HOSPITAL SERVICE DISTRICT NO. 3 OF THE PARISH OF LAFOURCHE, STATE OF LOUISIANA (D/B/ATHIBODAUX REGIONAL MEDICAL CENTER) Thibodaux, Louisiana

Transcription

1 j^(jb HOSPITAL SERVICE DISTRICT NO. 3 OF THE PARISH OF LAFOURCHE, STATE OF LOUISIANA (D/B/ATHIBODAUX REGIONAL MEDICAL CENTER) Thibdaux, Luisiana Audited Financial Statements Years Ended September 30, 2009 and 2008 Under prvisins f state law, this reprt is a public dcument. Acpy f the reprt has been submitted t the entity and ther apprpriate public fficials. The reprt is available fr public inspectin at the Batn Ruge ffice f the Legislative Auditr and, Vk/here apprpriate, at the ffice f the parish clerk f curt. Release Date

2 CONTENTS Independent Auditr's Reprt 1-2 Management's Discussin and Analysis 3-15 Financial Statements Balance Sheets 16 Statements f Revenue, Expenses and Changes in Net Assets 17 Statements f Cash Flws 18 Ntes t Financial Statements Independent Auditr's Reprt n Intemal Cntrl Over Financial Reprting and n Cmpliance and Other Matters Based n an Audit f Financial Statements Perfrmed in Accrdance With Gvernment Auditing Standards 36-37

3 ^^ H O R N E t^^ CPAS& Business Advisrs INDEPENDENT AUDITOR'S REPORT Bard f Cmmissiners Hspital Service District N. 3 f the Parish f Lafurche, State f Luisiana We have audited the accmpanying balance sheets f Hspital Service District N. 3 f the Parish f Lafurche, State f Luisiana (d^/a Thibdaux Reginal Medical Center) (the "HspitaV') as f September 30, 2009 and 2008, and the related statements f revenue, expenses and changes in net assets and cash flws fr the years then ended. These fmancial statements are the respnsibility f the Hspital's management. Our respnsibility is t express an pinin n these fmancial statements based n ur audits. We cnducted ur audits in accrdance with auditing standards generally accepted in the United States f America and the standards applicable t fmancial audits cntained in Gvernment Auditing Standards, issued by the Cmptrller General f the United States. Thse standards requite that we plan and perfrm the audit t btain reasnable assurance abut whether the fmancial statements are tree f material misstatement. An audit includes examining, n a test basis, evidence supprting the amunts and disclsures in the fmancial statements. An audit als includes assessing the accunting principles used and significant estimates made by management, as well as evaluating the verall financial statement presentatin. We believe that ur audits prvide a reasnable basis fr ur pinin. In ur pinin, the financial statements referred t abve present fairly, in all material respects, the financial psitin f the Hspital as f September 30, 2009 and 2008, and the results f its peratins and its cash flws fr the years then ended in cnfrmity with accunting principles generally accepted in the United States f America. In accrdance with Gvernment Auditing Standards, we have als issued ur reprt dated February 19, 2010, n ur cnsideratin f the Hspital's intemal cntrl ver financial reprting and ur tests f its cmpliance with certain prvisins f laws, regulatins, cntracts and grant agreements and ther matters. The purpse f that reprt is t describe the scpe f ur testing f intemal cntrl ver financial reprting and cmpliance and the results f that testing, and nt t prvide an pinin n the intemal cntrl ver fmancial reprting r n cmpliance. That reprt is an integral part f an audit perfrmed in accrdance with Gvernment Auditing Standards and shuld be cnsidered in assessing the results f ur audits.

4 The management's discussin and analysis n pages 3 thrugh 15 is nt a required part f the basic financial statements but is supplementary infrmatin required by accunting principles generally accepted in the United States f America. We have applied certain limited prcedures, which cnsisted principally f inquiries f management regarding the methds f measurement and presentatin f the required supplementary infrmatin. Hwever, we did nt audit the infrmatin and express n pinin n it. Ridgeland, Mississippi Febmary 19,2010

5 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 This sectin f the Hspital Service District N. 3 f the Parish f Lafurche, State f Luisiana (d/b/a Thibdaux Reginal Medical Center (the "Hspital"), annual fmancial reprt prvides imprtant backgrund infrmatin and management's analysis f the Hspital's financial perfrmance during the fiscal years ended September 30, 2009 and Please read this sectin in cnjunctin with the basic financial statements in this reprt. REQUIRED FINANCIAL STATEMENTS The basic fmancial statements cntained in this reprt are presented using Gvernmental Accunting Standards Bard ("GASB") accunting principles. These fmancial statements ffer shrt-term and lng-term fmancial infrmatin abut the Hspital's activities. The balance sheets include all f the Hspital's assets and liabilities and prvide infrmatin abut the nature and amunts f investments in resurces (assets) and the bligatins t Hspital creditrs (liabilities). They als prvide the basis fr cmputing rate f retum, evaluating the capital stmcture f the Hspital, and assessing the liquidity and financial flexibility f the Hspital. All f the current year's revenues and expenses are accunted fr in the statement f revenues, expenses, and changes in net assets. This statement measures changes in the Hspital's peratins ver the past year and can be used t determine whether the Hspital has been able t recver all f its csts thrugh its net patient service revenue and ther revenue surces. The final required financial statement is the statement f cash flws. The primary purpse f this statement is t prvide infrmatin abut the Hspital's cash frm perating, investing, and financing activities and t prvide answers t such questins as where did cash cme frm, what was cash used fr, and what was the change in the cash balance during the reprting perid. FINANCIAL ANALYSIS OF THE HOSPITAL The balance sheets and the statements f revenues, expenses, and changes in net assets reprt infrmatin abut the Hspital's activities. Increases r decreases in the Hspital's net assets are ne indicatr f whether its fmancial health is imprving r deterirating. Hwever, ther nnfmancial factrs such as changes in the healthcare industry, changes in Medicare and Medicaid regulatins, and changes in managed care cntracting shuld als be cnsidered FINANCIAL HIGHLIGHTS The fllwing summarizes the Hspital's fmancial highlights fr the year ended September 30, 2009.

6 p/b/a THIBODAUX REGIONAL MEDICAL CENTER) MANAGEMENT S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 The Flspital generated 33,697,000 in cash frm peratins during the year ended September 30, Investments in prperty and equipment ttaled 20,999,000 fr the 2009 fiscal year. The Hspital reprted an increase in net patient services revenue f 16,330,000 in This was a 16 percent increase cmpared t The Hspital's perating margin was 16.5 percent in 2009 versus 7.5 percent in The increase was primarily driven by an increase in bth inpatient admissins and utpatient visits as well as a charge increase that went int effect in Nvember Balance Sheets The Hspital's cndensed balance sheets are presented belw: TABLE 1 September 30, (In Thusands) Dllar Change Percent Change Ttal current assets Prperty, plant, and equipment, net Investments Other 33, ,823 90,666 1,230 25, ,509 84,569 1,001 7,303 11,314 6, % 10.33% 7.21% 22.88% Ttal assets 246, ,060 %_ 24, % Ttal current liabilities Net assets 12, ,552 9, ,583 2,974 21, % 10.38% Ttal liabilities and net assets 246, ,060 24,943 n.28% As shwn in Table 1 abve, ttal assets increased by 24,943,000 r percent, t 246,003,000 at September 30, 2009, up fi-m 221,060,000 at September 30, 2008.

7 MANAGEMENTS DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Current Assets An increase in current assets resulted primarily frm an increase in cash and a decrease in accunts receivable. Management invests excess cash in investments. At September 30, 2009, current assets cntinued t exceed current liabilities. The current rati remained cnstant at 2.7 fr September 30, These calculatins exclude cnsideratin f the investments designated by the Bard f Cmmissiners fr plant and equipment additins and replacements. Including these liquid investments in the calculatins wuld yield substantially higher ratis. Capital Assets Table 2 presents the cmpnents f the Hspital's capital assets at September 30, 2009 and Land and land imprvements Building, fixed equipment, and equipment TABLE 2 Subttal Less accumulated depreciatin and amrtizatin Cnstmctin in prgress Net capital assets September 30, (In Thusands) 12, , ,190 (78,412) 15, ,823 7, , ,014 (69,033) 8, ,509 During fiscal year 2009, the Hspital invested 20,999,000 in a brad range f capital assets. Net capital assets have increased as the Hspital has enhanced existing facilities and equipment, and the Hspital is in the prcess f building a new emergency department and fd services/cafeteria area. In Table 3, the Hspital's fiscal year 2010 capital budget prjects spending up t 12,200,000. These prjects are expected t be financed frm peratins. Mre infrmatin abut the Hspital's capital assets is presented in the ntes t the basic fmancial statements. Equipment purchases Cnstmctin / renvatin Ttal TABLE 3 5,800,000 6,400,000 12,200,000

8 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Net Assets Table 4 presents the cmpnents f the Hspital's net assets at September 30, 2009 and 2008: TABLE 4 September (In Thusands) Invested in capital assets, net f related debt 120, ,509 Unrestricted 112, , , ,583 During 2009, ttal net assets increased 21,969,000, r percent, as a result f revenue exceeding expenses. The Hspital purchased 20,999,000 f capital assets during 2009, which increased the reprted amunt f net assets invested in capital assets. This increase was ffset by depreciatin expense f 9,676,000. Statements f Revenue and Expenses A summary f the Hspital's revenues and expenses fr fiscal years 2009 and 2008 is presented belw: TABLE 5 Years Ended September 30, Dllar Percent Change Change (In Thusands) Revenue Net patient service revenue 117, ,463 16, % Other revenue 2,196 2,199 (3}_ (0.09%) Ttal perating revenue 119, ,662 16, %

9 p/b/a THIBODAUX REGIONAL MEDICAL CENTER) MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 TABLE 5 (cntinued) Years Ended September 30, (In' Thusands) Dllar Change Percent Change Expenses Salaries and wages and emplyee benefits and payrll taxes Other perating expenses Depreciatin 47,130 43,391 9,676 43,125 42,915 9,812 4, (136) 9.29% 1.11% (1.39%) Ttal perating expenses 100,197 95,852 4, % Incme frm peratins Nnperating incme 19,792 2,178 7,810 3,468 11,982 (1,290) % (37.20%) Revenue in excess f Expenses 21,970 11,278 10, % Net Patient Service Revenue During fiscal year 2009, the Hspital derived 98.2 percent f its ttal perating revenue fi'm net patient service revenue. Ttal net patient service revenue increased 16,330,000 r percent, in Overall activity at the Hspital, as measured by inpatient acute discharges, increased by 8.2 percent t 7,929 discharges in 2009 fi-m 7,330 discharges in Acute patient days increased 2.6 percent ver prir year, fi-m 30,691 in 2008 t 31,477 in The average length f stay fr acute patients, (excluding newbms), decreased t 4.0 days in 2009 frm 4.2 days in The Hspital experienced an increase in net revenue due t increases in bth inpatient admissins and utpatient visits. Table 6 presents the relative percentages f grss charges billed fr patient services by payr fr fiscal years 2009 and 2008: TABLE 6 Years Ended September 30, Medicare (includes Medicare Replacement) Managed care Medicaid Self-pay 49% % % 00%

10 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Table 7 presents the cmpnents f net patient service revenue fr fiscal years 2009 and 2008: Grss patient service charges Cntractual and ther allwances Medicare Managed care Medicaid Other Ttal cntractual allwances Prvisin fr bad debts Net patient service revenue TABLE 7 Years Ended September 30, (In Thusands) 380, ,417 70,689 33,747 7, , ,804 10, , ,341 92,733 46,004 22,882 4, , ,902 9, ,463 Change Dllar Percent 102,756 47,684 24,685 10,865 2,620 85,854 16, , % 51.42% 53.66% 47.48% 54.36% 51.58% 15.24% 6.06% 16.09% Grss patient service charges increased 102,756,000 r percent frm prir year primarily due t increases in inpatient admissins, utpatient visits and a charge increase that went int effect in Nvember, Net patient service revenue, befre prvisin fr bad debts, increased 16,902,000, r percent. Ttal cntractual allwances as a percentage f grss patient service charges were 66.4 percent fr 2009 and 60 percent in the prir year. Excluded fi'm grss patient service charges are amunts frgne fr patient services falling under the Hspital's charity care plicy. These amunts are based n established rates fr the services prvided. Grss charges f 2,363,000 were frgne during the current fiscal year cmpared t 1,366,000 in the prir fiscal year. The prvisin fr bad debts increased t 10,011,000 frm the prir year amunt f 9,439,000. This 572,000 r 6.06 percent increase is driven primarily by effects f the current ecnmic cnditins.

11 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Operating Expenses Emplyee related expenses increased 4,005,000, r 9.29 percent, t 47,130,000 in the current fiscal year fi-m 43,125,000 in the prir fiscal year. The increase is mainly due t market driven wage increases that were effective January 2009 and an increase in emplyees. As a percentage f ttal revenue, these expenses were apprximately 39 percent fr 2009 and 42 percent fr Other perating expenses increased 476,000, r 1.11 percent, fi'm the prir year. As a percentage f ttal revenue, these expenses were apprximately 36 percent fr 2009 and 41 percent fr Nnperating Incme Nnperating incme is cmprised primarily f investment incme and prfit fi-m the jint venture. Investment incme cnsists f interest earnings n fiinds designated by the Bard f Cmmissiners. Other gains/lsses that are nt directly related t the prvisin f healthcare services are als classified as nnperating incme. Nnperating incme decreased fi:m the prir year primarily due t the lwer interest rates in FINANCIAL HIGHLIGHTS The fllwing summarizes the Hspital's financial highlights fr the year ended September 30, The Hspital generated 15,785,000 in cash fi"m peratins during the year ended September 30, Investments in prperty and equipment ttaled 17,318,000 fr the 2008 fiscal year. The Hspital reprted an increase in net patient services revenue f 1,045,000 in This was a 1 percent increase cmpared t The Hspital's perating margin was 7.5 percent in 2008 versus 11.5 percent in The decrease was primarily driven by a decrease in patient revenue due t apprximately 1,900 utpatient surgery cases migrating t the jint venture ambulatry surgery center, market driven increases in salaries and additinal depreciatin expense due t hspital expansin.

12 p/b/a THIBODAUX REGIONAL MEDICAL CENTER) MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Balance Sheets The Hspital's cndensed balance sheets are presented belw: TABLE 8 September 30, (In Thusands) Dllar Change Percent Change Ttal current assets Prperty, plant and equipment, net Investments Other 25, ,509 84,569 1,001 30, ,344 76,545 1,090 (4,750) 6,165 8,024 (89) 15.46% 5.97% 10.48% (8.17%) Ttal assets 221, ,710 9, % Ttal current liabilities Net assets Ttal liabilities and net assets s L. 9, , ,060 11, , ,710 (1,928) 11,278 9,350 (16.90%) 5.63% 4.42% As shwn in Table 8 abve, ttal assets increased by 9,350,000 r 4.42 percent, t 221,060,000 at September 30, 2008, up fi-m 211,710,000 at September 30, Current Assets A decrease in current assets resulted primarily frm a decrease in cash and accunts receivable. Management invests excess cash in investments. At September 30, 2008, current assets cntinued t exceed current liabilities. The current rati remained cnstant at 2.7 at September 30, 2008, when cmpared t September 30, These calculatins exclude cnsideratin f the investments designated by the Bard f Cmmissiners fr plant and equipment additins and replacements. Including these liquid investments in the calculatins wuld yield substantially higher ratis. Capital Assets Table 9 presents the cmpnents f the Hspital's capital assets at September 30, 2008 and 2007.

13 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Land and land imprvements Building, fixed equipment and equipment TABLE 9 Subttal Less accumulated depreciatin and amrtizatin Cnstructin in prgress Net capital assets September 30, (In Thusands) 7,375 7, , , ,014 (69,033) 8, , ,181 (68,201) 3, ,344 During fiscal year 2008, the Hspital invested 17,318,000 in a brad range f capital assets. Net capital assets have increased as the Hspital has enhanced existing facilities and equipment, and the Hspital is in the prcess f building a new emergency department and fd services / cafeteria area. In Table 10, the Hspital's fiscal year 2009 capital budget prjected spending up t 28,100,000. These prjects are expected t be financed fi'm peratins. Mre infrmatin abut the Hspital's capital assets is presented in the ntes t the basic financial statements. Equipment purchases Cnstructin / renvatin Land purchase Ttal Net Assets TABLE 10 2,900,000 19,900,000 5,300,000 28,100,000 Table 11 presents the cmpnents f the Hspital's net assets at September 30, 2008 and 2007: Invested in capital assets, net f related debt Unrestricted TABLE 11 September 30, (In Thusands) 109, , ,344 96, , ,305

14 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 During 2008, ttal net assets increased 11,278,000, r 6 percent, as a result f revenue exceeding expenses. The Hspital purchased 17,318,000 f capital assets during 2008, which increased the reprted amunt f net assets invested in capital assets. This increase was ffset by depreciatin expense f 9,812,000. Statements f Revenue and Expenses A summary f the Hspital's revenues and expenses fr fiscal years 2008 and 2007 is presented belw: TABLE 12 Years Ended September 30, (In Thusands) Dllar Change Percent Change Revenue Net patient service revenue Other revenue 01,463 2, ,417 1,616 1, % 3.61% Ttal perating revenue 103, ,033 1, % Expenses Salaries and wages and emplyee benefits and payrll taxes Other perating expenses Depreciatin and amrtizatin 43,125 42,915 9,812 39,875 41,448 8,949 3,250 1, % 3.54% 9.64% Ttal perating expenses 95,852 90,272 5, % Incme fi'm peratins Nnperating incme 7,810 3,468 11,761 4,301 (3,951) (833) (33.59%) (19.37%) Revenue in excess f expenses 11,278 16,062 (4,784) (29.78%) 12

15 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Net Patient Service Revenue During fiscal year 2008, the Hspital derived 98 percent f its ttal perating revenue frm net patient service revenue. Ttal net patient service revenue increased 1,046,000, r 1 percent, in Overall activity at the Hspital, as measured by inpatient acute discharges, increased by less than 1 percent t 7,330 discharges in 2008 frm 7,290 discharges in Acute patient days decreased 3 percent ver prir year, frm 31,631 in 2007 t 30,691 in The average length f stay fr acute patients, (excluding newbms), decreased t 4.2 days in 2008 fi"m 4.3 days in The Hspital als had a decrease in net revenue due t the migratin f apprximately 3,400 utpatient surgical cases due t the ambulatry surgery center. Table 13 presents the relative percentages f grss charges billed fr patient services by payr fr fiscal years 2008 and 2007: TABLE 13 Years Ended September 30, Medicare (includes Medicare Replacement) Managed care Medicaid Self-pay 49% % % 00% Table 14 presents the cmpnents f net patient service revenue fr fiscal years 2008 and 2007: Grss patient service charges Cntractual and ther allwances Medicare Managed care Medicaid Other Ttal cntractual allwances TABLE 14 Years Ended September 30, (In Thusands) 277,341 92,733 46,004 22,882 4, , , ,799 92,224 44,194 23,450 2, , ,585 Change Dllar Percent 5, ,810 (568) 2,474 4,225 1, % 0.05% 4.10% 2.42% % 2.60% 1.20% Prvisin fr bad debts 9,439 9, % Net patient service revenue 101, ,417 1, % 13

16 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Grss patient service charges increased 5,542,000 r 2 percent fi'm prir year primarily due t the additin f anesthesia prfessinal fee revenue. Net patient service revenue, befre prvisin fr bad debts, increased 1,317,000, r 1 percent. Ttal cntractual allwances as a percentage f grss patient service charges were 60 percent fr bth the current and prir year. Excluded fi'm grss patient service charges are amunts frgne fr patient services falling under the Hspital's charity care plicy. These amunts are based n established rates fr the services prvided. Grss charges f 1,366,000 were frgne during the current fiscal year cmpared t 1,763,000 in the prir fiscal year. The prvisin fr bad debts increased t 9,439,000 firm the prir year amunt f 9,168,000. This 271,000 r 3 percent increase is driven primarily by an ffsetting decrease in charity care write-ffs. Operating Expenses Emplyee related expenses increased 3,250,000, r 8 percent, t 43,125,000 in the current fiscal year fi'm 39,875,000 in the prir fiscal year. The increase is mainly due t market driven wage increases that were effective January 2008 and an increase in emplyees. As a percentage f ttal revenue, these expenses were apprximately 42 percent fr 2008 and 39 percent fr Other perating expenses increased 1,467,000, r 4 percent, frm the prir year. The increase is primarily due t an increase in physician recruiting expenses and additinal prfessinal liability csts. As a percentage f ttal revenue, these expenses were apprximately 41 percent fr bth 2008 and Nnperating Incme Nnperating incme is cmprised primarily f investment incme and prfit fi-m the jint venture. Investment incme cnsists f interest earnings n fiinds designated by the Bard f Cmmissiners. Other gains/lsses that are nt directly related t the prvisin f healthcare services are als classified as nnperating incme. Nnperating incme decreased fi'm the prir year primarily due t the lwer interest rates in ECONOMIC FACTORS AND NEXT YEAR'S BUDGET While the annual budget f the Hspital is nt presented within these financial statements, the Hspital's Bard and management cnsidered many factrs when setting the fiscal year 2009 budget. Althugh the financial utik fr the Hspital is excellent, f primary imprtance in setting the 2010 budget is the status f the ecnmy and the healthcare envirnment, which takes int accunt market frces and envirnmental factrs such as: 14

17 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiscal Years Ended September 30, 2009 and 2008 Medicare reimbursement changes Medicaid reimbursement changes, as well as the cntinuatin at the current r increased level f the Disprprtinate Share and Upper Payment Limit prgrams Increased number f uninsured and wrking pr Onging cmpetitin fr services Wrkfrce shrtages primarily in nursing and ther clinically skilled psitins Cst f supplies Cst f pharmaceuticals Ability t cntinue recruiting medical staff physicians t maintain the high level f services ffered t ur service area Cntinued grwth f service levels in the ancillary departments CONTACTING THE HOSPITAL'S FINANCIAL MANAGER This financial reprt is designated t prvide ur citizens, custmers, and creditrs with a general verview f the Hspital's finances and t demnstrate the Hspital's accuntability fr the mney it receives. If yu have questins abut this reprt r need additinal fmancial infrmatin, cntact Hspital administratin.

18 Balance Sheets September 30, 2009 and ASSETS Current assets Cash and cash equivalents Investments Patient accunts receivable, net f allwance fr dubtful accunts f 7,431,027 and 6,468,760, respectively Interest and ther receivables Inventries Prepaid expenses Ttal current assets 14,804, ,388 15,063,918 54,280 1,842, ,578 33,284,243 6,019, ,183 16,309, ,191 1,917, ,196 25,981,141 Cash and investments designated by Bard fr plant and equipment additins and replacements Other assets Capital assets, net Ttal assets 90,665,504 84,568,452 1,230,583 1,001, ,822, ,508, ,003, ,059,506 LIABILITIES AND NET ASSETS Current liabilities Accunts payable and accrued expenses Accrued emplyee cmpensatin Amunts due t cntractual third-party settlements Ttal current liabilities Net assets Invested in capita! assets, net f related debt Unrestricted Ttal net assets Ttal liabilities and net assets 5,677,866 4,421,590 2,351,377 12,450, ,822, ,729, ,552, ,003,010 4,561,895 3,805,094 1,109,849 9,476, ,508, ,074, ,582, ,059,506 See accmpanying ntes.

19 PARISH OF LAFOURCHE, STATE OF LOUISLAJVA p/b/a THIBODAUX REGIONAL MEDICAL CENTER) Statements f Revenue, Expenses and Changes in Net Assets Years Ended September 30, 2009 and Net patient service revenue, net f prvisin fr bad debts f 10,011,225 and 9,438,844, respectively Other perating revenue Ttal perating revenue Operating expenses Salaries and wages Emplyee benefits Prfessinal fees and services Supplies and ther Purchased services Other Depreciatin Ttal perating expenses Incme fi-m peratins 117,792,577 2,196, ,989,357 39,712,332 7,417,860 6,759,646 21,013,446 8,892,056 6,725,176 9,676, ,196,939 19,792, ,462,517 2,199,076 03,661,593 37,230,496 5,894,265 8,162,116 18,799,852 9,442,041 6,510,988 9,812,087 95,851,845 7,809,748 Nnperating revenues and (expenses) Investment incme Nncapital grants and cntributins Lss fi'm dispsal f capital assets Incmefi-m jint venture Ttal nnperating incme 1,416,115 3,279,749 8,593 6,072 (8,506) (456,912) 760, ,997 2,177,09: 3,467,906 Increase in net assets Net assets, beginning f year 21,969, ,582,668 11,277, ,305,014 Net assets, end f year 233,552, ,582,668 See accmpanying ntes. 17

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21 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 1. Organizatin and Significant Accunting Plicies Organizatin The accmpanying fmancial statements include the accunts and transactins f Hspital Service District N. 3 f the Parish f Lafurche, State f Luisiana (d/b/a Thibdaux Reginal Medical Center) (the "Hspital"). The Hspital is a nnprfit crpratin rganized by Lafurche Parish. The Lafurche Parish Cuncil, which is the gveming authrity f Lafurche Parish, Luisiana, appints members t the Hspital's Bard f Cmmissiners. As a plitical subdivisin, the Hspital is exempt frm federal incme taxes under Sectin 115 f the Intemal Revenue Cde. This exemptin als extends t state incme taxes. Basis f Accunting The Hspital uses enterprise fund accunting whereby its financial statements are prepared using the accrual basis f accunting. Under the accrual basis f accunting, which is in accrdance with accunting principles generally accepted in the United States f America fr prprietary fund types, substantially all revenues and expenses are subject t accrual. Pursuant t Gvernment Accunting Standards Bard ("GASB") Statement N. 20, "Accunting and Financial Reprting fr Prprietary Funds and Other Gvernmental Entities That Use Prprietary Fund Accunting", as amended, the Hspital applies the prvisins f all relevant prnuncements f the Financial Accunting Standards Bard ("FASB") issued n r befre Nvember 30, 1989, unless thse prnuncements cnflict with GASB prnuncements. FASB Statements issued subsequent t Nvember 30, 1989, are nt applicable. Budgetary Infrmatin Budgets are prepared n a basis cnsistent with accunting principles generally accepted in the United States f America, with cncurrence by the wners n an annual basis. The Hspital is als required by the statute f the State f Luisiana t prepare a nn-apprpriated annual budget. The budget is nt subject t apprpriatin and is, therefre, nt required t be presented as supplementary infrmatin. Blended Cmpnent Unit The fmancial statements include the accunts f the Hspital and its blended cmpnent unit, Thibdaux Reginal Surgical Services, Inc., as defined by GASB Statement N. 14, ""Hie Financial Reprting Entity". Thibdaux Reginal Surgical Services, Inc., is a hlding cmpany that wns a 50 percent investment in Thibdaux Surgery Center, LLC, an ambulatry surgery center. All intercmpany accunts and transactins have been eliminated. 19

22 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 1. Cntinued Use f Estimates The preparatin f financial statements in cnfrmity with accunting principles generally accepted in the United States f America requires management t make estimates and assumptins that affect amunts reprted in the financial statements and accmpanying ntes. Such estimates and assumptins culd change in the future as mre infrmatin becmes knwn, which culd impact the amunts reprted and disclsed herein. In the healthcare envirmnent, it is reasnably pssible that estimates regarding third-party payments culd change in the near term as a result f ne r mre future cnfirming events (fr example, regulatry actins reflecting lcal r natinal audit r enfrcement initiatives). Fr mst entities with significant third-party payrs revenues, the effect f the change culd be material t the financial statements. Where material expsure exists, the uncertainty regarding revenue realizatin is disclsed in the ntes t the financial statements. Allwances fr dubtful accunts are estimated based n histrical write-ff and cllectin percentages, and cntractual allwances are estimated based n the terms f third-party cntracts. Dubtful accunts are written ff against the allwance after adequate cllectin effrt is exhausted and recrded as recveries f bad debts if subsequently cllected. Laws and regulatins gveming the Medicare and Medicaid prgrams are cmplex and subject t interpretatin. The Hspital believes it is in cmpliance with all applicable laws and regulatins and is nt aware f any pending r threatened investigatins invlving allegatins f ptential wrngding. While n such regulatry inquiries havebeen made, cmpliance with such laws and regulatins can be subject t future gvernment review and interpretatin as well as significant regulatry actin, including fines, penalties and exclusin frm the Medicare and Medicaid prgrams. Cash Equivalents Cash and cash equivalents include depsits that can be redeemed n demand and highly liquid debt investments with an riginal maturity f three mnths r less, excluding amunts restricted as t use by Bard designatin. Patient Accunts Receivable Patient accunts receivable is reprted fr services rendered at estimated net realizable amunts cllectible frm federal and state agencies (under the Medicare and Medicaid prgrams), managed health plans, cmmercial insurance cmpanies, wrkers' cmpensatin, emplyers and patients, after deductin f allwances fr estimated uncllectible amunts. 20

23 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 1. Cntinued The allwance fr dubtful accunts is based n histrical lsses and an analysis f currently utstanding amunts. This amunt is generally increased by charges t a prvisin fr bad debts, and decreased by write-ffs f accunts determined by management t be uncllectible. Investments All investments are stated at fair value based n quted market price. Changes in the fair value f investments are included in investment incme. Inventries Inventries, cnsisting primarily f pharmaceuticals and medical supplies, are stated at cst based n the first-in, first-ut methd r at market, whichever is lwer. Prepaid Expenses Prepaid expenses are amrtized ver the estimated perid f future benefit, generally n a straightline basis. Investment in Jint Venture The Hspital is accunting fr its investment in a 50 percent wned jint venture that prvides surgical and endscpy services under the equity methd f accunting. Using this methd f accunting, the Hspital's share f net incme (lss) is recgnized as investment incme (lss) in the Hspital's statements f revenue and expenses and added t (deducted frm) the investment accunt. The investment in jint venture is included in ther assets n the balance sheet. Capital Assets, Net The Hspital recrds all capital assets acquisitins at cst, except fr assets dnated t the Hspital, Dnated assets are recrded at fair value at the date f dnatin. The Hspital prvides fr depreciatin using the straight-line methd ver the estimated useful lives f the assets. In accrdance with GASB Statement N. 42, Accunting and Financial Reprting fr Impairment f Capital Assets and fr Insurance Reserves ("GASB 42"), management evaluates assets fr ptential impairment when a significant, unexpected decline in the service utility f a capital asset ccurs. 21

24 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 1. Cntinued Cmpensated Absences Hspital emplyees are granted bth vacatin and sick leave. Accumulated vacatin pay is accrued at the balance sheet date because it is payable upn terminatin f emplyment. Sick pay accrues, but is nt reflected as a hability, because it is nt payable upn terminatin f emplyment. Net Assets The Hspital's net assets are classified int three cmpnents and are defined as fllws: Invested in capital assets, net f related debt - this cmpnent reprts capital assets, including restricted capital assets, net f accumulated depreciatin, as reduced by the utstanding balances f any bnds, mrtgages, ntes r ther brrwings that are attributable t the acquisitin, cnstructin r imprvement f thse assets. As f September 30, 2009 and 2008, the Hspital had n utstanding debt. Restricted - this cmpnent reprts thse net assets with externally impsed cnstraints placed n their use by creditrs (such as thrugh debt cvenants), grantrs, cntributrs r laws r regulatins f ther gvemments r cnstraints impsed by law thrugh cnstitutinal prvisins r enabling legislatin. There were n restricted net assets at September 30, 2009 and Unrestricted - this cmpnent reprts net assets that d nt meet the definitin f either f the ther tw cmpnents. Operating Revenue and Nnperating Incme The Hspital's primary purpse is t prvide diversified healthcare services t individuals, physicians and businesses in Lafurche Parish and the surrunding cmmunities. As such, activities related t the nging peratins f the Hspital are classified as perating revenue. Operating revenue includes revenue that is generated fi'm direct patient care, related supprt services, gains r lsses frm dispsitin f perating prperties, rental incme and sundry revenues related t the peratin f the Hspital. Incme, gains and lsses frm investments nt generated frm perating funds and thse nt directly related t the nging peratins f the Hspital r that ccur infi*equently, and gifts, grants and bequests nt restricted by dnrs fr specific purpses, are reprted as nnperating incme. Net Patient Service Revenue The Hspital prvides medical services t gvernment prgram beneficiaries and has agreements with ther third-party payrs that prvide fr payments at amunts different fi-m established rates. Payment arrangements include prspecfively determined rates per discharge, reimbursed csts, discunted charges and per diem payments. Net patient service revenue is reprted at the estimated 22

25 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 1. Cntinued net realizable amunts frm patients, third-party payrs and thers fr services rendered. The percentage f ttal net patient service revenue derived firm services furnished t Medicare and Medicaid prgram beneficiaries was apprximately 49 percent in bth 2009 and Retractive settlements are prvided fr in sme f the gvernmental payment prgrams utlined abve, based n annual cst reprts. Such settlements are estimated and recrded as amunts due t r frm third-party payrs in the financial statements. The differences between these estimates and final determinatin f amunts t be received r paid are based n audits by fiscal intermediaries and are reprted as adjustments t net patient service revenue when such determinatins are made. As a result, there is at least a reasnable pssibility that recrded estimates will change by a material amunt in the near term. These adjustments resulted in increases t net patient service revenue f 487,300 in 2009 and 507,400 in Estimated settlements fr the Medicare and Medicaid prgrams thrugh September 30, 2006, have been reviewed by prgram representatives and adjustments have been recrded t reflect any revisins t the recrded estimates required. The effect f any adjustments that may be made t cst reprts still subject t review at September 30, 2009, will be reprted in the Hspital's results f peratins as such determinatins are made. Charitv Care The Hspital prvides care t patients wh meet certain criteria under its charity care plicy withut charge r at amunts less than its established fates. Because the Hspital des nt pursue cllectin f amunts determined t qualify as charity care, they are nt reprted as revenue. Charges frgne, based n established rates, ttaled apprximately 2,363,000 in 2009 and 1,366,000 in Risk Management The Hspital is expsed t varius risks f lss frm trts; theft f, damage t and destmctin f assets; business intermptin; errrs and missins; emplyee injuries and illnesses; natural disasters; medical malpractice; and emplyee health, dental and accident benefits. Cmmercial insurance cverage is purchased fr claims arising frm such matters. Settled claims have nt exceeded this cmmercial cverage in any f the three preceding years. Reclassificatins Certain reclassificatins have been made t the 2008 financial statements t cnfrm t the current year presentatin. These reclassificatins had n impact n net assets r increase in net assets, as previusly reprted. 23

26 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 2. Cash, Cash Equivalents and Investments The Hspital reprts cash, cash equivalents and investments utilizing GASB Statement N. 40 ("GASB 40"), Depsit and Investment Risk Disclsures, which requires certain disclsures f investment risks related t credit risk, cncentratin f credit risk and interest rate risk assciated with interest-bearing investments. Such disclsures required by GASB 40 and applicable t the Hspital are reflected belw. Credit Risk Credit risk is the risk that an issuer f an investment will nt fulfill its bligatin t the hlder f the investment. This is measured by the assignment f a rating by a natinally recgnized statistical rating rganizatin ("NRSRO"). The Hspital's investment plicy, which cnfrms t Luisiana state law, des nt specifically limit investment in securities based n an NRSRO credit rating, but the plicy des designate authrized investments by type. Authrized investments, within established guidelines, are limited t securities f the U.S. gvernment r its agencies, U.S. gvernment bligatins, U.S. and Luisiana municipal bnds, interest-bearing accunts and certificates f depsits f financial institutins, pen-end r clsedend management type investment cmpanies r investment tmsts and investment trusts cnsisting f pled r cmmingled funds f ther hspitals. Under GASB 40, unless there is infrmatin t the cntrary, bligatins f the U.S. Gvernment are nt cnsidered t have credit risk and d nt require disclsure f credit quality. The fllwing table presents each applicable rating gruped by investment type at fair value as f September 30, 2009 and The fllwing investments are exempt frm rating disclsure. Cash depsits, perating funds Certificates f depsit Mney market depsits Ttal cash and investments By Investment Type ,316,890 80,375,000 12,469,527 4,570,491 72,375,000 14,332, ,161,417 91,278,12 By Balance Sheet Categry Cash and cash equivalents Shrt-term investments Designated assets by Bard fr plant equipment additins and replacements Ttal cash and investments 14,804, ,388 90,665,504 6,019, ,183 84,568, ,161,417 91,278,121 24

27 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 2. Cntinued Cncentratin f Credit Risk The Hspital's investment plicy, in accrdance with state statute, restricts investments in U.S. agencies t 50 percent f ttal investments. Investments in pen-end and clsed-end management type investment cmpanies and investment tmsts are limited t 20 percent f ttal investments. At September 30, 2009 and 2008, management believes the Hspital cmplies with this plicy. GASB 40 indicates that cncentratin f credit risk is defined as the risk f lss attributed t the magnitude f a gvernment's investment in a single issuer. GASB 40 further defines an at-risk investment t be ne that represents mre than 5 percent f the market value f the ttal investment prtfli and requires disclsure f such at-risk investments. GASB 40 specifically excludes investments issued r explicitly guaranteed by the U.S. gvernment and investments in mutual funds, external investment pls and ther pled investments frm the disclsure requirement. At September 30, 2009, the Hspital had n investments requiring cncentratin-f-credit-risk disclsure. Custdial Credit Risk Custdial credit risk fr depsits is the risk that, in the event f the failure f a depsitry fmancial institutin, the Hspital will nt be able t recver its depsits r will nt be able t recver cllateral securities that are in the pssessin f an utside party. The custdial credit risk fr investments is the risk that, in the event f the failure f the cunterparty t a transactin, the Hspital will nt be able t recver the value f its investment r cllateral securities that are in the pssessin f anther party. The Hspital's frmal investment plicy is gverned by and in cnfrmity with Sectin 39:2955 f the Luisiana Revised Statutes, which establishes guidelines fr depsitry and investment activity as fllws: In accrdance with statutes f the State f Luisiana, the Hspital maintains its depsits at financial institutins authrized by the Bard f Cmmissiners. The cllateral fr public entity depsits in financial institutins is held in the name f the State Treasurer f Luisiana under a prgram established by the Luisiana State Legislature and is gvemed by Sectin 33:2955 f the Luisiana Revised Statutes. Under this prgram, the Hspital's funds are prtected thrugh a cllateral pl administered by the State Treasurer. Financial institutins hlding depsits f public funds must pledge securities as cllateral against these depsits. In the event f a financial institutin's failure, securities pledged by that institutin wuld be liquidated by the State Treasurer t replace the public depsits nt cvered by the Federal Depsit Insurance Crpratin. 25

28 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 2. Cntinued In accrdance with GASB 40, investments in external investment pls and in pen-end mutual funds is nt expsed t custdial credit risk because their existence is nt evidenced by securities that exist in physical r bk entry frm. At September 30, 2009, depsits and investments requiring custdial credit risk disclsure ttaled 106,161,417, all f which were insured r cllateralized in accrdance with state statute. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value f an investment. Generally, the lnger the maturity f an investment, the greater the sensitivity f its fair value t changes in market interest rates. Interest rate risk inherent in the prtfli is measured by mnitring the segmented dme distributin f the investments in the prtfli. The table belw summarizes the Hspital's segmented time distributin investment maturities in years by investment type as f September 30, 2009 and By Investment Type Cash depsits, perating funds Certificates f depsit Mney market depsits 2008 Ttal cash and investments By Investment Type Cash depsits, perating funds Certificates f depsit Mney market depsits Ttal cash and investments Fair Value 13,316,890 80,375,000 12,469, ,161,417 Fair Value 4,570,491 72,375,000 14,332,630 91,278,121 Years <1 13,316,890 80,375,000 12,469, ,161,417 Years <1 4,570,491 72,375,000 14,332,630 91,278,121 Nte 3. Accunts Receivable and Other Assets The Hspital prvides services primarily t the residents f Lafurche Parish, Luisiana and surrunding cmmunities withut cllateral. An allwance fr dubtful accunts is prvided in an amunt equal t the estimated lsses t be incurred in cllectin f the receivables. The allwance is based n histrical cllectin experiences and a review f the current status f the existing 26

29 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 3. Cntinued receivables. The mix f receivables frm patients and third-party payrs at September 30, is as fllws: Receivable frm patients and their insurance carriers Receivable fi-m Medicare Receivable frm Medicaid Ttal patient accunts receivable Less: allwance fr dubtful accunts Patient accunts receivable, net 17,040,857 5,202, ,728 22,494,945 (7,431,027) 16,038,131 6,195, ,065 22,777,994 (6,468,760) 15,063,918 16,309,234 A summary f ther assets fllws: Other Assets Assets held in tmst Investment - Thibdaux Surgical Center, LLC 716, , , ,543 Ttal ther assets 1,230,583 1,001,416 In cnnectin with emplyment cnttacts between the Hspital and a key fficer, a prvisin has been made fr future cmpensatin which is payable upn terminatin f emplyment withut cause. In the event f terminatin withut cause, an amunt equal t tw times the key fficer's salary wuld be paid ut. The assets held in tmst are carried at fair value and are included in ther assets in the balance sheets. The balance was 716,901 and 719,873 at September 30, 2009 and 2008, respectively. Nte 4. Retirement Plan The Hspital spnsrs an emplyee retirement plan (the "Plan") under Sectin 457(b) f the Intemal Revenue Cde. The Plan cvers all emplyees age 21 r lder with ne year f service in which at least 1,000 hurs were wrked. The Plan prvides that the Hspital, at its ptin, may make cntributins t the Plan based n a discretinary percentage f eligible emplyees' base cmpensatin, as defined, as well as matching cntributins. The Hspital's discretinary cntributin percentage was 4 percent fr the years ended September 30, 2009 and The Plan permits tax deferral by emplyees f amunts, cmbined with the Hspital's cntributin, up t a maximum f 25 percent f their base cmpensatin, subject t certain limits. Emplyer 27

30 Years Ended September 30, 2009 and 2008 NOTES TO FINANCIAL STATEMENTS Nte 4. Cntinued cntributins vest at 20 percent per year until they reach 100 percent at the end f year five. Emplyee cntributins are immediately vested. Retirement expense recrded by the Hspital fr the years ended September 30, 2009 and 2008, ttaled 882,390 and 782,446, respectively, r apprximately 4 percent f cvered payrll in each year. Nte 5. Cntingencies The Hspital participates in the State f Luisiana Patient Cmpensatin Fund (the "Fund") fr medical malpractice claims. As a participant, the Hspital has a statutry limitatin f liability which prvides that n award can be rendered against it in excess f 500,000, plus interest and legal csts. The Fund prvides cverage n a claims-made basis fr claims ver 100,000 and up t 500,000. The Hspital is als insured n a claims-made basis thrugh a cmmercial insurance carrier fr malpractice lsses up t 6,000,000 per ccurrence, with a ttal annual limit f 8,000,000, and with a self-insurance retentin f 100,000 per ccurrence up t a maximum f 300,000 in the aggregate per year. The Hspital has been named as defendant in lawsuits alleging medical malpractice. Management f the Hspital, using infrmatin prvided by its cmmercial insurance carrier, has accmed in the financial statements its best estimate f prbable cntingent lsses n these claims and n estimated claims incurred but nt reprted. Changes in the Hspital's claims liability amunt during the past tw years is reflected belw. Current Year Beginning Claims and Year Ended f Year Changes in Claims End f Year September 30, Liability Estimates Payments Liability , ,962 (410,762) 1,030, , ,259 (365,459) 975,000 The Hspital is self-insured fr wrkers' cmpensatin and fr emplyee health insurance up t 100,000 per claim respectively. A liability is recrded when it is prbable that a lss has been incurred and the amunt f that lss can be reasnably estimated. Liabilities fr claims incurred are reevaluated peridically t take int cnsideratin recently settled claims, frequency f claims, and ther ecnmic and scial factrs. The Hspital purchased cmmercial insurance that prvides cverage fr wrkers' cmpensatin and emplyee health claims in excess f the self-insured limits. The wrkers' cmpensatin and health insurance claims liabilities at September 30 are based n the requirements f GASB Statement N. 10. This statement prvides that a liability fr claims be 28