Hospital Financial Report June 2020 Survey Results Table of Contents

03 Financial Results At-A-Glance

04 AHCCCS Trends

06 Key Results ED Visits and Inpatient Discharges

09 Appendix

Financial Survey Reporting Results

Reporting for All Four Periods Hospital Financial Report June 2020

Hospital Financial Results At-A-Glance Hospital financial survey results for June 2020 show an operating margin of $215 million or 19.4%. This is only part of the story as these figures include the recording of $160 million in federal funding from the CARES Act as operating income for the month of June. Without this financial support, hospitals would have made $55 million, or 5.8%. The data shows discharges and patient days for the month were higher than they were in June in 2017, 2018 and 2019. Emergency room visits were still lower than they were in past years.

Uncompensated care for the month was 3.5%. The graph below illustrates how uncompensated care rose when the number of childless adults covered by the AHCCCS program declined, and then decreased when coverage was restored and expanded to 133% of the federal poverty level.

Arizona Hospitals Uncompensated Care Trends Before and After Medicaid Expansion

9.00% 500,000 8.00% 450,000 7.00% 400,000 6.00% 350,000 300,000 5.00% 250,000 4.00% 200,000 3.00% 150,000 2.00% 100,000 1.00% 50,000 0.00% - 2011 19-Jun 18-Jun 17-Jun 16-Jun 15-Jun 14-Jun 13-Jun 19-Oct 18-Oct 17-Oct 16-Oct 15-Oct 14-Oct 13-Oct 20-Feb 19-Feb 18-Feb 17-Feb 16-Feb 15-Feb 14-Feb 13-Feb 20-Aug

Uncompensated Care % Total Childless Adults Covered by AHCCCS 3 Hospital Financial Report June 2020

AHCCCS Trends

The timeline reflecting the major changes to the AHCCCS program is highlighted below. August2020 473,000 May 2011 enrolled in either Freeze December 2013 Prop. 204 enrollment in AHCCCS group restoration group medical spend membership = or adult down program 68,000 expansion group

July 2011 January 2014 Freeze Restoration of enrollment in the Prop. 204 and Childless Adult adult expansion Program to 133% of federal poverty level

AHCCCS Population Over the last 12 months, the AHCCCS population has varied slightly as illustrated below. However, beginning April, the population started to grow as a result of the pandemic. We foresee these rates changing as the unemployment rates are also impacted by COVID-19.

2,100,000

2,050,000

2,000,000

1,950,000

1,900,000

1,850,000

1,800,000

1,750,000 4 Hospital Financial Report June 2020

Childless Adults

The childless adult population financed through the provider assessment began to rise in April 2020 as a result of the increasing unemployment rates.

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

-

Hospital Assessment

The table below shows the hospital assessment funding for the Medicaid restoration and expansion for the first several years, as well as the initial and revised assessment for 2021, based on the May 15, 2020 report from AHCCCS.

600

500

400

300

200 Amount in in millions Amount 100

0 2014 2015 2016 2017 2018 2019 2020 2021 In. 2021 Rev 5 Hospital Financial Report June 2020

Key Results

The cost of uncompensated care in millions of dollars for reporting hospitals compared to prior periods:

Dollars in millions 2020 2019 2018 2017

Last 12 months $ 351 $ 313 $ 266 $ 253

Uncompensated care percentage 3.3% 2.9% 2.7% 2.5%

In June 2013 and 2012 respectively, when the childless adult enrollment was frozen, the uncompensated care percentage for June 2013 and 2012 was 8.1% and 6.4% respectively

The operating margins shown below include $160 million in June 2020 and $300 million year-to-date for 2020 related to COVID-19 funding programs.

Dollars in millions 2020 2019 2018 2017 June $ 215 $ 24 $ 79 $ 92 Year-to-date $ 406 $ 319 $ 357 $ 284 Operating margin year-to-date 6.3% 5.6% 6.4% 5.3%

Other trends for the most recent 12 months are: 12 months ending June Dollars in millions 2020 2019 2018 2017 Operating income estimate $ 1,036 $ 785 $ 881 $ 536 Uncompensated care costs estimate 502 448 380 362 Average operating margin 5.9% 4.9% 5.6% 3.5% Average uncompensated care percentage 3.3% 2.9% 2.7% 2.5%

The operating income estimate for the state is based on responses from hospitals representing approximately 70% of the state hospitals.

6 Hospital Financial Report June 2020

ED Visits and Inpatient Discharges

Over the last several years inpatient discharges have steadily increased while hospital emergency department (ED) visits have declined, based on information supplied by hospitals. Emergency room volumes were down significantly in June from prior years.

Hospital volume trends - 6 months ending June 30

1,200,000

1,000,000

800,000

600,000

400,000

200,000

- 2017 2018 2019 2020

Discharges ED Visits

7 Hospital Financial Report June 2020

ED Visits and Inpatient Discharges - Continued Hospital ED visits and hospital inpatient discharges were greatly impacted by the statewide ban on elective procedures and stay-at-home order back in March. Even after the executive order expired, emergency room volumes are still lower than in previous years. On the other hand, inpatient discharges are higher.

Reporting Hospital ED Visits 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 January February March April May June

2020 2019 2018 2017

Reporting Hospital Inpatient Discharges 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - January February March April May June

2020 2019 2018 2017

8 Hospital Financial Report June 2020

Appendix

Financial Survey Reporting Results

June Percentage Change Between 2020 and 2020 2019 2018 2017 2019 2018 2017 Income Statement Measures: Gross Charges 4,581,657,881 $ 4,310,500,109 $ 3,930,085,399 $ 3,756,354,181 6.3% 16.6% 22.0% Charity Allowances 118,176,657 65,257,375 54,086,461 57,581,064 81.1% 118.5% 105.2% Bad Debts 43,195,139 69,242,315 40,112,428 33,490,556 -37.6% 7.7% 29.0% Net Patient Revenue 917,721,196 852,180,570 837,227,462 869,861,678 7.7% 9.6% 5.5% Total Operating Revenues 1,106,410,372 880,393,915 899,044,882 894,509,499 25.7% 23.1% 23.7% Salaries and Wages 295,035,450 277,767,608 271,786,053 250,125,491 6.2% 8.6% 18.0% Employee Benefits 63,888,840 58,704,359 56,975,305 64,201,752 8.8% 12.1% -0.5% Interest Expense 12,743,202 12,774,095 10,914,759 11,315,316 -0.2% 16.8% 12.6% Depreciation 46,512,928 46,574,002 43,992,520 38,429,106 -0.1% 5.7% 21.0% Other Expenses 473,581,952 460,467,143 435,996,148 438,645,620 2.8% 8.6% 8.0% Total Expenses 891,762,372 856,287,207 819,664,785 802,717,285 4.1% 8.8% 11.1% Operating Income 214,648,000 24,106,708 79,380,097 91,792,214 790.4% 170.4% 133.8% Nonoperating Revenue 46,774,050 35,116,942 11,739,449 3,294,135 -33.2% 298.4% 1319.9% Excess of Revenue Over Expenses 261,422,050 59,223,650 91,119,546 95,086,349 341.4% 186.9% 174.9% Balance Sheet Measures: Net Accounts Receivable 1,632,955,263 1,631,824,650 1,524,020,077 1,382,320,467 0.1% 7.1% Current Assets 4,409,812,863 4,129,976,996 3,663,847,660 3,079,689,041 6.8% 20.4% 43.2% Current Liabilities 1,972,302,283 1,454,961,608 1,256,685,507 994,242,447 35.6% 56.9% 98.4% Volume Measures: Patient Discharges 36,977 34,860 34,098 34,605 6.1% 8.4% 6.9% Patient Days 182,632 170,567 163,108 161,359 7.1% 12.0% 13.2% ED Visits 117,886 137,041 139,097 153,031 -14.0% -15.2% -23.0% Births 4,857 4,692 5,040 5,161 3.5% -3.6% -5.9% FTE's 49,120 50,555 49,951 49,356 -2.8% -1.7% -0.5% Key Ratios Operating Margin 19.4% 2.7% 8.8% 10.3% 608.5% 119.7% 89.1% Total Income Margin 22.7% 6.5% 10.0% 10.6% 250.4% 126.6% 114.0% Current Ratio 2.2 2.8 2.9 3.1 -21.2% -23.3% -27.8% Days in Accounts Receivable 55.2 59.4 56.4 49.3 -7.1% -2.3% 12.0% Collection Percentage 20.0% 19.8% 21.3% 23.2% 1.3% -6.0% -13.5% Cost to Charge Ratio 18.7% 19.7% 20.5% 21.2% -5.3% -9.0% -11.9% Uncompensated Care Charges 161,371,796 134,499,690 94,198,889 91,071,620 20.0% 71.3% 77.2% Cost of Uncompensated Care 30,166,630 26,544,819 19,342,032 19,334,759 13.6% 56.0% 56.0% Uncompensated Care Percentage 3.52% 3.1% 2.4% 2.4% 12.9% 46.9% 45.3%

9 Hospital Financial Report June 2020

Reporting Hospitals For All Four Periods

Abrazo Arrowhead Campus Canyon Vista Medical Center Abrazo Heart Hospital Cobre Valley Regional Medical Center Copper Queen Community Hospital Dignity Health Chandler Regional Medical Center Dignity Health Mercy Gilbert Medical Center Banner Baywood Medical Center Dignity Health St. Joseph’s Hospital and Banner Behavioral Health Hospital — Scottsdale Medical Center Banner Boswell Medical Center Encompass Health Valley of the Sun Rehabilitation Banner Casa Grande Regional Medical Center Hospital Banner Del E. Webb Medical Center Kingman Regional Medical Center Banner Desert Medical Center Mt. Graham Regional Medical Center Banner Estrella Medical Center Page Hospital Banner Gateway Medical Center Summit Healthcare Regional Medical Center Banner Goldfield Medical Center Tucson Medical Center Banner Heart Hospital Valleywise Health Banner Ironwood Medical Center White Mountain Regional Medical Center Banner Payson Medical Center Yavapai Regional Medical Center Banner Thunderbird Medical Center Yuma Regional Medical Center Banner University Medical Center Phoenix Banner University Medical Center South Banner University Medical Center Tucson Benson Hospital

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