Temple University Health System Q2 FY Investors Update Conference Call. March 19, 2019

Transcription

1 Temple University Health System Q2 FY Investors Update Conference Call March 19, 2019

2 Cautionary Statement Regarding Forward-Looking Statements Welcome to today s TUHS investor call. As identified on the invitation published on DAC, the material being reviewed with you today can be found at our website of under the investor relations tab. Certain statements included, incorporated by reference or verbally discussed, constitute projections or estimates of future events, generally known as forward-looking statements. These statements are generally identifiable by the terminology used such as plan, expect, estimate, budget or other similar words. These forward-looking statements include, but are not limited to, the information contained within this presentation and the financial statements being referenced as part of this presentation. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Temple University Health System and their affiliates do not plan to issue any updates or revisions to those forward-looking statements if or when changes in its expectation, or events, conditions or circumstances on which such statements are based occur. 2

3 Presenters Dr. Larry Kaiser President & CEO of Temple University Health System Herbert White Interim Senior VP and CFO of Temple University Health System 3

4 First Six Months of FY2019 Net (Loss) for the six months ended December 31, 2018 was ($24,257,000) compared to a budget of ($27,665,000) and the six months ended December 31,2017 of ($36,909,000) resulting in a favorable variance of $3,408,000 to budget and $12,652,000 to prior year. Net patient service revenue was ($7,627,000) unfavorable to budget due primarily to unfavorable hospital inpatient volumes, partially offset by American Oncologic Hospital s (AOH) favorable chemotherapy infusions. Included in the variance was the ($5,207,000) temporary unfavorable impact of ASC 606, the new revenue recognition standard, which was essentially offset by $5,132,000 of favorable prior year cost report settlements. Operating expenses were favorable to budget by $1,009,000 due to favorable variance in employee retirement benefits of $3,211,000 and purchased services of $6,218,000, partially offset by unfavorable salaries of ($4,230,000) and supplies and pharmaceuticals of ($7,467,000). Salaries are primarily driven by an unfavorable length of stay variance at Temple University Hospital (TUH). Supplies and pharmaceuticals expense is unfavorable at AOH ($9,171,000) due to favorable chemotherapy infusions and the increased use of newer and more expensive drugs. Net Commonwealth funding was $4,780,000 favorable to budget due to higher than anticipated quality incentive payments. Population Health revenue was $6,775,000 favorable to budget due to Health Partners Plans risk performance in both the Medicaid and Medicare product lines. Contribution revenue was unfavorable ($2,028,000) due to lower than anticipated gifts received at Institute for Cancer Research (ICR). Liquidity at December 31, 2018 was $322,637,000 vs. a budgeted liquidity of $282,472,000 for a favorable variance of $40,165,000; and favorable compared to December 31, 2017 liquidity by $7,128,000. The favorable variances in liquidity were primarily due to the higher than anticipated quality incentive payments received, timing of the net commonwealth funding and reduction in capital spending particularly at AOH and JH. 4

5 Preliminary Q2 FY 2019 Financial Performance 5

6 Inpatient acute volume decreased by (7.3%) from the prior year. However, CMI (case mix index or acuity) and transplants were at budget, and up 2.7% and 5.6% respectively compared to prior year. Temple University Health System Key operating Indicators December 31, 2018 Actual Budget Variance % Change Prior Year Variance % Change Inpatient: Inpatient Acute Discharges 16,930 18,209 (1,279) -7.0% 18,256 (1,326) -7.3% Total CMI % % Transplants % % Outpatient: Observation Discharges 5,941 5, % 5, % Emergency Room Visits 86,053 85, % 85, % I/P Admissions from the ER 10,349 10,444 (95) -0.9% 10,721 (372) -3.5% 6

7 Clinical program investments have driven revenues through attracting a more acutely ill patient population. TUH has surpassed the top quartile of hospitals reporting to the Association of Academic Medical Centers since March TUH Case Mix Index (Acuity) FY2015 FY2016 FY2017 FY2018 YTD Dec FY %tile for AAMC 50%tile for AAMC 75%tile for AAMC Anticipated growth in CMI is primarily due to the continuation of high-acuity volume 7

8 The main driver of the continued growth in CMI is Temple Health s Pulmonary Program, which currently ranks 1 st in the Nation for Lung Transplant volume two years in a row. 2,500 Pulmonary Related Services 2, ,500 1,000 1,679 2,047 2, FY2016 FY2017 FY2018 First 6 Months FY2019 Lung Transplants All Other Pulmonary 8

9 Temple University Health System ended the first six months of FY2019 with a net loss of ($24,257,000) compared to a budget of ($27,665,000) for a favorable variance of $3,408,000 Temple University Health System Summary of Income Statement December 31, 2018 * ($ in thousands) Actual Budget Variance Prior Year Variance Total Revenues $ 911,850 $ 910,159 $ 1,691 $ 843,790 $ 68,060 Total Expenses 941, ,181 1, ,968 (55,204) Operating Income (Loss) (29,322) (32,022) 2,700 (42,178) 12,856 Non Operating Income 5,065 4, ,269 (204) Net Income (Loss) $ (24,257) $ (27,665) $ 3,408 $ (36,909) $ 12,652 Consolidated Liquidity $ 322,637 $ 282,472 $ 40,165 $315,509 $ 7,128 Consolidated Days Cash on Hand (3) * All figures presented exclude the portion of the University s non-preferred appropriation which is received through Temple University Hospital. 9

10 Temple University Health System Consolidated Operating Statement For the period ended December 31, 2018* ($ in thousands) 10 * All figures presented exclude the portion of the University s non-preferred appropriation which is received through Temple University Hospital.

11 Temple University Health System over the last three fiscal years has performed much stronger in the second half of its fiscal year. FISCAL YEAR Q1 $ (13,181) $ (14,592) $ (20,984) $ (2,574) Q2 (11,076) (22,317) (16,301) (7,820) Q3 (848) 12,720 (223) Q4 60,518 25,700 21,563 Total $ (24,257) $ 22,761 $ 1,135 $ 10,946 KEY FACTORS THAT DRIVE PERFORMANCE IN Q3 AND Q4: Commonwealth funding received later in the fiscal year Final professional liability costs (+/-) Strong revenue performance Finalizing expense accruals (+/-) Reserves (+/-) ($ figures are in 000 s) 11

12 Potential risk to the proposed reduction in state disproportionate share allotments under Medicaid. Beginning in Federal Fiscal Year 2020 (October 1 st ), unless Congress acts, CMS will reduce Medicaid state-specific disproportionate share hospital (DSH) allotments that are used fund DSH payments to hospitals. In FY 2018 Temple University Hospital received approximately $120 million in gross Medicaid disproportionate share payments. We are working aggressively with allies in Washington, D.C. to delay or eliminate these reductions, which we have successfully done for several years now. If there are reductions, Temple will work with our Congressional delegation, CMS, and the Commonwealth of Pennsylvania to ensure funding is prioritized for providers like Temple that serve the largest concentration of Medicaid patients. There are other mechanisms to provide supplemental funding to hospitals beyond Medicaid disproportionate share program, such as permissible managed care directed payments, fee-for-service supplemental payments, and graduate medical education payments. 12

13 13 Individual Member Performance

14 Actual performance at Temple University Hospital, Inc. compared to budget was the primary driver for the favorable net income variance. Temple University Health System December 31, 2018 Net Income/(Loss)* ($ in thousands) Actual Budget Variance Prior Year Temple University Hospital, Inc. $ (13,314) $ (21,847) $ 8,533 $ (18,315) AOH and Affiliates (380) 2,922 (3,302) 246 Jeanes Hospital (7,650) (2,398) (5,252) (4,137) Temple Physicians, Inc. (6,392) (7,027) 635 (6,649) Temple Transport Team (1,523) (1,556) 33 (1,322) Parent (TUHS, Inc.) 3,972 1,702 2,270 1,771 All Others 1, (8,503) Temple University Health System $ (24,257) $ (27,665) $ 3,408 $ (36,909) * All figures presented exclude the portion of the University s non-preferred appropriation which is received through Temple University Hospital. 14

15 Temple University Hospital, Inc. Income Statement Summary December 31, 2018 ($ in thousands) Actual Budget Variance Prior Year Total Revenues $ 561,721 $ 555,413 $ 6,307 $ 529,342 Total Expenses 577, ,085 1, ,558 Operating Income (Loss) (15,634) (23,672) 8,038 (21,215) Investment & Non-Operating Income 2,320 1, ,900 Net Income (Loss) $ (13,314) $ (21,847) $ 8,533 $ (18,315) TUH Inc. reported a net loss of ($13,314,000) for the six months ended December 31, 2018 versus a budgeted net loss of ($21,847,000) for a favorable budget variance of $8,533,000. Driving this performance were favorable Population Health and Commonwealth revenues partially offset by unfavorable inpatient and outpatient revenues which were significantly impacted by an accelerated collectability allowance due to the adoption of the new accounting standard. Unfavorable expenses in salaries were offset by favorable employee benefits, purchased services, and professional fees. The above reported net loss represented a $5,001,000 increase compared to the same period in the prior year. The primary drivers of this increase were growth in outpatient pharmacy and Population Health revenues, partially offset by increased expenses in salaries and supplies and pharmaceuticals. Without the accelerated collectability allowance, the net loss for the six months ended December 31, 2018 would have been $13,005,000 favorable to budget and $9,473,000 favorable to the prior year. 15

16 Jeanes Hospital Income Statement Summary December 31, 2018 ($ in thousands) Actual Budget Variance Prior Year Total Revenues $ 71,518 $ 80,084 $ (8,566) $ 77,680 Total Expenses 80,035 82,898 2,863 82,161 Operating Income (Loss) (8,517) (2,814) (5,703) (4,481) Investment & Non-Operating Income Net Income (Loss) $ (7,650) $ (2,398) $ (5,252) $ (4,137) JH reported a net loss of ($7,650,000) versus a budgeted net loss of ($2,398,000) for an unfavorable budget variance of ($5,252,000) which includes the impact of a ($557,000) collectability allowance as part of the adoption of the new revenue recognition accounting standard. The primary drivers of the budget variance were shortfalls in inpatient discharges (270) and CMI (0.10). The above reported net loss represented a ($3,513,000) decrease compared to the same period in the prior year. The primary reason for this decline was lower inpatient revenue, which was driven by a (0.05) decrease in CMI, lower surgery volumes, and an increase in denials. Without the accelerated collectability allowance, the net loss for the six months ended December 31, 2018 would have been ($4,695,000) unfavorable to budget and ($2,956,000) unfavorable to the prior year. 16

17 AOH and Affiliates Income Statement Summary December 31, 2018 ($ in thousands) Actual Budget Variance Prior Year Total Revenues $ 247,847 $ 244,597 $ 3,249 $ 219,406 Total Expenses 249, ,902 (6,412) 220,242 Operating Income (Loss) (1,468) 1,695 (3,163) (836) Investment & Non-Operating Income 1,088 1,227 (139) 1,082 Net Income (Loss) $ (380) $ 2,922 $ (3,302) $ 246 AOH and Affiliates reported a net loss of ($380,000) for the six months ended December 31, 2018 versus budgeted net income of $2,922,000 for an unfavorable budget variance of ($3,302,000). Driving this performance was unfavorable inpatient revenue due to a (1,924) shortfall in census patient days. Increased chemotherapy infusion volumes and retail pharmacy performance drove favorable outpatient revenue. The above reported net loss represented a ($625,000) decrease in performance compared to the same period in the prior year. The primary drivers of this decrease were lower inpatient volumes and increased supplies and pharmaceuticals and salaries expenses offset by increased outpatient revenues and research revenues. 17

18 Temple Health refers to the health, education and research activities carried out by the affiliates of Temple University Health System (TUHS) and by the Lewis Katz School of Medicine at Temple University. TUHS neither provides nor controls the provision of health care. All health care is provided by its member organizations or independent health care providers affiliated with TUHS member organizations. Each TUHS member organization is owned and operated pursuant to its governing documents.