CONTINUING DISCLOSURE ANNUAL REPORT OF EISENHOWER MEDICAL CENTER FOR THE FISCAL YEAR ENDED JUNE 30, 2013

Transcription

1 CONTINUING DISCLOSURE ANNUAL REPORT OF EISENHOWER MEDICAL CENTER FOR THE FISCAL YEAR ENDED JUNE 30, 2013

2 CONTINUING DISCLOSURE ANNUAL REPORT OF EISENHOWER MEDICAL CENTER FOR THE FISCAL YEAR ENDED JUNE 30, 2013 TABLE OF CONTENTS I. INTRODUCTION II. III. IV. AUDITED FINANCIAL STATEMENTS OF EISENHOWER MEDICAL CENTER FOR THE FISCAL YEAR ENDED JUNE 30, 2013 FACILITIES EMPLOYEES V. SOURCES OF REVENUE VI. VII. VIII. IX. UTILIZATION SUMMARY STATEMENT OF OPERATIONS OF THE OBLIGATED GROUP SUMMARY BALANCE SHEET OF THE OBLIGATED GROUP CAPITALIZATION X. DEBT SERVICE COVERAGE XI. XII. XIII. CASH AND INVESTMENTS AND DAYS CASH ON HAND HISTORICAL IMPACT OF INVESTMENT GAIN/(LOSS) ON EMC STATEMENT OF OPERATIONS PENSION FUND INVESTMENTS APPENDIX A SUPPLEMENTAL INFORMATION MANAGEMENT S DISCUSSION AND ANALYSIS TWO YEAR COMPARISON OF FINANCIAL RESULTS

3 I. INTRODUCTION Pursuant to the following Continuing Disclosure Agreements (collectively, the "Disclosure Agreements"), Eisenhower Medical Center (the "EMC") hereby provides its continuing disclosure annual report for the fiscal year ended June 30, 2013 (the "Annual Report"). Continuing Disclosure Agreement, dated July 7, 2004 (the "Series 1997B Disclosure Agreement") Continuing Disclosure Agreement, dated August 14, 2007 (the "Series 2007A Disclosure Agreement") Continuing Disclosure Agreement, dated August 11, 2010 (the "Series 2010A Disclosure Agreement") Obligations $31,140,000 City of Rancho Mirage Joint Powers Financing Authority Certificates of Participation (Eisenhower Medical Center), Series 1997B (the "1997B Certificates"); $262,495,000 City of Rancho Mirage Joint Powers Financing Authority Revenue Bonds (Eisenhower Medical Center), Series 2007A (the "2007A Bonds") and $110,675,000 California Municipal Finance Authority Revenue Bonds (Eisenhower Medical Center), Series 2010A (the "2010A Bonds", and together with the 1997B Certificates and 2007A Bonds, the "Obligations") On May 29, 2008, the Corporation remarketed its 1997B Certificates from variable rate mode to fixed rate to maturity. The CUSIP below relating to the 1997B Certificates represents the CUSIP for the fixed rate certificates. Each maturity of the Obligations is identified by the corresponding CUSIP Number set forth below: Maturity Date Series 1997B CUSIP Series 2007A CUSIP Series 2010A CUSIP July 1, YAG TGA5 July 1, YAH TGB3 July 1, YAJ TGC1 July 1, YAK TGD9 July 1, TGE7 July 1, TGF4 July 1, TGR8 July 1, TGG2 July 1, YAL TGH0 July 1, TGS6 July 1, HBG TGJ6 July 1, TGK3 July 1, TGM9 July 1, TGN7 July 1, TGQ0 July 1, YAM3 July 1, TGL1 July 1, YAN1 July 1, TGP2 July 1, YAP6 Note: The CUSIP Numbers above are provided for the convenience of Obligation holders. EMC is not responsible for the accuracy or completeness of such numbers. Page 1 of 12

4 Annual Report EMC s Annual Report contains certain financial and operating data of EMC for the fiscal years ended June 30, 2013 and In addition, a copy of EMC's audited financial statements for the fiscal years ended June 30, 2013 and 2012 has been posted on the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system ("EMMA") at Please note that this Continuing Disclosure Annual Report should be read in conjunction with EMC's audited financial statements for the fiscal years ended June 30, 2013 and Other Matters This Annual Report is provided solely pursuant to the Disclosure Agreements. The filing of this Annual Report does not constitute or imply any representation (i) that all of the information provided is material to investors, (ii) regarding any other financial, operating or other information about EMC or the Obligations, or (iii) that no changes, circumstances or events have occurred since the end of the fiscal year to which this Annual Report relates (other than as contained in this Annual Report), or any other date specified with respect to any of the information contained in this Annual Report, or that no other information exists, which may have a bearing on the security for the Obligations, or an investor s decision to buy, sell or hold the Obligations. The information contained in this Annual Report has been obtained from sources which are believed to be reliable. No statement in this Annual Report should be construed as a prediction or representation about future financial performance of EMC. Dated: November 26, 2013 EISENHOWER MEDICAL CENTER Page 2 of 12

5 II. AUDITED FINANCIAL STATEMENTS OF EISENHOWER MEDICAL CENTER FOR THE FISCAL YEAR ENDED JUNE 30, 2013 The audited financial statements of EMC for the fiscal year ended June 30, 2013 have been posted on EMMA at III. FACILITIES A current description of the facilities owned and operated by EMC for both on-campus and off-campus can be found in Appendix A to the Official Statement dated August 2, 2010 provided in connection with the issuance of the 2010A Bonds. Licensed Beds June 30, License Category 2011 (1) General Acute Care Intensive Care Geropsychiatry Rehabilitation Center Pediatric Coronary Care Total EMC places beds in service based on seasonal demand for inpatient beds. Therefore, during EMC s off peak season, the beds in service may be less than beds set forth above. (1) Licensed beds decreased from 542 to 540 on January 1, Source: EMC records. Page 3 of 12

6 IV. EMPLOYEES At June 30, 2013, EMC had 2,934 employees, of which 2,238 were full time employees and the remainders were part-time or per diem employees. Full-time equivalent employees totaled 2, V. SOURCES OF REVENUE The following table sets forth the payor mix, based on gross patient service revenues of EMC for the three fiscal years since Gross Patient Service Revenues Years Ended June 30, Source Medicare 54.0% 54.7% 55.8% Medicare HMO Medicare subtotal Medi-Cal Medi-Cal HMO Medi-Cal subtotal Managed Care Indemnity and Private Pay Total 100.0% 100.0% 100.0% Source: EMC records. Page 4 of 12

7 VI. UTILIZATION The following table summarizes EMC's utilization for the three fiscal years since Years Ended June 30, Licensed Beds 540 (1) Discharges 18,535 18,447 19,118 Births Patient Days 79,519 79,619 80,594 Occupancy % Average Daily Census Average Length of Stay Inpatient Surgical Procedures 7,039 7,438 7,870 Outpatient Surgical Procedures 4,744 5,036 5,176 Emergency Room Visits 62,977 67,027 68,322 Source: EMC records. (1) Licensed beds decreased from 542 to 540 on January 1, VII. SUMMARY STATEMENT OF OPERATIONS OF THE OBLIGATED GROUP The table showing a Summary Statement of Operations of the Obligated Group for the fiscal year ended June 30, 2013 is set forth in the audited financial statements of EMC, a copy of which has been posted on EMMA at VIII. SUMMARY BALANCE SHEET OF THE OBLIGATED GROUP The table showing a Summary Balance Sheet for the fiscal year ended June 30, 2013 is set forth in the audited financial statements of EMC, a copy of which has been posted on EMMA at Page 5 of 12

8 IX. CAPITALIZATION The following table sets forth the historical capitalization of the Obligated Group for the three fiscal years since Historic Debt to Total Capitalization (in thousands) June 30, Debt: Capital Leases and Other $ 140 $ 99 $ 55 Series 1997B Certificates 27,590 27,590 27,590 Series 2007A Bonds 262, , ,495 Series 2010A Bonds 110, , ,675 Credit Agreement Total Long-Term Debt 400, , ,815 Net Assets: Unrestricted 406, , ,521 Temporarily restricted 67,934 49,580 54,067 Permanently restricted 15,549 15,644 15,824 Total Net Assets 490, , ,412 Total Capitalization $ 891,061 $ 821,344 $ 813,227 Debt to Total Capitalization 45.0% 48.8% 49.3% Debt to Total Capitalization, excluding Temporarily and Permanently Restricted Net Assets 49.6% 53.0% 53.9% Source: EMC records. Page 6 of 12

9 X. DEBT SERVICE COVERAGE The table set forth below shows the historical coverage of maximum annual debt service for the three fiscal years since Debt Service Coverage Ratio (in thousands) Years Ended June 30, Income Available for Debt Service Excess (Deficiency) of Revenues over Expenses $ (28,458) $ (34,613) $ (25,432) Plus: Loss (gain) on sale of assets not in ordinary course of business (98) 5 (627) Plus: Unrealized investment losses (gains) (1,411) 186 (1,189) Plus: Depreciation and amortization 49,193 59,440 54,523 Plus: Interest Expense 11,790 20,144 20,294 Income Available for Debt Service $ 31,016 $ 45,162 $ 47,569 Historical Maximum Annual Debt Service ("MADS") $ 25,627 $ 25,627 $ 25,627 Historical Debt Service Coverage Ratio 1.2x 1.8x 1.9x Source: EMC Records. Page 7 of 12

10 XI. CASH AND INVESTMENTS AND DAYS CASH ON HAND (in thousands) The following table sets forth the actual cash and investments (excluding Trustee-held funds) of the Obligated Group for the three fiscal years since Also shown in the table are the Obligated Group's unrestricted cash and investments and the calculation of Days Cash on Hand for the corresponding periods. June 30, Cash and Cash Equivalents $ 56,307 $ 83,430 $ 84,171 Assets Limited to Use 61,425 56,927 65,739 Charitable Remainder Trusts 19,563 19,123 19,428 Investments 33,335 30,306 38,070 Total Cash and Investments 170, , ,408 Less: Restricted funds Trustee Held Funds 18,364 8,028 23,406 Temporarily & Permanently Restricted Donor Funds 33,335 30,306 38,070 Charitable Remainder Trusts 19,563 19,123 19,428 Total Restricted 71,262 57,457 80,904 Total Unrestricted Cash and Investments $ 99,368 $ 132,329 $ 126,504 Average Daily Operating Expenses (1) $ 1,053.1 $ 1,091.5 $ 1,218.6 Days Cash on Hand Total Unrestricted (2) Source: EMC Records (1) Defined as (total expenses less depreciation, amortization, and provision for doubtful accounts) divided by number of days in the period. For comparative purposes, the abandonment of capital project has been omitted from FY2012 expenses and the California Hospital Quality Assurance Fee has been omitted from FY 2011 and FY 2012 expenses. See Appendix A Supplemental Information. (2) Defined as (i) total unrestricted cash and investments divided by (ii) average daily operating expenses. Page 8 of 12

11 XII. HISTORICAL IMPACT OF INVESTMENT GAIN/(LOSS) ON EMC STATEMENT OF OPERATIONS (in thousands) Years Ended June 30, Realized gain/(loss) $ 416 $ 276 $ 858 Unrealized gain/(loss) 1,411 (167) 1,005 Total $ 1,827 $ 109 $ 1,863 Source: EMC Records. XIII. PENSION FUND INVESTMENTS For employees hired prior to July 1, 2006, the Medical Center s employees are provided pension benefits under EMC s noncontributory defined benefit pension plan covering eligible full-time employees who have attained age 21 and who have completed one full year of service (the Pension Plan). Effective July 1, 2006, new employees of the Medical Center are not eligible to participate in the Pension Plan and instead are eligible to participate in a defined contribution plan (the Contribution Plan). The Contribution Plan includes five-year vesting (20% vesting per year) and the Medical Center matches each dollar an employee contributes up to 5% of the employee s base pay. The Contribution Plan match expense totaled $5,404,000 in 2013 and $3,420,000 in The Board approved to freeze the Pension Plan effective December 31, For those employees who qualify for a pension on that date the amount they receive will be a fixed amount no longer increasing as years of service increase or increase due to inflation. EMC s net Pension Plan liability was approximately $44.7 million and $49.4 million as of June 30, 2013 and 2012, respectively. EMC made a contribution of approximately $1.8 million to its Pension Plan in fiscal year ended June 30, 2013 and plans on making a contribution of approximately $1.3 million in fiscal year The Pension Plan's investment policy sets a target for the asset allocation of 52.5% equity securities, 47.5% in fixed income securities. At June 30, 2012, the Pension Plan's asset allocations were 55% in equity securities, 43% in debt securities and 2% in other securities. Page 9 of 12

12 APPENDIX A SUPPLEMENTAL INFORMATION MANAGEMENT S DISCUSSION AND ANALYSIS Financial Performance for the Year Ended June 30, 2013 For comparative purposes the following discussion is based on the financial results for fiscal years 2012 and 2013 as shown in Appendix A Supplemental Information. Eisenhower Medical Center (EMC) continues to participate in the California Hospital Quality Assurance (CHQA) program. The net effect on the financial results is minimal and is shown in Appendix A Supplemental Information. EMC grew operating EBIDA from $44.6 million for the year ended June 30, 2012 to $46.2 million for the year ended June 30, 2013 for a $1.6 million increase year over year. Depreciation and interest expense was $74.8 million for the year ended June 30, 2013 and $79.6 million for the year ended June 30, 2012 for a $4.8 million decrease which was directly related to asset amortization as there was no material change in interest expense year over year. EMC recorded a deficit of revenues over expenses of $(25.4) million for the year ended June 30, 2013 as compared with $(34.6) million for the year ended June 30, Net patient service revenue (net of provision for doubtful accounts expense and excluding CHQA) increased to $434.7 million or an increase of $46.3 million (11.9%) for the fiscal year ended June 30, 2013 as compared to June 30, The growth in net revenue was driven by strong volume growth in inpatient discharges, outpatient visits, and total surgeries. Total discharges of 19,118 for the year ended June 30, 2013 were up over 3% or 671 discharges to prior year. Total OP Visits of 559,565 for the year ended June 30, 2013 were up 19% or 90,697 visits to prior year. Total Surgeries of 13,046 for the year ended June 30, 2013, were up 5% or 572 surgeries to prior year. Inpatient discharge and total surgery growth was seen across many service lines, so growth was systematic as there was no distinct product line or payer driving the growth. Growth in outpatient volume is a major strategic initiative for EMC with the growth in outpatient visits directly attributable to existing primary care clinics maturing, two new primary /specialty care clinics, and the addition of an on campus cardiology clinic. During the fiscal year, EMC operated three outpatient facilities in Palm Springs (Western Coachella valley); the Argyros Outpatient Center in La Quinta (Eastern Coachella valley); as well as an orthopedics, cardiology, and other primary care/specialty care clinics on or near EMC s main campus (Central Coachella Valley). Total contributions and net assets released from restrictions for operations (excluding CHQA) was $16.7 million and $24.8 million for the years ended June 30, 2013 and 2012 respectively, for an $8.1 million decrease with donor contributions declining by $1.5 million. Investment income was $2.4 million and $.4 million for the years ended June 30, 2013 and 2012 respectively, with the key driver being a change in net unrealized gains and losses on investments. Expenses excluding depreciation, interest, CHQA and the abandonment of capital project were $424.5 million for the year ended June 30, 2013, which was an increase of $44.2 million or 2% to prior year. Salary and benefit expenses increased by $25 million or 13% to $214.5 million for the year ended June 30, The key driver in salary and benefit expense was staff growth in the outpatient clinic division and a mid-year change to insource the health system revenue cycle function. Purchased services, supplies and other expenses increased by $19.3 million year over year with the key driver being a $12.5 million increase in physician fees related to the growth in the health system clinic division network. Page 10 of 12

13 Unrestricted cash and investments decreased from $132.3 million in fiscal year 2012 to $126.5 million in fiscal year 2013 for a $5.8 million year over year decline. Key drivers of the decrease were a reduction in cash from operations during the transition to insourcing the revenue cycle function as well as a 2013 change in the timing of $15 million in bond principal and interest payments. Page 11 of 12

14 APPENDIX A SUPPLEMENTAL INFORMATION TWO YEAR COMPARISON OF FINANCIAL RESULTS (in thousands) Years Ended June 30, Revenue: Net patient service revenue $ 438,001 $ 388,384 Other 19,958 16,514 Total revenue 457, ,898 Expenses: Salaries and benefits 214, ,527 Supplies and pharmaceuticals 82,373 77,613 Purchased services 101,522 83,734 Other 26,065 27,381 Total expenses 424, ,255 Operating income - prior to contributions 35,413 26,643 Contributions and net assets released for operations 16,736 24,825 Operating EBIDA - prior to other income (expenses) 50,215 51,468 California Hospital Quality Assurance Fee - 41 One-time adjustment net patient revenue (3,311) - Abandonment of capital project - (6,916) Operating EBIDA 46,904 44,593 Depreciation and amortization (54,523) (59,440) Interest expense (20,294) (20,144) Subtotal (74,817) (79,584) Loss from operations (27,913) (34,991) Investment income 2, Deficiency of revenue over expenses $ (25,432) $ (34,613) Page 12 of 12