I LJ~LEY MEDICAL CENTER Consolidated Financial Statement For the Nine Months Ended March 31, 2017
Hurley Medical Center Nine Month Period Ended March 31, 2017 Management Discussion and Analysis For the nine months ended March 31, 2017, the Medical Center had a consolidated net gain from operations of $15.7 million. The consolidation includes the results of the Medical Center and its affiliate, Hurley Health Services. There was a significant decline in operations as compared to the prior period gain of $23.0 million but the results were an improvement over the same period from 2 years ago. Inpatient activity improved from the prior year. Discharges were 1.6% ahead of prior year's level at 16,779 discharges and inpatient days increased to 83,444 days reflecting a decrease in the length of stay. The Medical Center's volume continues to grow and this has also been reflected in the Michigan Hospital Association's market analysis, showing the Medical Center's lead in market share for the last twelve published quarters. In addition to improved inpatient volumes, there were also improvements in the overall outpatient volumes reflecting an increase of outpatient revenue by 2.8%. Although the inpatient and outpatient volumes have increased there has been a slight decline in the overall reimbursement rates. This decline has been partially offset by the continued reduction in bad debt and charity care rates write-offs. Other Operating Revenues has increased approximately 13.6 % which reflects the professional revenue associated with higher patient volumes and an electronic medical record incentive payment. Operating expenses increased by 7.3% from the period over the comparable prior year. The largest increase reflects the additional pension expense associated with the GASB pension pronouncement including the changes in actuarial assumptions and soft investment returns on pension assets. The other increases in wages and medical expenses correlate with the increased volume levels. Non-Operating Revenue/Expense declined by $5.0 million over the prior year primarily due to the unrealized loss in the bond investment market in FY2017 vs. an unrealized investment gain in FY2016. The Medical Center's investment policy is restricted by the State of Michigan law Public Act 20, which restricts investments to US backed governmental securities. Also, in the prior year there was a gain on the sale of an ownership interest in a group purchase organization. Balance sheet accounts have steady improvement from the prior year. The days cash on hand increased to 159.1 days from 128.0 days in the prior year and the days of revenue in gross accounts receivable decreased to 48.9 days verses 53.2 days in the prior year. The increase in patient activity and lowering of accounts receivable resulted in an improved cash position. -1-
Consolidated Statement of Fund Net Position March 31, 2017 and 2016 Assets Current Assets: Cash and Cash Equivalents $ 68,531,736 $ 68,897,273 Accounts Receivable, net 42,773,373 40,685,443 Third Party Receivable 3,356,685 8,888,770 Accounts Receivable-Other 6,370,066 5,077,678 Inventory 5,952,951 5,770,473 Prepaid Expense 5, 183,779 3,738,085 Current Portion of Assets Whose Use is Limited 7,029,815 6,903,600 Total Current Assets 139, 198,405 139,961,322 Assets Whose Use is Limited: Board Designated Investments 121,325,176 77,132,459 Held in Trust - Other 18,637,654 16,389,493 Held in Trust - Bond 14,391,648 14,286,842 Total Assets Whose Use is Limited 154,354,478 107,808,794 Less Current Portion of Assets Whose Use is Limited (7,029,815) (6,903,600) Noncurrent Assets Whose Use is Limited 147,324,663 100,905, 194 Property, Plant and Equipment 306,624,592 303,430,621 Less Accumulated Depreciation {207, 719, 184} {198,091,992} Net Property, Plant and Equipment 98,905,408 105,338,629 Other Assets: Deferred Defeasance, net 614,764 828, 121 Investments in Joint Ventures 6,605,256 7,114,898 Deferred Pension Outflows 47,520,292 9,565,403 Other 1,300,000 1, 154, 103 Total Other Assets 56,040,312 18,662,525 Total Assets $ 441,468, 788 $ 364,867,670-2-
Consolidated Statement of Fund Net Position March 31, 2017 and 2016 Liabilities and Fund Net Position 3/31/2017 Current Liabilities: Current Portion of Debt $ 5,774,882 Accounts Payable 13,464,634 Third Party Settlements Payable 29,898,752 Other Accrued Expenses 28,079,841 Total Current Liabilities 77,218,109 Long Term Liabilities: Accrued Expenses 26,890,121 Debt, less Current Portion 80,473,360 Net Pension Liability 175,007,489 Deferred Pension Inflows 11,726,468 Total Noncurrent Liabilities 294,097,438 Fund Net Position: Unrestricted 62,660,848 Restricted 7,492,393 Total Fund Net Position 70,153,241 Total Liabilities and Fund Net Position $ 441,468,788 3/31/2016 $ 5,587,866 19,360,468 29,385,931 30,057,983 84,392,248 27,507,219 86,880,482 130,935,730 0 245,323,431 28, 145,850 7,006,141 35,151,991 $ 364,867,670-3-
Consolidated Statement of Revenue and Expense For the Period Ended March 31, 2017 and 2016 Year-to-Date Year-to-Date Patient Service Revenue: Inpatient Revenue Outpatient Revenue Gross Patient Service Revenue Less: Contractual Allowances Charity Care Provision for Uncollectible Accounts Net Patient Service Revenue Other Operating Revenue Total Operating Revenue Operating Expense: Salaries and Wages Professional Salaries Agency Payroll Taxes and Fringes Medical Supplies Supplies - Non-Clinical Maintenance and Repairs Utilities Other Purchased Services Depreciation Total Operating Expense lncome/(loss) from Operations Other Non-Operating Revenue/Expense Interest Expense Total Non-Operating Revenue/(Expense) $ 654, 731,566 $ 651,198,615 442,223,232 430,176,990 1,096,954,798 1,081,375,605 761,477,028 749,086,207 10,342,626 11,807,096 6,503,459 13,638,322 318,631,685 306,843,980 30,008,128 26,382,424 348,639,813 333,226,404 151,669,022 145,661,969 19,924,305 19,809,086 3,669,350 2,292,297 60,134,209 50,032,682 43,062,487 40,117,784 1,882,714 1,837, 143 3,420,071 3,359,598 4,707,078 4,254,049 31,231,832 29,851,472 13,224,998 13,009,899 332,926,066 310,225,979 15,713,747 23,000,425 (1,721,463) 3,277,144 {3,753,606) {3,947,480) (5,475,069) (670,336) Excess Revenue over Expense $ 10,238,678 $ 22,330,089-4-
Consolidated Statement of Changes in Fund Net Position For the Period Ended March 31, 2017 and 2016 Unrestricted Fund Net Position: Balance at the Beginning of the Year $ 52,422, 170 $ 5,815,761 Excess of Revenue over Expense 10,238,678 22,330,089 Balance at the End of the Period $ 62,660,848 $ 28,145,850 Restricted Fund Net Position: Balance at the Beginning of the Year $ 7,563,241 $ 6,955,557 Restricted Gifts and Bequests 96,561 459,771 Income from Investments 3 5 Transfer of Funds: To Unrestriced Funds: Property, Plant, Equipment Additions (128,904) 0 Other Operating Revenue (38,508) (409, 192) Balance at the End of the Period $ 7,492,393 $ 7,006,141-5-
Consolidated Statement of Cash Flows For the Period Ended March 31, 2017 and 2016 Cash Flows from operating activities: Revenues in excess of expenses $ Adjustments to reconcile revenue in excess of expenses to net cash provided by operating activities : Depreciation Amortizaton of Deferred Defeasance (Gain)/Loss on disposal of equipment Pension Liability and Deferred Outflows Change in operating assets and liabilities: Accounts receivable Inventories Prepaid Expenses Assets Whose Use is Limited Accounts Payable Other Accrued Expenses Amounts Due to Restriced Funds Net cash provided by (used in) operating activities Cash Flows from investing activities: 10,238,678 $ 22,330,089 Purchase of property and equipment Equity Distribution (Purchase) of accumulated earnings from Joint Ventures Proceeds from Sale of Assets Disposal(purchase) of Assets Whose Use is Limited 13,224,998 13,009,899 152,295 183,185 Net cash provided by (used in) 3,867 17,078 investing activities 9,768,408 0 Cash Flows from financing activities: Proceeds from debt 10,441,450 9,146,181 Repayment of debt (36,940) (46,740) (1,462,287) (804,900) Net cash provided by (used in) (27,691,050) (25, 120,092) finance activities (10,241,463) (1,636,274) 2,185,431 4,929,857 Net Increase (decrease) in cash (70,848) 50,584 Cash at the beginning of year 6,512,539 22,058,867 Cash at the end of the period (7,571,545) (13,027,630) 51,332 (320,000) 0 0 2,491,671 5,204,568 (5,028,542) (8,143,062) 123,255 540,000 (6,010,063) (5,717,403) (5,886,808) (5,177,403) (4,402,811) 8,738,402 72,934,547 60,158,871 $ 68,531,736 $ 68,897,273-6-
Hurley Medical Center Utilization Statistics For the Period Ended March 31, 2017 and 2016 Utilization: Licensed Beds 443 443 Discharges 16,779 16,512 Patient Days 83,444 82,491 Average Length of Stay (days) 4.97 5.00 Inpatient Surgeries 3,333 3,482 Observation Cases 1,400 1,428 Observation Days 2,619 2,242 Emergency Room Visits 74,157 76,328 Other Outpatient Visits 300,058 276, 173 Ambulatory Surgery Cases 4,906 4,786 Medicare Case Mix Index 1.53 1.59 Source of Patient Service Revenue: Medicare 21.43% 22.34% Medicare HMO 8.99% 7.73% Medicaid 7.63% 8.72% Medicaid HMO 38.31% 36.73% Blue Cross 9.27% 9.01% Commercial HMOs 4.16% 5.53% All Others 10.25% 9.94% Total 100.04% 100.00% -7-