* Artist rendering. Maryland Healthcare Financial Management Association Annual Institute Capital Planning New Financing Strategies Tuesday, March 4, 2014 Richard Baum, Assistant Treasurer, NYU Langone Medical Center
Cautionary Statement Regarding Forward-Looking Statements Certain statements included, incorporated by reference or verbally discussed constitute projections or estimates of future events, generally known as forward-looking statements. These statements are generally identifiable by the terminology used such as plan, expect, estimate, budget or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. NYUHC does not plan to issue any updates or revisions to those forward-looking statements if or when changes in its expectation, or events, conditions or circumstances on which such statements are based occur. NYUHC s operations are subject to various risks, including without limitation those risks described under the heading, Bondowners Risk and Matters Affecting the Health Care Industry in the Official Statement relating to NYU Hospitals Center Taxable Bonds, Series 2013A, available at www.emma.msrb.org. If any of these or other risks occur, or if the assumptions underlying any of the statements set forth in this document prove incorrect, the actual results may significantly differ from those expressed or implied by such statements. NYUHC does not update forward-looking statements retrospectively. Such statements are valid on the date of publication and can be superseded. Note: Cover image artist s rendering of future campus including NYU School of Medicine Facilities. 2
Unique Structure for NYU Langone Medical Center New York University NYU Langone Medical Center School of Medicine (including Faculty Group Practice) Key: Member of the Obligated Group Sole member Unincorporated division of New York University NYU Hospitals Center CCC550 Note: Neither New York University nor its School of Medicine are obligated with respect to NYUHC s Bonds or commercial debt. No assets or revenues of New York University or its School of Medicine are pledged to secure or available to pay debt service with respect to NYUHC s debt obligations. CCC550, NYU Hospitals Center s wholly owned captive insurance company, is also not obligated with respect to NYUHC s debt obligations and no assets or revenues of CCC550 are pledged to secure or available to pay debt service with respect to NYUHC s debt obligations. NYULMC is an integrated academic medical center in midtown Manhattan with outpatient centers across the region: Tisch Hospital (546 beds). Hospital for Joint Diseases (157 beds). Ambulatory care network. NYU Physician Network including NYU School of Medicine ( NYUSM ) Faculty Group Practice and private physicians: 2,300+ physicians. Over 100 medical practices. NYULMC is a virtual entity with one management team and one board of trustees making the key decision across the hospital and school of medicine. NYULMC FY 2013 operating revenues: $3.3 billion (including NYUHC ~ $1.9 billion) 3
Commitment to the Pursuit of Excellence Investment in Technology EPIC - First fully integrated Clinical and Billing system in New York Performance Dashboards Data Center - Key infrastructure component for the future Campus Transformation Broad System Implementation PeopleSoft - New Enterprise Resource Planning System Enterprise Data Warehouse & Business Intelligence Dedication to Clinical Quality Ranked #14 in the nation on the Best Hospitals Honor Roll with 12 nationally ranked specialties Ranked #1 for surgical care among the nation s academic medical centers Ranked #1 for Patient Safety and Quality. Recipient of the 2013 Quality Leadership Award 4
Expanding Inpatient and Ambulatory Facilities in Manhattan Expanded ambulatory presence in the last three years: Musculoskeletal Center (110,000 sq. ft.) Ambulatory Center (300,000 sq. ft.) Outpatient Surgery Center (18,000 sq. ft.) An extension clinic at NYUSM s Joan H. Tisch Center for Women s Health Tisch Center for Men s Health NYU Langone Internal Medicine The Miller Practice Affiliated Hospitals (Manhattan and Brooklyn): Bellevue Hospital Center PERELMAN Gouverneur Healthcare Services New York Harbor Veterans Affairs Medical Center Woodhull Hospital Medical Center 5
Growing Physician Presence Across Region Expanded geographic presence beyond Manhattan through new physician relationships: Outpatient care centers (i.e. Oncology, Orthopaedics) Specialist outreach programs Acquired and opened outpatient centers outside of Manhattan: Brooklyn Endoscopy and Ambulatory Surgery Center Hudson Valley Cardiology (Westchester, NY) Columbus Medical Center (Queens, NY) 6
NYULMC Campus Transformation Project* Expand NYULMC patient care, research and education footprint to 3.5 million sq. ft. of facility space Tisch Hospital elevator/lobby renovation - completed April 2013; 100% funded by philanthropy Energy Building supply electricity to First Avenue campus - construction FY 2012-2016 Science Building construction - NYUSM research facilities; University funded; construction FY 2013-2018 (300,000 sq. ft.) ED Renovation Tisch Hospital; expected to open Spring 2014 (change from 6,900 to 16,900 sq. ft.) Kimmel Pavilion new 22-story clinical pavilion on the First Avenue Campus; expected construction FY 2014 2017 (830,200 sq. ft.) * Artist rendering. 7
Coordinated Approach for NYU Langone Medical Center Utilize working capital lines of credit to fund project cash flow requirements on a revolving basis Capture taxable and tax-exempt market opportunities to take out lines of credit with permanent financings Effectively fit debt with other sources of funds philanthropy and equity Tranche permanent debt to lower cost of negative carrying cost Coordinate sources of funding across NYUHC and NYUSM debt strategies Projects are funded by each respective campus (NYUHC and NYUSM) NYUHC is obligated on NYUHC debt NYUSM is part of NYU debt structure 8
NYU Hospitals Center: Taxable Debt Strategy Long-Term Debt Outstanding as of January 31, 2014 ($000s) Line of Credits NYUHC line of credit capacity ~ $500 million; diversified across 4 banks $150 million drawn; $350 million available as of January 31, 2014 Provides flexible terms for use and repayment Lines of credit provides bridge funding to permanent debt Taxable Fixed Rate Bonds Advantages/Disadvantages Utilize taxable permanent debt for campus transformation and physician network expansion Market opportunities for lower cost Relative interest rates Seek to reduce pre-funding and carrying costs Short timeline to enter market Flexible use of funds Immediate access to proceeds Eliminates fees related to tax-exempt debt Make whole call provision Underlying Debt Mix (000's) Fixed $ 1,106,699 88% Variable 150,000 12% $ 1,256,699 100% Tax-Exempt Debt Issue Advantages/Disadvantages Call provisions (10 year par call) Amortizing principal payments annually creates debt capacity as debt is paid down Longer timetable to close transaction Requires DASNY and NYSDOH approvals 9
Managing Taxable Debt - Series 2012A $250 million and Series 2013A $350 million NYUHC established working capital discipline to fund liquidity and taxable bullet repayment Capital and program reserve fund Debt retirement fund for 30-year taxable bullet principal repayment Defined flexible use of proceeds: General corporate purposes, including to repay certain lines of credit, to pay the costs of various construction, renovation and equipping projects, and working capital Seek market opportunities to tranche debt funding in taxable market Pricing: Series 2012A 4.42% (T + 188 bps) July 2012 Pricing: Series 2013A 5.75% (T + 210 bps) July 2013 NYUHC has been out front in its communications to the investor community (tax-exempt and taxable investors) Repeated market updates on implications of Superstorm Sandy Investment banking conferences Transaction marketing (net roadshow, tour of NYUHC facility) Involvement of entire executive team in communication strategy 10
Financial and Operational Performance Update Since 2007, NYUHC rating upgrades: Baa3/BBB+/BBB+ to A3/A-/A- FY 2013 performance impacted by Superstorm Sandy Inpatient facilities at Tisch Hospital closed for 60 days Services at Hospital for Joint Diseases continued, with 7-day operations Outpatient facilities and majority of physician offices open throughout period Status Update: FEMA initial recovery monies received $179.3 million to date; continuing calculations on funding recovery and mitigation efforts Continuing conversations with commercial insurance companies and NIH Operations restored throughout campus, with the exception of ED Urgent Care Center within Tisch Hospital New, expanded ED scheduled to open in Spring 2014 11
NYUHC Financial Performance ($000) Fiscal Year Ended August 31, (Audited) Three Months Ending November 30, (unaudited) 2011 2012 2013 2012 (3) 2013 Net Patient Service Revenue $1,625,839 $1,830,158 $1,662,617 $385,837 $481,253 Other Operating Revenue 75,380 141,287 269,326 115,822 79,118 Total Operating Revenue 1,701,219 1,971,445 1,931,943 501,659 560,371 Total Operating Expenses 1,515,456 1,722,693 1,884,135 467,931 507,389 Gain from Operations 185,763 248,752 47,808 33,728 52,982 Other (1) 460 (1,803) (41,252) (31,847) 5,981 NYUSM Mission Support (45,000) (27,750) (35,735) (35,735) (22,500) Excess (deficiency) of Revenue Over Expenses 141,223 $219,199 $(29,179) $(33,854) $36,463 Other changes in unrestricted net assets (2) 21,551 (94,567) 169,200 10,306 8,995 Net increase (decrease) in unrestricted net assets $162,774 $124,632 $140,021 $(23,548) $45,458 (1) FY 2013 amount consists of ($33.7 million) in impairment on disposal of property, plant and equipment related to Superstorm Sandy and other non-storm related disposals and ($7.6 million) investment return on underlying asset portfolio. (2) Other changes in unrestricted net assets includes valuation changes to pension and postretirement obligations and contributions/net assets released for capital acquisition. (3) Superstorm Sandy occurred on October 29, 2012. Inpatient services at Tisch Hospital were closed for 60 days and resumed on December 27, 2012. An Urgent Care Center has been operating in absence of a functioning Emergency Department. Thus, results for FY 2013 (inclusive of the three months ended November 30, 2012) include materially reduced operations. 12
NYUHC Financial & Volume Metrics Operating Margin (2) EBIDA Margin (2) Cash to Debt (%) (2/3) 12.5% 10.9% 12.6% 6.7% 9.5% 17.8% 15.8% 17.6% 8.4% 12.5% 16.0% 87 64 61 55 66 52 2.4% FY10 FY11 FY12 FY13 Nov-12 Nov-13 FY10 FY11 FY12 FY13 Nov-12 Nov-13 FY10 FY11 FY12 FY13 Nov-12 Nov-13 Days Cash on Hand (1/2) Outpatient Visits (2) Discharges (2) 118 108 135 141 144 131 261,835 290,881 264,734 240,770 37,408 37,929 38,045 26,676 63,381 72,823 6,540 7,998 FY10 FY11 FY12 FY13 Nov-12 Nov-13 FY10 FY11 FY12 FY13 Nov-12 Nov-13 FY10 FY11 FY12 FY13 Nov-12 Nov-13 (1) Based on Master Trust Indenture methodology. (2) Superstorm Sandy occurred on October 29, 2012. Inpatient services at Tisch Hospital were closed for 60 days and resumed on December 27, 2012. An Urgent Care Center has been operating in absence of a functioning Emergency Department. Thus, results for FY 2013 (inclusive of the three months ended November 30, 2012) include materially reduced operations. (3) FY 2013 & November 2013 figures above are inclusive of NYUHC s Series 2013A $350 million taxable bond issuance. 13
Conclusion NYUHC is a highly integrated academic medical center with close ties to New York University Tireless Pursuit of Excellence Patient care quality focus Commitment to invest in technology Positioning the Medical Center for the future of healthcare Solid execution of ambulatory care strategy Strong physician recruitment efforts Moving forward on campus transformation plan Maintaining strategic agility to execute plan through the capital markets Balance sheet reserves provide operating flexibility Issuance of fixed rate bonds and utilization of lines of credit for quick access to fund capital plans Philanthropy continued support by NYC community for combined medical center enterprise 14