Michigan Critical Access HospitalsFinancial Benchmarking 2015Michigan Center for Rural HealthNovember 5, 20151
Agenda Update on Credit Analysis & Market Michigan Hospital Review 10 Year Trends Summary & Questions2
Credit Evaluation3
Hospital Operational rgersStaffingPrioritiesService LineOfferingsBudgetStrategies iesDebt PoliciesStrategic oryChanges4
Rating Agency MediansStandard & Poor’s Sept. 1, 2015 476 ratings (501 prior year) 494.4 million Net PatientRevenue ( 474.8) 12.0% EBIDA margins (11.1%) 214.0 Days Cash on Hand(197.6)Fitch Ratings August 10, 2015 235 hospitals (243) 642.1 million Total Op Revenue( 575.7) 11.7% EBIDA margins (10.9%) 203.4 Days Cash on Hand(193.9)Numbers in parenthesis represent prior year medianMoody’s Sept. 10, 2015 366 hospitals (383) 604.2 million Net PatientRevenue ( 576.2) 9.6% Operating Cash FlowMargin (9.0%) 205.8 Days Cash on Hand(201.4) 5.1% 3 Yr. Operating RevenueGrowth (5.0%) 5.2% 3 Yr. Operating ExpenseGrowth (5.4%)5
Rating Agency Commentary Fitch still negative outlook butsome positive trends Widening credit gap Strengthened liquidity Lower capital spending Revenue cycle management Improved leverage ratios Medicaid expansion positive Improved investment returns Risk based payer contractsSource: Moody’s report 9/10/15; S&P Report 9/1/15; Fitch report 8/10/156
S&P Change in CriteriaEnterprise Profile Industry Risk 20%Econ Fund 20%Market Pos. 50%Mgt & Govern. 10%Financial Profile Financial Perf. 40%Liquidity & Flex. 30%Debt & Cont. Liab. 30%Financial PoliciesSmall hospitals under 125 million in net patient revenue and/or DCOH under 75 days weaker creditsSource: S&P Report 12/15/14 – “U.S. Not-for-Profit Acute-Care Stand-Alone Hospitals – Methodology AndAssumptions”;7
S&P Small Hospital MetricsSample SizeNet Patient Revenue ( 000s)Profitability RatiosOperating Margin (%)Excess/Profit Margin (%)Cash Flow (EBITDA) Margin (%)Liqudity RatiosDays Cash on HandCushionCash to Debt (%)Days in Accounts ReceivableCapital Structure RatiosDebt Service Coverage (EBITDA)Debt Service to Revenue (%)Debt to Capital (%)Average Age of PlantCap Expend to Depreciation (%)Operational RatiosPersonnel Costs/Revenues (%)S&P 9.1.15 Rating medians for fiscal year ended 2014; smallhospital 125 million net patient rev or lessStandard & Poor'sSmall Hospital"BBB""A"1211 73,147 .202.5018.2010.3091.6057.3057.708
Market Conditions9
Bloomberg Economic Survey October 13, 2015Fed RateOctober 28th meeting has slim chance of Fedmoving rate up; many will look to press release onBloomberg Monthly SurveyMedian Rate Summaryhints of a mid-December rate hike.Mixed bag of economic indicators:Positive: Housing market continues to strengthen(housing starts are at their highest since2007) Jobless claims are at a 41-year low Better-than-expected purchasing managersreports provided a hopeful sign of someFed Funds2-Year Note10-Year Note30-Year Note3-Month LiborSource: Bloomberg GDP growth for the third quarter to bereleased 10/29 will probably bedisappointing, real growth might be only1.5%, versus 3.9% for the second quarter PCE core deflator, will be released two daysafter the FOMC meeting and at 1.4% YOY,would still be well short of the 2% target1Q20160.50%1.08%2.50%3.20%0.65%Bloomberg Monthly SurveyMedian Economic Indicator 0.42%UnemploymentConsumer SpendingCPI (YOY)PCE (YOY)Core PCE (YOY)GDPBudgetSource: %1.8%2.5%-2.5%SOURCES: Bloomberg as of October 13, 201510
Interest Rates are Still Very Attractive!Source: Bloomberg, October 22 201511
Ability to Afford?ProfitabilityDebtLiquidityDo You HavePositiveMargins?YesWhat is YourCashPosition?EnoughToo MuchDebt Now?NoShortYesNeed toFocus onOperationsNeed to BuildCashReservesFocus onReducingDebtNoWhat OptionsAreAvailable?12
Michigan CAH Analysis13
Methodology Obtained 2014 financial reports from 29 hospitals Hospitals self-selected based on request from Michigan Center forRural Health Created percentile rankings for each hospital based on key attributes Historical trends based on 10 years of data; not all the same hospitalsparticipated each year14
Revenue Analysis15
Patient Revenue - All16
System vs Non System17
Charity Care DollarsOnly 23 hospitals reported charity care dollars18
Contractual Allowances as % of Gross RevenueOnly 23 hospitals reported details of patient revenue; median 39.3%19
Medicare Revenue Payer MixOnly 19 hospitals reported Medicare revenue details20
Operating Margin - AllAverage 1.30% across hospitals21
Operating Margin22
EBITDA - AllAvg. EBITDA 3.07 mill23
EBITDA24
Debt Service Coverage - All25
Debt Service Coverage26
Bad Debt Expense - All27
Bad Debt Expense28
Personnel Expense29
Total Operating Expenses30
Balance Sheet Analysis31
Liquidity is Critical – DCOH - All32
Liquidity - DCOH33
Liquidity Support - Cash & Investments34
Cash on the Balance Sheet – Days AR35
Days AR System vs Non-System36
How Much Leveraged?37
How Old Are Your Facilities?S&P 2014 BBB rated stand alone average age of plant 11.6 years;38
Age of Plant Getting Older at Systems39
Are You Reinvesting in Your Facilities?S&P 2014 BBB rated stand alone median 74.6%; Michigan CAHs 72.5%40
Independent Hospitals Reinvesting More!41
Stronger Entities Continue to Strengthen42
10 Year Historical Trends**trends of all Michigan Critical Access Hospitals whohave participated in the study over the past 10 years.43
Revenue vs Cash FlowAnnual growth rate of 5% per year in total revenue; 9% for EBITDA44
Net Patient RevenueData gathered for years reflected in the chart45
Liquidity46
Debt OutstandingAmounts in millions of dollars47
Debt Repayment (Average)48
Key Expense Ratios49
Do You Have Creeping Deferred Maintenance?50
Keep Re-investing!Only data for last 5 years collected51
Thanks for participating!Tanya K. Hahn, CPA, MBAChief Financial OfficerNational Church ResidencesColumbus, OHPH: 614-273-3640 (office)PH: 614-582-7892 (cell)Email:thahn@nationalchurchresidences.org52
Michigan Critical Access Hospitals Financial Benchmarking 2015 Michigan Center for Rural Health. November 5, 2015. 2 . Mixed bag of economic indicators: Positive: . *trends of all Michigan Critical Access Hospitals who have participated in the study over the past 10 years. 44.
California’s Critical Access Hospitals: The Financial Landscape 2010 2010 California he a lt h Care fo u n d at i o n 2 Critical Access Hospitals contents . Critical Access Hospitals MEDIAN INDICATORS Note: Two hospitals converted to CAH status in 2008 and were excluded from the analysis of 2008 data.
Accreditation Requirements for Critical Access Hospitals, 2020 edition changes for 2020 v2 Page 1 of 39 Subsequent to CMS Final Rules published in the Federal Register on September 30, 2019, changes have been made to Accreditation Requirements for Critical Access Hospitals. The chart below details the revisions.
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hospitals, long-term acute care hospitals, critical access hospitals, and specialized hospitals. 56. 5 . Healthcare Workers with Occupational Exposure Risk Four states have HepB vaccination laws for at-risk healthcare workers as identified by the . considered long-term care facilities. 76 Illinois
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