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

Transcription

1 Auditor s Reports and Financial Statements

2 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... 46

3 Independent Auditor s Report on Financial Statements and Supplementary Information Board of Trustees Jackson, Wyoming Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and discretely presented component unit of (the District), as of and for the years ended, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. The financial statements of St. John s Medical Center Foundation, the discretely presented component unit, were not audited in accordance with Government Auditing Standards. 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. 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 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 the business-type activities and the discretely presented component unit of, as of, 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. Emphasis of a Matter As discussed in Note 1 of the financial statements, in fiscal year 2014, the District changed its method of accounting for financing costs in accordance with GASB Statement 65, Items Previously Reported as Assets and Liabilities. Our opinions are not modified with respect to this matter. 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 30, 2014, 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 30,

5 Management s Discussion and Analysis (Unaudited) Years Ended Introduction This management s discussion and analysis of 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. 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 2014 from $109 million to $120 million and increased in 2013 from $92 million to $109 million. The increases are 10.4% and 18.8%, respectively. The District s cash and cash equivalents (included in current assets) increased in 2014 by $5.3 million, or 11.7%, and increased in 2013 by $15.3 million, or 50.5%. The District s cash and cash equivalents and certificates of deposit were $50,945,339 and $0, respectively, totaling $50,945,339 for 2014 and $45,611,776 and $5,000,000 totaling $50,611,776 for The District reported operating income of $5,299,366 in fiscal year 2014 and operating income of $9,124,480 in fiscal year Operating revenues increased by approximately $558,000 and $11.0 million, or 0.6%, and 14.5% in fiscal years 2014 and 2013, respectively. Operating expenses increased in 2014 by 5.6% and 2013 by 9.1%. Capital contributions were $968,236 and $195,466 during 2014 and 2013, respectively. Property tax revenues received per year in 2014 and 2013 were $3.7 million. 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 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 sheet and the statement 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 statement of cash flows. The statement 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 $120 million in 2014, a 10.5% increase over Net position was $109 million in 2013, an 18.8% increase over The increase for 2014 and 2013 represents a 31.3% increase overall compared to total net position as of June 30, 2012, as shown in Table 1. 4

7 Management s Discussion and Analysis (Unaudited) Years Ended Table 1: Assets, Deferred Outflows of Resources, Liabilities and Net Position (Restated) (Restated) Assets and Deferred Outflows of Resources Cash and cash equivalents $ 50,945,339 $ 45,611,776 $ 30,308,644 Patient accounts receivable, net 9,580,148 10,654,758 10,936,394 Other current assets 8,134,766 8,164,479 12,724,099 Noncurrent cash and investments 2,208,768 8,766,929 17,015,967 Capital assets, net 84,510,886 73,436,554 55,979,051 Total assets 155,379, ,634, ,964,155 Deferred outflows of resources - Loss on refunding of debt 513, , ,481 Total assets and deferred outflows of resources $ 155,893,697 $ 147,221,460 $ 127,628,636 Liabilities Other current liabilities $ 10,293,348 $ 10,477,031 $ 8,165,985 Long-term debt outstanding 24,689,507 26,828,918 26,772,234 Other long-term liabilities 790,000 1,185,000 1,185,000 Total liabilities 35,772,855 38,490,949 36,123,219 Net Position Net investment in capital assets 62,110,390 50,938,144 41,312,590 Unrestricted 58,010,452 57,792,367 50,192,827 Total net position 120,120, ,730,511 91,505,417 Total liabilities and net position $ 155,893,697 $ 147,221,460 $ 127,628,636 The 2013 and 2012 information has been restated as a result of the implementation of GASB 65. The purpose of GASB 65 is to reclassify certain items that were previously reported as assets and liabilities as deferred outflows of resources or deferred inflow of resources respectively, and recognize certain items that were previously reported as assets and liabilities as outflows of resources (expenses) or inflow of resources (revenue). 5

8 Management s Discussion and Analysis (Unaudited) Years Ended Significant Changes In completing a review of Table 1, the reader will notice significant increases in cash and cash equivalents and capital assets, net, while noncurrent cash and investments exhibit a material decrease. During fiscal year 2014, the District's five-year CD matured and was thus reclassified from noncurrent cash and investments to cash and cash equivalents. This explains the majority of the year over year differential between the two asset lines. Capital assets had a net increase during the year due to the work on the construction and remodel project which primarily affects the obstetric, surgical, and oncology departments (the Project) and the completion of the Central Energy Plant. The obstetrical and oncology spaces were opened during the last quarter of fiscal year 2014, while the entire operating room upgrade should be finalized during fiscal year Despite the additional cash spent on these two improvements, the District had another strong year of cash inflows during fiscal year Some of this success can be attributed to the continued improvement in the collection process and the successful attestation of Electronic Health Record Meaningful Use Part II of Stage I. Another component of the aforementioned change in line items was the voter approved Special Purpose Excise Tax (SPET) money collected during the past few years. Several years ago, the District started planning for improvements to its operating rooms, oncology services and obstetric services (the Project mentioned in the previous paragraph). This Project is being financed by a combination of SPET, existing cash resources, and proceeds from the series 2011B Hospital Revenue Refunding bonds. During fiscal year 2014, the District received approximately $3.2 million in SPET that was used solely for the Project. This influx has helped the District keep its cash position steady, despite the increase in capital assets, yet presents as a decrease in noncurrent cash and investments. As the Project is winding down, funds classified as noncurrent cash and investments, due to their restricted nature of being used only for the Project, were expended to a greater degree than they came in. The growth of total net position is the result of a combination of a 3% increase in net patient service revenues netted with keeping the expenses to a 6% increase, community support for the expansion project, and strong reimbursement. 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 Table 2: Operating Results and Changes in Net Position (Restated) (Restated) Operating Revenues Net patient service revenues, net of provision for uncollectible accounts; $3,678,172, $4,080,841 and $4,290,079 $ 83,869,798 $ 81,448,866 $ 71,226,464 Other operating revenues 3,686,858 5,549,951 4,765,795 Total operating revenues 87,556,656 86,998,817 75,992,259 Operating Expenses Salaries and benefits 42,592,889 39,196,440 37,454,552 Purchased services and physician fees 13,505,087 13,141,714 11,116,765 Supplies 14,026,926 14,303,183 12,219,046 Other expenses 6,598,097 6,275,996 5,337,995 Depreciation and amortization 5,534,291 4,957,004 5,278,948 Total operating expenses 82,257,290 77,874,337 71,407,306 Operating Income 5,299,366 9,124,480 4,584,953 Nonoperating Expenses Interest expense 887, , ,556 Total nonoperating expenses 887, , ,556 Income After Interest Expense and Before Other Nonoperating Revenues (Expenses) 4,411,596 8,459,893 3,746,397 Other Nonoperating Revenues (Expenses) Property taxes 3,666,725 3,690,154 3,777,572 Interest income 228, , ,408 Investment income (loss) from other long-term investments (201,500) (27,090) (24,567) Gain (loss) on disposal of capital assets (851,663) 48,634 12,512 Net nonoperating revenues (expenses) 2,841,912 4,063,423 4,249,925 7

10 Management s Discussion and Analysis (Unaudited) Years Ended (Restated) (Restated) Excess of Revenues Over Expenses Before Capital Contributions and Specific Purpose Excise Tax 7,253,508 12,523,316 7,996,322 Capital Contributions 968, , ,602 Specific Purpose Excise Tax 3,171,604 4,500,062 3,146,832 Unrealized Gain (Loss) on Investments (3,017) 6,250 (114,125) Increase in Net Position 11,390,331 17,225,094 11,201,631 Net position, at beginning of year, as previously reported 108,730,511 91,505,417 80,856,917 Adjustment for adoption on new accounting standards - - (553,131) Net position, end of year $ 120,120,842 $ 108,730,511 $ 91,505,417 The 2013 and 2012 information has been restated as a result of implementation of GASB 65. The purpose of GASB 65 is to reclassify certain items that were previously reported as assets and liabilities as deferred outflows of resources or deferred inflow of resources respectively, and recognize certain items that were previously reported as assets and liabilities as outflows of resources (expenses) or inflow of resources (revenue). Operating Results and Changes in the District s Net Position In 2014, the District s increase in net position was $11,390,331, 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 $5,299,366 and $9,124,480 for fiscal years 2014 and 2013, respectively. One component of the District s operating income was its steady operating revenue. o While reviewing the total operating revenue, the reader may note an increase in net patient service revenue and a corresponding decrease in other operating revenues. This shift is primarily due to a change in the District s anesthesia relationship. 8

11 Management s Discussion and Analysis (Unaudited) Years Ended o o Corresponding to the nationwide trend, the District is experiencing a transition from higher inpatient revenue to more substantial outpatient revenue. Although this change has been occurring over the last five years, it is becoming more pronounced as each year passes. The District has continued to increase the focus on quality, successful outcomes, and patient-centered initiatives coupled with enhancement of the community s awareness of these initiatives. The District held expenses to a reasonable 5.6% increase during 2014, demonstrating management and staff s continued focus on controlling costs by increasing efficiency and improving employee productivity. The increase was primarily focused in two key areas: o Salaries and benefits increased by $3.4 million, or 9%, due to the combination of a 2% salary bonus, market adjustments, an expansion of customer service positions (providing for both internal and external customers), and an increase in the cost of health insurance. The District has placed an emphasis on customer service for the patients, the community and the employees. As a result, employee growth has encompassed departments that emphasize these areas such as a new patient assistance team, strengthened housekeeping, an enhanced wellness department, in house security, and the employment of key physicians in order to keep their services in the community (hospitalists, general surgeons). Correlating to this increase in employees, the District, which is self-insured, experienced a 12% increase in the cost of health insurance. o o Depreciation and amortization increased by 12% due to the partial completion of the Project and the construction of the central energy plant. During the last quarter of fiscal year 2014, the obstetrics, oncology and outpatient surgical waiting room came on line. In addition, the District completed a new central energy plant, which is more efficient and powerful than the previous system and integral to the new spaces. The finalization of these two projects resulted in a higher depreciation level. Depreciation expense will continue to increase during fiscal year 2015 as the rest of the Project is completed. In addition to the aforementioned increases, it should be noted that the District saw a decrease in supply expenses. Although some of the decrease was due to a decrease in volume, another portion of the decrease can be attributed to the vigorous supply contract negotiations that the District has been working on the last few years. 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. Property tax revenue is levied on behalf of the District for general purposes. Due to decreased property values, which do not change in real time, this amount decreased 0.6% during fiscal year

12 Management s Discussion and Analysis (Unaudited) Years Ended Capital Contributions For the fiscal years ended 2014 and 2013, the District received $968,236 and $195,466, respectively, in capital contributions from the St. John s Hospital Foundation (the Foundation). The primary purposes for these resources in fiscal year 2014 was to fund the remodel / expansion project to the oncology, surgery, and obstetrics departments, whereas, in fiscal year 2013 the donations primarily funded the tele-health robot and new medication pumps. 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 18 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 2014, inclusive of the capital contributions, was $1,663,455 and $1,138,647 in fiscal year 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. Some noteworthy developments that had the effect of considerably increasing the cash and cash equivalents figure at June 30, 2014 were the strong operating results for fiscal year 2014, the successful attestation of meaningful use, and the December 2013 maturation of the certificate of deposit. Capital Asset and Debt Administration Capital Assets At year-end, the District had $84.5 million and $73.4 million, respectively, net investment in capital assets, as detailed in Note 6 to the financial statements. The District had $18.5 million of additions during The fiscal year 2014 capital expenditures were primarily related to the remodel / expansion project for the oncology, surgery, and obstetrics departments, and the central energy plant. The rest were routine in nature. Debt Administration At fiscal year-end 2014, the District had $26.9 million of outstanding debt. The majority of this debt is related to the issuance of the 2011A and 2011B Hospital Revenue Bonds. At June 30, 2014, the bond debt outstanding was $2.6 million at a 2.24% interest rate and $22.1 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 balance at June 30, 2014 was $2.2 million. Please refer to Note 7 of the financial statements for a summary of long-term debt. 10

13 Management s Discussion and Analysis (Unaudited) Years Ended 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 Office of the Chief Financial Officer. Contact information: jkren@tetonhospital.org Phone: (307) Address: P.O. Box 428, 625 East Broadway, Jackson, Wyoming

14 Balance Sheets Assets and Deferred Outflows of Resources (Restated) Current Assets Cash and cash equivalents $ 50,945,339 $ 45,611,776 Assets held by trustee for debt service - current 2,159,429 2,166,830 Patient accounts receivable, net of allowance for contractuals and uncollectible accounts; $9,529,799 and $8,381,855 9,580,148 10,654,758 Other receivables 3,155,759 3,296,948 Supplies 1,575,307 1,501,068 Prepaid expenses and other 1,244,271 1,199,633 Total current assets 68,660,253 64,431,013 Noncurrent Cash and Investments Assets held by trustee for debt service 2,365,384 2,383,370 Board-restricted cash - Rainy Day Fund 2,002,703 - Assets held by trustee for capital acquisition - 3,550,279 4,368,087 5,933,649 Less amount required to meet current obligations 2,159,429 2,166,830 2,208,658 3,766,819 Long-term certificates of deposit - 5,000,000 Other long-term investments Total noncurrent cash and investments 2,208,768 8,766,929 Capital Assets, Net 84,510,886 73,436,554 Total assets 155,379, ,634,496 Deferred Outflows of Resources Loss on refunding of debt 513, ,964 Total assets and deferred outflows of resources $ 155,893,697 $ 147,221,460 See Notes to Financial Statements 12

15 Balance Sheets (continued) Liabilities and Net Position (Restated) Current Liabilities Current maturities of long-term debt $ 2,159,429 $ 2,166,830 Accounts payable 3,387,319 4,211,240 Accrued compensation, related taxes and benefits 3,713,479 3,414,903 Accrued interest payable 103, ,544 Estimated amounts due to Medicare 531, ,392 Other current liabilities 397,679 50,122 Total current liabilities 10,293,348 10,477,031 Long-term Debt Hospital revenue bonds 23,388,074 24,603,056 Capital lease obligations 1,301,433 2,225,862 Total long-term debt 24,689,507 26,828,918 Other Long-term Liabilities 790,000 1,185,000 Total liabilities 35,772,855 38,490,949 Net Position Net investment in capital assets 62,110,390 50,938,144 Unrestricted 58,010,452 57,792,367 Total net position 120,120, ,730,511 Total liabilities and net position $ 155,893,697 $ 147,221,460 See Notes to Financial Statements 13

16 St. John s Medical Center Foundation A Component Unit of Statements of Financial Position Assets Current Assets Cash and cash equivalents $ 4,370,898 $ 3,609,460 Pledges receivable - current 400,000 - Due from related party 1,886 - Total current assets 4,772,784 3,609,460 Other Assets Pledges receivable 400,000 - Cash and cash equivalents held for endowment fund 565, ,480 Investment in real estate 2,190,000 2,190,000 Art collection 321, ,190 Equity membership 20,000 - Total other assets 3,496,670 3,056,670 Total assets $ 8,269,454 $ 6,666,130 Liabilities and Net Assets Liabilities Accounts payable $ 2,943 $ - Due to related parties - 65,220 Total liabilities 2,943 65,220 Net Assets Unrestricted 2,054,663 1,745,514 Temporarily restricted 5,646,368 4,279,916 Permanently restricted 565, ,480 Total net assets 8,266,511 6,600,910 Total liabilities and net assets $ 8,269,454 $ 6,666,130 See Notes to Financial Statements 14

17 Statements of Revenues, Expenses and Changes in Net Position Years Ended (Restated) Operating Revenues Net patient service revenue, net of provision for uncollectible $ 83,869,798 $ 81,448,866 accounts; $3,678,172 and $4,080,841 Other operating income 3,686,858 5,549,951 Total operating revenues 87,556,656 86,998,817 Operating Expenses Salaries and wages 32,311,432 29,637,270 Employee benefits 10,281,457 9,559,170 Supplies 14,026,926 14,303,183 Purchased services - other 8,852,159 9,025,401 Physician fees 4,652,928 4,116,313 Repairs and maintenance 2,359,806 2,335,131 Utilities 1,329,864 1,127,926 Insurance 1,017, ,497 Lease and rental 750, ,007 Other expenses 1,140,030 1,257,435 Amortization 73,174 65,068 Depreciation 5,461,117 4,891,936 Total operating expenses 82,257,290 77,874,337 Operating Income 5,299,366 9,124,480 Nonoperating Expenses Interest expense 887, ,587 Income After Interest Expense Before Other Nonoperating Revenues (Expenses) 4,411,596 8,459,893 Other Nonoperating Revenues (Expenses) Property taxes 3,666,725 3,690,154 Interest income 228, ,725 Investment loss from other long-term investments (201,500) (27,090) Gain (loss) on disposal of capital assets (851,663) 48,634 Net other nonoperating revenues (expenses) 2,841,912 4,063,423 Excess of Revenues Over Expenses Before Capital Contributions and Specific Purpose Excise Tax 7,253,508 12,523,316 See Notes to Financial Statements 15

18 Statements of Revenues, Expenses and Changes in Net Position (continued) Years Ended (Restated) Excess of Revenues Over Expenses Before Capital Contributions and Specific Purpose Excise Tax 7,253,508 12,523,316 Capital Contributions 968, ,466 Specific Purpose Excise Tax 3,171,604 4,500,062 Unrealized Gain (Loss) on Investments (3,017) 6,250 Increase in Net Position 11,390,331 17,225,094 Net Position, Beginning of Year, as Previously Reported 108,730,511 92,000,585 Adjustment for adoption of new accounting standard - (495,168) Net Position, Beginning of Year, Restated 108,730,511 91,505,417 Net Position, End of Year $ 120,120,842 $ 108,730,511 See Notes to Financial Statements 16

19 St. John s Medical Center Foundation A Component Unit of Statement of Activities Year Ended June 30, 2014 Temporarily Restricted Permanently Restricted Unrestricted Totals Revenues, Gains and Other Support Major gifts $ 231,237 $ 1,591,500 $ - $ 1,822,737 Annual appeal 130,405 29, ,730 Old Bill s Fun Run 95,410 71, ,840 Employee contributions 3,633 4,169-7,802 Pledges - 1,005,000-1,005,000 Memorials/hospice/honorariums 3,219 10,825-14,044 Grants/service clubs ,100-12,350 Special events/auxiliary - 83,378-83,378 Satisfied patients 1, ,000 Unsolicited individuals 6,348 15,817-22,165 Net assets released from restrictions 1,468,035 (1,458,035) (10,000) - Total revenues, gains and other support 1,939,537 1,365,509 (10,000) 3,295,046 Expenses Program expenses 1,654, ,654,025 Administrative expenses 4, ,715 Fundraising expenses 4, ,715 Total expenses 1,663, ,663,455 Other Income Interest income 6, ,280 Other 26, ,730 Total other income 33, ,010 Change in Net Assets 309,149 1,366,452 (10,000) 1,665,601 Net Assets, Beginning of Year 1,745,514 4,279, ,480 6,600,910 Net Assets, End of Year $ 2,054,663 $ 5,646,368 $ 565,480 $ 8,266,511 See Notes to Financial Statements 17

20 St. John s Medical Center Foundation A Component Unit of Statement of Activities Year Ended June 30, 2013 Temporarily Restricted Permanently Restricted Unrestricted Totals Revenues, Gains and Other Support Annual appeal $ 227,231 $ 195,136 $ - $ 422,367 Old Bill s Fun Run 109,053 65, ,613 Employee contributions 720 3,828-4,548 Pledges - 5,000-5,000 Memorials/hospice/honorariums 13, , ,667 Grants/service clubs - 79,650-79,650 Special events/auxiliary - 301, ,727 Satisfied patients - 179, ,774 Unsolicited individuals 29,801 6,233-36,034 Net assets released from restrictions 645,219 (645,219) - - Total revenues, gains and other support 1,025, ,516-1,340,380 Expenses Program expenses 852, ,027 Administrative expenses 166, ,620 Fundraising expenses 120, ,000 Total expenses 1,138, ,138,647 Other Income Interest income 9,864 1,993-11,857 Unrealized gain on investments in real estate - 300, ,000 Other income 28, ,726 Total other income 38, , ,583 Change in Net Assets (74,193) 616, ,316 Net Assets, Beginning of Year 1,819,707 3,663, ,480 6,058,594 Net Assets, End of Year $ 1,745,514 $ 4,279,916 $ 575,480 $ 6,600,910 See Notes to Financial Statements 18

21 Statements of Cash Flows Years Ended (Restated) Operating Activities Receipts from and on behalf of patients $ 84,946,952 $ 81,909,238 Payments to suppliers and contractors (31,515,145) (31,341,744) Payments to employees (42,592,889) (39,220,493) Other receipts and payments, net 1,863,972 1,863,354 Net cash provided by operating activities 12,702,890 13,210,355 Noncapital Financing Activities Property taxes supporting operations 3,666,725 3,690,154 Net cash provided by noncapital financing activities 3,666,725 3,690,154 Capital and Related Financing Activities Proceeds from contributions restricted for investment in equipment 968, ,466 Principal paid on long-term debt (2,166,829) (2,736,623) Interest paid on long-term debt (867,753) (566,758) Specific purpose excise tax 3,171,604 4,500,062 Purchase of capital assets (19,432,086) (17,777,431) Proceeds from sale of capital assets 701,381 83,701 Net cash used in capital and related financing activities (17,625,447) (16,301,583) Investing Activities Proceeds from other investments - 205,248 Net sale of investments 5,000,000 6,564,402 Change in value of assets held by trustee for debt service and capital acquisitions 1,565,562 7,603,671 Investment loss from other long-term investments (201,500) (27,090) Unrealized gain (loss) on investments (3,017) 6,250 Interest income 228, ,725 Net cash provided by investing activities 6,589,395 14,704,206 Increase in Cash and Cash Equivalents 5,333,563 15,303,132 Cash and Cash Equivalents, Beginning of Year 45,611,776 30,308,644 Cash and Cash Equivalents, End of Year $ 50,945,339 $ 45,611,776 See Notes to Financial Statements 19

22 Statements of Cash Flows (continued) Years Ended (Restated) Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income $ 5,299,366 $ 9,124,480 Items not requiring cash Amortization 73, ,437 Depreciation 5,461,117 4,891,936 Changes in Patient accounts receivable, net 1,074, ,636 Other receivables 141,189 (1,598,949) Supplies (74,239) 16,588 Accounts payable and accrued expenses 422, ,907 Estimated amounts due to Medicare 2, ,736 Other current assets and liabilities 302,919 (199,416) Net cash provided by operating activities $ 12,702,890 $ 13,210,355 Supplemental Cash Flow Information Capital asset acquisition included in accounts payable $ 445,368 $ 1,393,961 Capital lease obligations incurred for capital assets $ - $ 3,213,114 See Notes to Financial Statements 20

23 Notes to Financial Statements 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 (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 46 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. During the years ended, the Foundation distributed $353,562 and $568,886, respectively, to the District to fund the payment requirements of the Series 2002 Revenue Bonds, operations and capital projects. 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 Note 1: Nature of Operations and Summary of Significant Accounting Policies Continued 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, 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. 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. During fiscal year 2011, Teton County passed a ballot initiative awarding the District a Specific Purpose Excise Tax. This revenue will be used to fund the costs associated with future renovations. The District has recognized revenue of $3,171,604 and $4,500,062 as of June 30, 2014 and 2013, respectively. The last payment was received in January Total revenue received to date was $11,749,

25 Notes to Financial Statements Note 1: Nature of Operations and Summary of Significant Accounting Policies Continued 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. Noncurrent Cash and Investments Noncurrent cash and investments include long-term certificate of deposits and 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 Assets limited as to use include assets set aside by the Board of Trustees for future bond principal and interest payments over which the Board retains control and may, at its discretion, subsequently use for other purposes. 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 for future costs/projects associated with the District meeting the requirements of health care reform, including any capital, programs, and/or expansions. Not more than 10% of any fiscal year revenue can be transferred into the Rainy Day Fund. Assets Held by Trustee for Capital Acquisition Assets limited as to use include assets set aside by the Board of Trustees for future capital acquisitions. The bond proceeds received by the District are for the expansion project, which is limited as to use until expended on the expansion project. During 2014, all funds related to the expansion project were expended. 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 23

26 Notes to Financial Statements Note 1: Nature of Operations and Summary of Significant Accounting Policies Continued 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. 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 2014 and 2013, the District capitalized interest of $485,980 and $758,965, respectively. 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 a deferred outflow 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. 24

27 Notes to Financial Statements Note 1: Nature of Operations and Summary of Significant Accounting Policies Continued 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 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 charity care 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. Payments under the Medicaid program are generally made for up to four years based upon a statutory formula, as determined by the state, which is approved by the Centers for Medicare and Medicaid Services. 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 25

28 Notes to Financial Statements Note 1: Nature of Operations and Summary of Significant Accounting Policies Continued 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 ratably over the reporting period starting at the point when management is reasonably assured it will meet all of the meaningful use objectives and any other specific grant requirements applicable for the reporting period. In 2013, the District completed the first-year requirements under the Medicare program and recorded revenue of approximately $939,000. In 2014, the District completed the second-year requirements under the Medicare program and has recorded revenue of approximately $708,000. This revenue is included in other operating income within operating revenues in the statement of revenues, expenses and changes in net position. Change in Accounting Principle In 2014, the District changed its method of presentation and disclosure of financing costs in accordance with GASB Statement 65, Items Previously Recorded as Assets and Liabilities. This standard identified debt financing costs as relating to costs provided in the period incurred and thus should be expensed. This change has been applied retroactively, as required. The change reduced District net position as of July 1, 2012 by $495,168 for debt issuance costs incurred in previous periods. Increase in net position in 2013 was increased by $91,369 due to implementation. In addition, GASB Statement 65 required reclassification of the deferred loss on refunding of debt, from Hospital revenue bonds to deferred outflows of resources. This change had no effect on net position. Reclassifications Certain reclassifications have been made to the 2013 financial statements to conform to the 2014 financial statement 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. Note 2: Charity Care and Other Community Benefits Charges excluded from revenue under the District s charity care policy were $3,683,534 and $3,732,643 for 2014 and 2013, respectively. 26