McLEOD HEALTH FINANCIAL INFORMATION FOR CONSOLIDATED & OBLIGATED GROUP FOURTH QUARTER REPORT TWELVE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 Note: These unaudited financial statements have been prepared in accordance with generally accepted accounting procedures for interim financial information. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and estimates) considered necessary for a fair presentation have been included. The year-to-date operating results reflected on these financial statements are not necessarily indicative of the results that may be expected for the entire fiscal year.
McLeod Health Fourth Quarter Report 2012 and 2011 Summary of Utilization and Financial Performance Fiscal Year Ended 2012 compared to Fiscal Year Ended 2011 An affiliation between 155-bed Loris Community Hospital District d/b/a Loris Healthcare System ("Loris") and McLeod Health became effective January 9, 2012. On such date Loris contributed the majority of its assets to McLeod Loris Seacoast Hospital (MLSH), a South Carolina non-profit corporation of which McLeod Health is the sole member. Separate obligated groups are maintained, but MLSH is consolidated into McLeod Health's financial statements. MLSH's outstanding debt includes a Federal Housing Administration insured mortgage note payable in the amount of $71.2M. As of 2012, McLeod is still in the process of obtaining valuations. The full impact of accounting for the transaction under Purchase Accounting will be recognized in the fiscal year 2012 audited financial statements. The Obligated Group had 28,009 admissions (consisting of 26,568 acute care, 132 swing bed, 583 Hospice and 726 Behavioral Health admissions) and 151,378 days (consisting of 135,034 acute care, 6435 swing bed, 3,918 Hospice and 5,991 Behavioral Health days), a 1.9% increase in admissions and 2.4% increase in patient days from the same period in 2011, respectively. Inpatient surgeries increased to 7,741 (up 0.6%). Emergency room visits increased to 87,795 (up 5.5%) while outpatient surgeries decreased to 12,682 (down 3.1%). The outpatient surgical decrease, attributed to general economic conditions, was mitigated by growth in inpatient services as well as inpatient admissions. Total System net patient service revenue of $830.5M (including $78.8M from MLSH) was up 17.0% and operating income of $41.6M (including -$10.2M from MLSH) was down from $48.1M during the same period in 2011. The System experienced a net $64.8M unrealized gain and a $5.7M net realized gain on investments. Unrestricted cash and investments of $640.4M (including $7.8M from MLSH) were up 27.4% from $502.8M for the same period in 2011. FINANCIAL PERFORMANCE Summary of Consolidated Statements of Operations (Unaudited) (in Thousands of Dollars) Revenue, Gains, and Other Support Net Patient Service Revenue 830,477 710,093 Other Operating Revenues 25,592 20,264 Total Revenue, Gains, and Other Support 856,069 730,357 Expenses Personnel 371,363 311,830 Other 237,791 208,590 Interest 14,672 11,486 Depreciation and Amortization 41,557 33,076 Provision for Uncollectible Accounts, Net 149,105 117,293 Subtotal 814,488 682,274 Income from Operations 41,581 48,083 Other Revenues (Expenses) Investment Management Fees (2,314) (1,935) Investment Income (Loss) 13,297 23,667 Other Revenues (Expenses) 2,544 307 Unrealized Gains (Losses) 64,844 (42,644) Increase (decrease) in Total Net Assets 119,953 27,479
McLeod Health Fourth Quarter Report 2012 and 2011 UTILIZATION McLeod Regional Medical Center Acute Admissions (excludes newborns) 23,591 22,917 Hospice Admissions 583 564 Acute Days (excludes newborns) 125,128 121,754 Hospice Days 3,918 3,698 Acute Length of Stay (excludes newborns) 5.30 5.31 Hospice Length of Stay 6.72 6.56 Emergency Department Visits 59,846 56,308 Inpatient Surgery Procedures 6,798 6,704 Outpatient Surgery Procedures 10,592 10,922 Open Heart Procedures 243 221 Newborn Deliveries 2,022 2,068 Medicare Case Mix Index 1.74 1.77 McLeod Medical Center - Dillon Acute Admissions (excludes newborns) 2,747 2,792 Acute Days (excludes newborns) 8,792 9,649 Length of Stay (excludes newborns) 3.20 3.46 Emergency Department Visits 27,949 26,934 Inpatient Surgery Procedures 678 729 Outpatient Surgery Procedures 1,314 1,261 Newborn Deliveries 306 291 Medicare Case Mix Index 1.18 1.26 McLeod Medical Center - Darlington Acute Admissions 230 384 Swing Bed Admissions 132 165 Behavioral Health Admissions 726 668 Acute Days 1,114 2,075 Swing Bed Days 6,435 5,262 Behavioral Health Days 5,991 5,435 Acute Length of Stay 4.84 5.40 Swing Bed Length of Stay 48.75 31.89 Behavioral Health Length of Stay 8.25 8.14 Inpatient Surgery Procedures 22 40 Outpatient Surgery Procedures 776 903 Medicare Case Mix Index 1.01 1.11 McLeod Loris/Seacoast Hospital (Non-Obligated Group)* Acute Admissions (excludes newborns) 2,974 0 Extended Care Center Admissions 167 0 Acute Days (excludes newborns) 11,715 0 Extended Care Center Days 17,594 0 Acute Length of Stay (excludes newborns) 3.94 0 Extended Care Center Length of Stay 105.35 0 Emergency Department Visits 33,495 0 Inpatient Surgery Procedures 896 0 Outpatient Surgery Procedures 3,691 0 Newborn Deliveries 280 0 Medicare Case Mix Index 1.48 0 *statistics included are for the period January 9 through 2012 only
McLeod Health Fourth Quarter Report 2012 and 2011 Sources of Revenue Payments to the Obligated Group are made on behalf of certain patients by third-party payors, including Federal and State governments under the Medicare and Medicaid programs, commercial indemnity insurance providers and managed care providers. The percentage distribution of the Obligated Group's total gross patient service revenue by source of payment for the fiscal years ended 2012 and 2011 is set forth in the following table. Percentage of Total Obligated Group Gross Revenues by Payor Categories Medicare 46.40% 45.94% Medicaid 16.59% 16.26% Commercial 0.74% 0.71% Contracted Payors 26.09% 27.02% Self Pay 10.18% 10.07% Source: Internal Records 100.00% 100.00%
McLeod Health Fourth Quarter Report 2012 and 2011 Current Indebtedness of the Obligated Group Long-term Debt. Long-term debt of the Obligated Group includes the following indebtedness secured by Master Trust Indenture Obligations as of 2012. Bonds Outstanding Master Trust Indenture Obligation Securing Debt 2012 Hospital Revenue Bonds (McLeod Regional Obligation No. 8 $20,885,000 Medical Center Project), Series 1998A, final maturity November 1, 2027 Hospital Revenue Bonds (McLeod Regional Obligation No. 10 $74,890,000 Medical Center Project), Series 2004A, final maturity November 1, 2034 Hospital Revenue Bonds (McLeod Regional Obligation No. 12 $120,610,000 Medical Center Project), Series 2010A, final maturity November 1, 2037 Hospital Revenue Bonds (McLeod Regional Obligation No. 13 $46,770,000 Medical Center Project), Series 2010B, final maturity November 1, 2040 Unamortized Premiums/Discounts on Above Bond Obligations $948,387 TOTAL $264,103,387 As of 09/30/12, the members of the Obligated Group have aggregate indebtedness of $23,679,401 that is not secured by a Master Trust Indenture Obligation, including a guarantee issued by the Borrower in respect of a commercial loan to McLeod Medical Partners, LLC outstanding in the amount of $11,838,085. The Borrower also has guaranteed the amounts payable by McLeod Medical Partners, LLC under the terms of an adjusted LIBOR rate swap agreement related to such commercial loan. Short-term Debt. McLeod Health has an unsecured line of credit with Wells Fargo Bank, National Assocation in the amount of $20,000,000. Outstanding balances from draws on the line of credit bear interest at LIBOR plus 1.25% (1.46% at 2012), and interest is payable monthly. There were no outstanding balances at 2012. Current Indebtedness of the Non-Obligated Group As mentioned previously, McLeod Medical Partners, LLC has a commercial loan outstanding in the amount of $11,838,085. In addition, MLSH has outstanding indebtedness in the amount of $71,444,932 consisting primarily of a Federal Housing Administration Insured Mortgage Note Payable. The Note is secured by the Mortgage held by Oppenheimer Multifamily Housing & Healthcare Finance, Inc.
M c L E O D H E A L T H OBLIGATED GROUP UNAUDITED BALANCE SHEET ASSETS: 09/30/12 09/30/11 Current Assets Cash and cash equivalents To $55,083,485 $18,415,839 Investments To 215 0 Receivables Net Patient Receivables Tot 70,910,837 69,652,167 Other Tot 5,274,625 1,947,575 Inventories Tot 3,568,713 3,505,259 Prepaid expenses Tot 7,767,128 7,481,988 Total Current Assets 142,605,003 101,002,828 Assets whose use is limited Tota 580,816,140 530,382,384 Net property and equipment Tota 405,591,762 357,761,650 Other assets Net Bond issue costs Tot 5,730,355 5,984,187 Net certificates of need and goodwill Tot 3,261,544 3,261,544 Other assets Tota 13,298,693 12,501,426 TOTAL ASSETS: $1,151,303,497 $1,010,894,019 LIABILITIES AND NET ASSETS: Current Liabilities Short-term borrowings $0 $0 Current portion of long term debt Tot 4,762,444 4,875,208 Accounts payable Tot 24,613,718 22,389,854 Accrued expenses and other liabilities Tot 36,424,975 30,925,779 Estimated third-party payor settlements Tot 38,133,642 36,858,605 Total Current Liabilities 103,934,779 95,049,446 Long-term debt less current maturities Tot 271,182,259 272,329,809 Total Liabilities 375,117,038 367,379,255 Non-Owned Interest in Net Assets Tot 0 0 Net Assets Unrestricted Tota 776,186,459 643,514,764 Temporarily restricted 0 0 Permanently restricted 0 0 Total Net Assets 776,186,459 643,514,764 TOTAL LIABILITIES AND NET ASSETS: $1,151,303,497 $1,010,894,019
M c L E O D H E A L T H OBLIGATED GROUP UNAUDITED OPERATING STATEMENT REVENUES AND EXPENSES: Patient Revenue: Inpatient Revenue $1,194,524,050 $1,108,279,416 Outpatient Revenue 788,217,582 743,258,797 Physician Fees 200,429,205 133,763,343 Total Patient Revenue 2,183,170,837 1,985,301,556 Revenue Deductions: Contractual Allowances 1,324,464,796 1,171,031,972 Provision for Charity Care 107,062,427 104,176,965 Total Deductions from Revenue 1,431,527,223 1,275,208,937 Net patient services revenue 751,643,614 710,092,619 Other operating revenue 22,407,747 16,722,137 Total Operating Revenue 774,051,361 726,814,756 Operating Expenses: Salaries 275,616,005 249,828,606 Employee Benefits 63,338,898 60,584,153 Contract Labor 603,228 1,040,120 Physician Fees 1,773,284 6,631,792 Professional Fees 8,181,199 9,658,578 Medical Supplies and Drugs 105,993,760 109,804,301 Other Supplies 12,367,600 12,573,367 Purchased Services 30,056,487 28,958,276 Facility Related Costs 17,394,665 16,281,954 Insurance 5,036,576 3,457,833 Depreciation, Amortization 35,154,729 32,527,035 Interest 10,248,675 10,797,706 Other Expenses 24,900,232 22,201,969 Bad Debts 131,092,374 117,292,509 Total Operating Expenses 721,757,712 681,638,199 Income from Operations 52,293,649 45,176,557 Non-Operating Revenues (Expenses) Interest and Dividends 7,550,461 8,808,350 Realized Gains (Losses) 5,576,963 15,243,311 Unrealized Gains (Losses) 64,554,178 (42,908,054) Management Fees (2,288,147) (1,910,034) Other 2,739,424 747,949 Net Non-Operating Revenues (Expenses) 78,132,879 (20,018,478) Increase in Net Assets $130,426,528 $25,158,079
M c L E O D H E A L T H CONSOLIDATED UNAUDITED BALANCE SHEET ASSETS: 09/30/12 09/30/11 Current Assets Cash and cash equivalents Tot $64,938,074 $21,057,240 Investments Tot 5,506,051 3,219,257 Receivables Net Patient Receivables Tota 84,358,017 69,652,167 Other Tota 3,889,345 1,865,978 Inventories Tota 5,934,983 3,505,259 Prepaid expenses Tota 8,964,811 7,519,236 Total Current Assets 173,591,281 106,819,137 Assets whose use is limited Tota 582,523,484 531,099,357 Net property and equipment Tota 505,641,201 373,423,143 Other assets Net Bond issue costs Tota 5,730,355 5,984,187 Net certificates of need and goodwill Tota 3,261,544 3,261,544 Other assets Tota 4,893,219 8,499,116 TOTAL ASSETS: $1,275,641,084 $1,029,086,484 LIABILITIES AND NET ASSETS: Current Liabilities Short-term borrowings $0 $0 Current portion of long term debt Tota 5,134,663 5,247,427 Accounts payable Tota 27,018,590 22,426,678 Accrued expenses and other liabilities Tota 38,977,211 32,394,033 Estimated third-party payor settlements Tota 40,171,946 36,858,605 Total Current Liabilities 111,302,410 96,926,743 Long-term debt less current maturities Tota 353,304,350 283,544,538 Total Liabilities 464,606,760 380,471,281 Non-Owned Interest in Net Assets Total 2,115,415 1,838,339 Net Assets Unrestricted Total 802,927,908 643,106,411 Temporarily restricted 5,274,028 2,953,480 Permanently restricted 716,973 716,973 Total Net Assets 808,918,909 646,776,864 TOTAL LIABILITIES AND NET ASSETS: $1,275,641,084 $1,029,086,484
M c L E O D H E A L T H CONSOLIDATED UNAUDITED OPERATING STATEMENT REVENUES AND EXPENSES: Patient Revenue: Inpatient Revenue $1,276,143,179 $1,108,279,416 Outpatient Revenue 929,066,811 743,258,797 Physician Fees 200,429,205 133,763,343 Total Patient Revenue 2,405,639,195 1,985,301,556 Revenue Deductions: Contractual Allowances 1,459,748,814 1,171,031,972 Provision for Charity Care 115,413,566 104,176,965 Total Deductions from Revenue 1,575,162,380 1,275,208,937 Net patient services revenue 830,476,815 710,092,619 Other operating revenue 25,592,395 20,263,893 Total Operating Revenue 856,069,210 730,356,512 Operating Expenses: Salaries 299,398,015 250,108,322 Employee Benefits 70,305,754 60,681,208 Contract Labor 1,659,412 1,040,120 Physician Fees 12,200,807 6,631,792 Professional Fees 9,573,688 10,158,980 Medical Supplies and Drugs 113,579,623 109,804,509 Other Supplies 15,624,176 12,862,961 Purchased Services 37,678,368 30,482,202 Facility Related Costs 16,172,090 13,290,955 Insurance 5,731,853 3,498,627 Depreciation, Amortization 41,557,272 33,075,927 Interest 14,672,285 11,485,951 Other Expenses 27,230,411 21,859,559 Bad Debts 149,104,661 117,292,509 Total Operating Expenses 814,488,415 682,273,622 Income from Operations 41,580,795 48,082,890 Non-Operating Revenues (Expenses) Interest and Dividends 7,636,100 8,883,855 Realized Gains (Losses) 5,660,614 14,783,134 Unrealized Gains (Losses) 64,844,406 (42,643,673) Management Fees (2,313,688) (1,934,894) Other 2,544,304 307,314 Net Non-Operating Revenues (Expenses) 78,371,736 (20,604,264) Increase in Net Assets $119,952,531 $27,478,626