Board of Directors September 28, 2017
COVENANT HEALTH AND COMMUNITY SERVICES, INC. BOARD OF DIRECTORS MEETING September 28, 2017 at 8:30 a.m. Conference Call: 1 (719) 457-6209 Passcode: 170672# AGENDA (p. 1) CONVENING OF MEETING TOM OWENS MINUTES OF THE COVENANT HEALTH AND COMMUNITY SERVICES BOARD OF DIRECTORS MEETING OF JULY 27, 2017 (pp. 2-4) ***** TOM OWENS COVENANT CARE AUGUST 2017 AND YTD FINANCIAL STATEMENTS (pp. 5-17) ***** ODIN BERG FOCUSED DISCUSSION INTRODUCTIONS: COO; VP, FINANCE (pp.18-19 ) JEFF MISLEVY WFCC UPDATE QRSC COMMITTEE REPORT FOUNDATION NAME CONSOLIDATION PRESIDENT S REPORT OTHER BUSINESS AS SUBMITTED ADJOURNMENT JEFF MISLEVY KARA BENEDICT AARON WEST JEFF MISLEVY TOM OWENS TOM OWENS NOTES: **** DENOTES VOTE OR OTHER ACTION REQUIRED 1
Covenant Health and Community Services, Inc. BOARD OF DIRECTORS MEETING July 27, 2017 MINUTES MEMBERS PRESENT: MEMBERS ABSENT: LEADERSHIP STAFF: Carey King Don Haferkamp Jamie Campbell Jeff Mislevy JT Young Patrice Villemure Rodney Guttmann Roger Poitras Susan Davis Steve Sarros Teresa Dos Santos Tom Owens Xan Smith Bill Greenhut Brett Parra Janet Kinney Kent Skolrood Wanda Kaye Hambrick Todd Fisher Odin Berg Amy Bajjaly Aaron West Rhonda Jordan Kara Benedict INTRODUCTION Mr. Owens convened the meeting at 8:34 a.m. and thanked everyone for attending. MINUTES Mr. Owens called for a motion to approve the minutes of the Covenant Health and Community Services Board Meeting of May 25, 2017. A motion was made and passed. FINANCIAL REPORTS Covenant Care June 2017 Consolidated Financial Report 2
COVENANT HEALTH AND COMMUNITY SERVICES, INC. BOARD OF DIRECTORS July 27, 2017 cont. Mr. Berg reported the following financial highlights: Covenant Health and Community Services: operating margin for the month was ($64,097); YTD operating loss was ($472,257) Covenant Hospice: operating margin for the month was $89,490; YTD operating margin was $304,493 Peoples Home Health: operating margin for the month was $151,036; YTD operating margin was $1,173,920 Covenant Hospice Foundation: net income of ($433); YTD net income was $355,109. After discussion, Mr. Owens called for a motion to approve the Covenant Care June 2017 and YTD Financial Report. A motion was made and passed. FOCUSED DISCUSSION West Florida Care Center Mr. Mislevy gave an overview of recent discussions with West Florida Hospital (WFH) administration regarding the potential relocation of Covenant s inpatient hospice unit. Relocating the unit to the first floor would improve the status of patient rooms and clinical spaces as well as provide an opportunity for better brand visibility. Ongoing dialogue with WFH administration included lease space and terms, and build-out requirements. Mr. Owens emphasized the positive impact of the strategically-aligned growth initiative for both entities. Mr. Mislevy explained that more information would be provided as negotiations progressed. Ratification of Covenant At Home, Inc. Management Board Mr. Berg explained that the bylaws of Covenant At Home, Inc. had been approved by its original directors in 2016. Likewise, Covenant At Home board members approved and elected the following 2017 Slate of Officers at its annual meeting: COVENANT AT HOME, INC. OFFICERS: Odin Berg, Chair James Smith, MD, Vice Chair Jeff Mislevy, Treasurer Todd Fisher, Secretary At the advice of legal counsel, the above-stated 2017 Slate of Officers for Covenant At Home, Inc. s Management Board required ratification by Covenant Health and Community Services, Inc. s Board of Directors. 3
COVENANT HEALTH AND COMMUNITY SERVICES, INC. BOARD OF DIRECTORS July 27, 2017 cont. After discussion, Mr. Owens called for the ratification of the 2017 Management Board for Covenant At Home, Inc. The motion was made and passed. Quality, Risk, Safety and Compliance Committee Report Mr. Owens gave an update on the committee s recent activities. The committee met regularly to monitor the implementation and outcomes of the Plan of Correction for Alabama and Florida service areas. Mr. Owens noted that the ongoing remediation and resource commitment had a financial impact as well. Ms. Benedict provided a detailed report on the progress made as a result of the Plan of Correction efforts. Also, a summary of the Navigant Report findings was presented for review and discussion. Ms. Benedict explained that the Quality Assurance/Process Improvement Committee continued to review and audit quality outcomes. Memory Care Update Mr. Fisher provided an update on the new memory care assisted living facility, The Residence. Renovation of the building was underway and completion of construction was expected by late October. Opening of The Residence was scheduled for January 1, 2018. The total capital budget for the project was $2,430,150. This new 22-bed facility would provide housing for residents and a portfolio of services for Alzheimer s and dementia patients and their caregivers. Mr. West presented various donor opportunities that were available to support The Residence and other community-based memory care programs and services. ADJOURNMENT There being no further business to discuss, the meeting was adjourned at 9:40 a.m. Submitted By: Carey King, Secretary 4
August 2017 Consolidated Financial Statements: CEO/CFO REPORT August 2017 marked the 9 th consecutive month of positive operating and overall financial performance 1. Covenant Care, consolidated results: August: Operating margin of $45,077; net income of $51,234 YTD: Operating margin of $696,633; net income of $1,348,282. 2. Covenant Hospice results: Covenant Hospice realized an August Operating Income of $11,340 (+0.2%); net non-operating revenue of ($5,218) produced a Net Income of $6,122 (0.1%). YTD Operating Margin is $582,378 (+1.6%) and YTD Net Income is $957,841 (+2.6%). 3. Peoples Home Health results: Peoples Home Health, achieved an August Operating Income of $173,544 (+15.5%). YTD Operating Margin is $1,499,715 (+17.0%). (Peoples non-operating revenues or expenses are immaterial.) 4. Covenant Health & Community Services (d/b/a Covenant Care ): Covenant Health & Community Services had an August operating loss of ($45,955) and a YTD operating loss of ($590,408). CHCS YTD expenses include $221,363 in compensation costs, and $364,993 in legal and consulting expenses. 5. Covenant Hospice Foundation: Covenant Hospice Foundation realized an August Net Loss of ($14,013). YTD Net Income is $56,472. 6. Construction-in-progress ( CIP ): As of 08/31/17, CIP for the two outstanding construction projects is $2,776,668: o Sacred Heart Hospital, hospice inpatient center: $1,634,015 (opened September 5, 2017) o Covenant Alzheimer s Services, The Residence memory care center: $1,142,653 5
August 2017 Consolidated Financial Statements STATISTICAL HIGHLIGHTS SUMMARY OF AUGUST STATISTICS: Covenant Hospice key statistics: --Average Daily Census: 770 (August); 778 (YTD) --Average Length of Stay: 59.8 (August); 54.7 (YTD) --Total admissions: 399 (August); 3,454 (YTD) [Average per month 432] --Inpatient admissions: 207 (August); 1,697 (YTD) [Average per month 212] --Deaths: 346 (August); 2,978 (YTD) [Average per month 372] Peoples Home Health key statistics: --Medicare & Medicare-like episodes: 413 (August); 3,389 (YTD) [Average per month 424] --Home health visits: 7,708 (August); 57,062 (YTD) [Average per month 7,133] --Average Medicare episode payment: $2,370 (YTD actual); $2,347 (2017 budget) --YTD 30-day readmissions: 16% Total Covenant Care activity: Admissions, August: 399 end-of-life admissions; 413 homebound admissions; 812 total admissions. Admissions, YTD: 3,454 end-of-life admissions; 3,280 homebound admissions; 6,734 total admissions Average daily census, August: 770, hospice ADC; 804, home health ADC; 1,574, total ADC Average daily census, YTD: 778, hospice ADC; 781, home health ADC; 1,559, total ADC 6
Covenant Care Month of August 2017 - Financial Results COVENANT CARE COMBINED STATEMENT OF OPERATIONS AUGUST 31, 2017 BUDGET ANALYSIS AUGUST COMBINED BUDGET VARIANCE % VARIANCE 2016 NET PATIENT/FAMILY CARE/PROGRAM REVENUE 5,724,546 6,490,546 (766,000) -11.8% 5,587,610 TOTAL PATIENT/FAMILY CARE EXPENSES 4,020,511 4,464,918 (444,407) -10.0% 4,332,481 CONTRIBUTIONS FROM OPERATIONS 1,704,035 2,025,628 (321,593) -15.9% 1,255,129 CONTRIBUTION % 29.8% 31.2% -1.4% 22.5% GENERAL & ADMINISTRATIVE EXPENSES Other Direct 734,117 954,372 (220,255) -23.1% 866,614 Payroll 796,836 918,582 (121,747) -13.3% 658,265 Benefits 128,006 162,706 (34,700) -21.3% 108,962 Allocation from CHCS - - - 0.0% - TOTAL G&A EXPENSES 1,658,958 2,035,660 (376,702) -18.5% 1,633,841 OPERATING MARGIN 45,077 (10,032) 55,109-549.3% (378,712) OPERATING MARGIN % 0.8% -0.2% 0.9% -6.8% NON-OPERATING REVENUES Contributions and fundraising 46,225 63,571 (17,346) -27.3% 48,674 Other Non-Operating Revenues 53,051 27,341 25,711 94.0% (4,321) Development/Fundraising Expense (52,604) (77,434) 24,829-32.1% (51,176) Other Non-Operating Expense (40,515) (35,809) (4,707) 13.1% (33,255) Contributions to Affiliates - - - 0.0% - NET NON-OPERATING REVENUE 6,157 (22,331) 28,488-127.6% (40,078) EXCESS OF REVENUE OVER EXPENSES 51,234 (32,363) 83,597-258.3% (418,790) 7
Covenant Care YTD August 2017 - Financial Results COVENANT CARE COMBINED STATEMENT OF OPERATIONS AUGUST 31, 2017 BUDGET ANALYSIS YTD AUGUST COMBINED BUDGET VARIANCE % VARIANCE 2016 NET PATIENT/FAMILY CARE/PROGRAM REVENUE 45,325,513 50,877,583 (5,552,070) -10.9% 43,463,223 TOTAL PATIENT/FAMILY CARE EXPENSES 30,655,321 35,294,610 (4,639,289) -13.1% 31,819,536 CONTRIBUTIONS FROM OPERATIONS 14,670,192 15,582,973 (912,781) -5.9% 11,643,686 CONTRIBUTION % 32.4% 30.6% 1.7% 26.8% GENERAL & ADMINISTRATIVE EXPENSES Other Direct 6,471,688 7,173,966 (702,278) -9.8% 7,356,382 Payroll 6,365,161 7,093,538 (728,376) -10.3% 4,183,006 Benefits 1,136,710 1,306,614 (169,905) -13.0% 747,926 Allocation from CHCS - - - 0.0% - TOTAL G&A EXPENSES 13,973,559 15,574,117 (1,600,559) -10.3% 12,287,314 OPERATING MARGIN 696,633 8,856 687,777 7766.5% (643,628) OPERATING MARGIN % 1.5% 0.0% 1.5% -1.5% NON-OPERATING REVENUES Contributions and fundraising 739,313 537,817 201,496 37.5% 636,096 Other Non-Operating Revenues 803,814 317,728 486,086 153.0% 609,367 Development/Fundraising Expense (622,496) (638,145) 15,649-2.5% (715,671) Other Non-Operating Expense (268,981) (236,202) (32,779) 13.9% (362,583) Contributions to Affiliates - - - 0.0% - NET NON-OPERATING REVENUE 651,650 (18,802) 670,452-3565.8% 167,208 EXCESS OF REVENUE OVER EXPENSES 1,348,282 (9,947) 1,358,229-13655.2% (476,420) 8
$1,200,000 Covenant Care: June 2016 - September 2017 Actual & Projected - Consolidated Operating Margin & Net Income $1,000,000 972,858 $800,000 $600,000 $400,000 $200,000 $- $(200,000) $(400,000) $(600,000) Jan 2016 103,825 Feb 2016 (134,962) (143,720) (197,384) (260,130) 253,953 Mar 2016 143,839 44,484 Apr 2016 (111,015) 107,219 May 2016 (268,074) 269,094 Jun 2016 19,409 7,228 Jul 2016 Aug 2016 (378,712) (418,790) Sep 2016 (643,204) Oct 2016 (171,692) (455,023) (460,704) (558,877) 76,441 Nov Dec (52,305) 2016 2016 137,588 93,112 57,601 69,544 36,018 Jan 2017 Feb 2017 347,579 Mar 2017 211,698 11,181 Apr 2017 166,916 252,684 140,454 77,764 73,853 99,633 51,234 39,642 45,077 May 2017 Jun 2017 Jul 2017 136,277 14,726 Aug Sep Oct Nov 2017 2017 2017 2017 PROJ PROJ PROJ (27,934) (23,042) (22,815) $(800,000) Operating Margin Net Income 9
Covenant Care Balance Sheet COVENANT CARE CONSOLIDATED STATEMENT OF CONDITION AUGUST 31, 2017 ASSETS AUG. 31, 2017 COMBINED CASH & EQUIVALENTS 4,506,298 TOTAL INVESTMENTS 21,136,986 TOTAL CASH & INVESTMENTS 25,643,284 GROSS ACCOUNTS RECEIVABLES 13,472,781 RECEIVABLE ALLOWANCES (1,347,619) NET ACCOUNTS RECEIVABLES 12,125,162 OTHER CURRENT ASSETS 4,614,372 TOTAL CURRENT ASSETS 42,382,818 LAND 1,936,722 BUILDINGS & IMPROVENTS 12,627,696 LEASEHOLD IMPROVEMENTS 2,269,009 FURNITURE, FIXTURES & EQUIPMENT 9,317,630 CONSTRUCTION IN PROGRESS 2,782,744 28,933,800 LESS ACCUMULATED DEPRECIATION (12,774,420) NET PROPERTY & EQUIPMENT 16,159,380 TOTAL INTANGIBLE ASSETS 9,531,190 TOTAL ASSETS 68,073,388 LIABILITIES & FUND BALANCE CURRENT LIABILITIES CURRENT PORTION OF LONG-TERM DEBT 448,784 ACCOUNTS PAYABLE 3,172,365 ADVANCES AGAINST ACCOUNTS RECEIVABLE 5,203,711 OTHER ACCRUALS 3,749,689 TOTAL CURRENT LIABILITIES 12,574,549 LONG-TERM LIABILITIES MORTGAGE PAYABLE 6,046,303 OTHER LONG TERM LOANS 11,529,180 LESS CURRENT PORTION (448,784) LONG-TERM CHARITABLE ANNUITIES 14,305 TOTAL LONG-TERM LIABILITIES 17,141,003 TOTAL LIABILITIES 29,715,552 NET ASSETS: UNRESTRICTED 34,934,692 BOARD DESIGNATED 885,711 TEMPORARILY RESTRICTED 2,537,433 TOTAL NET ASSETS 38,357,836 TOTAL LIABILITIES & NET ASSETS 67,300,720 10
Covenant Care August 2017 Balance Sheet Ratios & Bond Covenants BALANCE BALANCE 08/31/2017 12/31/2016 CASH ON HAND 146 119 DAYS REVENUE OUTSTANDING 67 72 DAYS REVENUE, EXCLUDING FLORIDA MEDICAID MANAGED CARE 49 57 DAYS PAYABLE OUTSTANDING 52 33 DEBT TO FUND BALANCE 0.8 0.8 CURRENT ASSETS TO CURRENT LIABILITIES 3.0 3.1 BOND FINANCIAL COVENANTS August 31, 2017 REQ. Ratio of Maximum Debt to Tangible Net Worth < 2.5:1 AMOUNTS MET? This bond covenant measures the relationship of all debt, if due and payable today, to Covenant Hospice's net worth 0.56 Y Minimum Tangible Net Worth > $6,500,000 This bond covenant calls for a minimum tangible net worth. Net worth related to intangible assets are excluded. $34,003,820 Y Minimum Fixed Charge Coverage of 1.10:1.0 This bond covenant compares fixed charges, including lease expense, to the earnings aviailable to pay these charges 2.62:1.0 Y Liquidity of $5,000,000 or more This ratios measures the amount of cash or "near cash" to meet immediate or short-term obligations $5,232,865 Y 11
Covenant Care Year-to-date Capital Expenditures Capital Expenditures, YTD 2017 Software.. $19,800 Bay Medical IPC, furniture....$9,528 Providence Hospital IPC, furniture...$18,329 LED TVs, various locations......$6,000 Other.... $20,417 Total $74,068 Capital Expenditures, Construction in Progress, YTD 2017 [2017 Budget - $1,245,850; unspent CapEx primarily relates to IS and leasehold improvement costs] Sacred Heart IPC $1,634,015 The Residence, Memory Care Center. $1,142,653 Total $2,776,668 [2017 Budget - $4,730,000; estimated total project costs are currently tracking to budget.] 12
Covenant Care Medicare Regulatory Changes for Fiscal Year 2018 - Hospice Key changes related to finance for hospices: Structure of U-shaped curve reimbursement system is unchanged for FY18 Components of U-shaped curve Tier 1 per diem, Tier 2 per diem and Service Intensity Add-on ( SIA ) payment each will increase about 1%. General Inpatient Rates will also increase 1%: Tier 1 FY18 National Rate - $192.80 (Escambia County - $166.29) [FY18 increase of about $200,000] Tier 2 FY18 National Rate - $151.41 (Escambia County - $129.61) [FY18 increase of about $100,000] SIA FY18 National Rate - $40.68/hour (Escambia County - $35.09) [FY18 increase of about $5,000] General Inpatient Rate - $743.55 (Escambia County - $648.36) [FY18 increase of about $100,000] The Aggregate Cap on hospice payments per patient also will increase 1%, to a national average rate of $28,689.04 [Most recent Covenant cap calculations, November, 2016: FL - $11,413; AL - $12,783] Covenant is in compliance. For FY18, quality and service adjustments will be made only to hospices who do not submit quality and satisfaction data Hospice Item Set ( HIS ) & Consumer Assessment of Healthcare Providers & Systems ( CAHPS ) During the regulatory comment period, many hospices requested that the SIA payments be automatic currently, hospices must bill to be paid. CMS acknowledged the request, but did not change the requirement Many hospice providers noted comments in the Federal Register regarding possible future changes for levels of referral source documentation required in the admitting hospice s medical record Separately, the Medicare Payment Advisory Commission ( MedPAC ) an advisory committee to CMS has expressed concern over the last 2 years about overpayments and misaligned incentives for post-acute care providers. A unified post-acute care payment system is under consideration, started in FY21. (Post-acute care providers include SNFs, HHAs, IRFs, LTCHs and hospice providers.) 13
Medicare Regulatory Changes for Calendar Year 2018 Home Health Key changes related to finance for Medicare-certified home health agencies: NOTE: CY18 rule is not final. Proposed preliminary rule was issued 07/25/17. The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that updates the Medicare Home Health Prospective Payment System (HH PPS) rates and wage index for calendar year (CY) 2018. The proposed policies included in the rule include: 0.4 percent decrease (-$80 million) in payments to HHAs in CY 2018. For CY 2019 payments, CMS proposes to implement an alternative case-mix adjustment methodology, the Home Health Groupings Model (HHGM). The HHGM would use 30-day periods, rather than 60-day episodes, and rely more heavily on clinical characteristics and other patient information (e.g., principal diagnosis, functional level, comorbid conditions, referral source, and timing) to place patients into more meaningful payment categories. For the HH Quality Reporting Program (QRP), CMS is proposing to adopt for the CY 2020 payment determination three measures to meet the requirements of the IMPACT Act and new standardized data elements. To reduce provider burden, CMS is proposing to remove or modify current OASIS items. CMS is also proposing changes to the Home Health Value-Based Purchasing (HHVBP) Model. 14
Three-year Projection Model versus Traditional Budgeting Model Described below is a long-term projection process that will replace the traditional one-year budgeting process. In the past, Covenant Care has utilized a traditional budgeting model, involving a one-year time horizon, a submission of individual department budget requests--subject to an approval process and requiring aggregation to determine total organizational impact--and a fixed set of assumptions that make subsequent changes difficult to flow through the budgeting system. A long-term (three-year) projection process is proposed to replace this system for the 2018-2020 time period. This system will flex to a limited number of key inputs that can be modified as necessary. Covenant is collaborating with Saltmarsh, Cleaveland & Gund on the development of the model, utilizing a proprietary system made available to Covenant. Using a flexible modeling tool will allow for a broader range of scenarios to be analyzed. The tool will also allow for periodic roll-forwards of the projections as internal and external assumptions change. Using a three-year time horizon will provide a better perspective on the development of major projects and new service lines, by revealing results for both the development and mature stages. Major capital expenditures items will be easier to evaluate in the context of a three-year return. Timeline for presentation to Board for review and approval is still targeted for the November 2017 meeting. 15
COVENANT HOSPICE, INC. WEST FLORIDA INPATIENT CENTER PROFORMA FINANCIAL STATEMENT INCOME STATEMENT West Florida Relocation Pro Forma Expected Census Scenario 2018-2023 2018 2019 2020 2021 2022 YR 1 YR 2 YR 3 YR 4 YR 5 Total Year Total Year Total Year Total Year Total Year Patient Revenue: Skilled Inpatient Revenue $ 2,609,281 $ 2,648,608 $ 2,675,089 $ 2,703,203 $ 2,744,814 Routine Home Care Revenue $ 20,697 $ 21,009 $ 21,219 $ 21,431 $ 21,917 Consulting/Primary Physician (1) $ 21,601 $ 21,601 $ 21,925 $ 22,253 $ 22,587 Total Patient Revenue $ 2,651,579 $ 2,691,217 $ 2,718,232 $ 2,746,887 $ 2,789,318 Charity/Unfunded Care $ 124,624 $ 126,487 $ 127,757 $ 129,104 $ 131,098 Contractual Adjustments - Normal $ 159,095 $ 161,473 $ 163,094 $ 164,813 $ 167,359 Contractual Adjustments - Sequestration $ 42,425 $ 43,059 $ 43,492 $ 43,950 $ 44,629 Total Deductions from Revenue (2) $ 326,144 $ 331,020 $ 334,343 $ 337,867 $ 343,086 Net Patient Revenue $ 2,325,434 $ 2,360,197 $ 2,383,889 $ 2,409,020 $ 2,446,232 Operating Expenses Direct Payroll, including Benefits (3) $ 1,131,931 $ 1,148,883 $ 1,143,699 $ 1,150,024 $ 1,163,626 Patient Care Expenses (4) $ 139,735 $ 141,132 $ 142,543 $ 143,969 $ 145,409 Facility Lease (5) $ 291,600 $ 303,264 $ 315,395 $ 328,010 $ 341,131 Depreciation/Amortization (6) $ 177,143 $ 177,143 $ 177,143 $ 177,143 $ 177,143 Other Direct Expenses (7) $ 37,200 $ 37,944 $ 38,703 $ 39,477 $ 40,266 Environmental, Dietary, Linen (8) $ 38,940 $ 39,719 $ 40,513 $ 41,323 $ 42,150 All Allocated Overhead Charges (9) $ 50,000 $ 50,500 $ 51,005 $ 51,515 $ 52,030 Total Operating Expenses $ 1,866,549 $ 1,898,584 $ 1,909,001 $ 1,931,461 $ 1,961,755 Net Operating Income ( Loss ) $ 458,886 $ 461,613 $ 474,888 $ 477,559 $ 484,477 Operating Margin 19.7% 19.6% 19.9% 19.8% 19.8% Non-Operating: Net Other non-operating Income/(Expense) $ - $ (19,938) $ (18,631) $ (17,300) $ (15,946) Increase/(Decrease) to Net Assets $ 458,886 $ 441,675 $ 456,257 $ 460,259 $ 468,530 Per Patient Day Operating Expenses Direct Payroll, including Benefits 269.67 273.71 272.47 273.98 277.22 Patient Care Expenses 33.29 33.62 33.96 34.30 34.64 Facility Lease 69.47 72.25 75.14 78.14 81.27 Other Direct Expenses 8.86 9.04 9.22 9.40 9.59 All Allocated Overhead Charges 11.91 12.03 12.15 12.27 12.40 Total Operating Expenses 393.20 400.65 402.94 408.10 415.12 STATISTICAL BASIS: Days 365 365 365 365 365 Number of Beds 13 13 13 13 13 Occupancy 88% 88% 88% 88% 88% Patient Days 4198 4198 4198 4198 4198 Average Daily Census 11.5 11.5 11.5 11.5 11.5 Average Length of Stay (10) 8.0 8.0 8.0 8.0 8.0 Number of Admissions 525 525 525 525 525 Patient Mix: Skilled Inpatient 97% 97% 97% 97% 97% Routine Home Care 3% 3% 3% 3% 3% An additional annual contribution margin of $194,544 is generated by WFH patients receiving home hospice care, either directly upon discharge from the hospital or upon discharge from the hospice unit.. 16
COVENANT HOSPICE, INC. WEST FLORIDA INPATIENT CENTER PROFORMA FINANCIAL STATEMENT INCOME STATEMENT West Florida Relocation Pro Forma Worst Case Census Scenario 2018-2023 2018 2019 2020 2021 2022 YR 1 YR 2 YR 3 YR 4 YR 5 Total Year Total Year Total Year Total Year Total Year Patient Revenue: Skilled Inpatient Revenue $ 1,815,152 $ 1,842,510 $ 1,860,931 $ 1,880,489 $ 1,909,436 Routine Home Care Revenue $ 14,398 $ 14,615 $ 14,761 $ 14,909 $ 15,247 Consulting/Primary Physician (1) $ 15,026 $ 15,026 $ 15,252 $ 15,481 $ 15,713 Total Patient Revenue $ 1,844,576 $ 1,872,151 $ 1,890,944 $ 1,910,878 $ 1,940,395 Charity/Unfunded Care $ 86,695 $ 87,991 $ 88,874 $ 89,811 $ 91,199 Contractual Adjustments - Normal $ 110,675 $ 112,329 $ 113,457 $ 114,653 $ 116,424 Contractual Adjustments - Sequestration $ 29,513 $ 29,954 $ 30,255 $ 30,574 $ 31,046 Total Deductions from Revenue (2) $ 226,883 $ 230,275 $ 232,586 $ 235,038 $ 238,669 Net Patient Revenue $ 1,617,693 $ 1,641,876 $ 1,658,358 $ 1,675,840 $ 1,701,727 Operating Expenses Direct Payroll, including Benefits (3) $ 1,131,931 $ 1,148,883 $ 1,143,699 $ 1,150,024 $ 1,163,626 Patient Care Expenses (4) $ 97,207 $ 98,179 $ 99,161 $ 100,152 $ 101,154 Facility Lease (5) $ 291,600 $ 303,264 $ 315,395 $ 328,010 $ 341,131 Depreciation/Amortization (6) $ 177,143 $ 177,143 $ 177,143 $ 177,143 $ 177,143 Other Direct Expenses (7) $ 37,200 $ 37,944 $ 38,703 $ 39,477 $ 40,266 Environmental, Dietary, Linen (8) $ 38,940 $ 39,719 $ 40,513 $ 41,323 $ 42,150 All Allocated Overhead Charges (9) $ 50,000 $ 50,500 $ 51,005 $ 51,515 $ 52,030 Total Operating Expenses $ 1,824,021 $ 1,855,631 $ 1,865,618 $ 1,887,645 $ 1,917,500 Net Operating Income ( Loss ) $ (206,327) $ (213,755) $ (207,261) $ (211,804) $ (215,774) Operating Margin -12.8% -13.0% -12.5% -12.6% -12.7% Non-Operating: Net Other non-operating Income/(Expense) $ - $ (19,938) $ (18,631) $ (17,300) $ (15,946) Increase/(Decrease) to Net Assets $ (206,327) $ (233,693) $ (225,892) $ (229,105) $ (231,720) Per Patient Day Operating Expenses Direct Payroll, including Benefits 387.65 393.45 391.68 393.84 398.50 Patient Care Expenses 33.29 33.62 33.96 34.30 34.64 Facility Lease 99.86 103.86 108.01 112.33 116.83 Other Direct Expenses 12.74 12.99 13.25 13.52 13.79 All Allocated Overhead Charges 17.12 17.29 17.47 17.64 17.82 Total Operating Expenses 550.66 561.22 564.37 571.64 581.58 STATISTICAL BASIS: Days 365 365 365 365 365 Number of Beds 13 13 13 13 13 Occupancy 62% 62% 62% 62% 62% Patient Days 2920 2920 2920 2920 2920 Average Daily Census 8.0 8.0 8.0 8.0 8.0 Average Length of Stay (10) 8.0 8.0 8.0 8.0 8.0 Number of Admissions 365 365 365 365 365 Patient Mix: Skilled Inpatient 97% 97% 97% 97% 97% Routine Home Care 3% 3% 3% 3% 3% An additional annual contribution margin of $135,344 is generated by WFH patients receiving home hospice care, either directly upon discharge from the hospital or upon discharge from the hospice unit.. 17
Mike Hamaker, COO Introduction: COO Born and raised in Lansing, Michigan, Hamaker has lived in Nebraska, Texas, Iowa, PA and MA following his career in healthcare. Mike is married to Pamela who he met in college for 35 years. Mike and Pamela have 3 boys ages 20 27, all in the Midwest. Mike is a graduate of Hillsdale College in Hillsdale, Michigan and subsequently, received his MHA in Iowa. Mike started his career as a pharma rep with Wyeth Labs, and soon converted to branch management with a national for-profit Home Health agency. Since that time, Mike has held progressive positions as, Executive Director of Genesis at Home, President and Vice-President of Home Care and Hospice for WellSpan Health System, and most recently as the COO of Post-Acute Care (including hospice & home care) with Lahey Health System. My role as COO is to serve our employees and patients on behalf of the CEO of Covenant Care while ensuring the care and services we are delivering are the very best in the industry. I believe Covenant Care can and is a large regional Home Health and Hospice, and I would like to see us expand that foot print so that more people can experience our services. I believe our size also allows us to have a national voice in this industry and be innovators. This is the perfect time to be in Home Care and Hospice since the inception of this type of care. Most recently, my experiences with large health systems have made it clear that providing for the needs of the acute setting and doing it with excellence, positions us for the future of Value-Based Purchasing, Medicare Shared Savings and ACO work. 18
Introduction: VP, Finance Martin Franklin, Vice President, Finance Marty is a strategic executive leader with over 20 years of progressively responsible financial management and accounting experience in the health care industry and more recently, with hospice and home health services. CPA and CMA with proven strengths in leadership, staff management and development, and technical accounting and finance knowledge. As an agent of change, I relish my role in always looking for ways to improve myself, my team, and my organization to ensure achievement of our strategic goals. Very adept with systems including start-ups and complex implementations/integrations, and just recently completed the successful implementation of a cloud-based ERP system. Experience in successful mergers and acquisitions including due diligence, valuations, and joint ventures, closed three transactions in 30 days recently. Wide range of industry experience including public accounting and healthcare, as well as privately-held for-for profits and not-for-profits. 19
WFCC Update Jeff Mislevy 20
Foundation: Name Consolidation Aaron West 21
QRSC Committee Report Kara Benedict 22
President s Report Jeff Mislevy 23
COVENANT HOSPICE, INC. BOARD OF DIRECTORS MEETING September 28, 2017 CONSENT AGENDA (p. 24) CONVENING OF MEETING TOM OWENS MINUTES OF THE COVENANT HOSPICE BOARD OF DIRECTORS MEETING OF JULY 27, 2017 (pp.25-26) ***** TOM OWENS COVENANT CARE AUGUST 2017 AND YTD FINANCIAL STATEMENTS (pp. 5-17) ***** ODIN BERG OTHER BUSINESS AS SUBMITTED ADJOURNMENT TOM OWENS TOM OWENS NOTES: **** DENOTES VOTE OR OTHER ACTION REQUIRED 24
Covenant Hospice, Inc. BOARD OF DIRECTORS MEETING July 27, 2017 MINUTES MEMBERS PRESENT: MEMBERS ABSENT: LEADERSHIP STAFF: Carey King Don Haferkamp Jamie Campbell Jeff Mislevy JT Young Patrice Villemure Rodney Guttmann Roger Poitras Susan Davis Steve Sarros Teresa Dos Santos Tom Owens Xan Smith Bill Greenhut Brett Parra Janet Kinney Kent Skolrood Wanda Kaye Hambrick Todd Fisher Odin Berg Amy Bajjaly Aaron West Rhonda Jordan Kara Benedict INTRODUCTION Mr. Owens convened the meeting at 9:40 a.m. MINUTES Mr. Owens called for a motion to approve the minutes of the Covenant Hospice, Inc. Board Meeting of May 25, 2017. A motion was made and passed. FINANCIAL REPORTS Covenant Care June 2017 Consolidated Financial Report 25
COVENANT HOSPICE, INC. BOARD OF DIRECTORS July 27, 2017 cont. Mr. Berg reported the following financial highlights: Covenant Health and Community Services: operating margin for the month was ($64,097); YTD operating loss was ($472,257) Covenant Hospice: operating margin for the month was $89,490; YTD operating margin was $304,493 Peoples Home Health: operating margin for the month was $151,036; YTD operating margin was $1,173,920 Covenant Hospice Foundation: net income of ($433); YTD net income was $355,109. After discussion, Mr. Owens called for a motion to approve the Covenant Care June 2017 and YTD Financial Report. A motion was made and passed. CORPORATE RESOLUTION The following corporate resolution was presented for discussion and approval. A copy of the resolution was provided on page 26 of the Board packet. BE IT RESOLVED that the Board of Directors of Covenant Hospice, Inc. does hereby authorize Odin Berg, Chief Financial Officer, and his successors in office to negotiate, on terms and conditions that he may deem advisable, a contract or contracts with the Alabama Medicaid Agency, and to execute said contract or contracts on behalf of the Corporation. And further we do hereby give him the power and authority to do all things necessary to implement, maintain, amend or renew said contract. After discussion, the above-stated corporation resolution was approved. ADJOURNMENT There being no further business to discuss, the meeting was adjourned at 9:42 a.m. Submitted By: Carey King, Secretary 26
COVENANT HOSPICE FOUNDATION, INC. BOARD OF DIRECTORS MEETING September 28, 2017 CONSENT AGENDA (p.27) CONVENING OF MEETING TOM OWENS MINUTES OF THE COVENANT HOSPICE FOUNDATION BOARD OF DIRECTORS MEETING OF JULY 27, 2017 (pp.28-29) ***** TOM OWENS COVENANT CARE AUGUST 2017 AND YTD FINANCIAL STATEMENTS (pp. 5-17) ***** ODIN BERG FOUNDATION NAME CONSOLIDATION OTHER BUSINESS AS SUBMITTED ADJOURNMENT AARON WEST TOM OWENS TOM OWENS NOTES: **** DENOTES VOTE OR OTHER ACTION REQUIRED 27
Covenant Hospice Foundation, Inc. BOARD OF DIRECTORS MEETING July 27, 2017 MINUTES MEMBERS PRESENT: MEMBERS ABSENT: LEADERSHIP STAFF: Tom Owens Rodney Guttmann Xan Smith Carey King Jeff Mislevy Sue Straughn Bill Greenhut Bob Peterson John Fogg Todd Fisher Odin Berg Aaron West Amy Bajjaly Rhonda Jordan Kara Benedict INTRODUCTION Mr. Owens convened the meeting at 9:40 a.m. MINUTES Mr. Owens called for a motion to approve the minutes of the Covenant Hospice Foundation, Inc. Board of Directors Meeting of May 25, 2017. A motion was made and passed. FINANCIAL REPORTS Covenant Care June 2017 Consolidated Financial Report Mr. Berg reported the following financial highlights: Covenant Health and Community Services: operating margin for the month was ($64,097); YTD operating loss was ($472,257) Covenant Hospice: operating margin for the month was $89,490; YTD operating margin was $304,493 Peoples Home Health: operating margin for the month was $151,036; YTD operating margin was $1,173,920 Covenant Hospice Foundation: net income of ($433); YTD net income was $355,109. 28
COVENANT HOSPICE FOUNDATION, INC. BOARD OF DIRECTORS July 27, 2017 cont. After discussion, Mr. Owens called for a motion to approve the Covenant Care June 2017 and YTD Financial Report. A motion was made and passed. ADJOURNMENT There being no further business to discuss, the meeting was adjourned at 9:42 a.m. Submitted By: Carey King, Secretary 29