Estes Park Medical Center

Transcription

1 Financial Statements December 31,2011 and 2010 Estes Park Medical Center www. I com

2 Table of Contents December and 2010 Independent Auditor's Report 1 Financial Statements Balance LHlt:t:I~.",." "", " """ '''''' ".,." "' ",..... ~ "" "'..",... " Statements of Financial Position - Discretely Presented Component 4 Statements of Revenues, Expenses, and Changes in Net Assets 5 Statements of Activities - Discretely Presented Component Unit 6 Statements of Cash Flows 7 9 Supplementary Information Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ", "'..".,'""' ',,,,,,. " ' ",.,'"1 Schedule of Findings and Reponses " " ""', ',,,.,, " ' ",..J

3 Eidebailly epas & BUSINESS ADVISORS Independent Auditor's Report The Board of Directors Estes Park Medical Center Estes Park, Colorado We have audited the accompanying balance sheets of Park Hospital District d/b/a Estes Park Medical Center (Medical Center) as of December 31,2011 and 2010, and the related statements of revenues, expenses, and changes in net assets and cash flows for the years then ended. These financial statements are the responsibility of the Medical Center's management. Our responsibility is to express an opinion on these financial statements based on our audits. We have audited the financial statements of Estes Park Medical Center Foundation, a discretely presented component unit of the Medical Center, for the years ended December 31, 2010 and December 31, 2011 and our reports expressed an unqualified opinion. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Park Hospital District d/b/a Estes Park Medical Center as of December 31, 2011, and the results of its operations, changes in net assets, and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 12 to the financial statements, an error in the recording of supplies inventory and related expense was discovered. The error resulted in an overstatement of supplies expense and an understatement of supplies and net assets in Management's discussion and analysis is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. However, management has elected not to include the management's discussion and analysis. 1 www. com th Ave, S, I p,o" Box 2545 Fargo, ND I T 701,239,8500 I F ,8600 EOE

4 In accordance with Government Auditing Standards, we have also issued our report dated April 20, 2012, on our consideration ofthe Medical Center's internal control over financial reporting and our tests ofits compliance with certain provisions of laws, regulations, contracts, and grants. The purpose of that report is to describe the scope of our testing of internal controls over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Fargo, North Dakota April 20,

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6 Balance Sheets December and Liabilities and Net Assets Current Liabilities Current maturities of long-term debt Accounts payable Accrued expenses Salaries, wages, and related liabilities Compensated absences Interest Other s 786,976 $ 748, , , , , , , , , Total current liabilities Long-Term Liabilities Long-term debt, less current maturities Resident deposits 21,412,896 21,448,826 Total long-term liabilities 21 Total liabilities 24,694, Net Assets Invested in capital assets, net of related debt Restricted, expendable Unrestricted Total net assets 8,419,834 1,216,431 9,086,758 1,161,088 Total liabilities and net assets 3

7 Estes Park Medical Center Foundation Statements of Financial Position - Discretely Presented Component Unit December and Assets Current Assets Cash and cash equivalents Pledges receivable Prepaids s 384,035 $ 357,962 20,864 27,377 Total current assets 406, ,961 Other Assets Investments Fixed assets Pledges receivable, net of current portion 2,278,021 1,757,969 1,882 2,895 Total assets Liabilities and Net Assets Current Liabilities Accounts payable Accrued expenses Total current liabilities $ 1,355 $ 3, ,010 18,506 7,941 Net Assets Unrestricted Temporarily Permanently restricted restricted 530, , , , Total net assets 2,667,999 Total liabilities and net assets See 4

8 Statements of Revenues, Expenses, and Changes in Net Assets Years Ended December and 2010 Operating Revenue Net patient and resident service revenue, net of provision for bad debts of $4,000,096 in 2011 and $3,601,467 in 2010 Other revenue Total operating revenue Operating Expenses Salaries and wages Employee benefits Professional fees and purchased services Supplies Utilities Leases and rentals Insurance Repairs and maintenance Depreciation and amortization Other Total operating expenses (restated) $ 31,116,976 $ 28,749, , ,944,580 15,789,421 14,261,276 3,685,885 3,230,120 4,933,877 4,536,172 3,086,782 2,568, , , , , , , , ,363 1,870,015 2,000, Operating Income Nonoperating Revenues (Expenses) Property tax revenues Interest expense Investment income Loss on disposal of capital assets Noncapital grants and contributions Other Total nonoperating revenues, net 2,678,039 (929,318) 33,444 70,427 2,644,782 (960,490) 35,741 (2,613) 8,460 (10,596) Revenues in Excess of Expenses Before Capital Contributions 2,017,696 2,279,176 Capital Contributions 3 Increase in Net Assets 2,048,774 Net Assets, Beginning of Year, as restated 2,416,197 20,738,389 Net Assets, End of Year See 5

9 Estes Park Medical Center Foundation Statements of Activities - Discretely Presented Component Unit Years Ended December and 2010 See 6

10 Statements of Cash Flows Years Ended December and (restated) Operating Activities Receipts from and on behalf of patients $ 30,565,127 $ 28,995,640 Payments to suppliers and contractors (9,927,121) (9,620,846) Payments to employees (19,089,753) (17,322,791) Other receipts and payments Net Cash from Operating Activities 1,762,723 Noncapital Financing Activities Property taxes supporting operations 2,677,580 2,644,913 Noncapital grants and contributions Net Cash from Noncapital Financing Activities 2,748,007 Capital and Capital Related Financing Activities Purchase of capital assets (428,646) (580,898) Repayment of long-term debt (748,526) (113,066) Interest paid on long-term debt (945,847) (492,901) Capital contributions 31, ,021 Proceeds from the sale of capital assets 1 Net Cash used for Capital and Capital Related Financing Activities Investing Activities Decrease (increase) in investments (942,919) 24,178 Investment income and other Net Cash from (used for) Investing Activities Net Increase in Cash and Cash Equivalents 1,514,305 3,912,546 Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year Reconciliation of Cash and Cash Equivalents to the Balance Sheets Cash and cash equivalents s 6,794,253 s 6,384,126 Restricted under bond indenture agreement, current Internally designated, noncurrent 2,720,395 1,183,711 Restricted by donor, noncurrent 1 Total cash and cash equivalents s 10,731,079 See 7

11 Statements of Cash Flows Years Ended December 31, 2011 and Reconciliation of Operating Income to Net Cash from Operating Activities Operating Income Adjustments to reconcile operating income to net cash from operating activities Depreciation and amortization Provision for bad debts Changes in assets and liabilities Patient receivables Other receivables Supplies Prepaid expenses Accounts payable Estimated third-party payor settlements Accrued salaries, compensated absences, and other s 175,481 $ 563,892 1,870,015 2,000,523 4,000, ,601, (4,916,945) (3,365,087) (10,143) 10,105 (70,609) (510,580) (47,652) (36,838) (38,897) (107,752) 365,000 10,016 Net Cash From Operating Activities Supplemental Disclosure of Cash Flow Information The Medical Center entered into a capital lease obligation for the acquisition of equipment totaling $751,987 during See 8

12 December 31, 2011 and 2010 Note 1 - Organization and Significant Accounting Policies Organization Park Hospital District d/b/a Estes Park Medical Center (Medical Center) operates a 16-bed acute care facility (Hospital); the Estes Park Retirement Center (Retirement Center); the Prospect Park Nursing Facility (Nursing Facility), a 60-bed skilled nursing facility; and the Family Medical Center (Clinic), located in Estes Park, Colorado. The Medical Center is governed by a Board of Directors consisting of five members elected by the residents of Park Hospital District. The Medical Center is not a component unit of another governmental entity, Discretely Presented Component Unit The Estes Park Medical Center Foundation (Foundation) is a 501(c)(3) organization whose sole purpose is to support the Medical Center. The Foundation conducts fundraising campaigns on behalf of the Medical Center. In accordance with Governmental Accounting Standards Board Statement No. 39, Determining Whether Certain Organizations Are Component Units, the Foundation has been determined to be a component unit and is presented as a discretely presented component unit in the Medical Center's financial statements. Complete financial statements ofthe Foundation may be obtained by contacting the Medical Center's Executive Office at 555 Prospect Avenue, Estes Park, Colorado Enterprise Fund Accounting The Medical Center uses enterprise fund accounting. Revenues and expenses are recognized on the accrual basis using the economic resources measurement focus. Based on Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reportingfor Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, as amended, the Medical Center has elected to apply the provisions of the Financial Accounting Standards Board (FASB) issued after November 30, 1989 that do not conflict with or contradict GASB pronouncements. The financial statements have been presented in conformity with generally accepted accounting principles as promulgated by GASB and as recommended in the Audit and Accounting Guide for Health Care Organizations published by the American Institute of Certified Public Accountants. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments, unless otherwise designated or restricted, with an original maturity of three months or less when acquired. 9

13 December and 2010 Patient and Resident Receivables Patient receivables are uncollateralized patient, resident, and third-party payor obligations. Payments of patient and resident receivables are allocated to the specific claims identified on the remittance advice or, if unspecified, are applied to the earliest unpaid claim. The carrying amount of patient and resident receivables is reduced by a valuation allowance that reflects management's estimate of amounts that will not be collected from patients, residents, and third-party payors. Management reviews patient and resident receivables by payor class and applies percentages to determine estimated amounts that will not be collected from third parties under contractual agreements and amounts that will not be collected from patients and residents due to bad debts. Management considers historical write off and recovery information in determining the estimated bad debt provision. Supplies Supplies are stated at lower of cost (first in, first out) or market. Investments and Investment Income Investments in securities are reported at fair value. Fair value is determined based on quoted market prices, if available, or estimated fair value using quoted market prices for similar securities. Certificates of deposit and money market funds are recorded at cost plus accrued interest. Interest, dividends, gains and losses, both realized and unrealized, on investments in debt and equity securities are included in nonoperating revenues when earned. Designated investments include assets set aside by the Board of Directors, over which the Board retains control and may, at its discretion, subsequently use for other purposes. Restricted investments include assets restricted under bond indenture agreements and by donors. Designated or restricted investments that are available for obligations classified as current liabilities are reported in current assets. Capital Assets Capital asset acquisitions in excess of $2,500 are capitalized and recorded at cost. Contributed capital assets are reported at their estimated fair value at the time of their donation. AU capital assets other than land and construction in progress are depreciated using the straight-line method of depreciation using these asset lives: Land improvements Buildings and leasehold improvements Equipment 8-40 years 5-40 years 2-25 years Costs of Borrowing Except for capital assets acquired through gifts, contributions, or capital grants, interest cost on borrowed funds during the period of construction of capital assets is capitalized as a component of the cost of acquiring those assets. 10

14 December and 2010 Deferred Financing Costs Deferred financing costs are amortized over the period the related obligation is outstanding using the straight-line method. Amortization of deferred financing costs is included in depreciation and amortization in the financial statements. Compensated Absences The Medical Center's policies permit most employees to accumulate vacation and sick leave benefits that may be realized as paid time off or, in limited circumstances, as a cash payment. Vacation benefits and the related liability are recognized when earned whether the employee is expected to realize the benefits as paid time off or in cash. Sick leave benefits and the related liability expected to be realized as paid time off are recognized as expense when the benefits are earned. Compensated absence liabilities are computed using the regular pay rate in effect at the balance sheet date, plus an additional amount for compensation related payments such as social security and Medicare taxes computed using rates in effect at that date. Net Assets Net assets are presented in the following three components: Net Assets Invested in Capital Assets, Net of Related Debt - Invested in capital assets, net of related debt, consists of capital assets, including restricted capital assets, net of accumulated depreciation, and reduced by the balance of any outstanding borrowings used to finance the purchase or construction of those assets. III Restricted Expendable Net Assets - Restricted expendable net assets are noncapital net assets that must be used for a particular purpose, as specified by creditor, grantors, or contributors external to the Medical Center, including amounts deposited with trustees as required by bond indenture agreements. Unrestricted Net Assets - Unrestricted net assets are remaining net assets that do not meet the definition of "Invested in Capital Assets, Net of Related Debt" or "Restricted." Net Patient and Resident Service Revenue The Medical Center has agreements with third-party payors that provide for payments to the Medical Center at amounts different from its established rates. Payment arrangements include prospectively determined rates per discharge, reimbursed costs, discounted charges, and per diem payments. Net patient and resident service revenue is reported at the estimated net realizable amounts from patients, residents, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods, as final settlements are determined. Operating Revenues and Expenses The Medical Center's statements of revenues, expenses, and changes in net assets distinguish between operating and nonoperating revenues and expenses. Operating revenues result from exchange transactions associated with providing health care services - the Medical Center's principal activity. Operating expenses are all expenses incurred to provide health care services, other than financing costs. Nonexchange revenues, including property taxes, grants and contributions received for purposes other than capital asset acquisition, are reported as nonoperating revenue. 11

15 December and 2010 Charity Care To fulfill its mission of community service, the Medical Center provides care to patients and residents who meet certain criteria under its charity care policy without charge or at amounts less than its established rates. Because the Medical Center does not pursue collection of amounts determined to qualify as charity care, they are not reported as patient service revenue (Note 2). Advertising Costs The Medical Center expenses advertising costs as incurred. Property Taxes The Medical Center received approximately 9 percent of its financial support for operations from property taxes. Taxes are assessed in January by the Office of the Treasurer of Larimer County, Colorado. The County Treasurer collects the determined taxes during the ensuing calendar year from the residents of the Park Hospital District. Taxes are recorded as revenue in the year they are assessed. Risk Management The Medical Center is exposed to various risks of loss from torts; theft of, damage to, and destruction of assets; business interruption; errors and omissions; employee injuries and illnesses; natural disasters; medical malpractice; and employee health, dental, and accident benefits. Commercial insurance coverage is purchased for claims arising from such matters. Settled claims have not exceeded this commercial coverage in any of the three preceding years. Reclassifications Certain items in the prior year financial statements have been reclassified for comparability purposes with the current year financial statements. These reclassifications did not affect the financial position or the change in net assets as previously reported. Note 2 - Charity Care The Medical Center provides care to patients who meet certain criteria under its charity care policy without charge or at amounts less than established rates. Because the Hospital does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue. The amount of charges foregone for services provided under the Hospital's charity care policy were approximately $499,074 and $297,469 for the years ended December 31,2011 and Total direct and indirect costs related to these foregone charges were approximately $255,397 and $152,227 at December 31,2011 and 2010, based on an average ratio of cost to gross charges. The Medical Center receives funds to offset or subsidize charity care services from the Colorado Indigent Care Program (CICP). The amount of funds received was approximately $1,065,628 and $1,100,909 for the years ended December 31,2011 and

16 December 31,2011 and 2010 Note 3 - Net Patient and Resident Service Revenue The Medical Center has agreements with third-party payors that provide for payments to the Medical Center at amounts different from its established rates. A summary of the payment arrangements with major third-party payors follows: Acute Care Facility Medicare - The Medical Center is licensed as a Critical Access Hospital (CAH). The Medical Center is reimbursed for most acute care services at cost plus one percent with final settlement determined after submission of annual cost reports by the Medical Center and are subject to audits thereof by the Medicare intermediary. Certain services are subject to cost limits or fee schedules. The Medical Center's Medicare cost reports have been audited by the Medicare fiscal intermediary through the year ended December 31, Medicaid - Inpatient acute care services rendered to Medicaid program beneficiaries are paid at prospectively determined rates per discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Inpatient nonacute services, certain outpatient services, and defined capital costs related to Medicaid beneficiaries are paid based on a cost reimbursement methodology. The Medical Center is reimbursed for cost-reimbursable items at tentative rates with final settlement determined after submission of annual cost reports by the Medical Center and audits thereof by the Medicaid fiscal intermediary. Blue Cross - Inpatient services rendered to Blue Cross subscribers are paid at prospectively determined rates per discharge and/or at a discount from established charges. Outpatient services are reimbursed at outpatient payment fee screens or at charges less a prospectively determined discount. The prospectively determined discount is not subject to retroactive adjustment. The Medical Center has also entered into payment agreements with certain commercial insurance carriers and other organizations. The basis for payment to the Medical Center under these agreements includes prospectively determined rates per discharge, discounts from established charges, and prospectively determined daily rates. Revenue from the Medicare and Medicaid programs accounted for approximately 37% and 8% of the Hospital's patient service revenue for each of the years ended December 31,2011 and Laws and regulations governing the Medicare, Medicaid, and other programs are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change by a material amount in the near term. Net patient service revenue for the year ended December 31,2011 increased approximately $142,000 due to removal of allowances previously estimated that are no longer necessary as a result of final settlements and years that are no longer likely subject to audits, reviews, and investigations. The Centers for Medicare and Medicaid Services (CMS) implemented a Recovery Audit Contractor (RAC) program under which claims subsequent to October 1,2007, are reviewed by contractors for validity, accuracy, and proper documentation. A demonstration project completed in several states resulted in the identification of potential overpayments, some being significant. If selected for audit, the potential exists that the Hospital may incur a liability for a claims overpayment at a future date. The Hospital is unable to determine if it will be audited and, if so, the extent of the liability of overpayments, if any. As the outcome of such potential reviews is unknown and cannot be reasonably estimated, it is the Hospital's policy to adjust revenue for deductions from overpayment amounts or additions from underpayment amounts determined under the RAC audits at the time a change in reimbursement is agreed upon between the Hospital and CMS. 13

17 December and 2010 Nursing Facility Resident service revenue is recorded at established billing rates that are determined on a cost-related basis subject to certain limitations as prescribed by Colorado Department of Human Services regulations. These rates are subject to retroactive adjustment by field audit. The nursing facility participates in the Medicare program for which payment for services is made on a prospectively determined per diem rate, which varies, based on a casemix adjusted patient classification system. The differences between actual charges and payments are accounted for as contractual adjustments. A summary of patient and resident service revenue, contractual adjustments, and provision for bad debts for the years ended December 31,2011 and 2010 is as follows: Gross patient and resident service revenue Less charity care Total patient and resident service revenue Contractual adjustments Medicare Medicaid Blue Cross Blue Shield Commercial insurance and other Provision for bad debts 2011 $ 56,223,656 (499,074) (12,223,128) (1,873,612) (665,279) 2010 $ 49,156,699 (297,469) (10,389,134) (1,785,340) (525,880) (3,808,165) (16,508,519) (3,601,467) Total contractual and provision adjustments for bad debts Net patient and resident service revenue Note 4,- Deposits, Investments, and Investment Income Custodial credit risk is the risk that in the event of a bank failure, the Medical Center's deposits may not be returned to it. Colorado statutes require that all deposits be with Colorado financial institutions who must maintain federal insurance on deposits held. Financial institutions are required to collateralize all deposits exceeding federally insured amounts. The State Regulatory Commissions for financial institutions are required to monitor the naming of eligible depositories and their reporting of uninsured deposits and assets maintained in their collateral pools. The Medical Center's investment policy does not address custodial credit risk. Thelvledical Center's financial institutions are fully collateralized in accordance with Colorado. 14

18 December and 2010 Investments The Medical Center's investments are reported at fair value. At December 31, 2011 and 2010, the Medical Center's investments consisted of the following: Fair Value Certificates of deposit $ 2,211,616 $ 895,119 $ Treasury securities Total Fair Certificates of deposit $ 1,573,040 $ 1,227,417 $ $ U.S, Treasury securities Total Interest Rate Risk The Medical Center's investment policy does not contain a provision that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk State Statutes limits the investment in bonds, debentures or notes of any corporation to be rated "A" or higher by nationally recognized statistical rating organizations. As of December 31, 2011 and 2010, the Medical Center was compliant with State Statutes with regard to credit risk. The Medical Center has no investment policy that would further limit its investment options. Concentration of Credit Risk The Medical Center currently does not place a limit on the amount it may invest with anyone issuer. Summary of Carrying Amounts The carrying amounts ofthe Medical Center's deposits and investments shown above are included in the balance sheets at December 31,2011 and 2010 as follows: Carrying amount Deposits Investments s 10,731,079 $ 9,216,774 15

19 Estes December and 2010 Deposits and Investmens are included in the followinz balance sheet captions Cash and cash eouivalents Restricted under indenture - current Noncurrent cash and investments I.ono-term investments Hn'_in''''H), designated funds Restricted by donors $ 6,794,253 s 6,384,126 1, 1,107,445 2,710,501 2,720,395 Total Investment Income Investment income on deoosits and investments consists of the followinz for the years ended December 31,2011 and 2010: Interest income Investment Interest income and losses 2011 $ 24,705 s s $ 5- '-''''!!-IU'U asset additions, transfers, retirements, and balances for the year ended December 31, 2011 is as follows: Balance December 31, 2010 Additions Transfers and Retirements Balance December 31, 2011 Construction in progress $ 333,973 $ $ 784,603 $ 333,973 Total assets, not 399, ,515 35,902,022 s 14,664 $ 4, ,179 35,854,180 Total assets Less accumulated depreciation for Land improvements $ 52, ,672 Total accumulated depreciation (16,295,040) Net assets Capital assets, net 16

20 December and 2010 Capital asset additions, transfers, retirements, and balances for the year ended December 31, 2010 is as follows: Balance December 31, 2009 Transfers and Retirements Balance December 31, 2010 Construction in progress $ 333,973 $ $ $ 333,973 Total assets, not 798,940 36,064,308 $ 3,526 86, ,515 35,902,022 Total assets Less accumulated depreciation for Land improvements $ 58, ,289 Total accumulated depreciation Net assets assets, net 10 Construction in progress at December 31, 2011 represents costs related to various IT system conversions and implementations. The estimated cost to complete these projects is $500,000 and will be financed using operating funds. Note 6 - Capital Lease Obligations The Medical Center leases certain equipment under noncancelable long-term lease agreements. Certain leases have been recorded as capitalized leases and others as operating leases. Total operating lease expense for the years ended December 31,2011 and 2010 was $221,661and $225,536. The Medical Center is obligated under a lease for MRI equipment that is accounted for as a capital lease. The cost of assets under capital lease at December 31, 2011 totaled $751,987. The obligation is collateralized by the leased equipment. 17

21 December and 2010 Scheduled minimum principal and interest payments on the capital lease obligation are as follows: Year December 31 Amount Thereafter $ 94, , , , ,284 8 Less imputed interest Present value of minimum lease payments Note 7 - Long-Term Debt Long-term debt activity for the year ended December 31, 2011 follows: Balance December 31, 2010 Additions Reductions Balance December 31, 2011 Amounts Due Within One Year Limited Tax-Revenue Bonds $ 22,060,000 Bond 18,826 lease obligations $ $ (630,000) (941) s 21,430,000 17,885 $ 705,000 Long-term debt activity for the year ended December 31, 2010 follows: Balance December 3 1, 2009 Additions Balance December 31, 2010 Amounts Due Within One Year Limited Tax-Revenue Bonds $ 22,060,000 Bond 19,767 lease 23 $ s s 22,060,000 18,826 1 $ 630,000 $ 22,311,359 The terms and due dates of the Medical Center's long-term debt at December 31,2011 and 2010 are as follows: The Limited Tax-Revenue Bonds (the Bonds) consist of Health Facilities Enterprise Revenue Bonds in the original amount of $22,900,000 dated February 1,2006. Interest is payable semiannually on each January 1 and July 1, with interest rates varying from 3.500% to 4.625%. Principal is due in varying annual installments to January The Bonds are secured by the Medical Center's pledged revenues. The capital lease obligation as of December 31,2011 is due in monthly payments of$13,524 including imputed interest at a rate of3% through May Secured by leased equipment. The capital lease obligation as of December 31, 2010 was paid in fun during

22 December and 2010 Scheduled principal and interest repayments on long-term debt are as follows: Interest Total 2012 $ 786,976 $ 924,066 $ 1,711, , ,146 1,778, , ,236 1,780, , ,621 1,780, , ,715 1,778, ,712,108 3,440,757 8,152, ,505,000 2,628,960 7,133, ,209,093 Note 8 - Designated Net Assets At December 31,2011 and 2010, $1,178,965 and $1,183,711 of unrestricted net assets has been designated by the Medical Center's Board of Directors. Designated funds remain under the control of the Board of Directors, which may be used at their discretion. Note 9 - Pension Plan The Medical Center has a defined contribution plan covering substantially all employees who meet age and hour requirements. Employer contributions to the plan are based on a percentage of eligible employee compensation for plan participants. Total pension expense for the years ended December 31, 2011 and 2010 was $1,012,621 and $787,412. Note 10 - Concentrations The Medical Center grants credit without collateral to its patients and residents, most of whom are insured under third-party payor agreements. The mix of receivables from third-party payors, patients, and residents at December 31,2011 and 2010 was as follows: Medicare Medicaid Blue Cross Other third-party payors Self pay 47% 6% 7% 17% 23% 36% 9% 5% 28% 22% 100% 100% 19

23 December and 2010 Note 11 - Commitments, Contingencies, and Guarantees Malpractice Insurance The Medical Center has insurance coverage to provide protection for professional liability losses on a claimsmade basis subject to a limit of $1 million per claim and an annual aggregate limit of $3 million. Should the claims-made policy not be renewed or replaced with equivalent insurance, claims based on occurrences during its term, but reported subsequently, would be uninsured. Litigation, Claims, and Disputes The Medical Center is subject to the usual contingencies in the normal course of operations relating to the performance of its tasks under its various programs. In the opinion of management, the ultimate settlement of any litigation, claims, and disputes in process will not be material to the financial position of the Medical Center. The health care industry is subject to numerous laws and regulations offederal, state, and local governments. Compliance with these laws and regulations, specifically those relating to the Medicare and Medicaid programs, can be subject to government review and interpretation, as well as regulatory actions unknown and unasserted at this time. Federal government activity has increased with respect to investigations and allegations concerning possible violations by health care providers of regulations, which could result in the imposition of significant fines and penalties, as well as significant repayments of previously billed and collected revenues from patient and resident services. Management believes that the Medical Center is in substantial compliance with current laws and regulations. Note 12 - Prior Period Restatement During the year ended December 31, 2010, an error in the recording of supplies inventory and related expense was discovered which resulted in a restatement of2010 ending net assets. The restatement increased 2010 end of year net assets by $529,000. The effects on the balance sheet assets were an increase in the following financial line items: supplies, total current assets, and total assets of$529,000. The effects on the balance sheet liabilities were an increase in the following financial line items: unrestricted net assets, total net assets, and total liabilities and net assets of $529,000. The effect on the statement of revenues, expenses, and changes in net assets was to reduce supplies and total operating expenses and to increase operating income, revenues in excess of expenses before capital contributions, increase in net assets, and end of year net assets by $529,000. The effect on the cash flow statement was to increase operating income and cash used for supplies by $529,000. Note 13 - Subsequent Events The Medical Center has evaluated subsequent events through April 20, 2012, the date which the financial statements were available to be issued. 20