Review of Performance

Transcription

1 Mount Sinai Health System Mount Sinai Health System is an integrated health care system and academic medical center consisting of five hospitals (the Hospitals ): The Mount Sinai Hospital ( MSH ), Beth Israel Medical Center ( BIMC ), The St. Luke s-roosevelt Hospital Center ( SLR ), The New York Eye and Ear Infirmary ( NYEE ) and South Nassau Communities Hospital ( South Nassau ); and a School of Medicine: Icahn School of Medicine at Mount Sinai ( ISMMS ). Mount Sinai Hospitals Group, Inc. ( MSHG ) is the member of the Hospitals. Mount Sinai Health System ( MSHS ) is the member of MSHG, ISMMS and The Mount Sinai Medical Center, Inc. MSH is currently the sole member of the Obligated Group. None of the other Mount Sinai Health System entities are obligated to repay the Obligations issued under the Master Trust Indenture. Following is an organizational chart demonstrating the corporate structure: Mount Sinai Health System, Inc. (Passive Parent Holding Company) Icahn School of Medicine at Mount Sinai Mount Sinai Hospitals Group, Inc. (Active Parent Holding Company) Mount Sinai Medical Center The Mount Sinai Hospital* Beth Israel Medical Center** The St. Luke s- Roosevelt Hospital Center The New York Eye & Ear Infirmary South Nassau Communities Hospital * Includes Mount Sinai campus in Queens ** Includes Beth Israel campus in Brooklyn Member of the Obligated Group Non-member of the Obligated Group Page 1

2 The creation of Mount Sinai Health System is an integral part of MSH s long-term vision and strategy. MSH management believes that, in the long term, an integrated health care system is central to meeting the requirements of a changing health care environment. The model of care is changing not just for New York hospitals, but for all health care providers, nationwide. Accountable care organizations, bundled payments, pay for performance and quality outcomes, shared savings programs and full risk models are becoming a reality and increasingly displacing the current system of fee- for-service. Expanded geographic reach, an increased patient base and access to primary care physicians will be critical components of successful systems in the future. Mount Sinai Health System was formed to address these changing conditions. Notwithstanding the benefits to the formation of the health system, there are risks, including execution risk and costs of integration. In September 2015, MSHG entered into an agreement with the New York State Department of Health to participate in the Vital Access Provider Safety Net Program ( VAP ). As a participant in this program, MSHG was awarded approximately $81.4 million in funding to extend over three years. As of March 31, 2018, the full VAP award has been received. MSHG was also granted a temporary Medicaid rate enhancement also extending over three years which ended on March 31, MSHG has also agreed to complete a full asset merger of MSH, BIMC, SLR and NYEE by no later than December 31, In October 2018, MSHG became the sole corporate member and active parent of South Nassau. In connection with the transaction, MSH has agreed to contribute $120 million to the South Nassau over five years to assist in the development of capital projects. For the year ended December 31, 2018, $20 million was contributed by MSH. South Nassau did not become a Member of the Obligated Group as part of this affiliation. On November 27, 2018, MSH, BIMC, Montefiore Health System, and Maimonides Medical Center, collectively the owners of Hospitals Insurance Company ( HIC ) and FOJP Service Corporation ( FOJP ), announced their agreement to sell HIC and FOJP to The Doctors Company for $650 million, subject to closing adjustments. The transaction is subject to regulatory approvals and is expected to close later in Page 2

3 2019. HIC has provided the hospitals and related physicians with medical malpractice insurance for 40 years. The hospitals will share in the proceeds ratably according to their ownership. Summary of Operations For the year ended December 31, 2018, MSH recorded an excess of operating revenue over operating expenses before other items of $209.3 million and a $160.1 million increase in net assets without donor restrictions. This compares to an excess of operating revenue over operating expenses before other items of $205.2 million and an increase in net assets without donor restrictions of $340.6 million for the year ended December 31, Excess of operating revenue over operating expenses before other items for the year ended December 31, 2018 were $4.1 million higher than the prior year. For the year ended December 31, 2017, MSH recorded total operating revenue before other items of approximately $2.90 billion: 63% from inpatient services; 31% from outpatient services; and 6% from other sources. MSH recorded $2.71 billion in net patient service revenue, earned $44.8 million in unrestricted investment income and net realized gains on sales of securities, received $1.0 million in unrestricted philanthropic contributions, and recorded $105.5 million in other revenue and $32.1 million in net assets released from restrictions for operations. Other revenue increased by $22.5 million, attributable to the receipt of Delivery System Reform Incentive Payment revenue (DSRIP) and 340(b) contract pharmacy program revenue. Other revenue also includes revenue from ancillary services, such as the cafeteria, parking lot and rental properties. DSRIP revenue is offset by related expenses included in operating expenses. Net assets released from restrictions represent donor-restricted contributions for which all donor restrictions have been satisfied during the reporting period. Total operating revenue before other items for the year ended December 31, 2018 increased $237.6 million, or 9%, as compared to the year ended December 31, Net patient service revenue, less provision for bad debts, increased 8% in 2018 as compared to The $200.2 million increase in net patient service revenue, less provision for bad debts, was a result of a $128.1 million increase in net inpatient revenue and a $72.1 million increase in net outpatient revenue. Inpatient discharges declined by 780 over the prior year period. Outpatient revenue increased 9% Page 3

4 largely due to an increase in outpatient cancer and non-cancer infusion, and cardiology cases. The increase in net inpatient revenue, less provision for bad debts, reflects an increase in complex cases and third party payments. Length of stay at the Manhattan campus increased to 6.2 from 6.0 in the prior year. Overall case mix for the Manhattan campus increased by 0.05 as compared to the prior year. Total operating expenses before other items for the year ended December 31, 2018 totaled $2.69 billion compared with $2.45 billion for the year ended December 31, Expenses for the year 2018 break down as follows: 49% in salaries and benefits; 46% in supplies; 4% in depreciation and amortization and 1% in interest expense. Salaries and benefits expense increased 12% in the year ended December 31, 2018 as compared to the same period in Supplies expense increased 8% partly as a result of higher costs related to increased surgical volume as well as in oncology and other, non-cancer infusion services. Reflecting the increase in net patient service revenue, less provision for bad debts, patient accounts receivable net at December 31, 2018 increased by $55.5 million since December 31, 2017, totaling 14% of net patient revenue as compared to 13% in the prior period. Days in accounts payable decreased from 66 days at December 31, 2016 to 64 days at December 31, MSH significantly increased its cash and investments in 2017 in anticipation of investing resources in support of its system strategy. The increase in 2017 was largely due to the sale of the non-hospital clinical laboratory and the sale of taxable bonds in December The use of cash to support system goals in 2018 included: MSH expended $143.0 million on acquisitions of capital from operations; MSH continues to provide ISMMS with liquidity in connection with ongoing projects related to the strategic plan. The amounts provided to ISMMS are recorded as Due from related organizations on the Consolidated Statements of Financial Position. The amount due to Page 4

5 MSH was approximately $269.7 million at December 31, 2018, an increase of $75.0 million since December 31, MSH contributed $20.0 million to South Nassau to support capital projects (see page 2 above); System support in the form of a building acquisition on behalf of SLR, renovation to the SLR campuses (NICU, surgical upgrades, infrastructure, information technology) and other capital support. As a result of these Cash expenditures, Cash and short-term and pooled and other investments decreased by $324.9 million (16%) between December 31, 2017 and December 31, There were several other items and other changes in net assets without donor restrictions on the Consolidated Statement of Operations. Of note are: Net Change in Participation in Captive Insurance Program. MSH is a part owner of an insurance company licensed by New York State called Hospitals Insurance Company ( HIC ) a pooled program providing malpractice coverage to its owners and other captive insurance companies. As part owner, MSH records its investment using the equity method. For the year ended December 31, 2018, MSH recorded a gain on its equity investment associated with HIC, the captive insurance companies and other related costs of the program. Please see paragraph 4 on page 2 for further discussion of HIC. Transfers to Affiliates. MSHG was granted a temporary Medicaid rate enhancement extending over three years which ended on March 31, For 2018, MSH recorded $4.7 million of revenue associated with the enhanced Medicaid rates which was transferred to BIMC. This amount is included in transfer to affiliates. During the prior year period, the transfer to affiliates included $48.8 million of the gain on sale of the non-hospital clinical outreach laboratory which was transferred to ISMMS to support strategic initiatives. Page 5

6 Additional Indebtedness In December 2017, MSH issued $382.0 million in taxable bonds for general corporate purposes. Approximately $106.0 million of the bond proceeds were used to repay the outstanding debt of BIMC which MSH had previously guaranteed. Funds transferred to BIMC from MSH are recorded as a component of due from related organizations. Other proceeds of the bonds were used to repay MSH s $40.0 million bank loan. Required Ratios At year-end 2018, the Long-Term Debt Service Coverage Ratio for MSH was 6.07x and the Days Cash on Hand was 198 days. System Strategy and Plans for 2019 The health care environment in New York and throughout the country continues to evolve with inpatient care increasingly reserved for high acuity cases, while lower acuity cases are cared for in an outpatient or ambulatory setting. Further accelerating the shift from inpatient to outpatient is the move from fee-for-service to other forms of value-based reimbursement, including shared savings, pay-forperformance and bundled payments. As part of its efforts to address such changes, Mount Sinai Health System is transforming its downtown campus (BIMC and NYEE) to recognize this change and has developed a strategy to improve access and increase quality while focusing on keeping the community healthy. The project is expected to include a new, smaller hospital with approximately 70 medical/surgical beds and a new Emergency Department. The transition is expected to take four years. BIMC will remain open during the transition. Mount Sinai Health System expects to make a significant investment into its downtown strategy over the coming years with the aforementioned new hospital and Emergency Department and by enlarging its physician network, ambulatory platform and cancer center. This investment will allow for the future growth of the system. Mount Sinai Health System is also building a new behavioral health center that will be a one-stop location for mental health, addictions, physical health, and social service needs for the downtown community. This site will consolidate and expand the behavioral health offerings to the community. Page 6

7 MSH s management continues to focus on developing and growing top-line revenue while controlling expenses as the best strategy to maintain progress and improvement. System integration, establishing centers of excellence and expanding Mount Sinai Health System s geographic footprint are key elements of this strategy. The Mount Sinai Health System network is comprised of multiple clinical, academic and administrative relationships throughout the greater New York metropolitan area and Florida. These relationships allow Mount Sinai Health System to extend its health care delivery system to a large and diverse patient population. This network includes hospitals, physician practices both employed and affiliated, urgent care centers, academic affiliations, long term care facilities and ambulatory surgery centers. The inclusion in the health system of South Nassau, a 455 bed, acute care hospital located in Oceanside, NY, serving over 900,000 residents on the south shore of Long Island serves to further increase the geographic reach of the network. Mount Sinai Health System continues to focus on recruiting key physicians in certain identified areas for growth, such as cancer, cardiac and surgical services. MSH will continue to focus on reducing its length of stay as a way to create additional capacity while limiting the cost of investing in new units, as well as renovating certain departments and relocating others. MSH participates in various shared savings agreements and is a participant in a Medicare ACO. MSH is also actively managing its Medicaid at-risk population. MSH is projecting a net hospital operating surplus for 2019 of $175.4M. Page 7