TENTATIVE MEETING AGENDA FINANCE COMMITTEE OF THE SARASOTA COUNTY PUBLIC HOSPITAL BOARD WEDNESDAY, August 30, 2017, 9:30 a.m. HARRISON Room I. Call to Order Jim Meister, Chairman II. Approval of the Minutes of the Meeting of July 17, 2017 III. For Approval: FY2018 Operating & Capital Budgets and Tax Millage Bill Woeltjen 15 min IV. For Approval: Banking Resolution Bill Woeltjen 10 min VII. VIII. Other Business Adjournment Finance Committee Members: James Meister, Chair cc: David Verinder Gregory Carter Bill Woeltjen Joseph J. DeVirgilio, Jr. Carol Ann Kalish, Esq. Sharon Wetzler DePeters Lorrie Liang Darryl Henry Peter Taylor Tramm Hudson Nelson Lane William Noonan Richard Rehmeyer, MD Susan Tucker Joel Gerber, MD Ron Shapo John Steele, MD Frank Fleischer
MINUTES OF MEETING OF THE FINANCE COMMITTEE OF THE SARASOTA COUNTY PUBLIC BOARD JULY 17, 2017 PRESENT: ABSENT: James Meister, Chairman Gregory Carter Sharon Wetzler DePeters Joseph DeVirgilio, Jr. Darryl Henry Tramm Hudson William Noonan Richard Rehmeyer, MD Frank Fleischer (by teleconference) Ron Shapo Dr. John Steele Susan Tucker Dr. Joel Gerber ALSO David Verinder Bill Woeltjen PRESENT: Lorrie Liang Carol Ann Kalish, Esq. Nelson Lane Colby McAnarney Megan Riegling Tom Perigo Jim Bugyis Pam Ramhofer Peter Taylor Michael Sutphin The meeting was called to order by James Meister, Chairman, at 9:00 a.m. Mr. Meister announced because we give citizens ample opportunity to speak at Board meetings, this committee generally does not entertain citizen comment at its meetings. We do, however, permit public comment in rare instances where proposed Committee action may in some way bind the Hospital Board itself. This exception normally will not enable vendors, suppliers, or other persons seeking hospital contracts awarded on a competitive basis to address this Committee, as their access to hospital officials may be restricted by the invitation for bid, request for proposal, or other purchasing criteria. Any citizen who seeks to address the committee on a topic falling within the exception should see the Board secretary at this time and fill out a speaker card. Speakers will be limited to five minutes. Mike Sutphin attended the meeting. Approval of the Minutes - The minutes of the meeting of the Finance Committee on April 17, 2017 were unanimously approved upon a motion by Darryl Henry, seconded by Greg Carter.
Recommendation of Preliminary Millage Rate for FY2018: William Woeltjen, Chief Financial Officer, presented information for the Committee to consider for setting the preliminary tax millage rate for FY 2018. He did a brief overview of the purpose of the taxing authority. He outlined the System s growth plans for FY2018 and beyond. He also reviewed the cost pressures that are impacting the System in preparing the budget for FY2018. The taxable value of property in Sarasota County, including the value of new construction, has increased 8% over the past year. He shared the recent ad valorem tax history going back to 2008. He discussed the millage options for FY2018. Management s recommendation for the FY2018 preliminary rate is 1.0420, which is a 1% reduction from the current rate. Mr. Hudson, seconded by Mr. DeVirgilio, moved to recommend Board approval to of setting the tentative maximum tax millage rate at the current rate of 1.0420, 1% lower than the millage rate for fiscal year 2017, and for setting the dates for the tax hearings as September 5th at 5:01 p.m. for the first public hearing and September 18th at 5:01 p.m. for the final tax hearing. There was discussion. The motion carried, with Mr. Henry voting against. A copy of the full report is attached to the original of these minutes. FPL Arlington Vault Project: Tom Perigo, Director of Architecture and Construction Services, and Jim Bugyis, Director of Engineering and Campus Facilities, presented to the committee for approval of the FPL Arlington Vault project. Mr. Bugyis explained that many years ago Florida Power & Light (FPL) installed the vault, along with the Hospital, to supply electrical service to parts of our hospital campus. Ownership of vault was transferred to Sarasota Memorial in 1965. An emergency generator was installed later with a load control switchgear to shed loads during any local FPL high-demand periods, thus enabling the hospital to go off-the-grid. As a result of this relationship, we receive a reduced FPL electrical rate; to date we have saved over $9,000,000 on our electrical utilities. The hospital-owned switchgear manages the distribution of electrical services to sections of the hospital. The generator and switchgear are over 35 years old and some mechanical parts are no longer available for repair or replacement. Some of the equipment does not meet current EPA regulations and any additional repairs would require major overhaul to the aging system. Mr. Perigo presented the scope of the project which is to tie in the areas of the Hospital currently supported by the Arlington vault to the more efficient Central Energy Plant; use the spare switchgear in the new Rehabilitation Pavilion; install a new transformer inside the hospital s Main Electrical room; re-feed facility on 1851 Arlington via a new FPL service feed; bury overhead power lines; remove old vault equipment and switchgear; and, demolish the old vault structure. The benefits of this project include streamlining back-up electrical power to the entire main campus; removal of antiquated equipment from service; maintaining our load shedding agreement with FPL; gaining additional square footage for new West Parking Garage, with an increase of 30 additional parking spaces; ensuring the electrical feed is hurricane hardened by removing overhead lines; and elimination of diesel fumes that could flow back to the facility. The proposed completion date is February 2018.
Mr. DeVirgilio, seconded by Mr. Carter, moved to recommend Board approval of the FPL Arlington Vault Project in the amount of $1,500,000, to be funded with surplus funds from the Rehabilitation Pavilion Project. There was discussion. The motion carried unanimously. A copy of the full report is attached to the original of these minutes. Managed Care Update: Megan Riegling, Managed Care Manager, presented an overview of the functions of the Managed Care department. She covered the roles and responsibilities of the staff, the payor mix and major managed care plans with which the System has contracts. Megan also discussed the current industry environment, managed Medicare, and managed Medicaid. No motion necessary, for information only. A copy of the full report is attached to the original of these minutes. Health Information Exchange (H.I.E.) Update: Pam Ramhofer, Chief Information Officer, introduced Brian Henderson, Director of Physician IT Services. He presented a review of the Health Information Exchange project that was approved by the Board in March of 2015 for $3,000,000. The Health Information Exchange (HIE) allows secure, electronic sharing of a patient s medical information among health care providers. It enables clinicians to share your medical history, lab or imaging results, or prescription information. This is accomplished within their native EMR or via the Clinical Viewer. Initially, there were some barriers including costs; technology; varying abilities of the community EHRs; adjusting process and documentation as some offices were resistant to change and/or too busy to learn new process; and willingness to share data. To date, the HIE includes greater than 750,000 unique items of clinical data; greater than 373,000 unique patients; contributing inpatient providers; 135 contributing community providers; greater than 300 users; and 24 contributing systems. Growth of the system continues with upcoming sites for the project being Kennedy White Orthopedics, Florida Cardiac Consultants, SMH Nursing & Rehabilitation Center, Heart Specialists of Sarasota, and Lung Associates of Sarasota. There is approximately $336,000 of budget remaining as of June 30, 2017. No motion necessary, for information only. A copy of the full report is attached to the originals of these minutes. Other Business: Bill Woeltjen also provided the Committee with two information items: A recent article from Moody s Investor Services on their preliminary ratio medians for not-for-profit hospitals; and a summary of the System s insurance renewals for the insurance period beginning April 16, 2017 and ending April 15, 2018. No motion necessary, for information only. A copy of the article and the summary are attached to the original of these minutes. There being no further business to come before this committee, the meeting was adjourned at 10:38 a.m.
Finance Committee August 30, 2017 Fiscal Year 2018 Operating & Capital Budgets and Tax Millage
FY 2018 Budget Challenges 3% Merit Increase ($9,800,000) $ Debt Issuance Cost ($4,900,000) Supply Inflation ($4,600,000) Incremental Depreciation ($3,600,000) Physician Group Practice Expansion ($3,900,000) Market Adjustments ($3,200,000) Information Systems ($2,200,000) Graduate Medical Education - Year 2 ($1,900,000) Investments made in FY18 will affect FY19 and forward 2
Volume Actual Actual Forecast Budget Fiscal Years Ending September 30, 2015 2016 2017 2018 % change Operating Statistics: Admissions 28,042 31,946 34,051 35,379 3.9% Patient Days 139,815 154,821 159,089 172,754 8.6% Average Acute Length of Stay 4.73 4.61 4.51 4.58 1.6% Emergency Care Center Visits 116,377 124,065 123,450 123,716 0.2% Urgent Care Center Visits 79,667 89,994 103,738 103,793 0.1% First Physicians Group Visits 334,710 387,907 414,205 469,225 13.3% Inpatient Surgery Cases 7,410 8,626 9,224 9,531 3.3% Outpatient Surgery Cases 12,608 12,721 13,120 13,523 3.1% Open Heart Cases 567 711 747 788 5.5% 3
FY 2018 Budget: Statement of Operations (in thousands) Forecast Budget FY17 FY18 Change Operating revenues Net patient service revenue $ 747,955 $ 773,677 $ 25,722 Other revenue 16,711 16,620 (91) Total operating revenues 764,666 790,297 25,631 Operating expenses Salaries, wages and fringe benefits 390,128 428,434 38,306 Supplies 162,202 169,328 7,126 Other expense 122,746 126,508 3,762 Depreciation and amortization 43,562 46,395 2,833 State of Florida medical assistance assessment 9,375 9,453 78 Total operating expenses 728,013 780,118 52,105 Operating Income 36,653 10,179 (26,474) Nonoperating items Ad valorem taxes 50,633 54,051 3,418 Interest expense and interest swap receipts (payments), net (14,178) (13,844) 334 Debt issuance costs - (4,900) (4,900) Investment income 12,965 19,636 6,671 Other nonoperating income (15,108) 2,000 17,108 Total nonoperating items 34,312 56,943 22,631 Excess of revenues over expenses $ 70,965 $ 67,122 $ (3,843) 4
Effective Use of Capital Capital Budget 2018 Routine Capital: Clinical and Ambulatory $ 13,674,000 Growth/Other: Support Services and Renovation 4,328,000 Information Systems 4,448,000 Non Clinical 3,590,000 First Physicians Group 1,960,000 Contingency 2,000,000 Total Routine $ 30,000,000 Laurel Road $ 50,000,000 Floors 9 and 10 East Tower Renovation 6,000,000 Other Growth and Strategic Initiatives 7,564,000 Total Growth/Other* $ 63,564,000 Total Capital* $ 93,564,000 * Amounts potentially needed for vertical integration strategies are not included in these amounts. 5
Significant Reduction in Reliance on Tax Revenue Millage Rate 2.5000 8.80% 10.00% 9.00% Tax Revenue as a % of Total Revenue 2.0000 1.5000 7.50% 7.40% 7.10% 6.55% 6.53% 6.10% 6.20% 6.40% 8.00% 7.00% 6.00% 1.0863 1.0863 1.0863 1.0863 1.0863 1.0863 1.0525 1.0525 1.0420 5.00% 1.0000 4.00% 3.00% 0.5000 2.00% - FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 B18 1.00% 0.00% Millage Rate Tax Revenue as a % of Total Revenue Millage rate reduced to 1.0525 for FY 2016 after being held constant for six years (FY 2010 through FY 2015) Budget 2018 includes a proposed millage rate reduction to 1.0420 which is 52% of the 2.0 mills maximum 6
Mission-Oriented Use of Tax Revenue Permitted Uses of Tax Revenue: Payment of operating expenses, debt service and capital expenditures Acquire real and personal property Establish, construct, acquire, operate and maintain hospitals and health care facilities for limited or extended care and treatment and any facilities that are necessary and incidental to the operation thereof within Sarasota County FY2016 Tax Revenue: $46.7 million FY2016 Tax Revenue Benefited: Community Programs (operational, net of 340B): $112 Million in FY 2016 Capital Asset Additions: $79 Million in FY 2016 7
Millage Options Fiscal Year 2018 Budget Fiscal year ending 9/30/2018 Projected Rolled-Back 3% reduced 2% reduced 1% reduced Prior Year 2017 rate rate rate rate rate Taxable value of property $ 50,454,995,143 $ 54,602,350,765 $ 54,602,350,765 $ 54,602,350,765 $ 54,602,350,765 $ 54,602,350,765 Millage rate 1.0525 0.9931 1.0209 1.0315 1.0420 1.0525 % change from prior year n/a -5.64% -3.00% -2.00% -1.00% 0.00% % change from rolled-back n/a 0.00% 2.80% 3.87% 4.93% 5.98% Gross tax receipts $ 53,103,882 $ 54,224,958 $ 55,743,540 $ 56,322,325 $ 56,895,649 $ 57,468,974 Less: Discounts, Fees & Uncollectibles (2,471,259) (2,711,248) (2,787,177) (2,816,116) (2,844,782) (2,873,449) Total Projected Receipts $ 50,632,623 $ 51,513,710 $ 52,956,363 $ 53,506,209 $ 54,050,867 $ 54,595,525 Calculated rate (under) over prior year receipts $ 881,086 $ 2,323,740 $ 2,873,586 $ 3,418,244 $ 3,962,902 % change in projected receipts 1.7% 4.6% 5.7% 6.8% 7.8% change in taxable value $ 4,147,355,622 $ 4,147,355,622 $ 4,147,355,622 $ 4,147,355,622 $ 4,147,355,622 % change in taxable value 8.2% 8.2% 8.2% 8.2% 8.2% Note: based on 6/29/17 Property Appraiser values (form DR420) Calculation of Rolled Back Rate: PY gross tax receipts Current year total taxable value 54,602,350,765 Subtract new construction (1,128,877,678) Adjusted current year value 53,103,882 (a) 53,473,473,087 (b) Rolled Back Rate (a) / (b) x 1,000 0.9931 8
Comparative FY2018 Ad Valorem Tax Millage Final rates 2016-2017 Preliminary rates 2017-2018 Change Sarasota School Board 7.4330 7.2090 (0.2240) Manatee School Board 6.9200 6.6080 (0.3120) Manatee County 6.4206 6.4303 0.0097 City of Venice 3.6000 3.6000 - City of North Port 3.4770 3.4770 - Sarasota County 3.1962 3.2128 0.0166 City of Sarasota 3.1728 3.1728 - Town of Longboat Key 2.1144 2.1144 - Sarasota Memorial 1.0525 1.0420 (0.0105) 9
Proposed motion: Recommend approval by the Board of the FY 2018 Operating and Capital Budgets and setting the tax millage rate at 1.0420 for FY2018. 10
RESOLUTION WHEREAS, the Sarasota County Public Hospital District (the District ) is an independent special district established by special act of the Florida Legislature and governed by the Sarasota County Public Hospital Board ("Hospital Board'); and WHEREAS, the enabling legislation of the Sarasota County Public Hospital District, Ch. 2003-359, Laws of Fla. ("Enabling Legislation"), authorizes the moneys and receipts from the operations of the District to be deposited in a bank or banks designated by the Board to be paid out as established by the Board; and WHEREAS, the Board desires to designate such bank or banks and to authorize its administration to take such steps as are necessary to effect the resolution. NOW THEREFORE, be it resolved: 1. That the Board hereby designates Wells Fargo Bank, N.A., PNC Bank, N.A., Bank of America N.A., and such other banks as have Florida status as a Qualified Public Depository ( Designated Banks ) as banks into which the moneys and receipts from the operations of the District may be deposited and from which such moneys and receipts can be paid out consistent with the Enabling Legislation and the policies and procedures of the Board. 2. That the administration of the Sarasota Memorial Health Care System be authorized and empowered to take steps pursuant to this resolution including opening, operating, and maintaining accounts with Designated Banks as necessary to efficiently and effectively manage the assets of the District. I, Tramm Hudson, Secretary of the Sarasota County Public Hospital Board, hereby certify that the above Resolution is a true and accurate copy of the Resolution adopted by the Sarasota County Public Hospital Board at its Regular Meeting, held September 18, 2017. Tramm Hudson Sarasota County Public Hospital Board