Geary Community Hospital

Geary Community Hospital A Component Unit of Geary County, Kansas Independent Auditor’s Report and Financial Statements April 30, 2016 and 2015 Geary Community Hospital A Component Unit of Geary County, Kansas April 30, 2016 and 2015

Contents

Independent Auditor’s Report ...... 1

Management’s Discussion and Analysis ...... 4

Financial Statements Balance Sheets – Geary Community Hospital ...... 12 Statements of Financial Position – Geary Community Healthcare Foundation ...... 13 Statements of Revenues, Expenses and Changes in Net Position – Geary Community Hospital .... 14 Statements of Activities – Geary Community Healthcare Foundation...... 15 Statements of Cash Flows – Geary Community Hospital ...... 16 Statements of Cash Flows – Geary Community Healthcare Foundation ...... 18 Notes to Financial Statements ...... 19

Required Supplementary Information Schedule of the Hospital’s Proportionate Share of the Net Pension Liability ...... 42 Schedule of the Hospital’s Contributions ...... 43 Notes to Required Supplementary Information ...... 44

Supplementary Information Net Patient Service Revenue ...... 45 Contractual Allowances, Charity Care and Other Operating Revenues ...... 46 Operating Expenses ...... 47

Independent Auditor’s Report

Board of Trustees Geary Community Hospital Junction City, Kansas

We have audited the accompanying financial statements of Geary Community Hospital (Hospital) as of and for the years ended April 30, 2016 and 2015, and its discretely presented component unit (Geary Community Healthcare Foundation) as of and for the years ended December 31, 2015 and 2014, collectively a component unit of Geary County, Kansas, and the related notes to the financial statements, which collectively comprise the Hospital’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We did not audit the financial statements of Geary Community Healthcare Foundation (Foundation), the discretely presented component unit of the Hospital. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Foundation, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the Kansas Municipal Audit and Accounting Guide. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Board of Trustees Geary Community Hospital Page 2

Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of Geary Community Hospital and its discretely presented component unit as of April 30, 2016 and 2015 and December 31, 2015 and 2014, respectively, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1 to the financial statements, in 2016 the Hospital adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and pension information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the Hospital’s basic financial statements. The Net Patient Service Revenue schedule, Contractual Allowances, Charity Care and Other Operating Revenues schedule and Operating Expenses schedule listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audits of the basic financial statements and certain additional

Board of Trustees Geary Community Hospital Page 3

procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.

Wichita, Kansas September 23, 2016

Geary Community Hospital A Component Unit of Geary County, Kansas Management’s Discussion and Analysis Years Ended April 30, 2016 and 2015

Introduction

This management’s discussion and analysis of the financial performance of Geary Community Hospital (Hospital) provides an overview of the Hospital’s financial activities for the years ended April 30, 2016 and 2015. It should be read in conjunction with the accompanying financial statements of the Hospital. Unless otherwise noted, the information and financial data included in the management’s discussion and analysis relates solely to the Hospital and does not include the Hospital’s component unit, Geary Community Healthcare Foundation (Foundation).

Financial Highlights

• Cash and short-term certificates of deposit decreased $1,480,687 or 33% in 2016 and $9,563 or less than 1% in 2015.

• The Hospital’s net position decreased $3,157,654 in 2016. In 2015, net position decreased $17,319,778, $16,142,220 was due to implementation of GASB 68 and 71 and the reporting of the Hospital’s portion of the net pension liability in the KPERS plan.

• The Hospital reported an operating loss of $3,629,869 and $1,823,376 in 2016 and 2015, respectively. The operating loss in 2016 increased by $1,797,493 compared to the operating loss reported in 2015.

• For 2016, the Hospital adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. The amounts reported in the management discussion and analysis for 2014 have not been restated for GASB 68 and 71.

Using This Annual Report

The Hospital’s financial statements consist of three statements – a Balance Sheet; a Statement of Revenues, Expenses and Changes in Net Position; and a Statement of Cash Flows. These statements provide information about the activities of the Hospital, including resources held by the Hospital but restricted for specific purposes by creditors, contributors, grantors or enabling legislation. The Hospital is accounted for as a business-type activity and presents its financial statements using the economic resources measurement focus and the accrual basis of accounting. Geary Community Healthcare Foundation, a nonprofit organization established to raise funds for the support of health care services and programs of Geary Community Hospital and the Geary County, Kansas area, is included in the Hospital’s financial statements as a component unit using the discrete presentation method.

The Balance Sheet and Statement of Revenues, Expenses and Changes in Net Position

One of the most important questions asked about any hospital’s finances is “Is the Hospital as a whole better or worse off as a result of the year’s activities?” The Balance Sheet and the Statement of Revenues, Expenses and Changes in Net Position report information about the Hospital’s resources and its activities in a way that helps answer this question. These statements include all restricted and unrestricted assets, deferred outflows of resources and all liabilities and deferred inflows of resources using the accrual basis of accounting. Using the accrual basis of accounting means that all of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the changes in the Hospital’s net position. The Hospital’s total net position (the difference between assets, deferred outflows of resources and liabilities and deferred inflows of resources) is one measure of the Hospital’s financial health or financial position. Over time, increases or decreases in the Hospital’s net position is an indicator of whether its financial health is improving or deteriorating. Other non-financial factors, such as changes in the Hospital’s patient base, changes in legislation and regulations, measures of the quantity and quality of services provided to its patients and local economic factors should also be considered to assess the overall financial health of the Hospital.

The Statement of Cash Flows

Changes in the Hospital’s cash flows are consistent with changes in operating income and nonoperating revenues and expenses, discussed earlier. In addition, cash has been expended for construction associated with the Hospital’s expansion plan. Details of this activity are described in the Capital Asset and Debt Administration – Capital Assets section of this document.

The Hospital’s Net Position

Net position is the difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources reported in the balance sheet. As shown in Table 1, the Hospital’s net position decreased by $3,157,654 in 2016. In 2015, net position decreased by $17,319,778, $16,142,220 was due to implementation of GASB 68 and 71 and the reporting of the Hospital’s portion of the net pension liability in the KPERS plan.

Table 1: Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position

2016 2015 2014 * Assets (As Restated) Cash$ 3,010,700 $ 4,491,387 $ 4,500,950 Patient accounts receivable, net 5,441,281 6,175,967 6,351,119 Other current assets 4,199,806 4,335,481 3,162,576 Capital assets, net 40,188,403 42,337,033 45,061,453 Other noncurrent assets 1,005,751 933,018 1,493,053

Total assets 53,845,941 58,272,886 60,569,151

Deferred Outflows of Resources - Pension 1,585,063 1,706,381 -

Total assets and deferred outflows of resources$ 55,431,004 $ 59,979,267 $ 60,569,151 Liabilities Long-term debt, excluding current portion$ 5,284,148 $ 5,730,729 $ 6,185,416 Current liabilities 4,821,823 4,892,967 5,103,107 Net pension liability 14,801,907 14,394,445 -

Total liabilities 24,907,878 25,018,141 11,288,523

Deferred Inflows of Resources - Pension 1,719,930 3,000,276 -

Net Position (Deficit) Net investment in capital assets 34,450,878 36,136,263 38,153,136 Restricted expendable 677,861 843,765 826,222 Unrestricted (deficit) (6,325,543) (5,019,178) 10,301,270

Total net position 28,803,196 31,960,850 49,280,628

Total liabilities, deferred inflows of resources and net position $ 55,431,004 $ 59,979,267 $ 60,569,151

* 2014 has not been restated for the adoption of GASB 68 and GASB 71

Cash decreased during the fiscal year ended April 30, 2016, due to several factors. Net patient service revenue decreased $1,881,711 or 4.6% during 2016, as compared to 2015, in part due to the loss of an orthopedic surgeon during 2016 as well as the implementation of a Hospitalist model. In addition to the decline in volume, the Hospital also saw a decline in DSH and EHR revenue of approximately $750,000 from 2015 to 2016. Current liabilities decreased from 2015 to 2016 mostly due to the timing payments toward accounts payable. Long-term liabilities decreased $446,581 or 8% because of the continuation of annual payments against the leases and bond. In 2015, cash decreased during the fiscal year ended April 30, 2015, mostly due to settlements of prior year cost reports and changes in Medicare interim payment rates. Net patient accounts receivable decreased $175,152 or 3% on April 30, 2015, as compared to April 30, 2014. The nature of accounts receivables at April 30, 2015, is similar to 2014; however, a larger percentage of the receivable balance is from Medicare. Current liabilities decreased from 2014 to 2015 mostly due to the timing payments toward accounts payable. Long-term liabilities decreased $454,687 or 7% because of the continuation of annual payments against the leases and the payment in full of the 2006 revenue bonds.

Operating Results and Changes in the Hospital’s Net Position

Table 2 shows the different components that make up the $3,157,654 decrease in net position for 2016. Also shown are the components that make up the $17,319,778 decrease in net position for 2015, $16,142,220 was due to implementation of GASB 68 and 71 and the reporting of the Hospital’s portion of the net pension liability in the KPERS plan. Table 2: Operating Results and Changes in Net Position

2016 2015 2014 * Operating Revenues (As Restated) Net patient service revenue$ 39,129,631 $ 41,011,342 $ 41,369,875 Electronic health records incentive revenue 320,420 704,987 988,241 Other operating revenues 731,377 763,510 833,166

Total operating revenues 40,181,428 42,479,839 43,191,282

Operating Expenses Salaries and employee benefits 23,648,435 24,878,196 25,618,979 Purchased services and professional fees 7,272,218 4,791,056 5,089,436 Depreciation 2,999,321 3,129,566 3,089,098 Other operating expenses 9,891,323 11,513,397 11,291,320

Total operating expenses 43,811,297 44,312,215 45,088,833

Operating Loss (3,629,869) (1,832,376) (1,897,551)

Nonoperating Revenues (Expenses) Noncapital appropriations - Geary County 207,443 279,070 238,156 Interest income 285,036 197,660 219,241 Interest expense (229,293) (263,976) (246,672) Noncapital grants and gifts 20,988 32,289 28,011

Total nonoperating revenues 284,174 245,043 238,736

Capital Grants and Gifts 188,041 409,775 367,298

Change in Accounting Principle - GASB No. 68 and 71 - (16,142,220) -

Change in Net Position $ (3,157,654) $ (17,319,778) $ (1,291,517)

* 2014 has not been restated for the adoption of GASB 68 and GASB 71

Operating Loss

The change in the Hospital’s net position is significantly affected by its operating income or loss. Generally, this is the difference between net patient service and other operating revenues and the expenses incurred to perform those services. The Hospital has reported an operating loss of $3,629,869 and $1,832,376 in 2016 and 2015, respectively. The operating loss for 2016 is an increase of $1,797,493 from the operating loss for 2015.

The primary components of the increased operating loss in 2016 are: • A decrease in net patient service revenue of $1,881,711 or 4.6%. Overall inpatient and outpatient volumes and revenues were down from prior year. Pricing Changes The hospital administration has been working with Simplified Revenue to adjust pricing to correctly set pricing and increase revenue. Simplified Revenue reviews the Charge Master quarterly to validate the competitive position of the Hospital charges. This process has unveiled some needed improvements in the facilities pricing structure. These changes helped to offset some of the volume declines that were seen in 2016. Loss of Orthopedic Surgeon The Hospital lost its orthopedic surgeon in early 2016 and saw a large decline in high dollar surgeries. This had a large impact on the decrease in NPSR during 2016. • A decrease in electronic health records incentive revenue of $384,567 or 54%. Meaningful Use Meaningful Use was part of the American Recovery and Reinvestment Act of 2009, and it sets specific objectives that hospitals must achieve to qualify for the CMS Incentive Program. Three stages of objectives must be met throughout the course of the program. In 2011, we began implementing enhancements to our electronic medical record with programs such as Computerized Provider Order Entry, Electronic Medication Administration, Quality eMeasures, and Emergency Department Management. In 2012, we attested to Meaningful Use Stage 1. Since then we have implemented more enhancements and have subsequently attested to the second year of Stage 1 in 2013 as well as Stage 2 in 2014. Meaningful Use has proven to be a difficult project for many hospitals. Of the hospitals that were working on Meaningful Use Stage 2, approximately 23% of the hospitals failed to meet the requirements. For fiscal year 2016, the Hospital received approximately $320,000 in the form of electronic health record incentive revenue. Reimbursements for the Meaningful Use program were structured to decline over time, with 2016 being the last year of benefit for the Hospital under this program. Altogether, the Hospital has received over $3,400,000 in total reimbursement for Meaningful Use. DSH The Hospital saw a decline in DSH revenue for 2016 of approximately $270,000 as compared to 2015. The reimbursement under the DSH program fluctuates annually due to changes in volume of care to low income individuals. The DSH program is budget neutral and changes at other facilities in the State of Kansas can have a positive or negative impact on the Hospital’s reimbursement under the program. • A decrease in salary and employee benefits of $1,229,761 or 5%. Key Staffing Issues During 2016 the Hospital outsourced plant and dietary. The Hospital also discontinued its gero- psych services during 2016. During FY 2016 the CFO position was occupied by an interim CFO with over thirty years of healthcare experience. There was one physician turnover, Dr. Holiday (orthopedic surgeon), in June 2015. Dr. Holiday is not expected to be replaced until FY 2017.

• An increase in purchased services and professional fees of $2,481,162 or 52%. This expense increased mostly due to costs associated with the outsourcing of plan and dietary. These increased purchased services were offset by decreases in salary and employee benefit costs as well as decreases in supply costs. The Hospital also implemented a Hospitalist model in 2016 which increased costs in purchased services. Overall operating expenses decreased $500,918 during 2016. The primary components of the increased operating loss in 2015 are: • A decrease in net patient service revenue of $358,533 or 1%. Overall inpatient and outpatient volumes and revenues were comparable to prior year. Pricing Changes The hospital administration has been working with Simplified Revenue to adjust pricing to correctly set pricing and increase revenue. Simplified Revenue reviews the Charge Master quarterly to validate the competitive position of the Hospital charges. This process has unveiled some needed improvements in the facilities pricing structure. $1.57 Million Cash Reduction Impact from Year End Settlements The Hospital participates in a CMS sponsored program, Rural Community Hospital Demonstration Program or ReaCH. Currently, 22 hospitals participate in the program that allows them to be reimbursed on a cost based methodology. This methodology utilizes the Medicare cost report for the basis on calculating the year end settlement that “trues up” the current fiscal year reimbursement with the actual allowable cost. An audit of the 2012 Medicare cost report resulted in a determination that $419,956 of costs had been overpaid. This required the Hospital to repay the overpayment during FYE 2015. These same FYE 2012 adjustments resulted in a re-evaluation of the monthly estimated payments being made during FYE 2015. To minimize the estimated FYE overpayment, the last two monthly payments totaling $334,080 were withheld from the Hospital’s FYE 2015 monthly payments. The preparation and filing of the FYE 2014 Medicare cost report also had a negative impact on the FYE 2015 cash flow. A repayment of $386,712 was indicated and paid during FYE 2015. It was later learned the software used in the preparation of the Medicare cost report contained an accounting error resulting in only a $36,391 liability. As a result of filing an amended Medicare cost report, the Hospital’s $350,000 overpayment was refunded during FYE 2016. The Hospital experienced one last adjustment during FYE 2015. A re-evaluation by CMS of the Disproportionate Share payments (DSH) resulted in the Hospital having a reduction of $427,000 during the final five (5) months of the fiscal year. This adjustment had a carryforward to FY 2016. • A decrease in electronic health records incentive revenue of $283,254 or 29%. Meaningful Use Meaningful Use was part of the American Recovery and Reinvestment Act of 2009, and it sets specific objectives that hospitals must achieve to qualify for the CMS Incentive Program. Three stages of objectives must be met throughout the course of the program. In 2011, we began implementing enhancements to our electronic medical record with programs such as Computerized Provider Order Entry, Electronic Medication Administration, Quality eMeasures, and Emergency Department Management. In 2012, we attested to Meaningful Use Stage 1. Since then we have implemented more enhancements and have subsequently attested to the second year of Stage 1 in 2013 as well as Stage 2 in 2014. Meaningful Use has proven to be a difficult project for many hospitals. Of the hospitals that were working on Meaningful Use Stage 2, approximately 23% of the hospitals failed to meet the requirements.

For fiscal year 2015, the Hospital received approximately $705,000 in the form of electronic health record incentive revenue. Reimbursements for the Meaningful Use program were structured to decline over time; reimbursements for 2014 were approximately 988,000. • A decrease in salary and employee benefits of $740,783 or 3%. Key Staffing Issues During FY 2015 lead personnel changes were experienced in Facilities Management, Laboratory and Patient Financial Services. In addition to these were changes in the position of Chief Financial Officer (CFO), both the CFO and his replacement left the organization during FY 2015 or first part of FY 2016. As of August 2015, the CFO position is occupied by an interim CFO with over thirty years of healthcare experience. There was one physician turnover, Dr. Velasquez, in August 2014. • A decrease in purchased services and professional fees of $298,380 or 6%. This expense decreased mostly due to costs associated with the collection of patient accounts receivables and expenses for temporary staffing in the Laboratory. In fiscal year 2014, the Hospital took steps to improve the process of billing patients for their portion of clinic services, which included contracting with an accounts receivable management service to handle billing follow-up; this lead to improvement on collection costs during 2015. In the Laboratory in 2014, we had difficulty in finding permanent replacements for staff that left the organization. In the interim, we contracted with a company to provide temporary staff in those positions. Those temporary staff were replaced with hospital employees in 2015.

Nonoperating Revenues and Expenses

Nonoperating revenues and expenses consist primarily of gifts, county tax proceeds, investment income and interest expense.

Capital Grants and Gifts

The Hospital received gifts of $188,041 from various individuals to purchase capital assets in 2016, compared to $409,775 in 2015. Capital Grants and Gifts are mostly gifts from the Geary Community Healthcare Foundation which are tied to specific construction projects or to equipment purchases. In 2015, the Foundation funded a significant portion of construction in the women’s center and phone system which increased the total amount of 2015 gifts above the amounts for 2016.

The Hospital’s Cash Flows

Capital Asset and Debt Administration

Capital Assets

At April 30, 2016 and 2015, the Hospital had $40,188,403 and $42,337,033, respectively, invested in capital assets, net of accumulated depreciation, as detailed in Note 6 to the financial statements. In fiscal years 2016 and 2015, the Hospital acquired new capital assets with a total cost of $850,691 and $463,141, respectively. Net capital assets amounts were reduced by normal depreciation of assets in the amount of $2,999,321 in 2016 and $3,129,566 in 2015.

Debt

At April 30, 2016 and 2015, the Hospital had $5,737,524 and $6,200,769, respectively, in revenue bonds and capital lease obligations outstanding, as detailed in Note 8 to the financial statements. In 2016, the Hospital made scheduled payments on outstanding debt. In 2015, the Hospital paid off their 2006 revenue bonds in full.

Contacting the Hospital’s Financial Management

This financial report is designed to provide our patients, suppliers, taxpayers and creditors with a general overview of the Hospital’s finances and to show the Hospital’s accountability for the money it receives. Questions about this report and requests for additional financial information should be directed to the Hospital administration by telephoning 785.238.4131.

11 Geary Community Hospital A Component Unit of Geary County, Kansas Balance Sheets April 30, 2016 and 2015

Assets and Deferred Outflows of Resources 2016 2015 Current Assets (As Restated) Cash$ 3,010,700 $ 4,491,387 Restricted cash - current 304,124 400,751 Patient accounts receivable, net of allowance; 2016 - $5,769,364, 2015 - $4,816,600 5,441,281 6,175,967 Estimated amounts due from third-party payers 1,733,000 1,883,000 Supplies 1,472,063 1,342,755 Prepaid expenses and other 690,619 708,975

Total current assets 12,651,787 15,002,835

Noncurrent Cash and Short-term Certificates of Deposit Held under bond indenture for debt service - cash 304,124 400,751 Held under bond indenture for debt service - short-term certificates of deposit 827,153 825,513 Restricted by donors for specific operating activities - cash 43,483 44,281 Restricted by donors for specific operating activities - short-term certificate of deposit 65,066 62,265 1,239,826 1,332,810 Less amount required to meet current obligations 304,124 400,751

Total noncurrent cash and short-term certificates of deposit 935,702 932,059

Capital Assets, Net 40,188,403 42,337,033

Other Assets Advances to physicians, net of estimated uncollectibles; 2016 - $143,895, 2015 - $143,895 70,049 959

Total assets 53,845,941 58,272,886

Deferred Outflows of Resources - Pension 1,585,063 1,706,381

Total assets and deferred outflows of resources$ 55,431,004 $ 59,979,267

See Notes to Financial Statements

Liabilities, Deferred Inflows of Resources and Net Position 2016 2015 Current Liabilities (As Restated) Current maturities of long-term debt$ 453,376 $ 470,040 Accounts payable 2,344,127 2,405,431 Accrued payroll and related expenses 1,866,997 1,847,294 Accrued interest 42,263 52,322 Unearned revenue 115,060 117,880

Total current liabilities 4,821,823 4,892,967

Long-term Debt 5,284,148 5,730,729

Net Pension Liability 14,801,907 14,394,445

Total liabilities 24,907,878 25,018,141

Deferred Inflows of Resources - Pension 1,719,930 3,000,276

Net Position (Deficit) Net investment in capital assets 34,450,878 36,136,263 Restricted - expendable for Debt service 573,231 737,219 Specific operating activities 104,630 106,546 Unrestricted deficit (6,325,543) (5,019,178)

Total net position 28,803,196 31,960,850

Total liabilities, deferred inflows of resources and net position$ 55,431,004 $ 59,979,267

12 Geary Community Healthcare Foundation A Discretely Presented Component Unit of Geary Community Hospital Statements of Financial Position December 31, 2015 and 2014

2015 2014 Assets Cash and cash equivalents$ 522,805 $ 635,638 Investments 4,066,820 4,408,930 Temporarily restricted cash - grant accounts 174,483 95,536

Total assets$ 4,764,108 $ 5,140,104

Liabilities and Net Assets Liabilities – Annuities Payable $ 14,917 $ 13,506

Net Assets Net assets – temporarily restricted 174,483 95,536 Net assets – unrestricted 4,574,708 5,031,062

Total net assets 4,749,191 5,126,598

Total liabilities and net assets$ 4,764,108 $ 5,140,104

See Notes to Financial Statements 13 Geary Community Hospital A Component Unit of Geary County, Kansas Statements of Revenues, Expenses and Changes in Net Position Years Ended April 30, 2016 and 2015

2016 2015 (As Restated) Operating Revenues Net patient service revenue, net of provision for uncollectible accounts; 2016 - $6,047,732, 2015 - $5,056,481$ 39,129,631 $ 41,011,342 Electronic health records incentive revenue 320,420 704,987 Other 731,377 763,510

Total operating revenues 40,181,428 42,479,839

Operating Expenses Salaries 19,251,562 20,380,403 Employee benefits 4,396,873 4,497,793 Purchased services and professional fees 7,272,218 4,791,056 Drugs 1,255,914 1,085,235 Food 146,612 455,890 Utilities 1,230,576 1,336,232 Insurance 442,882 467,328 Supplies and other 6,815,339 8,168,712 Depreciation 2,999,321 3,129,566

Total operating expenses 43,811,297 44,312,215

Operating Loss (3,629,869) (1,832,376)

Nonoperating Revenues (Expenses) Noncapital appropriations - Geary County 207,443 279,070 Interest income 285,036 197,660 Interest expense (229,293) (263,976) Noncapital grants and gifts 20,988 32,289

Total nonoperating revenues 284,174 245,043

Deficiency of Revenues Over Expenses Before Capital Grants and Gifts (3,345,695) (1,587,333)

Capital Grants and Gifts 188,041 409,775

Decrease in Net Position (3,157,654) (1,177,558)

Net Position, Beginning of Year, as Previously Reported 31,960,850 49,280,628

Change in Accounting Principle - GASB No. 68 and 71 - (16,142,220)

Net Position, Beginning of Year, as Restated 31,960,850 33,138,408

Net Position, End of Year $ 28,803,196 $ 31,960,850

See Notes to Financial Statements 14 Geary Community Healthcare Foundation A Discretely Presented Component Unit of Geary Community Hospital Statements of Activities Years Ended December 31, 2015 and 2014

2015 2014

Unrestricted Net Assets: Revenues, Gains and Other Support Donations $ 61,970 $ 109,667 Memorials 23,568 20,105 Special events 128,171 123,115 Donated staff and facilities 49,224 47,716 Net investment income 2,865 251,888

Total revenues, gains and other support 265,798 552,491

Expenses and Losses Program expenses 484,757 363,385 Supporting services 139,536 122,318 Fund raising 97,859 93,205

Total expenses 722,152 578,908

Decrease in Net Assets (456,354) (26,417)

Unrestricted Net Assets, Beginning of Year 5,031,062 5,057,479

Unrestricted Net Assets, End of Year $ 4,574,708 $ 5,031,062

Temporarily Restricted Net Assets: Revenues, Gains and Other Support Grant receipts $ 670,090 $ 202,182

Expenses and Losses Grant pass through payments 591,143 106,646

Increase in Net Assets 78,947 95,536

Temporarily Restricted Net Assets, Beginning of Year 95,536 -

Temporarily Restricted Net Assets, End of Year $ 174,483 $ 95,536

See Notes to Financial Statements 15 Geary Community Hospital A Component Unit of Geary County, Kansas Statements of Cash Flows Years Ended April 30, 2016 and 2015

2016 2015 (As Restated) Operating Activities Receipts from and on behalf of patients $ 40,011,497 $ 39,708,281 Payments to suppliers and contractors (17,345,856) (15,844,282) Payments to or on behalf of employees (24,370,239) (25,421,415) Other receipts, net 1,051,797 1,526,492

Net cash used in operating activities (652,801) (30,924)

Noncapital Financing Activities Noncapital appropriations - Geary County 207,443 279,070 Noncapital grants and gifts 20,988 32,289

Net cash provided by noncapital financing activities 228,431 311,359

Capital and Related Financing Activities Capital grants and gifts 188,041 409,775 Principal paid on revenue bonds payable (195,000) (440,000) Principal paid on capital leases (268,245) (267,547) Interest paid on long-term debt (239,352) (267,680) Purchase of capital assets (850,691) (463,141)

Net cash used in capital and related financing activities (1,365,247) (1,028,593)

Investing Activities Interest on investments 285,036 197,660 Advances to physicians (69,090) (16,903) Net change in certificates of deposit (2,801) (265) Net change in construction escrow and debt-related accounts (1,640) (1,629)

Net cash provided by investing activities 211,505 178,863

Decrease in Cash (1,578,112) (569,295)

Cash, Beginning of Year 4,936,419 5,505,714

Cash, End of Year $ 3,358,307 $ 4,936,419

See Notes to Financial Statements 16 Geary Community Hospital A Component Unit of Geary County, Kansas Statements of Cash Flows (Continued) Years Ended April 30, 2016 and 2015

2016 2015 (As Restated) Reconciliation of Cash to the Balance Sheets Cash in current assets $ 3,314,824 $ 4,892,138 Cash in noncurrent cash 43,483 44,281

Total cash $ 3,358,307 $ 4,936,419

Reconciliation of Operating Loss to Net Cash Used In Operating Activities Operating loss $ (3,629,869) $ (1,832,376) Depreciation 2,999,321 3,129,566 Loss on disposal of assets - 57,995 Change in allowance for advances to physicians - 98,701 Changes in operating assets and liabilities Patient accounts receivable, net 734,686 175,152 Estimated amounts due from and to third-party payers 150,000 (1,350,086) Accounts payable and accrued expenses (41,601) 191,637 Net pension liability 407,462 (3,087,143) Deferred outflows of resources 121,318 (367,013) Deferred inflows of resources (1,280,346) 3,000,276 Unearned revenue (2,820) (128,127) Other assets and liabilities (110,952) 80,494

Net cash used in operating activities$ (652,801) $ (30,924)

See Notes to Financial Statements 17 Geary Community Healthcare Foundation A Discretely Presented Component Unit of Geary Community Hospital Statements of Cash Flows Years Ended December 31, 2015 and 2014

2015 2014

Operating Activities Change in net assets$ (377,407) $ 69,119 Items not requiring (providing) cash Decrease in prepaid expense - 51 Increase (decrease) in annuities payable 1,411 (6,315) Grant accounts held for others (174,483) (95,536) Net realized and unrealized loss on investments 157,698 78,875

Net cash provided by (used in) operating activities (392,781) 46,194

Investing Activities Proceeds from sale of investments 1,863,932 1,011,693 Purchase of investments (1,583,984) (1,252,802)

Net cash provided by (used in) investing activities 279,948 (241,109)

Decrease in Cash (112,833) (194,915)

Cash, Beginning of Year 635,638 830,553

Cash, End of Year $ 522,805 $ 635,638

See Notes to Financial Statements 18 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Reporting Entity

Geary Community Hospital (Hospital) is an acute care hospital located in Junction City, Kansas. The Hospital is a component unit of Geary County (County) and the Board of County Commissioners appoints members to the Board of Trustees of the Hospital. The Hospital primarily earns revenues by providing inpatient, outpatient and emergency care services to patients in the Geary County area. It also operates a home health agency, hospice and home medical equipment supplier in the same geographic area. Geary Community Healthcare Foundation (Foundation) is a legally separate, tax-exempt component unit of the Hospital. The Foundation acts primarily as a fund raising organization to supplement the resources that are available to the Hospital in support of its programs. The fifteen- member board of the Foundation is self-perpetuating and consists of the Chief Executive Officer (CEO) of the Hospital, three Hospital board members and eleven community members. Although the Hospital does not control the timing or amount of receipts from the Foundation, the majority of resources, or income thereon, that the Foundation holds and invests are restricted to the activities of the Hospital by the donors or are provided to the Hospital for its programs. Because the majority of resources held by the Foundation can only be used by, or for the benefit of, the Hospital and for the benefit of patients served by the Hospital, the Foundation is considered a component unit of the Hospital and is discretely presented in the Hospital’s financial statements. The Foundation’s financial statements are presented on a December 31 year-end basis. During the years ended April 30, 2016 and 2015, the Foundation distributed $189,957 and $401,039, respectively, to the Hospital for both restricted and unrestricted purposes. Complete financial statements for the Foundation can be obtained from the Administrative Office at 1110 St. Mary’s Road, Junction City, Kansas 66441.

Basis of Accounting and Presentation

The financial statements of the Hospital have been prepared on the accrual basis of accounting using the economic resources measurement focus. Revenues, expenses, gains, losses, assets and liabilities from exchange and exchange-like transactions are recognized when the exchange transaction takes place, while those from government-mandated nonexchange transactions and county appropriations are recognized when all applicable eligibility requirements are met. Operating revenues and expenses include exchange transactions. Government-mandated nonexchange transactions that are not program specific such as county appropriations from property taxes, interest income and interest on capital assets-related debt are included in nonoperating revenues and expenses. The Hospital first applies restricted net position when an expense or outlay is incurred for purposes for which both restricted and unrestricted net position are available.

19 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

The Foundation is a private nonprofit organization that reports under the Financial Accounting Standards Board (FASB) Accounting Standards Codification. As such, certain revenue recognition criteria and presentation features are different from Governmental Accounting Standards Board (GASB) revenue recognition criteria and presentation features. No modifications have been made to the Foundation’s financial information in the Hospital’s financial reporting entity for these differences.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Noncapital Appropriations

The Hospital received approximately 0.51% in 2016 and 0.64% in 2015 of its financial support from Geary County. One hundred percent of the funds were used to support operations.

Risk Management

The Hospital is exposed to various risks of loss from torts; theft of, damage to and destruction of assets; business interruption; errors and omissions; employee injuries and illnesses; and natural disasters; and employee health, dental and accident benefits. Effective May 1, 2013, commercial insurance coverage is purchased for claims arising from such matters other than workers’ compensation. Settled claims have not exceeded this commercial coverage in any of the three preceding years. Workers’ compensation coverage is provided through a fund managed by the Kansas Hospital Association. The workers’ compensation premiums are subject to retrospective adjustment based upon the overall performance of the fund. Management believes adequate reserves are in place to cover claims incurred but not reported.

Patient Accounts Receivable

The Hospital reports patient accounts receivable for services rendered at net realizable amounts from third-party payers, patients and others. The Hospital provides an allowance for uncollectible accounts based upon a review of outstanding receivables, historical collection information and existing economic conditions. As a service to the patient, the Hospital bills third-party payers directly and bills the patient when the patient’s liability is determined. Patient accounts receivable are due in full when billed. Accounts are considered delinquent and subsequently written off as bad debts based on individual credit evaluation and specific circumstances of the account.

20 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Supplies

Supply inventories are stated at the lower of cost, determined using the first-in, first-out method, or market.

Capital Assets

Capital assets are recorded at cost at the date of acquisition, or fair value at the date of donation if acquired by gift. Depreciation is computed using the straight-line method over the estimated useful life of each asset. Assets under capital lease obligations are depreciated over the shorter of the lease term or their respective estimated useful lives. The following estimated useful lives are being used by the Hospital: Land improvements 5 – 20 years Buildings and building improvements 15 – 50 years Fixed equipment 10 – 18 years Major moveable equipment 3 – 20 years

Unearned Revenue

Unearned revenue represents funds received in connection with the Medicaid Disproportionate Share (DSH) Program. Payments are made on a quarterly basis. The Hospital received the quarterly payment, which related to the April through June time window, prior to year-end and deferred the revenue related to May and June.

Compensated Absences

Hospital policies permit most employees to accumulate vacation and sick leave benefits that may be realized as paid time off or, in limited circumstances, as a cash payment. Expense and the related liability are recognized as vacation benefits are earned whether the employee is expected to realize the benefit as time off or in cash. Expense and the related liability for sick leave benefits are recognized when earned to the extent the employee is expected to realize the benefit in cash determined using the termination payment method. Sick leave benefits expected to be realized as paid time off are recognized as expense when the time off occurs, and no liability is accrued for such benefits employees have earned but not yet realized. Compensated absence liabilities are computed using the regular pay and termination pay rates in effect at the balance sheet date.

Deferred Outflows of Resources

Deferred outflows of resources represent a consumption of net position that applies to a future period(s) and will not be recognized as an outflow of resources (expense) or reduction of a liability until that time. Deferred outflows of resources consist of unrecognized items not yet charged to pension expense and contributions from the employer after the measurement date but before the end of the employer’s reporting period.

21 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Deferred Inflows of Resources

Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) or reduction of expense until that time. Deferred inflows of resources consist of the unamortized portion of the net difference between projected and actual earnings on pension plan investments, changes in assumptions and other differences between expected and actual experience.

Defined Benefit Pension Plan

The Hospital participates in a cost-sharing multiple-employer defined benefit pension plan, the Kansas Public Employees Retirement Savings Plan (KPERS). For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of KPERS and additions to/deductions from KPERS’s fiduciary net position have been determined on the same basis as they are reported by KPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Net Position

Net position of the Hospital is classified in three components. Net investment in capital assets consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of borrowings used to finance the purchase or construction of those assets. Restricted expendable net position is noncapital assets that must be used for a particular purpose as specified by creditors, grantors or donors external to the Hospital. Unrestricted net position are remaining assets less remaining liabilities that do not meet the definition of net investment in capital assets or restricted expendable.

Net Patient Service Revenue

The Hospital has agreements with third-party payers that provide for payments to the Hospital at amounts different from its established rates. Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payers and others for services rendered and includes estimated retroactive revenue adjustments under reimbursement agreements with third-party payers and a provision for uncollectible accounts. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined.

22 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Charity Care

The Hospital provides care without charge or at amounts less than its established rates to patients meeting certain criteria under its charity care policy. Because the Hospital does not pursue collection of amounts determined to qualify as charity care, these amounts are not reported as net patient service revenue.

Electronic Health Records Incentive Program

The Electronic Health Records Incentive Program, enacted as part of the American Recovery and Reinvestment Act of 2009, provides for one-time incentive payments under both the Medicare and Medicaid programs to eligible hospitals that demonstrate meaningful use of certified electronic health records (EHR) technology. Payments under the Medicare program are generally made for up to four years based on a statutory formula. Payments under the Medicaid program are generally made for up to four years based upon a statutory formula, as determined by the state, which is approved by the Centers for Medicare and Medicaid Services. Payment under both programs are contingent on the hospital continuing to meet escalating meaningful use criteria and any other specific requirements that are applicable for the reporting period. The final amount for any payment year is determined based upon an audit by the fiscal intermediary. Events could occur that would cause the final amounts to differ materially from the initial payments under the program. The Hospital recognizes revenue ratably over the reporting period starting at the point when management is reasonably assured it will meet all of the meaningful use objectives and any other specific grant requirements applicable for the reporting period. In 2016 and 2015, the Hospital completed the requirements under the Medicare and Medicaid programs, respectively, and has recorded approximately $320,000 and $705,000 as revenue in the years ended April 30, 2016 and 2015, respectively.

Income Taxes

As an essential government function of the County, the Hospital is generally exempt from federal and state income taxes under Section 115 of the Internal Revenue Code and a similar provision of state law. The Hospital has obtained 501(c)(3) tax-exempt status with the IRS for purposes of participating in a Section 403(b) pension plan.

Implementation of New Accounting Principle

In fiscal year 2016, the Hospital implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68. The revised requirements establish new financial reporting requirements for state and local governments which provide their employees with pension benefits, including additional note disclosures and required supplementary

23 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

information. In addition, GASB No. 68 requires a state or local government employer to recognize a net pension liability and changes in the net pension liability, deferred outflows of resources and deferred inflows of resources which arise from other types of events related to pensions. During the transition year, as permitted, beginning balances for deferred outflows of resources and deferred inflows of resources will not be reported, except for deferred outflows of resources related to contributions made after the measurement date of the beginning net pension liability which is required to be reported by GASB No. 71. In accordance with GASB No. 68, the April 30, 2015, financial statements have been restated to report the adoption of the standard. The effects of the restatement are as follows:

Net position May 1, 2014, as previously reported $ 49,280,628

Net pension liability at May 1, 2014 (17,481,588)

Deferred outflows of resources related to contributions made after the June 30, 2013, measurement date 1,339,368

Net position, May 1, 2014, as restated $ 33,138,408

Decrease in net position for the year ended April 30, 2015, was decreased by $453,880. Net pension liability and deferred outflows and inflows of resources were also recorded at April 30, 2015, as discussed in Note 11.

Note 2: Net Patient Service Revenue

The Hospital has agreements with third-party payers that provide for payments to the Hospital at amounts different from its established rates. These payment arrangements include: Medicare. Inpatient acute care and skilled swing-bed services are paid at cost, subject to certain limitations, under a demonstration project with Medicare. Additional reimbursements under this program were approximately $1,435,000 in 2016 and $1,365,000 in 2015. Substantially all outpatient services rendered to Medicare program beneficiaries are paid at prospectively determined rates per discharge, or per billable service unit. The outpatient payment rates vary according to a patient classification system that is based on clinical, diagnostic and other factors. Inpatient rehabilitation services, inpatient gero-psychiatric services, medical education costs and home health agency services are paid at prospectively determined per diem rates that are based on the patients’ acuity. Rural Health Clinic services are paid based on a cost reimbursement methodology. The Hospital is reimbursed for certain services at tentative rates with final settlement determined after submission of annual cost reports by the Hospital and audits thereof by the Medicare administrative contractor.

24 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Medicaid. Inpatient and most outpatient services rendered to Medicaid program beneficiaries are reimbursed under a prospective reimbursement methodology. Rural Health Clinic services are paid on a cost reimbursement methodology. Due to certain financial and clinical criteria, the Hospital also receives Medicaid disproportionate share (DSH) funding. Medicaid DSH payments were $618,654 and $886,953 in 2016 and 2015, respectively. Approximately 52% and 56% of net patient service revenue are from participation in the Medicare and state-sponsored Medicaid programs for the years ended April 30, 2016 and 2015, respectively. Laws and regulations governing Medicare and Medicaid programs are complex and subject to interpretation and change. As a result, it is reasonably possible recorded estimates will change materially in the near term. The Hospital has qualified for additional reimbursements from the Tricare program under its hold harmless provisions regarding certain outpatient services provided on and after January 1, 2010. Regulations have been issued regarding this reimbursement, however, due to the uncertainty surrounding the computations and significant delays in implementation of these payment provisions, no amounts have been recorded in the financial statements. The Hospital has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations and preferred provider organizations. The basis for payment to the Hospital under these agreements includes prospectively determined rates per discharge, discounts from established charges and prospectively determined daily rates.

Note 3: Deposits and Investment Income

Deposits

Custodial credit risk is the risk that in the event of a bank failure, a government’s deposits may not be returned to it. The Hospital’s deposit policy for custodial credit risk requires compliance with the provisions of state law. State law requires collateralization of all deposits with federal depository insurance; bonds and other obligations of the U.S. Treasury, U.S. agencies or instrumentalities or the state of Kansas; bonds of any city, county, school district or special road district of the state of Kansas; bonds of any state; or a surety bond having an aggregate value at least equal to the amount of the deposits. At April 30, 2016 and 2015, respectively, $0 and $577,520 of the Hospital’s bank balances of $4,267,416 and $5,947,152 were exposed to custodial credit risk as follows: 2016 2015

Uninsured and uncollateralized$ - $ 577,520

25 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Summary of Carrying Values

The carrying values of deposits shown above are included in the balance sheets as follows: 2016 2015

Carrying value Deposits$ 4,250,526 $ 5,824,197

Included in the following balance sheet captions Cash $ 3,010,700 $ 4,491,387 Restricted cash - current 304,124 400,751 Noncurrent cash and certificates of deposit 935,702 932,059

$ 4,250,526 $ 5,824,197

Note 4: Patient Accounts Receivable

The Hospital grants credit without collateral to its patients, many of whom are area residents and are insured under third-party payer agreements. Patient accounts receivable at April 30, 2016 and 2015, consisted of:

2016 2015

Medicare$ 1,158,051 $ 1,038,774 Medicaid 747,378 513,812 Blue Cross 384,737 597,595 Other third-party payers 1,428,392 1,396,940 Patients 7,492,087 7,445,446 11,210,645 10,992,567 Less allowance for uncollectible accounts 5,769,364 4,816,600

$ 5,441,281 $ 6,175,967

26 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Note 5: Advances to Physicians

The Hospital has entered into agreements with certain physicians to assist them in starting their practices. Advances made under these agreements are to be repaid when the practice income exceeds specified amounts within a defined time period. At April 30, 2016 and 2015, there were advances to physicians outstanding in the amounts of $213,944 and $144,854, respectively. The outstanding principal balances for the various physician agreements accrue interest at the rate of prime plus 1% per annum and are forgiven after various years of service, dependent upon the physician’s contract. If prior to the agreed upon anniversary date of the employment agreement, the physician voluntarily terminates their employment with the Hospital or is terminated for justifiable causes, the unpaid principal balance and all accrued unpaid interest of the agreement shall become due and payable in full immediately.

Note 6: Capital Assets

Capital assets activity for the years ended April 30, 2016 and 2015, were:

2016 Beginning Ending Balance Additions Deletions Transfers Balance

Land and land improvements $ 1,247,767 $ - $ - $ - $ 1,247,767 Buildings and building improvements 52,194,027 64,192 - 110,192 52,368,411 Fixed equipment 4,488,398 62,765 - - 4,551,163 Major moveable equipment 19,326,754 662,954 - - 19,989,708 Construction in progress 110,192 60,780 - (110,192) 60,780

77,367,138 850,691 - - 78,217,829

Less accumulated depreciation Land improvements 1,021,030 6,525 - (16,391) 1,011,164 Buildings and building improvements 15,582,090 1,484,916 - 16,391 17,083,397 Fixed equipment 4,202,923 51,747 - - 4,254,670 Major moveable equipment 14,224,062 1,456,133 - - 15,680,195

35,030,105 2,999,321 - - 38,029,426

Capital Assets, Net $ 42,337,033 $ (2,148,630) $ - $ - $ 40,188,403

27 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

2015 Beginning Ending Balance Additions Deletions Transfers Balance

Land and land improvements $ 1,247,767 $ - $ - $ - $ 1,247,767 Buildings and building improvements 52,148,947 45,080 - - 52,194,027 Fixed equipment 4,488,398 - - - 4,488,398 Major moveable equipment 19,099,564 319,239 (92,049) - 19,326,754 Construction in progress 11,370 98,822 - - 110,192

76,996,046 463,141 (92,049) - 77,367,138

Less accumulated depreciation Land improvements 1,014,505 6,525 - - 1,021,030 Buildings and building improvements 14,114,669 1,467,421 - - 15,582,090 Fixed equipment 4,122,195 80,728 - - 4,202,923 Major moveable equipment 12,683,224 1,574,892 (34,054) - 14,224,062

31,934,593 3,129,566 (34,054) - 35,030,105

Capital Assets, Net $ 45,061,453 $ (2,666,425) $ (57,995) $ - $ 42,337,033

Note 7: Medical Malpractice Claims

The Hospital purchases medical malpractice insurance under a fixed premium which provides $200,000 of coverage for each medical incident and $600,000 of aggregate coverage for each policy year. The policy only covers claims made and reported to the insurer during the policy term, regardless of when the incident giving rise to the claim occurred. The Kansas Health Care Stabilization Fund provides an additional $800,000 of coverage for each medical incident and $2,400,000 of aggregate coverage for each policy year. Accounting principles generally accepted in the United States of America require a health care provider to accrue the expense of its share of malpractice claim costs, if any, for any reported and unreported incidents of potential improper professional service occurring during the year by estimating the probable ultimate costs of the incidents. Based upon the Hospital’s claims experience, no such accrual has been made. It is reasonably possible that this estimate could change materially in the future.

28 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Note 8: Long-term Obligations

The following is a summary of long-term obligation transactions for the Hospital for the years ended April 30, 2016 and 2015:

2016 Beginning Ending Current Balance Additions Deductions Balance Portion

Long-term debt Public Building Commission bonds payable$ 4,820,000 $ - $ 195,000 $ 4,625,000 $ 205,000 Capital leases payable 1,380,769 - 268,245 1,112,524 248,376

$ 6,200,769 $ - $ 463,245 $ 5,737,524 $ 453,376

2015 Beginning Ending Current Balance Additions Deductions Balance Portion

Long-term debt Public Building Commission bonds payable$ 4,925,000 $ - $ 105,000 $ 4,820,000 $ 195,000 Revenue bonds payable 335,000 - 335,000 - - Capital leases payable 1,648,316 - 267,547 1,380,769 275,040

$ 6,908,316 $ - $ 707,547 $ 6,200,769 $ 470,040

Revenue Bonds Payable

The revenue bonds payable consist of Hospital Revenue Refunding Bonds (Bonds) in the original amount of $2,610,000 dated May 1, 2003, which bear interest at 4.4%. The Bonds are payable in annual installments through August 1, 2014. The Hospital is required to make monthly deposits of approximately $24,000 to the debt service fund held by the trustee. All of the Bonds still outstanding may be redeemed at the Hospital’s option on or after August 1, 2011. The redemption price is 100%. The Bonds are secured by a pledge of the gross revenues of the Hospital and the restricted cash funds set aside under the bond documents.

29 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

The bond document requires the Hospital to comply with certain restrictive covenants including minimum insurance coverage, maintaining a debt-service coverage ratio of at least 1.25 to 1, restrictions on incurrence of additional debt and maintaining minimum days unrestricted cash on hand of 30 days. As of April 30, 2015, the Hospital has paid off the revenue bonds in full.

Public Building Commission Bonds Payable

The Public Building Commission bonds payable consist of Geary County, Kansas Public Building Commission Revenue Bonds Series 2006B (Geary Community Hospital) (Bonds) in the original amount of $4,925,000 dated July 1, 2006, which bear interest at 4.05% to 4.35%. The Bonds are payable in annual installments beginning August 1, 2014 through August 1, 2031. Semiannual interest only payments are due through August 1, 2014. The Hospital is required to make monthly deposits of approximately $17,500 to the debt service fund held by the trustee. All of the Bonds still outstanding may be redeemed at the Hospital’s option on or after August 1, 2016. The redemption price is 100%. The Bonds are secured by a pledge of the gross revenues of the Hospital and the restricted cash funds set aside under the bond documents. The bond document requires the Hospital to comply with certain restrictive covenants including minimum insurance coverage, maintaining a debt-service coverage ratio of at least 1.25 to 1, and restrictions on incurrence of additional debt. As of April 30, 2016, the Hospital was not in compliance with the restrictive covenants listed above. As a result of not being in compliance, the Hospital is to retain an outside consultant to review operations. However, the bonds are not callable as a result of not being in compliance with the covenants. The debt service requirements of the Bonds as of April 30, 2016, are as follows:

Total to be Year Ending April 30, Paid Principal Interest

2017 $ 397,409 $ 205,000 $ 192,409 2018 393,800 210,000 183,800 2019 395,038 220,000 175,038 2020 395,755 230,000 165,755 2021 396,003 240,000 156,003 2022 - 2025 1,995,170 1,380,000 615,170 2026 - 2030 2,023,076 1,740,000 283,076 2031 - 2032 408,700 400,000 8,700

$ 6,404,951 $ 4,625,000 $ 1,779,951

30 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Capital Lease Obligations

The Hospital is obligated under leases for equipment that are accounted for as capital leases. Assets under capital leases at April 30, 2016 and 2015, totaled $1,058,967 and $1,344,652, net of accumulated depreciation of $606,619 and $513,634, respectively. The following is a schedule by year of future minimum lease payments under the capital leases including interest rates of 2.12% to 3.22% together with the present value of the future minimum lease payments as of April 30, 2016:

Year Ending April 30, 2017 $ 279,121 2018 271,800 2019 261,922 2020 225,577 2021 153,819 Total minimum lease payments 1,192,239 Less amount representing interest 79,715

Present value of future minimum lease payments $ 1,112,524

Note 9: Restricted and Designated Net Positions

At April 30, 2016 and 2015, restricted expendable net positions were available for the following purposes: 2016 2015

Debt service $ 573,231 $ 737,219

Specific operating activities Nursing scholarships 103,176 105,092

Total restricted expendable net position $ 676,407 $ 842,311

At April 30, 2016 and 2015, $802,063 and $884,787, respectively, of unrestricted net position (deficit) were designated by the Hospital’s Board of Trustees for capital acquisitions. Designated net position remain under the control of the Board of Trustees, which may at its discretion later use for other purposes.

31 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Note 10: Charity Care, Medicaid and Other Public Aid

Charges excluded from revenue under the Hospital’s charity care policy were $1,360,232 and $1,619,964 for 2016 and 2015, respectively. In support of its mission, the Hospital voluntarily provides free care to patients who lack financial resources and are deemed to be medically indigent. Because the Hospital does not pursue collection of amounts determined to qualify as charity care, they are not reported in net patient service revenue. In addition, the Hospital provides services to other medically indigent patients under certain government-reimbursed public aid programs. Such programs pay providers amounts which are less than established charges for the services provided to the recipients and many times the payments are less than the cost of rendering the services provided.

Note 11: Pension Plan

Plan Description

The Kansas Public Employees Retirement System Plan is an umbrella organization administering the following three statewide retirement systems under one plan as provided by K.S.A. 74, Article 49: Kansas Public Employees Retirement System (KPERS), Kansas Police and Fire Retirement System and Kansas Retirement System for Judges. The KPERS plan is a cost-sharing multiple-employer defined benefit plan. KPERS is intended to be a qualified retirement plan under Section 401(a) of the Code. Information relating to KPERS, including stand-alone financial statements, is available by writing to KPERS, 611 South Kansas Avenue, Suite 100, Topeka, Kansas 66603-3869 or accessing the internet at www.KPERS.org. KPERS makes separate calculations for pension-related amounts for the following four groups participating in the plan:

• State/School • Local • Police and Firemen • Judges

The Hospital’s employees participate in the Local group.

32 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Benefits Provided

Retirement benefits for employees are calculated based on the credited service, final average salary and a statutory multiplier. KPERS has two levels of benefits depending on retirement age and years of credited service. Tier 1 benefits are for members who are age 65 or age 62 with ten years of credited service or of any age when combined age and years of credited service equal 85 “points.” Tier 2 benefits are for members who are age 65 with five years of credited service or age 60 with 30 years of credited service. Tier 1 members receive a participating service credit of 1.75% of the final average salary for years of service prior to January 1, 2014. Participating service credit is 1.85% of final average salary for years of service after December 31, 2013. Tier 2 members retiring on or after January 1, 2012, participating service credit is 1.85% for all years of service. Early retirement is permitted at the age of 55 and ten years of credited service. Benefits are reduced by 0.2% per month for each month between the ages of 60-62, plus 0.6% for each month between the ages of 55 and 60 for Tier 1 members. For Tier 2 members, benefits are reduced actuarially for each early commencement. The reduction factor is 35% at the age of 60 and 57.5% at age 55. If the member has 30 years of credited service, the early retirement reduction is less (50% of regular reduction). The plan also provides disability and death benefits to plan members and their beneficiaries. The terms of the plan provide for annual 2% cost-of-living adjustment for Tier 2 members who retired prior to July 1, 2012, beginning the later of age of 65 or the second July 1 after retirement date. Other participants do not receive a cost-of-living adjustment.

Contributions

The law governing KPERS requires an actuary to make an annual valuation of the liabilities and reserves and a determination of the contributions required to discharge the KPERS liabilities. The actuary then recommends to the KPERS Board of Trustees the state wide employer-contribution rates required to maintain the three systems on the actuarial reserve basis. Prior to January 1, 2014, Tier 1 participants were required to contribute 4% of their annual pay. Effective January 1, 2014, the rate was raised to 5% with an increase in the benefit multiplier to 1.85% beginning January 1, 2014, for future years of service only. Effective January 1, 2015, the contribution rate was raised to 6%. Tier 2 participants are required to contribute 6% of compensation. The Hospital’s contractually required contribution rate for the years ended April 30, 2016 and 2015, was 9.38% and 9.05% of annual payroll, respectively. The employer contribution is actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The Hospital’s contributions to KPERS for pensions for the years ended April 30, 2016 and 2015, were $1,657,442 and $1,712,969, respectively.

33 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Pension Liabilities, Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

At April 30, 2016 and 2015, the Hospital reported a liability of $14,801,907 and $14,394,445, respectively, for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015 and 2014, respectively, and the total pension liability used to calculate the net pension liability was determined by actuarial valuations as of December 31, 2014 and 2013, respectively, rolled forward to June 30, 2015 and 2014, respectively. The Hospital’s proportion of the net pension liability was based on the ratio of the Hospital’s actual contributions to total employer and nonemployer actual contributions of the group for the respective measurement periods. At June 30, 2015, the Hospital’s proportion was 1.127297%, which was a decrease of 0.042210% from its proportion measured as of June 30, 2014, of 1.169507%. At June 30, 2013, the proportion was 1.148532%. For the years ended April 30, 2016 and 2015, the Hospital recognized pension expense of $921,926 and $1,247,571, respectively. At April 30, 2016 and 2015, the Hospital reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

2016 Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience$ - $ 419,011 Net difference between projected and actual earnings on pension plan investments - 576,187 Changes of assumptions - 206,874 Changes in proportion 209,546 517,858 Hospital’s contributions subsequent to the measurement date 1,375,517 -

Total$ 1,585,063 $ 1,719,930

34 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

2015 Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience$ - $ 408,746 Net difference between projected and actual earnings on pension plan investments - 2,591,530 Changes in proportion 264,401 - Hospital’s contributions subsequent to the measurement date 1,441,980 -

Total$ 1,706,381 $ 3,000,276

At April 30, 2016, the Hospital reported $1,375,517 as deferred outflows of resources related to pension contributions made subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ending April 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources at April 30, 2016, related to pensions will be recognized in pension expense as follows:

2017$ (502,102) 2018 (502,102) 2019 (502,102) 2020 124,458 2021 (128,536)

$ (1,510,384)

Actuarial Assumptions

The total pension liability in the December 31, 2014 and 2013, actuarial valuations was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3% Salary increases 4% to 16%, including inflation (4% to 12.5% for 2013) Investment rate of return 8%, net of pension plan investment expense, including inflation Mortality rates were based on the RP-2000 Combined Mortality Table for males or females Annuitant table, as appropriate with adjustments for mortality improvements based on Scale AA. The actuarial assumptions used in the December 31, 2014, valuation were based on the results of an actuarial experience study for the three-year period ended December 31, 2012.

35 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

The actuarial assumptions used in the December 31, 2013 and 2012, valuations were based on the results of an actuarial experience study conducted for the three-year period ended December 31, 2009. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

2016 Long-term Expected Target Real Rate of Asset Class Allocation Return

Global equity 47% 6.30% Fixed income 13% 0.80% Yield driven 8% 4.20% Real return 11% 1.70% Real estate 11% 5.40% Alternatives 8% 9.40% Short-term investments 2% -0.50%

100%

2015 Long-term Expected Target Real Rate of Asset Class Allocation Return

Global equity 47% 6.00% Fixed income 14% 0.85% Yield driven 8% 5.50% Real return 11% 3.75% Real estate 11% 6.65% Alternatives 8% 9.50% Short-term investments 1% 0.00%

100%

36 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Discount Rate

The discount rate used to measure the total pension liability was 8%. The projection of cash flows used to determine the discount rate assumed that member contributions will be made at the contractually required rate. Participating employer contributions do not necessarily contribute the full actuarial determined rate. Based on legislation passed in 1993, the employer contribution rates certified by KPERS’ Board of Trustees for these groups may not increase by more than the statutory cap. The expected KPERS employer statutory contribution was modeled for future years, assuming all actuarial assumptions are met in future years. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Hospital’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The Hospital’s proportionate share of the net pension liability has been calculated using a discount rate of 8%. The following presents the Hospital’s proportionate share of the net pension liability calculated using a discount rate 1% higher and 1% lower than the current rate. Current 1% Discount 1% Decrease Rate Increase (7%) (8%) (9%)

Hospital’s proportionate share of the net pension liability (2016) $ 21,012,093 $ 14,801,907 $ 9,536,890

Hospital’s proportionate share of the net pension liability (2015) $ 20,670,614 $ 14,394,445 $ 9,076,831

Pension Plan Fiduciary Net Position

Detailed information about the pension plan’s fiduciary net position is available in the separately issued KPERS’ financial report.

37 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Note 12: Employee Incentive Plan

The Hospital has established an incentive plan which provides for one-third of income from Hospital operations before the incentive payment (exclusive of county tax proceeds, contributions and interest income) to be shared with employees. Participants employed prior to the beginning of the fiscal year must be employed during the entire plan year, have positive employee evaluations, work more than 416 hours and be employed on the last day of the fiscal year. Participants employed after the start of the fiscal year must be employed on the last day of the fiscal year and have completed their probationary period. The plan must be approved by the Board before the beginning of each fiscal year. There were no amounts payable as of April 30, 2016 and 2015.

Note 13: Geary Community Healthcare Foundation

Summary of Significant Accounting Policies

Organization

The Foundation is a not-for-profit organization whose purpose is to raise funds for the support of health and health care programs in the County and the Hospital.

Basis of Accounting

The financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles.

Display of Net Assets by Class

Net assets of the two restricted classes are created only by donor-imposed restrictions on their use. All other net assets, including board-designated or appropriated amounts, are legally unrestricted, and are reported as part of the unrestricted class. Temporarily restricted assets received in the current year and whose restrictions are met during the year are shown as unrestricted net assets.

Income Taxes

The Foundation is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code classified by the Internal Revenue Service as other than a private foundation.

38 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Cash and Cash Equivalents

The Foundation considers all highly liquid investments with a maturity of one year or less to be cash equivalents. Cash and cash equivalents consist of bank accounts and certificates of deposit located at various financial institutions and brokerages. All deposits were insured by FDIC Coverage and additional pledged securities.

Investments

Investments are composed of certificates of deposit with maturities longer than one year, U.S. government obligations, corporate bonds and equity securities (mutual funds) carried at fair value. Fair value is determined by quoted market prices in active markets (all Level 1 measurements).

Property and Equipment

The Foundation’s equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives. Expenditures for property, furniture and equipment in excess of $500 and with useful lives of more than one year are capitalized.

Functional Allocation of Expenses

The costs of providing the Foundation’s programs and administration have been summarized on a functional basis in the Statements of Activities. Accordingly, expenses that benefit both programs and supporting services have been allocated using management’s estimates.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Donated Staff/Facilities

The Hospital provides the office space and utilities as well as a portion of the salaries. The values of these donations are at cost or approximate fair value and are included in “Donated staff and facilities” on the Statements of Activities.

Donated Services

The Foundation receives donated services from unpaid volunteers who assist in fund raising and special projects. No amounts have been recognized in the Statements of Activities because the criteria for recognition under accounting principles generally accepted in the United States of America have not been satisfied.

39 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Revenues, Gains and Other Support

Annual donations are generally available for unrestricted use in the current year unless specifically restricted by the donor. The Foundation holds special fund raising events each year. The revenues from these events are reported separately from their expenses which are recorded in the Statements of Activities as a fund raising activity expense.

Investments

The Foundation’s investments as of December 31, 2015 and 2014, are summarized below and are listed at fair value. Investments in debt and equity securities with readily determinable fair values are carried at fair value based on quoted prices in active markets (all Level 1 measurements).

2015 2014

Corporate bonds $ 81,051 $ 750,394 Mutual funds - equities 3,985,769 3,658,536

Total $ 4,066,820 $ 4,408,930

The following schedule summarized the investment return for the years ended December 31, 2015 and 2014:

December 31, December 31, 2015 2014 Unrestricted Unrestricted

Interest and dividends $ 97,179 $ 147,543 Net realized and unrealized gain (loss) on investments (94,314) 104,345

Total investment return $ 2,865 $ 251,888

Annuities Payable

The Foundation has received charitable gift annuities. These split interest agreements call for payment to the annuitant, over the annuitant’s life expectancy based on the IRS annuity tables. At December 31, 2015, the present value of the liability for these payments was $14,917 and at December 31, 2014, was $13,506.

40 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Financial Statements April 30, 2016 and 2015

Designated Net Assets

The Board of Trustees of the Foundation has designated $3,000,000 of investments for specific future purposes as of December 31, 2015 and 2014, respectively. The total may be adjusted annually as determined by the Board of Trustees.

Related Entity

The Foundation works closely with the Hospital. Facilities and 20% of the Foundation’s executive director’s salary and benefits are provided by the Hospital. As discussed above, much of the funds raised by the Foundation are distributed to the Hospital. The entities share four common members of their Boards of Trustees.

Subsequent Events

Subsequent events related to the Foundation were evaluated through the date of the Independent Auditor’s Report, which is the date the financial statements were available to be issued.

Required Supplementary Information

Geary Community Hospital A Component Unit of Geary County, Kansas Schedule of the Hospital’s Proportionate Share of the Net Pension Liability Kansas Public Employees Retirement System Plan Last Ten Fiscal Years

2016 * 2015 *

Hospital’s proportion of the net pension liability 1.127297% 1.169507% Hospital’s proportionate share of the net pension liability$ 14,801,907 $ 14,394,445 Hospital’s covered-employee payroll$ 18,184,652 $ 18,216,708 Hospital’s proportionate share of the net pension liability as a percentage of its covered-employee payroll 81.40% 79.02% Plan fiduciary net position as a percentage of the total pension liability 64.95% 66.60%

Note to Schedule: This schedule is intended to show a 10-year trend. Additional years will be reported as they become available.

*The amounts presented for each fiscal year are as of the measurement date (June 30 of each fiscal year).

42 Geary Community Hospital A Component Unit of Geary County, Kansas Schedule of the Hospital’s Contributions Kansas Public Employees Retirement System Plan Last Ten Fiscal Years

2016 * 2015 *

Contractually required contribution $ 1,657,442 $ 1,712,969

Contribution in relation to the contractually required contribution 1,657,442 1,712,969

Contribution deficiency (excess) $ - $ -

Hospital’s covered-employee payroll $ 17,669,957 $ 18,920,865

Contributions as a percentage of covered-employee payroll 9.38% 9.05%

Note to Schedule: This schedule is intended to show a 10-year trend. Additional years will be reported as they become available.

*The amounts presented for each fiscal year are as of the most recent fiscal year-end (April 30).

43 Geary Community Hospital A Component Unit of Geary County, Kansas Notes to Required Supplementary Information April 30, 2016 and 2015

Changes of Benefit and Funding Terms: The following changes to the plan provisions as of January 1, 2015 and 2014, as listed below, were reflected in the valuation performed:

Effective January 1, 2014, KPERS Tier 1 member’s employee contribution rate increased to 5.0% with an increase in benefit multiplier to 1.85% for future years of service. Effective January 1, 2015, the rate increased to 6.0% with the benefit multiplier continuing at 1.85% for future years of service. For Tier 2 members retiring after July 1, 2012, the cost of living adjustment is eliminated but members will receive a 1.85% multiplier for all years of service.

Supplementary Information

Geary Community Hospital A Component Unit of Geary County, Kansas Net Patient Service Revenue Years Ended April 30, 2016 and 2015

2016 Inpatient Outpatient Total Nursing, dietary and room service$ 4,718,770 $ - $ 4,718,770 Intensive care 1,580,528 - 1,580,528 Geriatric psych unit - - - Nursery 753,909 - 753,909 Operating room 5,582,410 7,832,806 13,415,216 Extended recovery 7,354 412,630 419,984 Anesthesiology 970,647 1,724,609 2,695,256 Radiology, CT, MRI and Ultrasound 2,078,566 23,240,001 25,318,567 Nuclear medicine 35,856 1,471,654 1,507,510 Laboratory 2,762,346 18,884,572 21,646,918 Intravenous therapy - 668,927 668,927 Inhalation therapy 2,097,854 2,019,507 4,117,361 Physical therapy 196,922 1,513,631 1,710,553 Occupational therapy 156,749 346,441 503,190 Speech therapy 53,290 637,342 690,632 Cardiac pulmonary rehabilitation 710,485 918,841 1,629,326 Sleep lab 11,830 1,380,514 1,392,344 Central supply 2,074,532 1,438,927 3,513,459 Pharmacy 3,347,770 2,884,964 6,232,734 Emergency room 915,917 12,482,136 13,398,053 Observation - 1,061,742 1,061,742 Pediatric clinic – RHC 275,089 1,226,197 1,501,286 Gray clinic – RHC 89,540 1,003,976 1,093,516 Jenkins clinic – RHC 78,167 166,501 244,668 Frieze clinic – RHC 71,586 389,995 461,581 Mace clinic – RHC 60,174 172,521 232,695 Craig clinic – RHC 128,974 367,700 496,674 Alphacare – RHC - 1,203,797 1,203,797 Velasquez clinic – RHC - 596,096 596,096 Home health - 635,214 635,214 Hospice - 133,386 133,386 Home medical equipment - 2,029,056 2,029,056 Lifeline - 3,010 3,010 Orthopedic clinic 200,984 904,619 1,105,603 Chapman clinic - 142,997 142,997 Flint Hills Surgical clinic 475,832 1,043,797 1,519,629 Community wellness - 1,100 1,100 Psych clinic - 1,440 1,440 Total Hospital$ 29,436,081 $ 88,940,646 118,376,727

Contractual allowances and charity care 79,247,096 Net patient service revenue$ 39,129,631

2015 Inpatient Outpatient Total $ 4,941,050 $ - $ 4,941,050 1,600,101 - 1,600,101 1,244,050 - 1,244,050 546,868 - 546,868 6,008,904 8,257,368 14,266,272 3,205 329,259 332,464 1,064,240 1,805,726 2,869,966 2,055,133 21,242,026 23,297,159 54,966 1,797,505 1,852,471 2,852,097 16,968,748 19,820,845 - 262,021 262,021 1,919,165 1,648,208 3,567,373 227,703 2,127,798 2,355,501 163,089 486,641 649,730 102,044 698,499 800,543 468,377 815,838 1,284,215 6,606 1,445,467 1,452,073 2,672,248 1,624,604 4,296,852 3,644,920 3,011,036 6,655,956 945,584 11,291,121 12,236,705 - 1,147,166 1,147,166 194,183 1,339,389 1,533,572 36,160 877,280 913,440 18,976 383,238 402,214 35,447 438,469 473,916 42,879 183,175 226,054 111,959 409,377 521,336 - 1,324,369 1,324,369 - 415,127 415,127 - 597,155 597,155 - 133,077 133,077 - 2,072,533 2,072,533 - - - 456,127 963,553 1,419,680 - 143,281 143,281 387,775 1,370,975 1,758,750 - 2,004 2,004 34,485 11,796 46,281 $ 31,838,341 $ 85,623,829 117,462,170 76,450,828 $ 41,011,342

45 Geary Community Hospital A Component Unit of Geary County, Kansas Contractual Allowances, Charity Care and Other Operating Revenues Years Ended April 30, 2016 and 2015

Contractual Allowances and Charity Care 2016 2015

Hospital-sponsored charity care$ 1,360,232 $ 1,619,964

Contractual allowances: Medicare 32,149,811 31,167,496 Medicaid 10,573,716 9,898,095 Blue Cross 11,996,177 11,668,549 Tricare 10,814,330 9,728,637 HMO/PPO 3,077,287 3,508,491 Pediatric clinic – RHC (371,535) 129,475 Gray clinic – RHC (12,454) (18,208) Jenkins clinic – RHC 42,620 59,041 Frieze clinic – RHC 35,671 43,351 Craig clinic – RHC 10,067 3,647 Alphacare – RHC 121,128 198,244 Velasquez – RHC 22,916 (28,687) Chapman clinic 55,543 49,923 Flint Hills Surgical clinic 986,500 1,088,300 Mace clinic 15,162 22,805 Orthopedic clinic 549,776 829,170 Psych clinic 2,934 19,764

Employee discounts 23,305 33,113

Administrative adjustments 1,746,178 1,373,177

Provision for uncollectible accounts 6,047,732 5,056,481

$ 79,247,096 $ 76,450,828

Other Operating Revenues 2016 2015

Cafeteria and catering$ 416,902 $ 466,729 Rental income 233,271 238,075 Medical records transcript fees 13,943 42,483 Vending machine receipts 2,541 3,354 Miscellaneous 64,720 12,869

$ 731,377 $ 763,510

46 Geary Community Hospital A Component Unit of Geary County, Kansas Operating Expenses Years Ended April 30, 2016 and 2015

2016 Salaries Other Total Nursing service$ 1,924,579 $ 229,503 $ 2,154,082 Intensive care 663,953 74,639 738,592 Geriatric psych unit 27,041 29,708 56,749 Nursery 45,251 11,236 56,487 Operating room 926,396 809,031 1,735,427 Anesthesiology - 131,219 131,219 Radiology, CT, MRI and Ultrasound 905,221 617,000 1,522,221 Nuclear medicine 71,229 107,533 178,762 Laboratory 765,375 1,467,432 2,232,807 Intravenous therapy - 2,978 2,978 Inhalation therapy 454,194 115,706 569,900 Physical therapy - 1,155,716 1,155,716 Occupational therapy - 262,555 262,555 Speech therapy - 223,736 223,736 Cardiac pulmonary rehabilitation 144,944 9,581 154,525 Sleep lab 120,651 34,750 155,401 Central supply 156,053 435,127 591,180 Pharmacy 427,962 753,286 1,181,248 Emergency room 916,888 1,110,040 2,026,928 Pediatric clinic – RHC 606,831 568,840 1,175,671 4th Floor MAB II clinic – RHC 1,720,901 858,562 2,579,463 Frieze clinic – RHC 410,987 117,734 528,721 Craig clinic – RHC 319,098 176,932 496,030 Alphacare – RHC 530,830 389,390 920,220 Velasquez clinic – RHC 410,577 336,095 746,672 Clinic management – RHC 267,026 (270,552) (3,526) Ambulance - - - Home medical equipment 233,968 458,025 691,993 Home health 532,781 236,823 769,604 Hospice 120,338 71,812 192,150 Depreciation - 2,798,913 2,798,913 Employee health and welfare - 3,351,192 3,351,192 Administrative and general 3,046,959 2,992,127 6,039,086 Operation of plant 540,008 1,376,599 1,916,607 Laundry and linen 44,942 32,042 76,984 Housekeeping 170,075 702,047 872,122 Dietary 209,355 1,002,858 1,212,213 Dietician 34,161 522 34,683 Nursing administrative 710,036 115,252 825,288 Foundation 17,405 38,290 55,695 Public relations 84,817 161,005 245,822 Chapman clinic 65,879 40,712 106,591 Flint Hills Surgical clinic 1,166,197 511,913 1,678,110 Psych clinic - 10,169 10,169 Ortho clinic 443,280 531,683 974,963 Community wellness 2,126 - 2,126 Medical arts building 13,248 369,974 383,222 $ 19,251,562 $ 24,559,735 $ 43,811,297

2015 Salaries Other Total $ 1,969,114 $ 242,474 $ 2,211,588 644,264 57,151 701,415 415,114 138,921 554,035 81,437 12,202 93,639 1,045,545 1,250,976 2,296,521 - 134,076 134,076 922,324 576,716 1,499,040 92,521 138,278 230,799 782,670 1,458,176 2,240,846 - 2,737 2,737 420,593 136,985 557,578 - 1,096,664 1,096,664 - 291,870 291,870 - 245,737 245,737 109,743 8,798 118,541 151,576 43,736 195,312 166,315 456,138 622,453 464,305 682,059 1,146,364 951,635 1,010,720 1,962,355 566,195 432,929 999,124 1,543,515 612,376 2,155,891 364,599 114,381 478,980 326,698 142,003 468,701 520,851 300,638 821,489 353,325 242,586 595,911 200,404 (200,130) 274 - 2,589 2,589 244,306 380,561 624,867 488,352 215,555 703,907 152,451 82,318 234,769 - 2,931,128 2,931,128 - 4,071,809 4,071,809 3,199,448 3,177,607 6,377,055 400,300 1,474,201 1,874,501 59,176 32,703 91,879 562,574 117,917 680,491 567,322 553,689 1,121,011 65,417 1,690 67,107 724,501 114,204 838,705 19,161 4,828 23,989 46,611 151,082 197,693 64,099 34,328 98,427 1,039,744 333,768 1,373,512 - 5,187 5,187 637,072 239,231 876,303 3,878 - 3,878 13,248 378,220 391,468 $ 20,380,403 $ 23,931,812 $ 44,312,215