The University of Vermont Health Network Inc. and Subsidiaries

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The University of Vermont Health Network Inc. and Subsidiaries The University of Vermont Health Network Inc. and Subsidiaries Consolidated Financial Statements and Supplemental Consolidating Information September 30, 2020 and 2019 The University of Vermont Health Network Inc. and Subsidiaries Index September 30, 2020 and 2019 Page(s) Report of Independent Auditors ........................................................................................................... 1–2 Consolidated Financial Statements Balance Sheets ............................................................................................................................................ 3 Statements of Operations ............................................................................................................................ 4 Statements of Changes in Net Assets ......................................................................................................... 5 Statements of Cash Flows ........................................................................................................................... 6 Notes to Financial Statements ............................................................................................................... 7–51 Supplemental Consolidating Information Note to Consolidating Information .............................................................................................................. 52 Obligated Group Balance Sheet ................................................................................................................ 53 Balance Sheet ............................................................................................................................................ 54 Obligated Group Statement of Operations ................................................................................................. 55 Statement of Operations ............................................................................................................................ 56 Report of Independent Auditors To the Board of Trustees of The University of Vermont Health Network, Inc. We have audited the accompanying consolidated financial statements of The University of Vermont Health Network Inc. and its subsidiaries (the “Network”), which comprise the consolidated balance sheets as of September 30, 2020 and 2019, and the related consolidated statements of operations, of changes in net assets and of cash flows for the years then ended. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Network's preparation and fair presentation of the consolidated 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 Network'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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The University of Vermont Health Network Inc. and its subsidiaries as of September 30, 2020 and 2019, and the results of their operations, their changes in net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, MA, 02210 T: (617) 530 5000, F: (617) 530 5001, www.pwc.com/us Emphasis of Matter As discussed in Note 3 to the consolidated financial statements, the Network changed the manner in which it accounts for leases in 2020. Our opinion is not modified with respect to this matter. Other Matter Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The consolidating information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves and other additional procedures, in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated, in all material respects, in relation to the consolidated financial statements taken as a whole. The consolidating information is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of operations, changes in net assets and cash flows of the individual companies and is not a required part of the consolidated financial statements. Accordingly, we do not express an opinion on the financial position, results of operations, changes in net assets and cash flows of the individual companies. Boston, Massachusetts January 28, 2021 2 The University of Vermont Health Network Inc. and Subsidiaries Consolidated Balance Sheets September 30, 2020 and 2019 (in thousands) 2020 2019 Assets Current assets Cash and cash equivalents $ 526,654 $ 171,861 Short-term investments 15,085 29,979 Current portion of assets whose use is limited or restricted 9,831 6,403 Patient and other trade accounts receivable 256,607 257,588 Inventories 59,800 44,857 Receivables from third-party payers 13,059 11,820 Prepaid and other current assets 76,160 52,549 Total current assets 957,196 575,057 Assets whose use is limited or restricted Board-designated assets 645,676 659,416 Assets held by trustee under bond indenture agreements 4,265 3,974 Restricted assets 85,732 84,396 Donor-restricted assets for specific purposes 55,212 48,360 Donor-restricted assets for endowment 42,860 42,206 Total assets whose use is limited or restricted 833,745 838,352 Property and equipment, net 908,847 927,238 Operating lease right of use assets, net 70,389 - Finance lease right of use assets, net 3,911 - Other 54,354 43,201 Total assets $ 2,828,442 $ 2,383,848 Liabilities and Net Assets Current liabilities Current installments of long-term debt $ 34,064 $ 39,582 Accounts payable 41,760 50,901 Accrued expenses and other liabilities 61,889 53,259 Accrued payroll and related benefits 144,369 113,751 Current portion of third-party payer settlements 41,528 12,757 Incurred but not reported claims 23,425 18,486 Operating lease right of use obligations 14,317 - Finance lease right of use obligations 1,916 - Contract liabilities 109,277 - Total current liabilities 472,545 288,736 Long-term liabilities Long-term debt - net of current installments 708,556 570,990 Malpractice and workers' compensation claims net of current portion 48,533 44,553 Pension and other postretirement benefit obligations 77,622 92,890 Third-party payer settlements, net of current portion 23,053 19,788 Operating lease right of use obligations, net of current portion 56,461 - Finance lease right of use obligations, net of current portion 1,736 - Other 36,698 33,370 Total long-term liabilities 952,659 761,591 Total liabilities 1,425,204 1,050,327 Net assets Without donor restrictions 1,290,532 1,229,029 With donor restrictions Time or purpose 65,816 58,385 Perpetual 46,890 46,107 Total with donor restrictions 112,706 104,492 Total net assets 1,403,238 1,333,521 Total liabilities and net assets $ 2,828,442 $ 2,383,848 The accompanying notes are an integral part of these consolidated financial statements. 3 The University of Vermont Health Network Inc. and Subsidiaries Consolidated Statements of Operations Years Ended September 30, 2020 and 2019 (in thousands) 2020 2019 Revenue and other support without donor restrictions Net patient service revenue before Enhanced Medicaid
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