Consolidated Financial Statements December 31, 2017 and 2016 (Unaudited) Prepared by: Duke University Health System Finance Print Date: January 17, 2018
Consolidated Balance Sheets (Unaudited) December 31, 2017 and 2016 Assets 12/31/2017 12/31/2016 Current Assets: Cash and cash equivalents $ 200,423 238,507 Patient accounts receivable, net 407,738 374,975 Estimated third-party payor settlements, net 20,817 13,248 Other receivables 36,815 33,709 Due from the University, net 6,578 4,500 Inventories of drugs and supplies 90,985 86,885 Other assets 30,837 25,912 Short-term investments 373,376 174,711 Assets limited as to use 25,653 29,162 Total current assets 1,193,222 981,609 Assets limited as to use 83,835 79,355 Investments 3,077,667 2,259,499 Property and equipment, net 1,503,293 1,460,143 Due from the University 500 639 Other noncurrent assets 44,066 38,535 Total assets $ 5,902,583 4,819,780 Liabilities and Net Assets Current Liabilities: Accounts payable $ 123,479 111,354 Other current liabilities 81,318 80,980 Accrued salaries, wages and vacation payable 181,207 167,836 Current portion of postretirement and postemployment benefit obligations 6,145 6,087 Current portion of indebtedness 23,340 22,275 Current portion of capital lease obligations 1,750 2,031 Current portion of estimated professional liability costs 16,276 15,612 Total current liabilities 433,515 406,175 Other noncurrent liabilities 39,146 66,258 Postretirement and postemployment benefit obligations, net of current portion 417,941 477,921 Indebtedness, net of current portion 1,630,256 1,072,552 Capital lease obligations, net of current portion 125,325 119,622 Derivative instruments 73,930 86,605 Estimated professional liability costs, net of current portion 31,763 28,125 Total liabilities 2,751,876 2,257,258 Net Assets: Unrestricted 3,092,722 2,504,661 Temporarily restricted 43,488 43,590 Permanently restricted 14,497 14,271 Total net assets 3,150,707 2,562,522 Total liabilities and net assets $ 5,902,583 4,819,780 2
Consolidated Statements of Operations (Unaudited) 12/31/2017 12/31/2016 Unrestricted revenues, gains and other support: Net patient service revenue (net of contractual allowances and discounts) $ 1,712,200 1,567,898 Provision for bad debts (36,161) (22,045) Net patient service revenue less provision for bad debts 1,676,039 1,545,853 Other revenue 95,933 94,556 Total unrestricted revenues, gains and other support 1,771,972 1,640,409 Expenses: Salaries, wages and benefits 783,497 746,155 Medical supplies 425,534 380,628 Interest 29,373 17,725 Depreciation 79,292 77,499 Other operating expenses 331,170 309,981 Total expenses 1,648,866 1,531,988 Operating income 123,106 108,421 Non-operating income: Investment gain 138,145 122,912 Loss on extinguishment of debt - (18,328) Other 1,023 67 Total non-operating income 139,168 104,651 Excess of revenues over expenses 262,274 213,072 Change in funded status of defined benefit plans 2,879 5,435 Net assets released from restrictions for purchase of property and equipment 500 519 Transfers to the University, net (45,970) (51,441) Increase in unrestricted net assets $ 219,683 167,585 3
Consolidated Statements of Changes in Net Assets (Unaudited) 12/31/2017 12/31/2016 Unrestricted net assets: Excess of revenues over expenses $ 262,274 213,072 Change in funded status of defined benefit plans 2,879 5,435 Net assets released from restrictions for purchase of property and equipment 500 519 Transfers to the University, net (45,970) (51,441) Increase in unrestricted net assets 219,683 167,585 Temporarily restricted net assets: Contributions for restricted purposes 1,387 1,223 Transfers to the University, net (249) (48) Net assets released from restrictions used for operations (1,501) (2,072) Net assets released from restrictions for purchase of property and equipment (500) (519) Net realized and unrealized gains 879 890 Increase (decrease) in temporarily restricted net assets 16 (526) Permanently restricted net assets: Contributions for endowment funds 74 57 Transfers from the University, net 200 - Net realized and unrealized gains 518 514 Increase in permanently restricted net assets 792 571 Increase in net assets 220,491 167,630 Net assets, beginning of year 2,930,216 2,394,892 Net assets, end of period $ 3,150,707 2,562,522 4
Consolidated Statements of Cash Flows (Unaudited) 12/31/2017 12/31/2016 Cash flows from operating activities: Increase in net assets $ 220,491 167,630 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 79,292 77,499 Investment income (139,024) (123,802) Loss on the extinguishment of debt - 18,328 Net (gain) loss on other investments and disposals of property and equipment (370) 180 Transfers to the University, net 46,019 51,489 Provision for bad debts 36,161 22,045 Restricted contributions received for long-term capital projects (26) (533) Permanently restricted contributions and associated realized and unrealized gains (592) (571) (Increase) decrease in: Patient accounts receivable (78,714) (29,561) Estimated third-party payor settlements, net (34,339) (32,492) Due from the University, net (4,583) (18,757) Other receivables (5,704) (4,716) Inventories of drugs and supplies (4,523) (4,487) Other assets (9,444) (7,469) Increase (decrease) in: Accounts payable 2,518 (6,298) Other current liabilities 39,028 36,399 Accrued salaries, wages and vacation payable 4,781 10,002 Postretirement and postemployment benefit obligation 7,455 12,901 Other noncurrent liabilities 1,191 1,118 Estimated professional liability costs 2,741 1,680 Net cash provided by operating activities 162,358 170,585 Cash flows from investing activities: Capital expenditures (91,946) (93,743) (Increase) decrease in assets limited as to use (351) 10,013 Sales of investments 1,632,446 623,488 Purchases of investments (1,636,715) (696,156) Proceeds from sale of fixed assets 49 600 Decrease (increase) in other assets 1,225 (207) Net cash used in investing activities (95,292) (156,005) 5
Consolidated Statements of Cash Flows, Continued (Unaudited) 12/31/2017 12/31/2016 Cash flows from financing activities: Payments on indebtedness and bank borrowings $ - (137,859) Proceeds from issuance of indebtedness - 140,200 Bond issuance and rate hedge costs (505) (1,432) Restricted contributions received for long-term capital projects 602 1,121 Proceeds from restricted contributions and associated realized gains 592 571 Payments on capital lease obligations (2,456) (1,764) Transfers to the University, net (46,815) (58,053) Net cash used in financing activities (48,582) (57,216) Net increase (decrease) in cash and cash equivalents 18,484 (42,636) Cash and cash equivalents, beginning of year 181,939 281,143 Cash and cash equivalents, end of period $ 200,423 238,507 Supplemental disclosures of cash flow information: Cash paid for interest, net of amount capitalized $ 35,171 25,055 Supplemental disclosures of noncash investing/financing activities: Transfer of investments to the University - 501,417 Net transfers to the University of property and equipment 1,723 1,265 Net transfers payable between the Health System and the University 449 2,196 6
Hospital Utilization Statistics (Unaudited) Duke University Duke Regional Duke Raleigh Hospital Hospital Hospital Combined 6 months 6 months 6 months 6 months 6 months 6 months 6 months 6 months 12/31/2017 12/31/2016 12/31/2017 12/31/2016 12/31/2017 12/31/2016 12/31/2017 12/31/2016 Adult Patient Days 149,128 143,102 39,194 38,444 21,163 21,172 209,485 202,718 Average Adult Daily Census 810 778 213 209 115 115 1,139 1,102 Licensed Beds 957 957 369 369 186 186 1,512 1,512 Average Number of Available Beds 951 951 353 356 175 168 1,479 1,475 Full Time Equivalents 8,537 8,250 1,727 1,682 1,440 1,356 11,704 11,288 Average Adult Occupancy 85% 82% 60% 59% 66% 69% 77% 75% Adult Discharges 21,496 21,450 8,305 8,151 4,635 4,735 34,436 34,336 Average Adult Length of Stay 6.9 6.7 4.7 4.7 4.6 4.5 6.1 5.9 Medicare Case Mix Index 2.4259 2.4049 1.6927 1.6665 1.9428 2.0268 - - Number of Deliveries 1,710 1,672 1,203 1,277 - - 2,913 2,949 Surgical Procedures 20,391 20,031 7,814 7,092 8,292 7,866 36,497 34,989 Endoscopy Procedures 6,596 6,530 2,912 2,487 1,701 1,481 11,209 10,498 Emergency Department Visits 37,828 38,503 31,172 31,118 24,061 23,912 93,061 93,533 Outpatient Visits ED Outpatient & CEU 30,373 31,326 26,950 26,975 21,054 20,944 78,377 79,245 Observation Visits 5,430 4,712 4,039 3,736 4,440 3,932 13,909 12,380 Hospital Clinics 465,918 493,857 56,403 33,965 89,658 74,021 611,979 601,843 Outpatient Surgeries and Endoscopies 16,850 16,748 8,099 7,124 7,766 6,930 32,715 30,802 DPC Visits 354,775 335,519 - - - - 354,775 335,519 Total Outpatient Visits 873,346 882,162 95,491 71,800 122,918 105,827 1,091,755 1,059,789 Gross Revenues by Payor Medicare 43% 42% 45% 45% 51% 50% 45% 44% Medicaid 11% 12% 11% 11% 6% 7% 11% 11% Managed Care 37% 38% 33% 34% 36% 36% 36% 37% Indemnity 1% 1% 1% 1% 1% 1% 1% 1% Self-pay 3% 3% 7% 7% 4% 4% 4% 3% Other 5% 4% 3% 2% 2% 2% 3% 4% Total 100% 100% 100% 100% 100% 100% 100% 100% 7
Consolidating Statements of Operations (Unaudited) For the Six Months Ended December 31, 2017 Duke Duke Duke All University Regional Raleigh Other Hospital Hospital Hospital Affiliates Consolidated Unrestricted revenues, gains and other support: Net patient service revenue (net of contractual allowances and discounts) $ 1,203,454 181,676 231,059 96,011 1,712,200 Provision for bad debts (21,555) (6,083) (5,521) (3,002) (36,161) Net patient service revenue less provision for bad debts 1,181,899 175,593 225,538 93,009 1,676,039 Other revenue 31,646 4,529 6,377 53,381 95,933 Total unrestricted revenues, gains and other support 1,213,545 180,122 231,915 146,390 1,771,972 Expenses: Salaries, wages and benefits 394,637 80,162 67,706 240,992 783,497 Medical supplies 293,547 32,798 69,362 29,827 425,534 Interest 22,381 3,380 3,311 301 29,373 Depreciation 39,657 7,318 8,766 23,551 79,292 Other operating expenses 366,717 50,721 61,637 (147,905) 331,170 Total expenses 1,116,939 174,379 210,782 146,766 1,648,866 Operating income $ 96,606 5,743 21,133 (376) 123,106 8