I N T E R I M U N A U D I T E D F I N A N C I A L S T A T E M E N T S F OR T HE P E R I O D E N D E D D E C E M B E R 3 1, 2014

Transcription

1 I N T E R I M U N A U D I T E D F I N A N C I A L S T A T E M E N T S A N D O T H E R I N F O R M A T I O N F OR T HE P E R I O D E N D E D D E C E M B E R 3 1, 2014 Southwest General Health Center

2 Table of Contents: INTRODUCTION. 3 General.3 CORPORATE STRUCTURE... 3 The Hospital and the Obligated Group The Parent The Hospital.. 4 OCCUPANCY STATISTICS....5 SUMMARY FINANCIAL INFORMATION Summary Statement of Operations and Change in Net Assets... 7 Summary Balance Sheet...9 Summary Statement of Cash Flows MANAGEMENT S DISCUSSION & ANALYSIS

3 General INTRODUCTION Southwest General Health Center ( Southwest General or the Hospital ) is a private, nonprofit, 358-registered bed, including 30 newborn bassinets, acute care hospital facility located in Middleburg Heights, Ohio. The Hospital serves southwestern Cuyahoga, eastern Lorain and northern Medina counties. Founded in 1920 by the citizens of the surrounding communities, Southwest General has a rich history of community partnership and a deep commitment to providing a healthy future for the patients, families and communities it serves. Six communities currently support Southwest General by means of a self-imposed property tax: the cities of Berea, Brook Park, Middleburg Heights, Olmsted Falls, Strongsville and Columbia Township. Southwest General offers modern technology and facilities, board-certified physicians and a full range of services, including comprehensive medical, surgical and emergency care. Strategic areas of focus include cardiovascular care, neurosciences, orthopedics, oncology, women s health and emergency services. Additionally, patients and families benefit from an extensive program of social services and support groups that provide mental, emotional and spiritual support. All services are provided with an eye toward excellence and individual attention. This is best expressed in Southwest General s mission statement: Health is our Passion. Quality is our Focus. Compassion is our Way. CORPORATE STRUCTURE The Hospital and the Obligated Group Southwest Community Health System (the Parent ) is an Ohio nonprofit corporation and is the sole voting member of the Hospital. The Parent and the Hospital comprise the Obligated Group. Both the Parent and the Hospital are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Parent The Parent s purpose is to coordinate the activities of several interrelated healthcare entities. In addition to being the sole voting member of the Hospital, the Parent is the sole voting member of the Southwest Community Health Foundation (the Foundation ) which is also an Ohio nonprofit corporation exempt from taxation under Section 501(c)(3) of the Internal Revenue Code. The Foundation operates fundraising activities, capital giving programs, deferred giving programs and supports community health care projects. It is not a member of the Obligated Group and has no obligation to pay debt service on the Series 2011 and 2012 Bonds. The Parent has the right to approve certain matters relating to the Hospital and the affiliated corporations, including long-term borrowing, the sale or mortgage of certain real property, the annual capital and operating budgets and the appointment of the members of the Hospital Board. 3

4 The Hospital The Hospital was organized to establish, operate and maintain a hospital and other health care facilities and services. As described above, the Hospital offers a full range of services at its main campus located in Middleburg Heights, Ohio and a wide variety of outpatient services at other locations in its service area. Those other locations include the Brook Park UrgiCare, Strongsville Medical Center and UrgiCare, Brunswick Medical Center and Emergency Department, Middleburg Heights Medical Center that includes the Regional Spine Center, Jefferson Park Complex that houses the Neighborhood Care Center and the administrative offices of Southwest s Home Health agency, Hospice and the Southwest General Medical Group, Inc.; LifeWorks of Southwest General that is a comprehensive fitness facility, Oakview Behavioral Health Center, and The Thomas P. Perciak Family Residential Hospice. The Hospital wholly controls Southwest General Medical Group, Inc., an Ohio professional corporation which employs physicians and other providers to provide medical services to patients in their offices, the Hospital, and other facilities. A wholly-owned subsidiary of the Hospital, Southwest Holdings, Inc. ( Holdings ) is a for-profit corporation engaging in for-profit activities. Its main activity at this time is operating a retail pharmacy on the main Hospital campus. 4

5 OCCUPANCY STATISTICS For the quarter ending December 31, For the twelve months ending December 31, Variance % Variance % Licensed Beds* Medical Surgical Obstetrics/Gynecology Mental Health Skilled Nursing Acute Rehab Total Staffed Beds* Medical Surgical Obstetrics/Gynecology Mental Health Skilled Nursing Acute Rehab Total Patient Days* Medical Surgical 14,819 14, % 58,086 57, % Obstetrics/Gynecology % 2,617 2, % Mental Health 2,079 1, % 8,604 8, % Skilled Nursing % 3,204 3, % Acute Rehab % 3,680 3, % Total 19,111 18, % 76,191 76, % Discharges* Medical Surgical 3,301 3, % 13,144 13, % Obstetrics/Gynecology % 1,092 1, % Mental Health % 1,177 1, % Skilled Nursing % % Acute Rehab % % Total 4,014 3, % 16,074 15, % Average Length of Stay (in days)* Medical Surgical Obstetrics/Gynecology Mental Health Skilled Nursing Acute Rehab Total Overall Percentage Occupancy of Licensed Beds Medical Surgical 66.6% 65.5% 1.1% 65.8% 67.5% -1.7% Obstetrics/Gynecology 29.3% 28.4% 0.9% 31.2% 29.7% 1.5% Mental Health 62.8% 60.3% 2.5% 65.5% 68.3% -2.8% Skilled Nursing 65.8% 74.5% -8.8% 73.2% 73.1% 0.0% Acute Rehab 62.8% 69.6% -6.7% 67.2% 70.5% -3.3% Total Overall 63.3% 62.8% 0.6% 63.6% 65.2% -1.6% *Excludes newborns 5

6 For the quarter ending December 31, For the twelve months ending December 31, Variance % Variance % Percentage Occupancy of Staffed Beds Medical Surgical 76.0% 68.4% 7.6% 75.1% 70.5% 4.6% Obstetrics/Gynecology 29.3% 28.4% 0.9% 31.2% 29.7% 1.5% Mental Health 62.8% 60.3% 2.5% 65.5% 68.3% -2.8% Skilled Nursing 65.8% 74.5% -8.8% 73.2% 73.1% 0.0% Acute Rehab 62.8% 69.6% -6.7% 67.2% 70.5% -3.3% Total Overall 69.7% 64.8% 4.9% 70.0% 67.3% 2.7% Outpatient services Laboratory Tests 18,364 19, % 73,531 81,028-7, % Surgical Operations 3,132 3, % 11,896 12, % Outpatient Visits 99,428 99, % 393, ,505-10, % (including outpatient surgery and emergency room visits) Emergency Room Visits 12,472 11, % 49,693 48, % 6

7 Summary Statement of Operations and Change in Net Assets of the Obligated Group Unrestricted revenue (in thousands) Three Months Ending December 31, 2014 Actual 2013 Actual (Unaudited) (Audited) Net patient service revenue Less: Provision for bad debts Net patient service revenue less provision for bad debt Other revenue Total unrestricted revenue $ 80,483 $ 77,950 2,448 5,672 78,035 72,278 3,811 4,061 81,846 76,339 Expenses Salaries, wages and benefits Supplies, insurance and other Depreciation and amortization Interest Total expenses Income (loss) from operations 40,009 38,016 32,595 29,806 5,736 4,299 1, ,696 73,005 2,150 3,334 Non-operating gains (losses): Tax levy receipts Investment income Other - net Total non-operating gains (losses), net ,934 3,658 (750) (711) 3,371 3,143 Excess (deficiency) of revenue over expenses before drawable credited earnings due to UHHS Drawable credited earnings due to UHHS Excess (deficiency) of revenue over expenses 5,521 6,477 (1,325) (1,532) 4,196 4,945 Net change in unrealized holding gains on other-thantrading investments Net assets released from restrictions for capital Pension adjustment Contributions to Foundation from Southwest General Health Center Increase in unrestricted net assets (3,432) 3, (31,678) 26,346 (383) (447) (30,622) 34,800 Unrestricted net assets at beginning of quarter Unrestricted net assets at end of quarter 220, ,844 $ 190,314 $ 211,644 7

8 Summary Statement of Operations and Change in Net Assets of the Obligated Group Unrestricted revenue (in thousands) Twelve Months Ending December 31, 2014 Actual 2013 Actual (Unaudited) (Audited) Net patient service revenue Less: Provision for bad debts Net patient service revenue less provision for bad debt Other revenue Total unrestricted revenue $ 326,869 $ 308,208 17,630 14, , ,802 10,639 11, , ,504 Expenses Salaries, wages and benefits Supplies, insurance and other Depreciation and amortization Interest Total expenses Income (loss) from operations 149, , , ,673 20,700 17,279 4,451 2, , ,526 11,260 12,978 Non-operating gains (losses): Tax levy receipts Investment income Other - net Total non-operating gains (losses), net ,052 10,927 (3,004) (3,120) 9,827 8,590 Excess (deficiency) of revenue over expenses before drawable credited earnings due to UHHS Drawable credited earnings due to UHHS Excess (deficiency) of revenue over expenses 21,087 21,568 (5,077) (5,171) 16,010 16,397 Net change in unrealized holding gains on other-thantrading investments Net assets released from restrictions for capital Pension adjustment Contributions received from (to) Foundation from Southwest General Health Center Increase in unrestricted net assets (6,228) 7, (31,678) 26,346 (109) (557) (21,330) 50,123 Unrestricted net assets at beginning of year Unrestricted net assets at end of year 211, ,521 $ 190,314 $ 211,644 8

9 Summary Balance Sheet of the Obligated Group (in thousands) Year to Date as of December 31, 2014 December 31, 2013 (Unaudited) (Audited) Current Assets $ 76,502 $ 81,244 Investments 188, ,378 Property, Plant and Equipment 202, ,073 Other Assets 8,133 8,180 T otal Assets $ 475,169 $ 473,875 Current Liabilities $ 55,702 $ 62,990 Drawable Credited Earnings due to UHHS 5,086 5,317 Revenue Bonds 154, ,713 Other Long T erm Liabilities 70,020 47,211 Unrestricted Net Assets $ 190,314 $ 211,644 T otal Liabilities and Net Assets $ 475,169 $ 473,875 9

10 Summary Statement of Cash Flows of the Obligated Group (in thousands) Cash flows from operating activities T welve Months Ending December 31, (Unaudited) (Audited) Increase (decrease) in unrestricted net assets $ (21,330) $ 50,123 Adjustments to reconcile change in net assets to net cash provided by operating activities: Unrealized holding (gains) losses on investments 5,729 (7,708) Depreciation and amortization 13,517 2,055 (Increase) decrease in: Patient accounts receivable 2,413 (4,425) Other assets (3,258) (674) Increase (decrease) in: Accounts payable (11,012) 16,201 Other current liabilities 5,083 1,466 Estimated amounts payable to third-party payors (364) 462 Insurance claims reserve (4,510) (2,585) Workers' compensation reserve 45 (114) Accrued retirement costs 26,302 (28,304) Other long-term liabilities 1,176 (1,294) Net cash provided (used) by operating activities 13,791 25,203 Cash flows from investing activities Purchases of property, plant and equipment (43,598) (55,714) (Increase) decrease in investments 21,353 34,895 Net cash provided (used) in investing activities (22,245) (20,819) Cash flows from financing activities Increase in long-term debt 9,223 - Payments of long-term debt and capital leases (3,022) (2,648) Drawable credited earnings due to UHHS (231) (1,059) Net cash provided (used) in financing activities 5,970 (3,707) Net increase (decrease) in cash and cash equivalents (2,484) 677 Cash and cash equivalents, beginning of period 19,220 18,543 Cash and cash equivalents, end of period $ 16,736 $ 19,220 10

11 Twelve Months Ending December 31, 2014 MANAGEMENT S DISCUSSION & ANALYSIS (Discussion of dollars in thousands) The Hospital reported excess of revenue over expenses of $11,260 for the twelve months ending December 31, 2014, providing a 3.5% margin on total unrestricted revenue. The operating margin is attributed to strong surgical volume, a $2,300 decrease in pension expense from prior year based on an actuary report, offset by the capitalization of the new emergency department, critical care unit, patient bed tower and parking garage, which has created an additional $3,421 of depreciation expense and $1,917 of interest expense over prior year. Also contributing to the operating margin was $1,400 received for successful attestation to Meaningful Use. Total expenses were $308,618, which is a 5.5% increase from the prior year. The increase is mainly due to: an organization wide merit wage increase effective early May 2013; the recruitment of new physicians to the employed medical group; the capitalization of the new emergency department in January 2014, the capitalization of the 24-bed critical care unit in April 2014 and the capitalization of the patient bed tower and parking garage in October 2014; an increase in chemotherapy pharmaceuticals due to an increase in chemotherapy volume; an increase in surgical supplies directly related to an increase in surgical volume and facility expense greater than prior year due to the extreme cold temperatures at the beginning of the year. At December 31, 2014, spendable cash and investments totaled $183,800 (excluding selfinsurance trust), representing 220 days of cash on hand. Investments declined to $188,358 in 2014 due to the utilization of bond funds for the Phase I and Phase II of the construction project. Property, plant and equipment increased to $202,176 for the same reason. The new emergency department was placed into service in January 2014, the 24-bed critical care unit was placed into service in April 2014 and the patient bed tower and parking garage were placed into service in October The $31,678 pension adjustment made to unrestricted net assets reflect changes in the retirement plan assets and benefit obligations related to changes in the actuarial assumptions regarding the discount rate and the mortality assumptions used at December 31,