Franciscan Alliance, Inc. and Affiliates

61 Pages·2013·0.33 MB·English

Franciscan Alliance, Inc. and
Affiliates
Consolidated Financial Statements with
Supplemental Financial Information
December 31, 2012 and 2011
Franciscan Alliance, Inc. and Affiliates
Index
December 31, 2012 and 2011
Page(s)
IndependentAuditor'sReport..............................................................................................................1
ConsolidatedFinancialStatements
ConsolidatedBalanceSheets.................................................................................................................2
ConsolidatedStatementsofOperationsandChangesinNetAssets....................................................3-4
ConsolidatedStatementsofCashFlows.................................................................................................5
NotestoConsolidatedFinancialStatements......................................................................................6-36
SupplementalSchedules
IndependentAuditor'sReportonAccompanyingConsolidatingInformationand
OtherSupplementalFinancialInformation...........................................................................................37
ConsolidatingBalanceSheet...........................................................................................................38-39
ConsolidatingBalanceSheet-CentralIndianaRegion....................................................................40-41
ConsolidatingBalanceSheet-WesternIndianaRegion...................................................................42-43
ConsolidatingBalanceSheet-NorthernIndianaRegion..................................................................44-45
ConsolidatingBalanceSheet-CorporateandOther........................................................................46-47
ConsolidatingStatementofOperations.................................................................................................48
ConsolidatingStatementofOperations-CentralIndianaRegion..........................................................49
ConsolidatingStatementofOperations-WesternIndianaRegion.........................................................50
ConsolidatingStatementofOperations-NorthernIndianaRegion........................................................51
ConsolidatingStatementofOperations-CorporateandOther..............................................................52
PatientAccountsReceivableandRelatedData....................................................................................53
GrossRevenueCompositionbyPayor(Unaudited).........................................................................54-55
ServiceStatistics(Unaudited)..........................................................................................................56-57
Full-TimeEquivalentPersonnel(Unaudited).........................................................................................58
MedicalStaffComplement(Unaudited).................................................................................................59
IndependentAuditor'sReport
BoardofTrustees
FranciscanAlliance,Inc.
Mishawaka,Indiana
WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofFranciscanAlliance,Inc.and
Affiliates(collectivelyreferredtoasthe“Corporation”),whichcomprisetheconsolidatedbalancesheetsas
ofDecember31,2012and2011,andtherelatedconsolidatedstatementsofoperationsandchangesin
netassetsandofcashflowsfortheyearsthenended.
Management'sResponsibilityfortheConsolidatedFinancialStatements
Managementisresponsibleforthepreparationandfairpresentationoftheconsolidatedfinancial
statementsinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica;
thisincludesthedesign,implementation,andmaintenanceofinternalcontrolrelevanttothepreparation
andfairpresentationofconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,
whetherduetofraudorerror.
Auditor'sResponsibility
Ourresponsibilityistoexpressanopinionontheconsolidatedfinancialstatementsbasedonouraudits.
WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesof
America. Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassurance
aboutwhethertheconsolidatedfinancialstatementsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresin
theconsolidatedfinancialstatements. Theproceduresselecteddependonourjudgment,includingthe
assessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherdueto
fraudorerror. Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttothe
Corporation'spreparationandfairpresentationoftheconsolidatedfinancialstatementsinordertodesign
auditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressingan
opinionontheeffectivenessoftheCorporation'sinternalcontrol. Accordingly,weexpressnosuch
opinion. Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthe
reasonablenessofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingthe
overallpresentationoftheconsolidatedfinancialstatements. Webelievethattheauditevidencewehave
obtainedissufficientandappropriatetoprovideabasisforourauditopinion.
Opinion
Inouropinion,theconsolidatedfinancialstatementsreferredtoabovepresentfairly,inallmaterial
respects,thefinancialpositionoftheCorporationatDecember31,2012and2011andtheresultsoftheir
operationsandtheircashflowsfortheyearsthenendedinaccordancewithaccountingprinciples
generallyacceptedintheUnitedStatesofAmerica.
April22,2013
PricewaterhouseCoopersLLP,OneNorthWackerDriveChicago,IL,60606
T:(312)2982000,F:(312)2982001,www.pwc.com/us
Franciscan Alliance, Inc. and Affiliates
Consolidated Balance Sheets
December 31, 2012 and 2011
(Inthousands)
2012 2011 2012 2011
Assets LiabilitiesandNetAssets
Currentassets Currentliabilities
Cashandcashequivalents $ 199,564 $ 172,319 Currentportionoflong-termdebt $ 22,103 $ 17,909
Short-terminvestments 37,159 40,418 Accountspayableandaccruedexpenses 228,870 222,514
Patientaccountsreceivable,netof Accruedpayrollandrelatedexpenses 110,656 99,128
allowancefordoubtfulaccountsof$42,917 Estimatedthird-partypayorsettlements 34,420 29,074
in2012and$47,933in2011 336,243 312,539
Inventoriesofsupplies 39,855 36,418 Totalcurrentliabilities 396,049 368,625
Othercurrentassets 123,365 83,259
Totalcurrentassets 736,186 644,953 Long-termdebt,netofcurrentportion 1,116,075 1,119,157
Boarddesignatedandotherinvestments 1,726,697 1,673,904 Fairvalueofinterestrateswapcontracts 102,208 105,964
Property,plant,andequipment,net 1,570,193 1,504,623 Accruedpensionliability 426,629 326,527
Investmentsinunconsolidatedaffiliates 21,378 24,012 Estimatedinsuranceliabilities 130,132 136,362
Goodwill 21,361 18,425 Otherliabilities 57,944 37,680
Intangibleassets,netofaccumulated Totalliabilities 2,229,037 2,094,315
amortizationof$10,554in2012and$7,732
in2011 19,077 9,940 Netassets
Unrestricted 1,904,372 1,815,411
Noncontrollinginterestsinconsolidatedaffiliates 28,376 28,383
Otherassets 96,314 91,985 Totalunrestrictednetassets 1,932,748 1,843,794
Temporarilyrestricted 17,559 17,798
Permanentlyrestricted 11,862 11,935
Totalnetassets 1,962,169 1,873,527
Totalassets $ 4,191,206 $ 3,967,842 Totalliabilitiesandnetassets $ 4,191,206 $ 3,967,842
Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.
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Franciscan Alliance, Inc. and Affiliates
Consolidated Statements of Operations and Changes in Net Assets
Years Ended December 31, 2012 and 2011
(Inthousands)
2012 2011
Unrestrictedrevenues,gains,andothersupport
Patientservicerevenue,netofcontractualallowancesanddiscounts $ 2,460,016 $ 2,200,132
Provisionfordoubtfulaccounts (106,994) (93,140)
Netpatientservicerevenue 2,353,022 2,106,992
Capitationandpremiumrevenue 134,779 108,828
Otheroperatingrevenue 126,525 139,112
Equityinearningsofinvestmentsinunconsolidatedaffiliates 5,001 7,608
Netunrealizedinvestmentgains(losses) 5,533 (4,132)
Netassetsreleasedfromrestrictionsusedforoperations 2,001 3,068
Totalunrestrictedrevenues,gainsandothersupport 2,626,861 2,361,476
Operatingexpenses
Salaries 1,000,612 920,065
Employeebenefits 290,012 262,262
Physicians’fees 52,721 48,310
Utilities 43,031 41,473
Repairsandmaintenance 41,115 39,503
Drugsandpharmaceuticals 95,961 89,884
Medicalsupplies 189,503 190,356
Insurance 38,749 35,100
Purchasedservices 253,927 215,153
Othersuppliesandexpenses 340,145 245,234
Interest 35,133 33,199
Depreciationandamortization 136,171 126,175
Totaloperatingexpensesbeforeassetimpairment 2,517,080 2,246,714
Operatingincomebeforeassetimpairment 109,781 114,762
Assetimpairment (30,000) -
Operatingincome 79,781 114,762
Otherincome(expense)
Investmentincome 82,065 88,709
Netunrealizedinvestmentgains(losses)ontradingsecurities 76,311 (62,303)
Netunrealizedlossesandperiodicsettlementsoninterest
rateswapcontracts (10,673) (63,971)
(Loss)gainonsale/disposalofassets (1,045) 7
Netassetsreleasedfromrestrictions 1,318 2,072
Contributions 431 1,387
Other,net (5,040) (3,764)
Totalotherincome(expense),net 143,367 (37,863)
Excessofrevenuesoverexpenses $ 223,148 $ 76,899
Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.
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Franciscan Alliance, Inc. and Affiliates
Consolidated Statements of Operations and Changes in Net Assets
Years Ended December 31, 2012 and 2011
(Inthousands)
2012 2011
Unrestrictednetassets,controllinginterest
Excessofrevenuesoverexpenses $ 204,073 $ 59,111
Changeinpensionandpostretirementbenefitsotherthannet
periodicpensioncostsincludedinaccruedpensionliability (116,529) (94,433)
Other,net (241) (3,004)
Netassetsreleasedfromrestrictionsusedforpurchaseof
property,plant,andequipment 1,658 784
Increase(decrease)inunrestrictednetassets,
controllinginterest 88,961 (37,542)
Unrestrictednetassets,noncontrollinginterest
Excessofrevenuesoverexpenses 19,075 17,788
Distributions (19,082) (16,892)
(Decrease)increaseinunrestrictednetassets,
noncontrollinginterest (7) 896
Temporarilyrestrictednetassets,controllinginterest
Contributions 3,498 6,237
Investmentincome 366 250
Netassetsreleasedfromrestrictions (4,977) (5,924)
Netunrealizedinvestmentgains(losses) 100 (147)
Other,net 774 115
(Decrease)increaseintemporarilyrestricted
netassets,controllinginterest (239) 531
Permanentlyrestrictednetassets,controllinginterest
Contributions 15 -
Investmentincome 95 71
Netunrealizedinvestment(losses)gains (64) 252
Other,net (119) (111)
(Decrease)increaseinpermanentlyrestricted
netassets,controllinginterest (73) 212
Increase(decrease)innetassets 88,642 (35,903)
Netassets,beginningoftheyear 1,873,527 1,909,430
Netassets,endoftheyear $ 1,962,169 $ 1,873,527
Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.
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Franciscan Alliance, Inc. and Affiliates
Consolidated Statements of Cash Flows
Years Ended December 31, 2012 and 2011
(Inthousands)
2012 2011
Cashflowsfromoperatingactivities
Increase(decrease)increaseinnetassets $ 88,642 $ (35,903)
Adjustmentstoreconcilechangeinnetassetstonetcash
providedbyoperatingactivities:
Depreciationofplant,property,andequipment 131,557 122,577
Amortizationofbonddiscounts,deferredfinancingcosts,and
otherintangibleassets 4,614 3,598
Provisionfordoubtfulaccounts 106,994 93,140
Loss(gain)onsale/disposalofassets 1,045 (7)
Netinvestmentgains (163,909) (22,274)
Assetimpairment(seeNote2) 30,000 -
Netunrealized(gains)lossesoninterestrateswapcontracts (3,756) 49,510
Distributionstononcontrollinginterests
inconsolidatedaffiliates 19,082 16,892
Distributionsfromunconsolidatedaffiliates 8,261 10,981
Equityinearningsofinvestmentsinunconsolidatedaffiliates (5,001) (7,608)
Restrictedcontributionsandinvestmentincome (3,974) (6,558)
Changeinpensionandpostretirementbenefitsotherthannet
periodicpensioncostsincludedinaccruedpensionliability 116,529 94,433
Changesinoperatingassetsandliabilities:
Patientaccountsreceivable (130,699) (157,212)
Inventoriesofsupplies (2,488) 1,748
Otherassets (42,943) (30,835)
Accountspayableandaccruedexpenses 5,155 9,734
Accruedpayrollandrelatedexpenses 11,528 13,159
Estimatedthird-partypayorsettlements 5,346 (995)
Estimatedinsuranceliabilities (6,230) 15,357
Accruedpensionliability (16,427) (21,051)
Otherliabilities 20,264 (8,865)
Totaladjustments 84,948 175,724
Netcashprovidedbyoperatingactivities 173,590 139,821
Cashflowsfrominvestingactivities
Purchasesofinvestments (8,068,570) -
Proceedsfromsaleofinvestments 8,228,260 -
(Purchases)salesofboarddesignatedandotherinvestments
intheHSD,net(seeNote2) (45,315) 66,501
Purchasesofproperty,plant,andequipment (208,646) (198,993)
Proceedsfromsaleofproperty,plant,andequipment 2,977 1,792
Acquisitionofphysicianpracticesandotherhealthcareservice
organizations (25,712) (14,827)
Proceedsfromsaleofinvestmentsinunconsolidatedaffiliates - 556
Netcashusedbyinvestingactivities (117,006) (144,971)
Cashflowsfromfinancingactivities
Proceedsfromissuanceoflong-termdebt(seeNote6) 88,142 -
Refundingoflong-termdebt(seeNote6) (82,620) -
Principalpaymentsonlong-termdebt (19,753) (20,029)
Distributionstononcontrollinginterestsofconsolidatedaffiliates (19,082) (16,892)
Restrictedcontributionsandinvestmentincome 3,974 6,558
Netcashusedbyfinancingactivities (29,339) (30,363)
Netincrease(decrease)incashandcashequivalents 27,245 (35,513)
Cashandcashequivalents,beginningofyear 172,319 207,832
Cashandcashequivalents,endofyear $ 199,564 $ 172,319
Theaccompanyingnotesareanintegralpartoftheseconsolidatedfinancialstatements.
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Franciscan Alliance, Inc. and Affiliates
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
1. DescriptionofOrganizationandMission
Organization
FranciscanAlliance,Inc.andAffiliates(collectivelyreferredtoasthe“Corporation”),underthe
sponsorshipoftheSistersofSt.FrancisofPerpetualAdoration,Inc.,isanIndiananonprofit,
Catholichealthcaresystem. TheCorporationisdedicatedtoprovidingcomprehensivehealthcare
services,includingmedical,surgical,behavioralhealth,rehabilitative,andotherhealthservicesin
inpatientandoutpatientsettings;homehealthcareservices;primaryandspecialtyphysician
services;aswellasphysicianhospitalmanagedcarenetworkstocommunitieswithinfour
geographicregionsinIndianaandIllinois(the“HealthCenters”). TheCorporationalsohasa
numberofsupportrelateddivisionsandaffiliatesincludingacorporateoffice,aconsolidated
informationtechnologyservicesdivision,variousbackoffice/managementsupportorganizations,a
constructioncompany,acaptiveinsurancecompany,andnonprofitfoundations. Inaddition,the
Corporationhasvariousinvestmentsinconsolidatedandunconsolidatedaffiliates(seeNote10).
TheCorporationisincorporatedasanot-for-profitcorporationunderthelawsofIndianaandisa
tax-exemptorganizationasdescribedinSection501(c)(3)oftheInternalRevenueCode(the
“Code”).
Mission
TheCorporation’smissionstatementisasfollows:
ContinuingChrist’sMinistryinOurFranciscanTradition
Consistentwithitsmission,theCorporationprovidesmedicalcaretoallpatientsregardlessoftheir
abilitytopay. Inaddition,theCorporationprovidesservicesintendedtobenefitthepoorand
underservedandtoenhancethehealthstatusofthecommunitiesinwhichitoperates.
ThefollowingsummaryhasbeenpreparedinaccordancewiththeCatholicHealthAssociationof
theUnitedStates’policydocument,GuideforPlanningandReportingCommunityBenefit, 2008
edition. Thebenefitsprovidedaremeasuredattotalcost,netofanyoffsettingrevenues,
donations,orotherfundsusedtodefraycost.
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Franciscan Alliance, Inc. and Affiliates
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
ThefollowingamountsreflecttheCorporation’squantifiablecommunitybenefitsfortheyears
endedDecember31,2012and2011:
(Unaudited)
2012 2011
(inthousands)
Benefitsforthepoorandunderserved
UnreimbursedcostsofMedicaidandotherindigent
careprograms $ 96,672 $ 119,144
Costofcharitycareprovided 83,775 69,465
Otherbenefitsforthepoorandunderserved
Subsidizedhealthservices 2,953 2,203
Communityhealthimprovementservices 713 673
Financialandin-kindcontributions 584 1,229
Healthprofessionseducation - 21
Communitybuildingactivities - 2
Communitybenefitoperations 2 7
4,252 4,135
Totalbenefitsforthepoorandunderserved 184,699 192,744
Benefitsforthebroadercommunity
Subsidizedhealthservices 30,954 18,058
Healthprofessionseducation 14,349 15,373
Communityhealthimprovementservices 4,380 4,050
Financialandin-kindcontributions 2,545 754
Research 937 597
Communitybuildingactivities 890 988
Communitybenefitoperations 151 107
Totalbenefitsforthebroadercommunity 54,206 39,927
Totalquantifiablecommunitybenefits 238,905 232,671
UnreimbursedcostsofMedicare 250,739 192,996
Totalquantifiablecommunitybenefitsincluding
unreimbursedcostsofMedicare $ 489,644 $ 425,667
TotalquantifiablecommunitybenefitsincludingunreimbursedcostsofMedicarewere
approximately19%oftotaloperatingexpenses,beforetheassetimpairment,forboththeyears
endedDecember31,2012and2011.
TheCorporationalsoprovidesasignificantamountofuncompensatedcaretopatientswhichis
reportedasprovisionfordoubtfulaccountsintheconsolidatedstatementsofoperationsand
changesinnetassetsandisnotreportedinthesummaryofquantifiablecommunitybenefits.
DuringtheyearsendedDecember31,2012and2011,theCorporationreportedapproximately
$107.0millionand$93.1million,respectively,asprovisionfordoubtfulaccountsbasedon
accumulatedcharges.
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Franciscan Alliance, Inc. and Affiliates
Notes to Consolidated Financial Statements
December 31, 2012 and 2011
Benefitsforthepoorandunderservedincludethecostofprovidingprogramsandservicesto
personswhoareeconomicallypoororaremedicallyindigentandcannotaffordtopayforhealth
careservicesbecausetheyhaveinadequateresourcesand/orareuninsuredorunderinsured.
Benefitsforthebroadercommunityincludethecostsofprovidingprogramsandservicesaimed
atpersonsandgroupsforreasonsotherthanpoverty. Thesepersonsandgroupsmayinclude
needypopulationsthatmaynotqualifyaspoorbutneedspecialservicesandsupportorbroader
populationswhobenefitfromhealthycommunityinitiatives. Theseprogramsandservicesarenot
intendedtobefinanciallyself-supporting.
UnreimbursedcostsofMedicaidandotherindigentcareprograms representthecost
(determinedusingacosttochargeratio)ofprovidingservicestobeneficiariesofpublicprograms
includingStateMedicaidandindigentcareprogramsinexcessofanypaymentsreceived.
Charitycarerepresentsthecost(determinedusingacosttochargeratio)ofhealthcareservices,
providedinaccordancewiththeCorporation’scharitycarepolicy,forwhichnoorpartial
reimbursementwillbereceivedbecauseoftherecipient’sinabilitytopayforthoseservices.
Subsidizedhealthservices arenetcostsforbilledservicesthataresubsidizedbythe
Corporation. Theseincludeservicesoffereddespiteafinanciallossbecausetheyareneededin
thecommunityandeitherotherprovidersareunwillingtoprovidetheservicesortheservices
wouldotherwisenotbeavailableinsufficientamount. Examplesofservicesincludeemergency
services,freestandingcommunityclinics,hospicecare,behavioralhealthservices,prenatal
services,women’sandchildren’sservices,palliativecare,andparishnurseprograms.
Communityhealthimprovementservices areactivitiesandservicesforwhichnopatientbill
exists. Theseservicesarenotexpectedtobefinanciallyself-supporting,althoughsomemaybe
supportedbyoutsidegrantsorfunding,whichisnettedagainstanyamountsreported. Some
examplesincludehealtheducation,healthfairs,freeorlowcosthealthscreening,immunization
services,prescriptionmedicationassistanceprograms,andothervariouscommunityoutreach
programs. TheCorporationactivelycollaborateswithcommunitygroupsandagenciestoassist
thoseinneedinprovidingsuchservices.
FinancialandinkindcontributionsaremadebytheCorporationonbehalfofthepoorand
underservedtovariouscommunityagencies. Theseamountsincludefundsusedforcharitable
activitiesaswellasresourcescontributeddirectlytoprograms,organizations,andfoundationsfor
effortsonbehalfofthepoorandunderserved. Inkindservicesincludehoursdonatedbystaffto
thecommunitywhileonworktime,overheadexpensesofspacedonatedtocommunitygroups,
anddonationsoffood,equipment,andsupplies.
Healthprofessionseducationincludestheunreimbursedcostoftraininghealthprofessionals
suchasmedicalresidents,nursingstudents,technicians,andstudentsinalliedhealthprofessions.
Communitybuildingactivitiesincludethecostsofprogramsthatimprovethephysical
environment,promoteeconomicdevelopment,enhanceothercommunitysupportsystems,provide
leadershipdevelopmentskillstraining,andbuildcommunitycoalitions.
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