West Virginia United Health System

Transcription

1 West Virginia United Health System 1000 TECHNOLOGY DRIVE TELEPHONE: SUITE2320 FAX: FAIRMONT, WV WVUNITEDHEALTHSYSTEM.ORG RE: Officers Certificate for WVUHS Obligated Group related to the filing of the Obligated Group's Unaudited Financial Statements for the following financings: (1) 2015 TD Bank, N.A. Taxable Term Loan (2) 2014 Branch Banking and Trust Company Taxable Term Loan (3) 2014 Branch Banking and Trust Company Business Loan (4) West Virginia Hospital Finance Authority Hospital Revenue Refunding and Improvement Bonds (West Virginia United Health System Obligated Group) 2013 Serles A (5) 2013 Branch Banking and Trust Company Term Loan (6) West Virginia Hospital Finance Authority Hospital Refunding Bond (West Virginia United Health System Obligated Group) 2012 Series A (7) West Virginia Hospital Finance Authority Hospital (8) West Virginia Hospital Finance Authority Hospital Refunding Bond (West Virginia United Health System Refunding Bond (West Virginia United Health System Obligated Group) 2012 Serles B Obligated Group) 2012 Serles C (9) West Virginia Hospital Finance Authority Hospital (10) West Virginia Hospital Finance Authority Hospital Refunding Bond (West Virginia United Health System Refunding Bond (West Virginia United Health System Obligated Group) 2012 Serles D Obligated Group) 2012 Serles E (11) West Virginia Hospital Finance Authority Hospital (12) West Virginia Hospital Finance Authority Taxable Revenue Bond (West Virginia United Health System Hospital Revenue Bond (West Virginia United Health Obligated Group) 2011 Serles B System Obligated Group) 2011 Series C (13) West Virginia Hospital Finance Authority Hospital (14) West Virginia Hospital Finance Authority Hospital Refunding Bond (West Virginia United Health System Refunding Bond (West Virginia United Health System Obligated Group) 2011 Serles D Obligated Group) 2011 Serles E (15) West Virginia Hospital Finance Authority Hospital (16) Wells Fargo Bank, N.A. Revolving Line of Credit Revenue Refunding and Improvement Bonds (West Virginia United Health System Obligated Group) 2009 Serles C, CUSIP Numbers C44, C51, C69, C77, C85,956622C93,956622D (17) 2009 Branch Banking and Trust Company Term Loan (18) West Virginia Hospital Finance Authority Hospital Refunding Revenue Bonds (West Virginia United Health System Obligated Group) 2008 Series E, CUSIP Numbers YQ1,956622YR9 (19) West Virginia Hospital Finance Authority Hospital (20) West Virginia Hospital Finance Authority Hospital Improvement Revenue Bonds (Camden-Clark Memorial West Virginia United Health System Obligated Group Hospital Corporation) 2007 Serles A, CUSIP Numbers Hospital Revenue Bonds (United Hospital Center, Inc A20, A38, A46, A53, Project) 2006 Series A, CUSIP Numbers WNO, A61,956622A79,956622A87,956622ZY3,956622ZZO WPS, WQ3, WR1, WS9, WT7, WU4, WV2, WWO, WX8,956622WY6,956622WZ3,956622XA7 (21) West Virginia Hospital Finance Authority Hospital (22) West Virginia Hospital Finance Authority Hospital Auction Rate Certificates Revenue Refunding and Auction Rate Certificates Revenue Refunding and Improvement Bonds (Camden-Clark Memorial Hospital Improvement Bonds (Camden-Clark Memorial Hospital Corporation) 2004 Series B, CUSIP Number VX9 Corporation) 2004 Series C, CUSIP Number VY7 (23) West Virginia Hospital Finance Authority Hospital (24) West Virginia Hospital Finance Authority Fixed Rate Revenue Refunding Bonds (West Virginia University Hospital Revenue Bonds (West Virginia University Hospitals, Inc.) 2003 Series B Auction Rate Certificates, Hospitals, Inc.) 2003 Series D, CUSIP Number YP3, CUSIP Number UQ YN8 ~WVUHS MEMBERS BEnKELEY MEDICAL CENTER MARTINSBURG Ill CAMDEN CLARK MEDICAL CENTER PARKERSBURG JEFFERSON MEDICAL CENTEH RANSON Ill POTOMAC VALLEY HOSPIT1\L KEYSER UNITED HOSPITAL CENTER BRIDGEPORT II WEST VIRGINIA UNIVERSITY HOSPITALS MORGANTOWN

2 QUARTERLY COMPLIANCE CERTIFICATE This Compliance Certificate is furnished to applicable parties by West Virginia University Hospital, Inc., as Obligated Group Agent ("Obligated Group Agent") on behalf of City Hospital, Inc. d/b/a Berkeley Medical Center ("Berkeley Medical"), City Hospital Foundation, Inc. d/b/a University Healthcare Foundation, Inc. ("University Healthcare Foundation"), The Charlestown General Hospital d/b/a Jefferson Medical Center ("Jefferson Medical "), United Hospital Center, Inc. ("UHC"), and Camden-Clark Memorial Hospital Corporation ("Camden Clark" and together with the Obligated Group Agent, Berkeley Medical, University Healthcare Foundation, Jefferson Medical and UHC, the "Obligated Group"). The applicable parties are associated with financings by the Obligated Group pursuant to financing documents for the financings listed above. The Undersigned hereby certifies that: 1. I am an Authorized Officer of the Obligated Group Agent. 2. I hereby certify that the unaudited financial statements attached hereto as Schedule 1 constitute the annual financial information required by Section 2 of the 2008 Series E Continuing Disclosure Agreement and further that the information herein and attached hereto complies with such Continuing Disclosure Agreement and Securities and Exchange Commission Rule 15c-2-12; 3. I hereby certify to the best of my knowledge that, as of June 30, 2015, the financial data and computations evidencing the Obligated Group's compliance with certain covenants of the financing documents set forth in Schedule 1 hereto are true, complete and correct and have been made in accordance with the relevant financing documents; 4. I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the applicable Obligated Group Members during the accounting period covered by the attached consolidated unaudited financial statements for the purpose of determining whether or not the Obligated Group has complied with the financing documents; 5. To the best of my knowledge, the Obligated Group has kept, observed, performed and fulfilled the covenants, provisions and conditions of the financing documents; 6. The examinations described in paragraph 4 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Potential Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below;

3 7. The Subsidiaries of the Obligated Group Members are Allied Health Services Inc., United Summit Center Inc., United Health Foundation Inc., Potomac Valley Hospital, United Physicians Care Inc., West Virginia United Insurance Services, Inc., Camden Clark Physician Corporation, Camden Clark Foundation, and the Family Fitness Center; and 8. To the best of my knowledge, the attached financial statements fairly represent the applicable Obligated Group's condition in accordance with GAAP as of the dates and for the periods covered thereby, and the unaudited financial statements have been prepared on substantially the same basis as the most recent financial statements provided by the Obligated Group. [Remainder of Page Intentionally Left Blank]

4 The foregoing certifications and the unaudited financial statements delivered with this Certificate in support hereof, are made and delivered this August 28, WEST VIRGINIA UNIVERSITY HOSPITALS, INC. as Obligated Group Agent ~~M/!J,~ By: Name: DOiia;Coffman Title: Authorized Officer

5 Schedule 1 Unaudited Financial Statements, including a discussion by management of the results, utilization and payor mix data, and Calculations as required by Applicable Financing Documents

6 FAIRMONT, WEST VIRGINIA FINANCIAL REPOR RT FOR THE MONTH OF June 2015

7 TABLE OF CONTENTS Management s Summary 1 Moody s Healthcare Rating Road Map 5 WVUHS Comparative Ratio Analysis 6 Ratio Calculation Formula Summary 7 Divisional Summaries 8 Comparative Balance Sheet 13 Comparative Balance Sheet (Obligated Group Only) 14 Statement of Revenue and Expenses: Actual vs. Budget (w/ PVH) 15 Statement of Revenue and Expenses: UHC and Subsidiaries 16 Statement of Revenue and Expenses: WVUH-Mgtn and Subsidiaries 17 Statement of Revenue and Expenses: Univ. Healthcare and Subsidiaries 18 Statement of Revenue and Expenses: CCHS and Subsidiaries 19 Statement of Revenue and Expenses: PVH 20 Statement of Revenue and Expenses: WVUHS and Subsidiaries 21 Statement of Revenue and Expenses: Actual vs. Budget (Obligated Group Only) 22 Statement of Cash Flows 23 Statement of Changes in Net Assets 24 Comparative Ratio Analysis by Hospital and Division 25 Census Statistics Totals 26 Census Statistics Totals by Financial Class 27 Procedure Statistics Totals 28

8 MANAGEMENT SUMMARY June 30, 2015 STATEMENT OF REVENUE AND EXPENSE PATIENT SERVICE REVENUE Current Month Year-to-Date Actual Budget Actual Budget Inpatient Revenue $ 154,874 $ 160,410 $ 946,995 $989,244 Outpatient Revenue 156, , , ,726 Other Patient Revenue 1,334 1,250 8,009 8,208 Gross Patient Service Revenue 313, ,327 1,834,385 1,858,178 Medicare Deductions 83,325 85, , ,517 Medicaid Deductions 53,118 50, , ,976 Other Contractual Adjustments 40,258 35, , ,546 Provision for Bad Debt 3,534 5,054 25,489 30,474 Charity Deductions 2,782 4,343 19,805 26,195 Net Patient Service Revenue 130, , , ,471 Other Revenue 7,549 5,901 41,771 34,204 Total Operating Revenue $ 137,735 $ 130,602 $801,521 $ 799,675 Gross patient revenue was $7.8M or 3% above budget for the month due primarily to strong outpatient volumes. Below are the following divisional gross revenue variances for June: Division Budget Budget Comments Variance ($) Variance (%) WVUH $7.1M 4.9% Discharges 8.5% above budget. Key outpatient services of surgery (20%), Diagnostic Radiology (37%), and CT Scan (32%) all well above budget. Total ER visits right at budget. CCHS ($2.8M) (4.6%) Primarily IP related. IP Discharges 5.8% below budget. Surgeries, both IP and OP below budget 12%. Total ER visits 14% below budget. UHC $928K 1.6% Primarily OP related. IP Discharges 4% below budget. Total OP Visits 12% above budget. Total ER visits 5% above budget UH $2.7M 7.1% IP Discharges 11% above budget, ALOS 5% below budget. OP Surgery/Endo procedures at budget, Diagnostic Imaging procedures consistently above budget, and Laboratory tests 7% above budget. Total ER Visits slightly below budget. Deductions for the month were $5.5M and 4% above budget, which is fairly consistent with the Gross Patient Revenue budget variance. Total Deductions as a percent of Gross Patient Revenue was 58.4% compared to a budget of 59.1%. Positive initiatives to manage length of stay has contributed to lower contractual adjustments. In addition, the reduction is RAC audit activity is also a positive factor. Finally, WVUHS continues to see lower levels of Bad Debt and Charity write offs as a direct result of the 2014 WV Medicaid Expansion Initiative. The variance in Other Operating Revenue is primarily due to the Special Pharmacy at WVUH. Activity at the Specialty Pharmacy is higher than expected at the beginning stages of this initiative. 1

9 OPERATING EXPENSES Actual-MTD Budget-MTD Actual-YTD Budget-YTD Salaries & Wages $ 44,060 $ 44,374 $ 263,146 $268,626 Physicians Salaries & Wages 7,598 7, ,847 45,131 Employee Benefits 12,787 12,941 77,219 78,800 Medical/Surgical Supplies 14,970 14,841 84,272 89,800 Drugs & IV Solutions 11,481 9,866 62,954 59,963 Other Expenses 24,512 21, , ,222 Depreciation & Amortization 8,595 8,226 50,244 49,119 Interest Expense 2,321 3,138 16,488 18,979 Margin Redistribution 2,711 5,459 29,145 32,458 Total Operating Expenses $ 129,033 $ 128,120 $ 767,030 $ 778,099 Overall, Total Operating Expenses were $914,000 and less than 1% above budget for the month. Total Salaries/Wages and Employee Benefits are 50% of our total operating expenses and were $387,000 and 0.6% below budget. Below is a Full Time Equivalent analysis for the month by division: Division Total FTEs Budget Comments Variance (%) WVUH 4, % Higher IP volumes. FTE per Adjusted Patient Day is below budget CCHS 1,404 (8.3%) Direct result of cost savings plan UHC 1, % Budget variance caused by higher OP volumes in OR, ER, and physician offices. 20+ new grad nurses started in June. UH 1,349 (0.6%) FTEs right at budget. FTE per Adjusted Patient Day is below budget Other significant operating expense variances include the following: $1.6M above budget variance at WVUH due to increase risk associated with malpractice case $1.6M above budget variance in Pharmacy & IV solutions. Variances exists at WVUH, UHC, and UH due primarily to increase in cancer related services and related specialty drugs. $1.3M above budget in Other Expenses due primarily to CCHS ($508K due budget process and cost savings program allocation) and WVUH ($520K due to timing of expense recognition) Below budget variances exist in Professional Services due to lower purchased services at CCHS ($861K related to cost savings program and budget allocation) and Margin Redistribution due to positive operating results at UHP ($751K) and UHA ($2.0M) Actual-MTD Budget-MTD Actual-YTD Budget-YTD INCOME FROM OPERATIONS $ 8,702 $2,483 $ 34,490 $ 21,575 INVESTMENT INCOME 3,934 3,884 25,597 20,184 UNREALIZED INVESTMENT INCOME (14,866) (10) (14,640) 499 SWAP - GAIN OR LOSS 8,877 (8) 4,322 (48) IMPAIREMENT LOSS OTHER NON-OPER REVENUES (242) 6 (177) (39) EXCESS REVENUES OVER EXPENSES 6,405 6,355 49,593 42,171 OTHER CHANGES IN NET ASSETS $ (1,456) $ (1,186) $ (6,226) $ (12,615) 2

10 WVUHS incurred a net investment loss for the month of approximately $10,932,000 and 1.5%. During June 2015, the S&P 500 Stock Index decreased just more than 2.1% and the fixed income market (Aggregate Bond Index) decreased just more than 1.2% during the month. During June, the System recognized a gain of $8,877,000 related to the valuation of its various SWAP agreements as the interest rates/value related to similar borrowings have recently increased. Future changes in value of the SWAP agreement will be recorded on a calendar quarter basis. BALANCE SHEET ASSETS Current Total Prior Month Audited Dec-14 CURRENT ASSETS Cash & Short Term Investments $ 122,673 $ 128,858 $111,666 Patient Receivables Gross 440, , ,821 Less: Reserve for Deductions/Uncollectible (252,751) (298,038) (284,682) Prepaid Expenses/Other Current Assets 10,845 11,159 12,817 NET PROPERTY, PLANT & EQUIPMENT 943, , ,642 INVESTMENT & OTHER NONCURRENT ASSETS Bond Funds Noncurrent 131, , ,368 Board Designated Funds 707, , ,094 Self-Insurance Fund Noncurrent 58,164 58,786 55,964 Other Assets 78,807 78,941 77,948 TOTAL ASSETS $ 2,324,666 $2,340,367 $ 2,314,277 LIABILITIES Audited Current Total Prior Month Dec-14 CURRENT LIABILITIES Long Term Debt - Current $ 34,673 $ 39,299 $ 34,669 Accounts Payable & Accrued Expense 45,088 51,080 65,476 Accrued Wages & Fringe Benefits 80,418 76,080 84,410 Accrued Interest Payable 4,205 12,089 4,265 Other Accrued Liabilities 51,006 55,338 60,266 Total Current Liabilities 215, , ,085 LONG-TERM DEBT NONCURRENT. Bonds Payable 854, , ,955 Notes Payable 39,339 38,547 42,483 Total Long Term Debt 893, , ,438 OTHER NONCURRENT LIABILITIES Accrued Malpractice Liability 45,543 43,429 43,505 Other Liabilities - Noncurrent 50,570 59,344 55,173 Total Other Noncurrent Liabilities 96, ,773 98,678 NET ASSETS 1,119,443 1,114,495 1,076,076 TOTAL LIABILITIES & NET ASSETS $ 2,324,666 $ 2,340,367 $ 2,314,277 Significant Balance Sheet variances in the month of June include the following: Patient Receivables and Reserve for Deductions/Uncollectibles both had significant decreases during the month due primarily to adjustment made by CCHS. Upon management review, approximately $43M of accounts deemed to be bad debt and uncollectible accounts were still reflected in CCHS gross accounts 3

11 receivable. These accounts have been placed with outside agencies and have no value or much chance of being collected. The Reserve for Deductions/Uncollectibles was 57.4% of Patient Receivables. The decline in Board Designated Funds (Unrestricted) was due to financial market conditions. As noted above, WVUHS incurred a net investment loss for the month of approximately $10,932,000 and 1.5%. During June 2015, the S&P 500 Stock Index decreased just more than 2.1% and the fixed income market (Aggregate Bond Index) decreased just more than 1.2% during the month. Other Liabilities-Noncurrent consists primarily of the Unrealized Loss related to the valuation of the WVUHS SWAP agreements. During June, the System recognized a gain of $8,877,000 related to the valuation of its various SWAP agreements as the interest rates/value related to similar borrowings have recently increased. Future changes in value of the SWAP agreement will be recorded on a calendar quarter basis. There were no other significant items to note from a WVUHS perspective for the month of June. Further detail analysis by WVUHS operating divisions follow. 4

12 Moody's Healthcare Rating Road Map WVUHS 2014 & 2nd Qtr Performance Rating Category A Actual WVUHS WVUHS Ratio's S&P Core Metrics Threshold 12/31/2014 6/30/2015 6/30/2015 A Rated Weaker Market Demand & Declining Cash Flow Margins Patient volume declines limited to -2.00% Adjusted patient days -0.06% -0.87% Adjusted discharges -0.54% 5.39% Net patient revenue least 2.00% 8.83% 5.07% Bad debt growth no more than 15.00% % % Operating cash flow least 7.50% 11.75% 12.63% Investment Losses & Weaker Balance Sheet Days cash on hand 115 Days Cash to debt 80.00% 92.99% 89.46% Debt Structure and Liquidity Stress Significant headroom with bank and SWAP covenants-clearance 40.00% Days cash on hand MTI 90 days % % Debt to capitalization MTI 67% 31.81% 32.34% 45.34% 42.30% Debt service coverage MTI 1.1x % % Includes FAS 159 reporting % % Strong diversification of investments, managers, funds, banks & counterparties Unrestricted cash to puttable debt 90.00% % % Market Access Problems Variable rate debt limited to 35.00% 34.88% 36.23% Strained but still viable market access at higher spreads Management and Governance Actions Evidence that management & board are taking decisive steps to identify and mitigate financial risk by swiftly execution opertional, liquidity and capital strategies 5

13 WVUHS Comparative Ratio Analysis June 2015 SYSTEM TOTAL YTD YTD YTD Median Median Desired System System System Ratios Ratios Position Total Total Budget Compared to A Rated A+ Rated Median & Trend Profitability Ratios: Operating Margin 2.95% 4.30% 2.70% 1.00% 2.30% Above/Up Total Margin 6.05% 7.24% 5.09% 3.20% 4.20% Above/Up EBITDA Margin 14.28% 15.31% 13.40% 9.70% 11.30% Above/Up Operating Cash Flow Margin Above/Up Liquidity Ratios: Current Ratio * 2.00* Above/Up Unrestricted Cash / L.T. Debt 90.96% 89.46% 89.12% % % Above/Up Days in AR Net Below/Down Average Payment Period * 61.50* Average Days Cash on Hand Total Above/Up Capital Structure Ratios: Funded Indebtedness (LT Debt to Capitalization) 44.99% 45.34% 45.05% 42.30% 36.10% Below/Down Cash Flow / Total Debt 16.48% 18.39% 15.04% 13.10% 15.00% Above/Up LT Debt to Cash Flow * 3.00* Below/Down Cushion Ratio Above/Up Maximum Debt Service Coverage Above/Up Max Debt Service / Total Oper Rev 4.13% 4.04% 3.96% 2.90% 2.80% Below/Down Historical Debt Service Coverage * 5.50* Operating Ratios: Average Daily Census 1, ,024 n/a n/a n/a Adjusted Patient Days 308, , ,333 n/a n/a n/a Adjusted Discharges 57,949 63, ,066 n/a n/a n/a Total Hospital FTE's 9,275 9,153 9,234 n/a n/a n/a Salary & Benefits/NPR 47.92% 47.85% 48.21% 58.90% 56.30% Below/Down Bad Debts/Net Patient Rev. 4.39% 3.25% 3.83% n/a n/a n/a Nonoperating Revenue % 3.20% 3.07% 2.46% 2.30% 2.60% Above/Up Average Age of Plant Below/Down *2013 Moody's A1 and A2 rated median (all others are 2013 S&P) (2014 Audit Reported in 2015) 6

14 RATIO CALCULATION FORMULA SUMMARY Profitability Ratios: Operating Margin Total Margin EBITDA Margin Operating Cash Flow Margin Liquidity Ratios: Current Ratio Unrestricted Cash / LT Debt Days in AR Net Average Payment Period Days Cash on Hand Total Descriptions: Income from operations / total operating revenue Excess revenues over expenses / total revenue EBITDA / total revenue (Income from operating + depreciation & amortization exp + interest expense) / total operating revenue Total current assets / current liabilities Cash / (LTD current + total LTD) Net patient receivables / (net patient services rev / ytd days) Total current liabilities / ((total operating exp depr & amort exp interest expense) / ytd days) Cash / ((total operating exp depr & amort exp) / ytd days) Capital Structure Ratios: Funded Indebtedness (LT Debt to Capitalization) ((Total LTD + LTD current) / (net assets + total LTD + LTD current) Cashflow / Total Debt ((Excess rev over exp + depr & amort exp) x annualized factor*) / (current liabilities + LTD + other noncurrent liabilities) LT Debt to Cash Flow (Total LTD + LTD current) / ((excess of revenues over expenses + depreciation & amortization expense) x annualized factor*) Cushion Ratio Cash / maximum annual debt service Maximum Debt Service Coverage Net available for debt service / maximum annual debt service Max Debt Service / Total Oper Rev Maximum annual debt service / ((net patient services revenue + other revenue) x annualized factor*) Historical Debt Service Coverage Net available for debt service / annual debt service Operating Ratios: Salary & Benefits/NPR (Salary & wages + physician salary + employee benefits WVUHM physician salary) / net patient services revenue Bad Debts/Net Patient Rev. Provision for bad debts / net patient service revenue Nonoperating Revenue % Investment income / total revenue Average Age of Plant Accumulated depreciation / ((depreciation expense) x annualized factor*) EBITDA Excess revenues over expenses + depreciation & amortization expense + interest expense Maximum Annual Debt Service Estimate future peak principal payments and interest expense (65,333,958) Net Available for Debt Service ((Excess revenues over expense + depreciation & amortization expense + interest expense) x annualized factor*) Cash Cash and short term investments + unrestricted board designated funds Total Revenue Net patient service revenue + other revenues + investment income * Note: Annualized Factor = 12/current month (i.e. June = 2.0) Note: All ratios exclude Extraordinary Items, Unrealized Investment Income, and SWAP adjustments. System ratios have been revised as of January 2010 to include Eliminating entries. However, Hospital and Division ratios exclude the Eliminating entries. 7

15 Divisional Summaries, June 2015 Summary WVUH Morgantown Division For the month of June, WVUH reported income from operations totaling $6,912,000 compared to a budgeted income from operations of $2,872,000. The operating margin percentage for the month was 9.8%. Gross revenues were $7,121,000 above budget with the largest favorable variances in the OR ($1,815,000 attributable to volume +275), pharmaceutical services ($1,176,000), CT Scan ($1,103,000), clinical labs ($708,000), and Neaonatal ICU ($701,000), offset by unfavorable variances in OR Neurology ($1,250,000), OR Vascular ($559,000), and UTC - Radiology ($527,000). Total inpatient and outpatient surgeries (excluding endo) were above budget by 275 surgeries or 15.8%, with CVT and Ortho above budget, 39.7% and 4.9%, respectively contributing to the noted favorable O.R. gross revenue variance. Additionally, acute care days were above budget by 1.4% (or 118 days) and critical care days were also above budget by 0.5% (or 17 days). In terms of average daily census, acute ADC and critical care ADC were above budget by 3.93 (or 1.4%) and 0.57 (or 0.5%), respectively. Overall deductions were $2,676,000 over budget for the month. This was due to increased Medicare ($6,234,000), Medicaid ($5,426,000) and PEIA revenue ($1,565,000). From another revenue perspective, WVUH was $1,711,000 greater than budget for the month, due to higher Med Center Pharmacy revenues related to Specialty Rx s ($1,353,000), HTC revenue greater than budgeted for the month ($244,000), and HealthNet profit of ($190,000). WVUH ended the month $2,117,000 (or 3.4%) over budget in total operating expenses. Expense categories over budget included insurance expense ($1,622,000 resulting from an increase in medical malpractice accrual due to potential case settlement), drugs & IV solutions ($1,541,000 which includes specialty pharmacy scripts of $907,000 driven by Vol. +104), depreciation expense ($539,000 due to an accrual of 1.5 months of depreciation for UTC Building ($311k) and timing of assets set to become fully depreciated in 2015), maintenance & repairs ($525,000driven by timing related to budget spread), other expenses ($520,000 because of timing related to budget spread), and medical/surgical supplies ($378,000 owing to increased surgical volumes (+275). Expense categories under budget included interest expense ($683,000 due to favorable shared interest adjustment and timing of project draws), and employee benefits ($503,000 by reason of a reduction in health claims accrual and timing related). The JOA margin redistribution was below budget for the month ($1,997,000). Noteworthy items on the balance sheet for the month, as compared to May 31, 2015, included a decrease in cash of $7,156,000 due to increased capital and overall A/P spend. Fixed assets increased $11,514,000 relating primarily to capital expansion projects. Bond funds decreased by $7,382,000 due to interest and principle payments made in June. Board designated funds decreased by $6,902,000 due to unfavorable June investment performance. Long term debt current decreased $4,574,000 due to an annual bond principle payment paid in June. Accounts payable & accrued expenses decreased $6,372,000 due to payments on previously accrued expenses, including capital related expenditures. Accrued wages & fringe expense increased $2,810,000 due to timing of pay period at month end. Accrued interest decreased $5,501,000 due to bi-annual interest payments made on the 03 D, 08 E and 13 A bonds. Summary University Healthcare Division For the month ended June 2015, University Healthcare s income from operations was $1,196,000 which was $1,206,000 above budgeted loss from operations. Total operating revenue was $1,706,000 above budget and operating expenses were $500,000 above budget. Non-operating losses for the month were $508,000 related to financial market changes and loss on sale of asset. Revenue and Deductions Gross revenues were $2,761,000 above budget with the largest favorable variances as follows: BMC Clinical Lab +$314,000, BMC Pharmacy +$617,000, JMC Pharmacy +$128,000, Oncology +$276,000, NICU $179,000, BMC Interventional Radiology +$307,000, BMC OR +$120,000, BMC Ultrasound +$126,000 JMC CT Scan +$121,000, JMC Obstetrics/Gynecology +$51,000. These were offset by unfavorable variances in BMC Cardiac Catheterization (-$253,000), JMC Recovery (-$86,000), JMC OR (-$55,000). 8

16 Deductions were $1,250,000 above budget for the month. Medicare and Medicaid deductions were above $509,000 and $501,000, respectively, due to higher revenue. Other contractual adjustments were above budget $633,000. Provision for bad debt and charity deductions were $392,000 below budget. Statistics Inpatient surgeries (excluding endoscopy) were (+3.0%) above budget where BMC was (5.0%) above budget and JMC was (-7.4%) below budget. Total patient days were (+10.7%) above budget where the Observation days were (+64.0%) above budget, Critical Care days were (+5.6%) above budget, as were NICU days (+47.0%) with 169 days for the month. Behavioral Health days were below budget (-9.7%), as were Swing Bed (-16.3%) and Newborn days (-6.6%). Average Daily Census (ADC) for June was ; ADC above budget. Average Length of Stay (ALOS) was 3.91 days which was below budget. Medicare Casemix at BMC was (-9.6%) below budget and Overall Casemix was (-3.3%) lower. Medicare Casemix at JMC was (-6.3%) below budget and Overall Casemix was (+1.4%) above budget. Inpatient Ancillary procedures were mixed for the month, with Endoscopy (+42.6%), MRI (+6.6%), Births (+18.4%) and Interventional Radiology (+13.6%) above budget and CT Scan (-11.4%), Nuclear Medicine (-8.3%), Diagnostic Radiology (-15.4%), and Cardiac Catheterization (-35.4%) below budget for the month. Outpatient surgeries (excluding endoscopy) were (-8.9%) below budget and Endoscopy (+14.7%) above budget. Outpatient ancillary services were mostly above budget, including MRI (+10.3%), CT Scan (+6.9%), Diagnostic Radiology (+3.1%), Rehab Services (+3.5%), Wound Care (+9.0%), Interventional Radiology (+7.6%). Below budget services include Cardiac Catheterization (-40.6%), Home Health visits (-23.2%) and Sleep Center (-8.4%). Operating Expenses University Healthcare s total operating expenses were $500,000 above budget for the month. Categories with the largest negative variance were drugs & IV Solutions (-$468,000); related to higher volume, employee benefits (-$275,000); related to high employee health claims, licenses & taxes (-$242,000); related to higher revenue and reclassification of sales tax refund to capital, professional services (-$209,000); related to contract labor in BMC Clinical areas and higher reference lab fees, Physicians salaries & wages (-$69,000); related to increased usage of interns & residents and unbudgeted physician contracts, and other expenses (-$57,000); related to above budget contributions, linens, and Foundation event costs. The categories with the largest positive variances were Mission Support for UHP +$751,000 below budget related to better than budgeted performance, Depreciation & amortization +$46,000; related to timing of purchases, and maintenance & repairs +$53,000; related primarily to maintenance contracts under budget. The resulting operating margin for the month was 5. Balance Sheet Cash decreased $783,000 where operations provided $1,377,000. During the month, the Videoendoscopy system was upgraded on a capital lease at a cost of $710,000, and the old system sold. Bond principal of $1,870,000, and related semiannual interest payments, as well as a quarterly swap payment were made during the month. Summary UHC Division The UHC Division consists of United Hospital Center (UHC), United Summit Center, and United Health Foundation. Key highlights of the month and year to date explanations follows: For June 2015, total operating revenue was $26,015,000 and 4% above budget. Gross patient service revenue was above budget for the month by $928,000 and slightly less than 2% due primarily to strong outpatient volumes during the month. On the inpatient side, gross patient service revenue was 11% below budget and was consistent with patient volumes. The actual number of patient days for the month were 4,031 compared to the budget of 4,650 (13% below budget), however the actual number of patient discharges were just 4% below budget (894 actual patient discharges compared to budget of 933 discharges). Outpatient visits were 12% above budget for the month and outpatient revenue was almost 10% above budget for the month. Some of the higher outpatient visit volumes are being driven by physician office visits and home care, which have lower than average revenue per visit charges. Contractual adjustments were also below budget for the month and were fairly consistent with the ratio/correlation with gross patient revenue. Bad debt and charity write offs continue to trend well below budget due to 2014 WV Medicaid expansion initiative. 9

17 Year-to-date, inpatient discharges are within 1% of budget (patient days are 4% below budget) and outpatient visits are approximately 6% above budget. Gross patient service revenue is 2% below budget and contractual adjustments are 4% below budget due as deductions related to self-pay responsibilities continue to be well below budget due primarily to impact of the 2014 WV Medicaid Expansion initiative. Medicare Deductions are 5% below budget and Medicare gross revenue is 2% below budget. UHC has not had any RAC take backs in 2015 (budget of $510,000) and our average charge per discharge is 8% below budget. The case mix index is comparable to budget and prior year. Both inpatient surgeries and laboratory tests are well below budget in the first half of 2015 and will impact the average charge per discharge and thus the contractual adjustment to gross patient service revenue correlations. Total operating expenses for June 2015 were $24,216,000, which was $200,000 and less than 1% above budget for the month. Total salaries/wages (including physicians) and employee benefits, which are approximately 55% of total operating expenses, were 2% above budget for the month due primarily to higher than budget employee health plan claims. In addition, physician salaries were above budget primarily due to the accrued performance bonuses to be paid for the first half of The monthly amount to be accrued for future payment (next payment should occur in July/August 2015 for the first half of 2015) will exceed the budget amount by approximately $60,000 per month based on actual amounts paid for the second half of Medical supplies and drugs/iv Solutions were $62,000 and almost 2% above budget for the month. The pharmacy variance ($54,000) is due to higher than budget oncology related patient volumes. Outpatient infusion (drugs and IVs) volumes were 12% higher than budget for the month (10% year-to-date).there were no other significant expense variances to note during the month. Year-to-date, total operating expenses are 2% below budget. This variance includes a one-time benefit of approximately $750,000 related to a refund of WV sale tax ( tax years). Also, the year-to-date benefit of the Premier stock conversion is approximately $625,000. Both are unbudgeted benefits. However, for the most part total salary related and operating expenses are 1% below budgeted spend amounts. There are no other significant cost variances to note through the first half of At June 30, 2015, United Hospital Center s consolidated total assets were $608,336,000. Gross accounts receivable (AR - $95,343,000) for UHC increased almost 4% in June. However, the gross days in A/R increased just slightly from just over an average of 52 days at May 31, 2015 to just over 53 days at June 30, Part of the increase in gross accounts receivable was due primarily to the increase in gross patient service revenue in June compared to May. The average daily hospital revenue in June was $1,970,000 compared to $1,836,00 in May (a 7% increase). UHC s invested reserves totaled $161,529,000 and decreased just over 1% during the month of June 2015 due to market conditions. The S&P 500 Stock Index decreased just more than 2.1% and the fixed income market (Aggregate Bond Index) decreased just more than 1.2% during the month. Our portfolio consists of approximately 40% equity style investments. Finally, the Unrealized Loss of Value related to the SWAP agreements at June 30, 2015 was approximately $18.2 million. During the first half of 2015, the hospital has recognized a gain of $1,795,000 ($3,671,000 in June 2015) as interest rates/value related to similar borrowings have increased slightly compared to December Future changes in value of the SWAP agreement will be recorded on a calendar quarter basis. There were no other significant or unusual items to note as of June Summary CCHS Division Camden Clark Health Services, Inc. (CCHS) consists of Camden Clark Medical Center (CCMC) and CCMC's ownership in Ohio Valley Ambulatory Surgical Center. Together these are the hospital operations of Camden Clark, and represent the significant majority of the consolidated revenues and assets. Other consolidated entities consist of Camden Clark Physician Corporation (CCPC) and Camden Clark Foundation (CCF). For the month of June, CCHS reported a loss from operations totaling ($715,577) compared to a budgeted loss from operations of ($1,169,364). This was a favorable variance of $453,787. Gross patient revenues were ($2,794,582) lower than budget. Overall deductions were $1,546,027 favorable to budget for the month. Other operating revenues were unfavorable to budget by ($142,198). Operating expenses were $1,844,540 favorable to budget. Summary Camden Clark Medical Center (including OVASC) (CCMC) For the month ended June 2015, CCMC s income from operations was $783,502 which was $1,070,098 above the budgeted income from operations. Total operating revenue was ($699,321) below budget and operating expenses were ($1,769,419) below budget. 10

18 Volumes & Statistics Inpatient surgeries (excluding endoscopy) were 6.51% below budget. Adjusted patient days were 16.92% below budget, Observation days were 9.99% above budget. Average Daily Census (ADC) for June was 150, or 39 below budget. Average Length of Stay (ALOS) was 3.58 days which was 21% below budget. Inpatient Ancillary procedures were below budget in all areas. Outpatient surgeries (excluding endoscopy) were 14.93% below budget and Outpatient Endoscopy was 1.63% above budget. Visits to the Emergency Department were below budget by 13.7%. Revenues and Deductions Gross revenues were ($2,602,729) below budget with the largest favorable variances as follows: Cardiac Diagnostics (+$1,214,429), Nuclear Medicine (+$251,668), Nursery CC (+$200,200) and PP Gyn CC (+$165,659). Departments with the largest unfavorable variances were Pharmacy (-$824,344), Laboratory (-$561,049), Emergency Room Services (- $517,579), CVU (-$289,355), Respiratory Therapy (-$240,422), and Radiation Oncology (-$227,360). Deductions were ($2,119,250) below budget for the month. Operating Expenses Total operating expenses were ($1,769,419) below budget for the month. Expenses with the largest favorable variances were Salaries & Wages ($626,701), Professional Services ($867,415), and Drugs & IV Solutions ($366,307). Expenses with the largest unfavorable variances were Other Expenses ($506,597 savings for New Horizons was budgeted in this line), Physicians Salaries & Wages ($93,074) and Maintenance & Repair ($50,773). The operating income for the month was $783,502 or $1,070,098 favorable from budget for the month. Balance Sheet Patient Receivables and Reserve for Deductions/Uncollectibles both decreased by $43M. Bad debt accounts have been sitting in the AR for the past couple of years. These accounts are still being pursued by outside agencies, although they have no value or much chance of being collected. We have removed them from the active AR. Other Current Receivables decreased from the prior month by $22.6M or 89%, and Net Assets decreased by $21.2M or 58%. This is related to the intercompany between CCMC and CCPC. The physician group (CCPC) will never have the means to pay back the monthly cash advances so the balance was reclassed to the Net Assets on both balance sheets and each month those will be recorded as a change in Net Assets instead of a Due To/From. Summary Camden Clark Physician Corporation (CCPC) For the month ended June 2015, CCPC s income from operations was ($1,573,133), which was an unfavorable variance of ($689,464) from budget. Total operating revenue was ($760,430) below budget and operating expenses were ($70,965) below budget. Volumes & Statistics Work RVU s were 4.69% below budget. The budgeted Work RVU s with the largest favorable variances were Rheumatology (+48.01%), Radiation Oncology (+43.88%), Resident Clinic (+31.03%) and Lowden (+16.82%). Revenues and Deductions Gross revenues were ($191,853) below budget. Deductions were $573K unfavorable to budget for the month. Operating Expenses Total operating expenses were $70,965 below budget for the month. Expenses with the largest favorable variances were Physicians Salaries & Wages ($186,985) and Salaries & Wages ($133,533). Expenses with the largest unfavorable variances were Professional Services ($322,285) and Other Expenses ($79,526 unbudgeted rent of $60,000/month). The 11

19 loss from operations for the month was ($1,573,133). For year-to-date, the loss from operations of ($6,110,952) is an unfavorable variance from budget by ($1,190,365). Balance Sheet There were no significant balance sheet fluctuations for the month. Summary PVH Potomac Valley Hospital reported a loss from operations of $121,000 for the month of June 2015, compared to a budget of expected net income from operations of $96,000. Inpatient revenue was under budget by $312,000 for the month related primarily to a low census and lower surgical volume. Outpatient revenue was under budget by $63,000 related to a reduction in outpatient surgery. In total, revenue was under budget for the month by $376,000. Deductions were $117,000 under budget for the month, as a result of payor mix and lower overall gross revenue. Total operating revenue was unfavorable to budget by $248,000. Salaries were over budget by $24,000 and medical and surgical supplies were over budget by $28,000 related to a high volume of total joint replacement surgeries in the month. These unfavorable areas were offset by $17,000 of lower insurance premiums and employee deductibles in employee benefits, $16,000 under budget in drugs and IV solutions, and $17,000 in interest savings related to the switch to non-profit lending rates. In total, operating expenses were favorable to budget by $31,000 for the month. The total operating margin for the month was -7.67% compared to a budget of 5.26%. 12

20 West Virginia United Health System Comparative Balance Sheet June 30, 2015 (unaudited) (in thousands) ASSETS Current Month Actual System Totals WVUHS WVUHS UHC WVUH-M Univ Hltcare CCHS Curr Prior Audited Curr Mo Div Div Div Div Div PVH Total* Month* Dec-14* Last Yr* CURRENT ASSETS Cash & Short Term Investments $5,903 $51,895 $21,728 $34,727 $8,005 $415 $122,673 $128,858 $111,666 $84,944 Patient Receivables Gross 1,888 95, ,867 47,207 79,853 3, , , , ,919 Less: Reserve for Deductions/Uncollectible (817) (56,476) (116,250) (25,602) (52,242) (1,363) (252,751) (298,038) (284,682) (287,005) Other Current Receivables 3,566 5,222 34,899 11,778 2, ,511 37,438 33,819 36,614 Supplies Inventory 274 3,535 14,881 2,351 5, ,375 27,310 26,948 27,772 Trusteed Funds Current 7,648 6,195 2,155 3,119 19,116 24,385 16,872 16,848 Prepaid Expenses/Other Current Assets 472 3,336 1, , ,845 11,159 12,817 11,473 Total Current Assets 11, , ,382 73,558 52,191 4, , , , ,564 FIXED ASSETS Property, Plant, & Equipment 13, , , , ,133 17,796 1,737,351 1,722,639 1,658,154 1,597,185 Less: Accumulated Depreciation (5,383) (145,474) (385,152) (105,337) (150,966) (1,528) (793,840) (785,529) (748,512) (748,195) Net Property, Plant & Equipment 7, , ,554 95, ,167 16, , , , ,990 INVESTMENTS & OTHER NONCURRENT ASSETS Bond Funds Noncurrent 11,322 86, , , , , ,182 Board Designated Funds , ,208 39,546 34, , , , ,329 Self Insurance Fund Noncurrent 15,507 28,752 5,121 8,785 58,164 58,786 55,964 56,882 Other Assets 7,120 8,686 37,065 11,030 17,842 4,968 78,807 78,941 77,948 74,636 Total Other Noncurrent Assets 7, , ,360 55,762 94,546 4, , ,736 1,024,374 1,032,030 TOTAL ASSETS $26,466 $608,336 $1,167,295 $224,397 $301,904 $25,788 $2,324,666 $2,340,367 $2,314,277 $2,252,583 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Long Term Debt Current 356 7,796 7,671 3,017 12,953 2,878 34,673 39,299 34,669 33,908 Accounts Payable & Accrued Expense 8,230 8,359 22,460 16,730 9,562 1,364 45,088 51,080 65,476 55,616 Accrued Wages & Fringe Benefits 1,338 14,713 34,217 11,102 18, ,418 76,080 84,410 67,146 Accrued Interest Payable 815 1,127 2,540 (310) 33 4,205 12,089 4,265 5,286 Other Accrued Liabilities 3,798 7,520 31,093 8, ,006 55,338 60,266 49,428 Total Current Liabilities 13,722 39,203 96,569 41,531 40,969 5, , , , ,385 LONG-TERM DEBT - NONCURRENT Bonds Payable 214, ,115 65, , , , , ,817 Notes Payable 3,998 16,947 2,127 16,267 39,339 38,547 42,483 26,350 Total Long Term Debt 3, , ,062 67, ,739 16, , , , ,167 OTHER NONCURRENT LIABILITIES Accrued Malpractice Liability 7,514 23,702 3,727 9, ,543 43,429 43,505 47,811 Other Liabilities Noncurrent 2,517 18,460 11,488 8,363 17,646 50,570 59,344 55,173 48,133 Total Other Noncurrent Liabilities 2,517 25,974 35,190 12,090 27, , ,773 98,678 95,943 NET ASSETS 6, , , ,802 21,592 3,867 1,119,443 1,114,495 1,076,076 1,080,089 TOTAL LIABILITIES AND NET ASSETS $26,466 $608,336 $1,167,295 $224,397 $301,904 $25,788 $2,324,666 $2,340,367 $2,314,277 $2,252,583 *The Current Month, Prior Month, and Unaudited Dec 2014 totals are net of eliminating entries. Effective July 1, 2010, WVUH entered into a joint operating agreement with University Health Associates (UHA), collectively WVU Healthcare. As part of this agreement, funds are transferred between WVUH and UHA in order to achieve a common operating margin for WVU Healthcare as a whole. These financial statements include the July 2010 to December 2013 final amounts for this funds transfer. Estimates for year-to-date 2014 are included. 13

21 West Virginia United Health System Comparative Balance Sheet (Obligated Group Only) June 30, 2015 (unaudited) (in thousands) ASSETS Current Month Actual Obligated Group Totals WVUHS Univ. HC Curr Prior Audited Curr Mo UHC WVUH BMC JMC Foundation CCMC Total* Month* Dec-14* Last Yr* CURRENT ASSETS Cash & Short Term Investments $40,678 $21,728 $18,017 $14,036 $810 $6,521 $101,790 $105,820 $89,918 $67,025 Patient Receivables Gross 91, ,867 38,533 8,674 71, , , , ,137 Less: Reserve for Deductions/Uncollectible (55,322) (116,250) (21,886) (3,716) (46,019) (243,193) (288,198) (276,150) (277,119) Other Current Receivables 3,592 34,899 6,252 2, ,799 28,352 52,658 43,425 40,326 Supplies Inventory 3,535 14,881 1, ,569 26,336 26,298 25,998 26,900 Trusteed Funds Current 7,648 6,195 1, ,119 19,116 24,385 16,872 16,848 Prepaid Expenses/Other Current Assets 3,186 1, ,460 9,341 9,518 11,184 9,915 Total Current Assets 94, ,382 45,140 22, , , , , ,032 FIXED ASSETS Property, Plant, & Equipment 439, , ,144 35,550 27, ,101 1,681,418 1,666,949 1,603,249 1,536,148 Less: Accumulated Depreciation (140,571) (385,152) (70,049) (20,028) (9,014) (145,926) (770,741) (762,871) (727,935) (722,672) Net Property, Plant & Equipment 299, ,554 55,095 15,522 18, , , , , ,476 INVESTMENTS & OTHER NONCURRENT ASSETS Bond Funds Noncurrent 11,322 86, , , , , ,182 Board Designated Funds 157, ,208 14,732 10,458 14,356 34, , , , ,060 Self Insurance Fund Noncurrent 14,242 28,752 3,727 1,394 8,785 56,900 57,507 54,647 55,536 Other Assets 6,266 37,065 4,133 5,756 1,141 13,887 60,344 60,561 60,081 58,802 Total Other Noncurrent Assets 189, ,360 22,641 17,622 15,499 90, , ,640 1,000,854 1,010,581 TOTAL ASSETS $582,842 $1,167,295 $122,876 $55,293 $34,787 $292,679 $2,226,253 $2,263,132 $2,232,836 $2,171,089 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Long Term Debt Current 7,796 7,671 1, ,898 31,384 35,981 31,906 31,024 Accounts Payable & Accrued Expense 7,965 22,460 11,535 3, ,691 32,459 37,745 53,146 44,144 Accrued Wages & Fringe Benefits 13,446 34,217 8,865 2,237 16,166 74,931 70,609 78,028 62,244 Accrued Interest Payable 815 1,127 1, (310) 4,172 12,055 4,213 5,220 Other Accrued Liabilities 5,975 31,093 4,106 3, ,613 50,368 54,687 44,122 Total Current Liabilities 35,997 96,569 28,000 11, , , , , ,755 LONG-TERM DEBT - NONCURRENT Bonds Payable 214, ,115 47,339 9,698 8, , , , , ,817 Notes Payable 16,947 1, ,073 18,191 21,023 4,412 Total Long Term Debt 214, ,062 49,003 10,161 8, , , , , ,228 OTHER NONCURRENT LIABILITIES Accrued Malpractice Liability 7,514 23,702 2, ,959 44,902 42,801 42,945 47,811 Other Liabilities Noncurrent 18,460 11,488 2, ,646 42,063 50,836 46,667 39,560 Total Other Noncurrent Liabilities 25,974 35,190 4,811 1, ,605 86,965 93,637 89,612 87,371 NET ASSETS 306, ,474 41,062 32,892 25,274 15,379 1,077,275 1,093,880 1,052,267 1,053,735 TOTAL LIABILITIES AND NET ASSETS $582,842 $1,167,295 $122,876 $55,293 $34,787 $292,679 $2,226,253 $2,263,132 $2,232,836 $2,171,089 *The Current Month, Prior Month, and Unaudited Dec 2014 totals are net of eliminating entries. Effective July 1, 2010, WVUH entered into a joint operating agreement with University Health Associates (UHA), collectively WVU Healthcare. As part of this agreement, funds are transferred between WVUH and UHA in order to achieve a common operating margin for WVU Healthcare as a whole. These financial statements include the July 2010 to December 2013 final amounts for this funds transfer. Estimates for year-to-date 2014 are included. 14