in the District s reporting entity because of the significance of its operational and financial relationship with the District in accordance with Statement No. 39 of the Governmental Accounting Standards Board (GASB), Determining Whether Certain Organizations Are Component Units an amendment of GASB Statement No. 14 and Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. Discretely Presented Component Unit St. John s Medical Center Foundation a/k/a St. John s Hospital Foundation The Foundation is a legally separate, tax-exempt component unit of the District. The Foundation was established in July Although the District does not control the timing or amount of receipts from the Foundation, the majority of resources, or income thereon, that the Foundation holds in investments are restricted to the activities of the District by the donors. Because these restricted resources held by the Foundation are primarily to be used by, or for the benefit of the District, the Foundation is considered a component unit of the District and is discretely presented in the District s financial statements. The Foundation is a private not-for-profit organization that reports under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), including ASC Topic 958, Not-for-Profit Entities. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation s statements in the District s financial reporting entity for these differences. Complete financial statements of the Foundation may be obtained by contacting the District s Executive Office at Phone Address P.O. Box 428, 625 East Broadway, Jackson, Wyoming

24 Notes to Financial Statements June 30, 2016 Basis of Accounting and Presentation The financial statements of the District have been prepared on the accrual basis of accounting using the economic resources measurement focus. Revenues, expenses, gains, losses, assets and liabilities from exchange and exchange-like transactions are recognized when the exchange transaction takes place, while those from government-mandated nonexchange transactions (principally federal and state grants and county appropriations) are recognized when all applicable eligibility requirements are met. Operating revenues and expenses include exchange transactions and program-specific, government-mandated nonexchange transactions. Government-mandated nonexchange transactions that are not program specific, such as county appropriations, property taxes, investment income and interest on capital assets-related debt are included in nonoperating revenues and expenses. The District first applies restricted net position when an expense or outlay is incurred for purposes for which both restricted and unrestricted net position are available. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and deferred outflows of resources, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash Equivalents The District considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2016 and 2015, cash equivalents consisted primarily of money market accounts with brokers and certificates of deposit. Property Tax Revenues The District received approximately 4% of its financial support from ad valorem taxes for both years ended June 30, 2016 and Taxes are levied in August for the calendar year and are received by the county in September and March (of the following year) and become delinquent after May of the following year. Investments and Investment Income Investments in U.S. Treasury, U.S. Agency and instrumentality obligations with a remaining maturity of one year or less at the time of acquisition and nonnegotiable certificates of deposit are carried at amortized cost. Investments in equity investees are reported on the equity method of accounting. All other investments are carried at fair value. Fair value is determined using quoted market prices. Investment income includes dividend and interest income, realized gains and losses on investments carried at other than fair value and the net change for the year in the fair value of investments carried at fair value. 22

25 Notes to Financial Statements June 30, 2016 Noncurrent Cash and Investments Noncurrent cash and investments include assets held by trustees for capital acquisitions and debt service requirements. Amounts required to meet current liabilities of the District are included in current assets. Assets Held by Trustee for Debt Service Under the terms of the Series 2011 Bonds, the District is required to maintain certain deposits with a trustee for future bond principal and interest payments. Amounts required to meet current liabilities of the District are included in current assets. Board-restricted Cash Rainy Day Fund The Rainy Day Fund was established as of July 24, 2013 by the Board of Trustees for future costs/projects associated with the District meeting the requirements of health care reform, including any capital, programs, and/or expansions. A maximum of 10% of any fiscal year revenue can be transferred into the Rainy Day Fund. Patient Accounts Receivable The District reports patient accounts receivable for services rendered at net realizable amounts from third-party payers, patients and others. The District provides an allowance for uncollectible accounts based upon a review of outstanding receivables, historical collection information and existing economic conditions. As a service to the patient, the District bills third-party payers directly and bills the patient when the patient s liability is determined. Patient accounts receivable are ordinarily due in full when billed. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the patient or third-party payer. Supplies Supply inventories, other than medical supplies, are stated at cost, determined using the first-in, first-out basis. 23

26 Notes to Financial Statements June 30, 2016 Capital Assets Capital assets are recorded at cost at the date of acquisition or fair value at the date of donation, if acquired by gift. Depreciation is computed on a straight-line basis over the estimated useful life of each asset following guidelines of the American Hospital Association. Assets under capital lease obligations and leasehold improvements are amortized over the shorter of the lease term or their respective estimated useful lives. The following estimated useful lives are being used by the District: Land improvements Buildings and building improvements Equipment, computers and furniture 15 to 20 years 20 to 40 years 3 to 7 years The District capitalizes interest costs as a component of construction-in-progress, based on interest costs of borrowing specifically for the project, net of interest earned on investments acquired with the proceeds of the borrowing. During 2016 and 2015, the District capitalized interest of $0. Deferred Loss on Refunding The cost of debt refinancing is deferred and amortized using the straight-line method over the remaining life of the old debt or the life of the new debt, whichever is shorter, and reported as deferred outflows of resources on the District s balance sheets. Compensated Absences The District s policies permit most employees to accumulate paid time-off benefits. Expense and the related liability are recognized as benefits are earned. Compensated absence liabilities are computed using the regular pay rates in effect at the balance sheet date, plus an additional amount for compensation-related payments, such as Social Security and Medicare taxes computed using rates in effect at that date. Net Position Net position of the District is classified in two components. Net investment in capital assets consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of borrowings used to finance the purchase or construction of those assets. Unrestricted net position is the remaining net position that does not meet the definition of net investment in capital assets or restricted net position. Net Patient Service Revenue The District has agreements with third-party payers that provide for payments to the District at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered and includes estimated retroactive revenue adjustments and a provision for uncollectible accounts. Retroactive adjustments are considered in the recognition of revenue on an estimated basis in the 24

27 Notes to Financial Statements June 30, 2016 period the related services are rendered and such estimated amounts are revised in future periods as adjustments become known. Charity Care The District provides care without charge or at amounts less than its established rates to patients meeting certain criteria under its patient financial assistance policy. Because the District does not pursue collection of amounts determined to qualify as charity care, these amounts are not reported as net patient service revenue. Income Taxes As an essential government function, the District is generally exempt from federal and state income taxes under Section 115 of the Internal Revenue Code and a similar provision of state law. However, the District would be subject to federal income tax on any unrelated business taxable income. Electronic Health Records Incentive The Electronic Health Records Incentive Program, enacted as part of the American Recovery and Reinvestment Act of 2009, provides for one-time incentive payments under both the Medicare and Medicaid programs to eligible hospitals that demonstrate meaningful use of certified electronic health records technology (EHR). Payments under the Medicare program are generally made for up to four years based on a statutory formula. Payment under both programs are contingent on the hospital continuing to meet escalating meaningful use criteria and any other specific requirements that are applicable for the reporting period. The final amount for any payment year is determined based upon an audit by the fiscal intermediary. Events could occur that would cause the final amounts to differ materially from the initial payments under the program. The District recognizes revenue at the end of the reporting period when management is reasonably assured it will meet all of the meaningful use objectives and all other contingencies have been met. In 2015, the District completed the third-year requirements under the Medicare program and recorded revenue of approximately $544,000. In 2016, the District completed the fourth-year requirements under the Medicare program and has recorded revenue of approximately $294,000. This revenue is included in other operating income within operating revenues in the statements of revenues, expenses and changes in net position. Reclassifications Certain reclassifications have been made to the 2015 financial statements to conform to the 2016 presentation. The reclassifications had no effect on the changes in financial position. Subsequent Events Subsequent events have been evaluated through the date of the Independent Auditor s Report, which is the date the financial statements were available to be issued. 25

28 Notes to Financial Statements June 30, 2016 Note 2: Charity Care and Other Community Benefits Charges excluded from revenue under the District s patient financial assistance policy were $3,814,714 and $3,218,482 for 2016 and 2015, respectively. Note 3: Net Patient Service Revenue The District has agreements with third-party payers that provide for payments to the District at amounts different from its established rates. These payment arrangements include: Medicare. Inpatient and certain outpatient acute care services rendered to Medicare program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. Inpatient nonacute services and certain outpatient services related to Medicare beneficiaries are paid based on a combination of fee schedules and a cost reimbursement methodology. The District is reimbursed for certain services at tentative rates with final settlement determined after submission of annual cost reports by the District and audits thereof by the Medicare fiscal intermediary. Medicaid. Inpatient acute care services rendered to Medicaid program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. Inpatient nonacute services and certain outpatient services rendered to Medicaid program beneficiaries are reimbursed under a cost reimbursement methodology. The District is reimbursed at a tentative rate with final settlement determined after submission of annual cost reports by the District and audits thereof by the Medicaid fiscal intermediary. Gross patient service revenues from participation in the Medicare and state-sponsored Medicaid programs were approximately 38% and 37% for the years ended June 30, 2016 and 2015, respectively. Net patient service revenues from participation in the Medicare and state-sponsored Medicaid programs were approximately 18% and 16% for the years ended June 30, 2016 and 2015, respectively. Laws and regulations governing Medicare and Medicaid are complex and subject to change. As a result, it is reasonably possible that recorded estimates will change materially in the near term. The District has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for payment to the District under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates. 26