THE EVANGELICAL LUTHERAN GOOD SAMARITAN SOCIETY

Transcription

1 THE EVANGELICAL LUTHERAN GOOD SAMARITAN SOCIETY OBLIGATED GROUP MANAGEMENT DISCUSSION FOR THE YEAR ENDING DECEMBER 31, 2015 The Evangelical Lutheran Good Samaritan Society Obligated Group (the Society) experienced another year of underperformance resulting in net operating loss of $23.9 million. The main reason for the operating loss was the 2.7% decrease in skilled nursing census. The Society s skilled nursing occupancy is 83.7% which is slightly higher than the national skilled nursing census as reported by the National Investment Center for Senior Housing & Care (NIC). Skilled nursing locations that are smaller in unit size, lack the continuum of care, and in rural areas had greater census loss in 2015 than larger locations in more populated markets. Census decline in the locations with a fewer number of beds in service are more difficult to operate profitably because variable costs become fixed as census declines because of the diminishing economies of scale. The Society s leadership is actively evaluating the viability of a number of these locations. In addition, marketing has been focused on key markets for the Society to increase census in The Society s post-acute census per day for 2015 increased slightly from However, the Society s average Medicare and post-acute length of stay decreased by 1 day in 2015 resulting in fewer census days per day. Reducing the length of stay has been intentional by the Society. The occupancy for residential housing increased slightly from 2015 as the result of several remodeling and capital upgrade projects. The management of operating expenses was successful in a number of areas such as food, general and professional liability, workers compensation, electronic medical record implementation and other administrative costs. There were certain expense increases that exceeded the 2015 budget. Because of the tightening of available labor in a number of markets, the Society s contract labor increased from $3.1 million in 2014 to $7.3 million in Skilled nursing wages increased approximately $3 million in 2015 because of a 25% to 30% increase in the Medicaid rates for all of the Society s locations in Minnesota. This increase will also result in an equal increase in the private rates because of Minnesota s rate equalization law. The 2016 rate increase effective January 1, 2016, is expected to result in an increase of $18 to $20 million in operating revenue. The Society self-insures for group health insurance and in the fall of 2015 announced a major plan redesign for 2016 to higher deductibles with a health saving plan. The 2016 plan change resulted in the acceleration of health insurance usage in the fourth quarter of 2015 with an estimate additional 2015 expense of approximately $5 million. The Society has identified key markets and has evaluated the services presently being offered in those markets. As a result of this work, the Society has determined that its home health care services needed to strengthen through acquisition so it would be able to offer a full continuum of care to ACOs operating

2 in these markets. In January 2015, a large home health corporation was purchased in Texas with another large New Mexico home health corporation purchased in November. The number of home health visits in 2015 increased 8% because of these acquisitions and the additional growth of existing agencies. In 2015, the Society took a significant acceleration of depreciation expense recorded as a loss on disposal of fixed assets for properties that are permanently impaired per the Generally Accepted Accounting Principles guidelines. These properties are being evaluated by senior management and the board for future divesture. The unrealized loss in market value for the Society s fixed income and equity investments was $15.9 million for The Society has 8 separate professional managers for its diversified portfolio that is allocated 55% equity and 45% fixed income. The Society has not made a significant repositioning of the portfolio, but continues to rebalance on a quarterly basis when necessary.

3 THE EVANGELICAL LUTHERAN GOOD SAMARITAN SOCIETY OBLIGATED GROUP CONSOLIDATED BALANCE SHEET AS OF 12/31/2015 Obligated Group Obligated Group 12/31/15 12/31/14 CONSOLIDATED CONSOLIDATED TOTAL TOTAL % CHANGE CURRENT ASSETS Cash and Cash Equivalents 11,042,336 11,808, % Investments 283,273, ,036, % Accounts Receivable 86,361,340 76,356, % Notes, Other Curr Receivable 17,894,251 24,928, % Supplies Inventory 3,943,369 4,010, % Prepaid Expenses 5,931,793 3,450, % TOTAL CURRENT ASSETS 408,446, ,589, % ASSETS LIMITED AS TO USE Investments - Mgmt Designated 53,357,079 61,349, % Investments - Defease Bond Res 77,599, % Investments - Bond Retirement 87,306,354 43,671, % TOTAL INVESTMENTS-LIMITED 218,263, ,021, % PROPERTY Land and Land Improvements 162,556, ,728, % Buildings 1,418,660,783 1,375,417, % Furniture and Equipment 282,333, ,095, % Motor Vehicles 19,699,827 18,774, % subtotal 1,883,251,030 1,808,016, % Less: Accum.Depreciation (1,031,343,122) (973,250,071) 6.0% subtotal 851,907, ,766, % Construction in Progress 134,192, ,704, % TOTAL PROPERTY 986,100, ,470, % OTHER ASSETS Notes Reveivable & Other Assets 76,825,656 89,459, % Investments Donor Restricted 37,537,758 38,178, % Investments - Partnerships 20,578,916 20,314, % Deferred Finance Fees 5,225,511 3,345, % TOTAL OTHER ASSETS 140,167, ,297, % TOTAL ASSETS 1,752,978,338 1,646,379, % CURRENT LIABILITIES Current Matur. of L-T Debt 181,178,002 19,461, % Resident Fund, Prepaid Rents 1,805,799 1,239, % Accounts Payable 53,353,965 59,979, % Accrued Salaries and Wages 19,828,207 17,096, % Accrued Vacation 27,650,914 26,940, % Accrued Sick 43,317 47, % Acc. Payroll Tax, Empl Ben. 18,960,261 16,108, % Accrued Insurance 2,739,275 3,661, % Accrued Interest 2,475,960 2,037, % Other Current Liabilities 5,087,524 3,943, % TOTAL CURRENT LIABILITIES 313,123, ,514, %

4 L-T DEBT (Less Curr. Matur.) 590,601, ,063, % ENTRY FEES, OTHER LIAB. 123,375, ,316, % ANNUITIES 2,509,077 3,214, % TOTAL LIABILITIES 1,029,609, ,109, % NET ASSETS Unrestricted 684,177, ,278, % Temporary Restricted 16,233,600 19,688, % Permanently Restricted 22,958,122 37,303, % TOTAL NET ASSETS 723,369, ,270, % TOTAL LIABILITIES AND NET ASSETS 1,752,978,338 1,646,379, %

5 OPERATING REVENUES CURRENT MONTH ACTUAL 12/31/2015 CURRENT MONTH BUDGET VARIANCE YEAR TO DATE ACTUAL YEAR TO DATE BUDGET VARIANCE PRIOR YR TO DATE ACTUAL Resident Routine Care 72,384,404 75,708,318 (3,323,914) 857,428, ,774,532 (34,346,135) 863,086,746 Ancillary Services 11,661,970 8,299,348 3,362, ,966,675 97,717,281 3,249,394 74,546,314 Employee/Guest Meals 427, ,957 (98,342) 5,740,044 6,192,615 (452,571) 6,153,805 Resource Development 389, ,860 86,493 2,644,296 3,565,867 (921,571) 3,293,529 Administrative Services 159, ,887 (106,035) 4,412,619 3,130,603 1,282,016 3,392,274 Net Assets Rel'd from Op Res (2,159,972) 139,332 (2,299,304) 1,873,506 1,640, ,027 2,743,407 Discontinued Operations 10,408 (513,484) 523,892 (2,496,412) (6,045,861) 3,549,449 (9,958,632) Other Revenue 2,242,227 1,673, ,958 28,244,847 19,697,665 8,547,182 20,853,839 TOTAL OPERATING REVENUES 85,115,857 86,401,487 (1,285,630) 998,813,972 1,017,673,181 (18,859,209) 964,111,282 OPERATING EXPENSES Administrative 23,176,972 22,268, , ,790, ,303,357 (2,512,873) 252,204,197 Resource Development 192, ,354 (98,343) 2,689,067 3,418,353 (729,286) 3,175,842 Resident care 28,796,801 27,757,756 1,039, ,792, ,823,616 7,968, ,398,304 Rehabilitation 4,382,057 4,168, ,129 49,845,228 49,085, ,661 55,823,819 Activity Services 1,422,659 1,324,784 97,875 15,404,217 15,597,479 (193,262) 15,061,942 Social Services 876, ,271 (35,399) 10,283,673 10,740,934 (457,261) 10,992,981 Laundry 927, ,561 12,246 10,346,360 10,779,523 (433,163) 10,662,679 Housekeeping 1,653,233 1,681,861 (28,628) 18,512,709 19,801,951 (1,289,242) 19,512,023 Diatary 8,491,363 7,969, ,338 93,542,113 93,827,870 (285,757) 95,443,918 Universal 1,822,252 1,126, ,233 11,033,958 13,257,795 (2,223,837) 13,255,618 Barber/Beauty Shop 68,807 74,628 (5,821) 811, ,628 (66,810) 882,391 Special Care 5,792,204 3,416,751 2,375,453 44,972,409 40,229,291 4,743,118 21,783,435 Operations/Maintenance 6,466,277 6,136, ,759 69,834,906 72,352,357 (2,517,451) 71,675,303 Property/Financial 443, ,347 44,414 5,155,533 4,727, ,825 3,875,159 Interest 1,949,546 2,065,631 (116,085) 23,799,228 24,345,819 (546,591) 22,434,571 Depreciation 6,535,039 5,999, ,484 71,516,458 70,699, ,687 67,371,126 Discontinued Operations (60,794) (507,307) 446,513 (3,510,948) (5,973,062) 2,462,114 (12,322,534) Other Opearting Expenses 331, ,330 (2,756) 3,932,660 3,953,499 (20,839) 3,936,840 TOTAL OPERATING EXPENSES 93,268,441 86,334,279 6,934,162 1,022,752,079 1,016,850,456 5,901, ,167,614 OPERATING INCOME (LOSS) (8,152,584) 67,208 (8,219,792) (23,938,107) 822,725 (24,760,832) (22,056,332) NON-OPERATING GAINS (LOSSES) OBLIGATED GROUP STATEMENT OF OPERATIONS Income from Investments 194, ,603 (591,167) 6,833,906 9,249,573 (2,415,667) 8,415,169 Gain/Loss on Disposals (13,220,859) 0 (13,220,859) (10,964,317) 0 (10,964,317) (16,239,060) Discontinued Operations-Net (71,202) 6,177 (77,379) (1,014,536) 72,799 (1,087,335) (2,363,902) Net Assets Rel' d-prop Restrc (1,724,290) 370,357 (2,094,647) 5,171,832 4,360, ,192 12,698,509 Realized Gain (Loss) 5, ,023 9,648, ,648,205 4,215,745 Unrealized Mrkt Val Gain (Loss) (5,429,758) 0 (5,429,758) (15,882,378) 0 (15,882,378) 13,335,654 TOTAL NON-OPERATING GAINS (20,246,650) 1,162,137 (21,408,787) (6,207,288) 13,683,012 (19,890,300) 20,062,115 INCREASE IN UNRESTRICTED N.A. (28,399,234) 1,229,345 (29,628,579) (30,145,395) 14,505,737 (44,651,132) (1,994,217) **Estimated eliminating entries are only included in YTD Actual.

6 Master Trust Indenture Debt Service Coverage Ratio Calculation- Obligated Group ($ in Thousands) PRELIMINARY-UNAUDITED (Deficiency)/Excess of Revenue over Expense $ (30,145) Add: Unrealized (Gain)Loss on Investments 15,882 Interest Expense 23,799 Depreciation Expense 71,516 Amortization Expense (155) (Gain)Loss on Disposal and Impairment of Property 10,964 Net Assets Released from Restrictions (5,172) Income Available for Debt Service $ 86, Maximum Annual Debt Service $ 41,564 Debt Service Coverage Ratio 2.09 Required Debt Service Coverage Under Master Trust Indenture 1.15

7 PRELIMINARY-UNAUDITED Master Trust Indenture Days Cash on Hand - Obligated Group ($ in Thousands) Cash and Cash Equivalents $ 11,042 Investments (Current) 283,273 Investments (Assets Limited as to Use) 53,357 Total Cash Available $ 347,672 Total Operating Expenses $ 1,022,752 Less: Depreciation (71,516) Amortization 155 Adjusted Operating Expenses $ 951,391 Days Cash on Hand 133