For the Period Ended December 31, 2015 Unaudited Quarterly Disclosure
For the Period Ended June 30, 2016 Unaudited Quarterly Disclosure
Quarterly Disclosure Report for June 30, 2016
The following discussion and analysis provides a narrative explanation of the results of operations and financial position of ProMedica Health System Inc. and its subsidiaries (collectively,”ProMedica”) for the six months ended June 30, 2016. The analysis should be read in conjunction with ProMedica Health System and ProMedica Healthcare Obligated group’s financial statements for the six-month period ending June 30, 2016 and 2015. Beginning with the disclosure information presented for the Second Quarter of 2016, the discussion and analysis is made with respect to consolidated ProMedica Health System and does not include a separate discussion or presentation of the results of operations and financial position for the members of the Obligated Group except in those instances where management of ProMedica believes that discussion of the results of the members of the Obligated Group is relevant to understanding the discussion and analysis. The Obligated Group accounted for approximately 51% of total operating revenues for the six months ended June 30, 2016.
Bond Cusips
Bond Series CUSIP 2008D 52601PBD9 549310VH0 549310TV2 52601PBE7 549310VJ6 549310TW0 549310VK3 2011D 2011A 549310UN8 2011E 549310TZ3 549310UP3 52601PBF4 549310UA6 549310UQ1 52601PBG2 549310UB4 549310UR9 52601PBH0 549310UC2 549310US7 52601PBJ6 549310UD0 549310UT5 52601PBK3 549310UE8 549310UU2 52601PBL1 549310UF5 549310UV0 52601PBM9 549310UG3 549310UW8 52601PBN7 549310UH1 549310UX6 52601PBP2 549310UJ7 549310UY4 52601PBQ0 549310UK4 549310UZ1 52601PBR8 549310UL2 549310VA5 52601PBS6 549310UM0 549310VB3 549310VC1 2015B 2011B 549310VD9 549310VlL1 52601PBA5 549310VE7 52601PBB3 549310VF4 52601PBC1 549310VG2
TABLE OF CONTENTS
PROMEDICA OVERVIEW ...... 1
Who ProMedica is… ...... 1 Service Area ...... 3
Awards ...... 4
Community Benefit...... 5
Organizational Overview ...... 6 Structure ...... 6
ProMedica Obligated Group Members ...... 7
Clinical Service Lines ...... 8
Non-Obligated Group Members ...... 10
Executive Leadership & Governance ...... 14
Strategy ...... 15
RECENT SIGNIFICANT DEVELOPMENTS ...... 16
Expansion Activities ...... 16
University of Toledo Affiliation ...... 17
Epic Implementation ...... 17
St. Luke’s Divestiture ...... 18
Other ...... 18
Leadership Changes ...... 19
MANAGEMENT DISCUSSION AND ANALYSIS ...... 20
Operational Performance ...... 20
Income Statement ...... 20 Net Operating income ...... 21
Sources of Revenue ...... 21
Acute Patient Revenue Payor Mix ...... 22
ProMedica Quarterly Disclosure
Non-Operating Income ...... 22
Balance Sheet ...... 23 Balance Sheet and Cash Flow ...... 23
Debt ...... 24 Interest Rate Swaps: ...... 24
Recent Debt Activity ...... 25
Ratings ...... 25
Investments ...... 26 Valuations ...... 27
Liquidity ...... 27
Pension Plans ...... 27
Financial Indicators ...... 28 Profitability ...... 28
Liquidity/Leverage ...... 28
UTILIZATION STATISTICS – SYSTEM ...... 29
FINANCIAL STATEMENTS ...... 30
DEBT COVENANT CALCULATIONS ...... 40
ProMedica Quarterly Disclosure
PROMEDICA OVERVIEW
Who ProMedica is… Mission Formed in 1986, ProMedica is a mission-driven, community-based, not- for-profit health system serving northwest Ohio and southeast Michigan. Our Mission is to improve ProMedica operates acute care hospital facilities, integrated continuing your health and well-being. care facilities and services, a health insurance company with several health plans and a physician organization. ProMedica also has numerous joint ventures, co-management and other affiliations, including a long- term academic affiliation. Values ProMedica has maintained a steadfast commitment to operating as a fully Compassion – We treat our patients and integrated health system. ProMedica Toledo Hospital, established in each other with respect, integrity and 1874, is the legacy hospital, and ProMedica’s tertiary facility. The dignity. development of the health system began in 1986, with the inception of ProMedica Health System, followed by the formation of Paramount Innovation – We continually search to (health plan) in 1988 and ProMedica Physicians in 1992. ProMedica find a better way forward. Toledo Children’s Hospital was established in 1993. Thereafter, ProMedica’s expansion began, transforming ProMedica into the largest Teamwork – We partner with others health system in the region, with 14 owned, managed or affiliated because we are better together than hospitals. apart. Excellence – We strive to be the best ProMedica is… in all we do.
2,100+ Acute Care Beds 14(1) Hospitals 338,000+ lives covered by 330+ Paramount insurance Continuum Services Beds 17,000+ Employees 900+ (2015) 2,000+ Inpatient Hospice Credentialed Physicians days & Allied Health Professionals 226,000 (2015) Home care visits 1.5 million (2015) ProMedica Physicians’ annual patient visits 200+ 880+ Residents/Fellows on rotation ProMedica Physicians and providers 20 Different specialties (1) As of June 30, 2016, St. Luke’s Hospital, inclusive of St. Luke’s Hospital Foundation, was included as part of ProMedica Health System and included in the above statistics.
ProMedica Quarterly Disclosure 1
Service Area ProMedica is headquartered in Toledo, Ohio, and serves a 27 county area in northwest Ohio and southeast Michigan. The graph below denotes the location of ProMedica facilities across the service area:
2STATES Ohio and Michigan
LEGEND Hospital Clinical Health Centers Hospice Home Care Rehab/Skilled Nursing Pharmacy Behavioral Health Center Radiology Laboratories Urgent Care
Paramount serves members throughout all of Ohio and southeast counties of Michigan, as represented by the light green shading in the map to the right. Paramount is the largest provider-sponsored health plan in Ohio. In 2013, Paramount, through its statewide Paramount Advantage subsidiary, was one of five Medicaid insurers in Ohio selected to provide statewide managed care services. Paramount Advantage is now offered in all 88 counties in Ohio. Paramount’s workers compensation product (HMS) is also offered throughout Ohio. In addition to these products, Paramount offers commercial (Paramount Care) and Medicare (Paramount Elite) products in various counties in Ohio and Michigan.
ProMedica Quarterly Disclosure 3
Awards
ProMedica Toledo Hospital was named one of America’s 100 Best Hospitals by Healthgrades. This distinction places ProMedica Toledo Hospital in the Top 2% of hospitals in the nation for exhibiting superior patient care in multiple clinical specialty areas for three consecutive years.
In 2016, The Centers for Medicare and Medicaid (CMS) evaluated 3,663 hospitals and 25% received a four-star rating and 48% received a three-star rating. Five ProMedica hospitals earned the CMS four-star rating as follows: ProMedica Bay Park, Defiance Regional, Flower, Memorial and Toledo Hospitals. Four earned three-star ratings as follows: ProMedica Bixby Hospital, Fostoria Community, Herrick and Monroe Regional Hospitals.
ProMedica Monroe Regional Hospital received Healthgrades Distinguished Hospital Award for Clinical Excellence, placing it in the Top 5% of the nation’s hospitals.
ProMedica Bay Park Hospital was Healthgrades five-star recipient for the treatment of stroke.
ProMedica Memorial Hospital was recently recognized by Healthgrades as being in the Top 15% of hospitals in patient experience based on HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) patient satisfaction scores as reported to Centers for Medicare & Medicaid Services.
ProMedica Bixby Hospital was of one six southeast Michigan hospitals to receive a grade “A” rating from Leapfrog Group for Hospital Safety Scores. Leapfrog assigns letter grades to hospitals based on their patient safety rates and record of helping consumers prevent avoidable errors, accidents, and infections.
ProMedica Herrick Hospital was one of 13 Michigan hospitals to receive the Healthgrades 2016 Patient Safety Excellence Award. The award recognizes the Top 10% of hospitals as leaders in patient safety, and is based on analysis of quality and safety indicators relating to 14 potentially serious, preventable adverse events.
The Centers for Medicare and Medicaid Services recognized ProMedica Home Health Care with a five- star rating for patient satisfaction. ProMedica Home Health Care is also ranked in the Top 25th percentile of all home care programs in the nation.
Paramount’s Medicare product (Paramount Elite) achieved a four-star rating from the Centers for Medicare and Medicaid (CMS).
Becker’s Healthcare named ProMedica one of its 150 Great Places to Work in Healthcare. The list includes hospitals and health systems throughout the country that have achieved high employee satisfaction and value work-life balance.
ProMedica Quarterly Disclosure 4
ProMedica Innovations has received the EY Entrepreneur Of the Year® 2016 Award in the Michigan and Northwest Ohio Region. ProMedica was recognized for its leadership role in helping to revitalize downtown Toledo and bring new jobs to the region, as well its work in the community addressing hunger and other social issues.
For the second consecutive year; the ProMedica supply chain management team has earned the Economic Cycle Research Institute’s Healthcare Supply Chain Management Award. ProMedica is one of only 12 healthcare organizations to receive this prestigious award which honors organizations that demonstrate excellence in overall spend management and in adopting best practice solutions.
Community Benefit ProMedica Health System is dedicated to maintaining a strategic focus to fulfill its mission by providing services benefitting the communities it serves, regardless of income or ability to pay. Care is provided for the well-insured, the underinsured and the uninsured; to men, women and children, regardless of race, creed, national origin, disability or age.
ProMedica seeks to remain a financially strong organization so that it can sustain its caring mission and invest back into our communities. This includes generational investments such as the construction of new bed towers and innovative approaches to providing access to care. ProMedica’s total community benefit contribution for the year ended December 31, 2015, was approximately $199 million.
ProMedica’s vision is to intentionally build healthy and whole communities through strategic partnerships, focused education, and meaningful relationships. Addressing the social determinates of health such as education, housing and hunger, which have equally impactful implications to both parts of ProMedica’s Mission, will provide meaningful opportunities to improve both health and well-being.
ProMedica Quarterly Disclosure 5
Organizational Overview
Structure ProMedica has established an “Obligated Group” structure, with the entities included in the Obligated Group highlighted in green in the chart below. ProMedica is the sole member, or excises control over the sole member, of each of the members of the Obligated Group, but ProMedica is not a member of the Obligated Group. Only those entities defined as Obligated Group members are obligated to make payments under the Master Trust Indenture.
ProMedica Health System, Inc. (1)
Bay Park Defiance ProMedica ProMedica St. Luke’s Community Regional (2) Physicians & Insurance Hospital Hospital Hospital Continuum Services Corporation
ProMedica Fostoria ProMedica Indemnity Flower Hospital Hospital Foundation Association Corporation
Herrick Hospital Toledo Hospital ProMedica Continuing Care Services Memorial Mercy Memorial Hospital Hospital
Emma L. Bixby Medical Center LEGEND = Obligated Group Member Lenawee Long Term Care = Non-Obligated Group
(1) Some of the Obligated Group Members and Non-Obligated Group Members included in the chart above control one or more subsidiary organizations. Those subsidiary organizations, none of which is an Obligated Group Member, are excluded from the above chart.
(2) Effective April 1, 2016, St. Luke’s Hospital, inclusive of St. Luke’s Hospital Foundation, was officially removed from the Obligated Group and on July 1, 2016, they officially divested from ProMedica Health System and now operates as an independent hospital.
ProMedica Quarterly Disclosure 6
ProMedica Obligated Group Members ProMedica’s Obligated Group facilities operate solely within the ambulatory and acute care services and the continuum care services business lines. It is comprised of 11 acute care facilities (1,803 licensed beds) and several long-term, skilled nursing and hospice business lines. A summary of the members of the Obligated Group Acute Care Hospitals as of June 30, 2016 is as follows:
• ProMedica BayPark Hospital • ProMedica Memorial Hospital • Oregon, Ohio • Licensed Beds: 91 • Fremont, Ohio • Year Established: 2001 • Licensed Beds: 100 • Year Affiliated: 2014
• ProMedica Bixby Hospital • Adrian, Michigan • ProMedica Monroe • Licensed Beds: 101 Regional Hospital • Year Affiliated: 1999 • Monroe, Michigan • Licensed Beds: 251 • Year Affiliated: 2015 • ProMedica Defiance Regional Hospital • Defiance, Ohio • Licensed Beds: 51 • ProMedicaToledo • Year Affiliated: 1999 Hospital • Toledo, Ohio • Licensed Beds: 641 • ProMedica Flower • Year Affiliated: Legacy Hospital • Sylvania, Ohio • Licensed Beds: 315 • Year Affiliated: 1996 • ProMedica Toledo Children's Hospital • Toledo, Ohio • ProMedica Fostoria • Licensed Beds: 151 Hospital • Year Established: 1994 • Fostoria, Ohio • Licensed Beds: 25 • Year Affiliated: 2000
• ProMedica Wildwood • ProMedica Herrick Orthopaedic & Spine Hospital • Toledo, Ohio • Tecumseh, Michigan • Licensed Beds: 42 • Licensed Beds: 35 • Year Established: 2011 • Year Affiliated: 1999
Corporation Licensed Beds Location
Long-Term Care/Assisted Living/Other Goerlich Center for Alzheimer's Care 60 Sylvania, Ohio Ebeid Hospice 12 Sylvania, Ohio Caring Home Health Services N/A Sylvania, Ohio Herrick Manor 25 Tecumseh, Michigan Provincial House of Adrian 117 Adrian, Michigan Charlotte Stephenson Manor 50 Adrian, Michigan Monroe Nursing Center 69 Monroe, Michigan Total Long-Term Care Beds 333
ProMedica Quarterly Disclosure 7
Clinical Service Lines The focused work of ProMedica’s clinical service lines allows ProMedica to offer a greater depth of highly reliable care, close to home for patients across our service area.
Strategic objectives for 2016 – 2018 include:
Improved patient access to key programs and services in each clinical service line: Identify high potential areas for program and service growth and expanded offerings to meet the evolving healthcare needs in those communities. Drive improved care management, quality service, and cost efficiency across each clinical service line: Identify key clinical and service quality measures and cost opportunities and systematically improve performance in those areas across the organization in all care settings. Establish a physician and advanced practice provider recruitment strategy for each clinical service line: Build a provider strategy by clinical service line in collaboration with ProMedica Physicians’ recruitment efforts. Advance academics, research and healthcare innovation by clinical service line: Identify and pursue opportunities to advance care within clinical service lines through academics, research and innovation. Encourage a culture of innovation in each service line: Evaluate and adopt cutting-edge strategies and technologies to advance clinical care, while establishing mechanisms for development of intellectual property.
Key achievements toward these initiatives include:
ProMedica Cancer Institute • Opened new cancer center in Fremont, Ohio, that offers both chemotherapy and radiation. • Continued lung cancer screenings, increasing to 1,154 patients screened with 17 positive biopsies. • Completed survey with The American College of Surgeon’s Commission on Cancer. Results: zero deficiencies; seven areas with commendable ratings. • Established new evidence-based cardio-oncology clinic for cancer patients whose treatment puts them at risk for heart damage.
ProMedica Heart and Vascular Institutes • Grew vascular physician group into the largest practice in the region and the only one with vascular medicine physicians. • Opened a dedicated vascular unit at ProMedica Toledo Hospital to increase efficiency of care for vascular and wound care patients and soon will open a dedicated endovascular lab for interventions. • Launched cardiac observation pilot to lower length of stay for patients with low-risk chest pain: Pre- pilot, 34 hours; post pilot length; 16.2 hours (national benchmark, 16 hours). Result: creating a permanent unit. • Began providing emergent percutaneous coronary interventions at ProMedica Monroe Regional Hospitals for patients experiencing heart attacks.
ProMedica Quarterly Disclosure 8
ProMedica Orthopaedic Institute • Implemented bundled payments for lower extremity joint replacements. • Continued to apply standardized best practices from specialty orthopaedic hospital across ProMedica including standards of care of osteoarthritis diagnosis and physical therapy after total knee joint replacement. • Launched Center for Medicare and Medicaid Services’ Comprehensive Care for joint Replacement payment model to minimize discrepancy in episode price for hip and knee joint replacement surgeries. Toledo is one of 67 cities nationwide participating in the new program.
Neuroscience Institute • Continued to recruit broad range of neuroscience specialists to increase patient access. • Initiated clinical trials to test efficacy and safety of using mesenchymal stem cells in treating traumatic brain injury. • ProMedica Toledo Hospital is the first hospital in Toledo and one of the few healthcare facilities in the country to earn Comprehensive Stroke Center accreditation from the Joint Commission and American Heart Association/American Stroke Association (AHA/ASA) for meeting extremely high standards for treating the most serious stroke cases.
ProMedica Quarterly Disclosure 9
Non-Obligated Group Members
Paramount Insurance As a health system with a health insurance company, ProMedica has a long history of managing financial risk as well as managing health. Paramount is key to ProMedica’s integrated delivery system, especially in the areas of collaboration with providers, development of medical home and accountable care products, and introduction of care navigation.
Paramount is a wholly owned subsidiary of ProMedica. As the largest provider-sponsored health plan in Ohio, Paramount provides ProMedica with more than 25 years of experience in managing risk and population health. Neither Paramount, nor any of its subsidiaries, are Members of the Obligated Group.
Paramount and its subsidiaries offer the following insurance products in Ohio and Michigan:
Commercial (Paramount Care): o Fully funded insurance products (Ohio and Michigan) o Self-funded administrative services-only (“ASO”) plans o Health insurance marketplace plans offering gold, silver, bronze and catastrophic plans
Medicaid (Paramount Advantage): Paramount Advantage has been contracted with the Ohio Department of Medicaid since 1993. Paramount Advantage was selected as one of five statewide Medicaid product offerings in July 2013, expanding its Medicaid presence from 18 counties in northwest Ohio to all 88 counties in Ohio. Paramount Advantage serves covered Families and Children, Adult and Pediatric Aged Blind and Disabled, and adult extension members. The provider contract with ODM does not have a specific termination date. Paramount Advantage served over 235,000 Medicaid members at the end of second quarter, 2016.
Medicare (Paramount Elite): This Medicare product is offered in 14 counties in Ohio and two counties in Michigan. Paramount Elite has been contracted with Centers for Medicare/Medicaid Services (CMS) since 1995.
Managed Care Workers Compensation (HMS) – This Ohio statewide product is the fifth (out of sixteen) largest worker’s compensation managed care organization in Ohio. Other entities provide workers compensation third party administration services, life care planning, and expert witness testimony services.
As of June 30, 2016, there were approximately 338,000 members in the various health plans offered by Paramount and its subsidiaries, with the largest growth in Paramount Advantage. The overall plan mix among Paramount’s product offerings has experienced a shift to the government sector plans over the last four years, with nearly 75% of the enrollment in the government sector (227,000 Medicaid and 15,000 Medicare enrollees) as of December 31, 2015, which is an increase from 54% in the government sectors as of December 31, 2010.
ProMedica Quarterly Disclosure 10
ProMedica Physicians and Continuum Services ProMedica Physicians and Continuum Services (“Physician/Continuum Services”) is an Ohio nonprofit corporation organized to provide management and support services to ProMedica Physician Group, Inc. and its subsidiary limited liability companies (collectively, “PPG”).
Through PPG, ProMedica’s comprehensive network consists of 887 employed providers, including 526 primary care physicians, and specialist physicians as well as 361 advanced practice providers. PPG handled more than 1.5 million patient encounters in 2015. An additional 82 providers were recruited in the first half of 2016 as part of ProMedica’s continued focus on expanding patient access within the provider network.
Physicians/Continuum Services provides billing, administrative and staff support to ProMedica providers employed by PPG, as well as a framework for system-wide consideration and management of provider- specific issues. ProMedica providers are engaged in achieving quality outcomes by targeting preventive health care, with special emphasis on cardiovascular diseases and cancer. Members of the physician network provide leadership to ProMedica through participation on boards, councils and membership in co-management companies.
Physician/Continuum Services also includes ProMedica Continuing Care Services Corporation, an Ohio nonprofit corporation that provides and manages pharmacy, durable medical equipment, home health, palliative care, hospice, and inpatient and outpatient rehabilitation services.
ProMedica Health Network ProMedica Health Network, a clinically integrated network focused on providing seamless care for patients and more opportunity for independent provider collaboration across the region, especially with respect to population health initiatives. Its first of three performance years began January 1, 2016.
It is comprised of 12 hospitals, 360 practices, more than 1,600 community providers, and 32,000 attributed Medicare beneficiaries. It recently welcomed Harbor/Lifestream as a new ACO participant.
ProMedica Health Network’s goals are to: align providers around quality, service and cost-effective care; ensure appropriate access to ProMedica programs and services; and effectively manage value-based contracts.
St. Luke’s Hospital On April 1, 2016 St. Luke’s Hospital, inclusive of St. Luke’s Foundation, was officially removed from the Obligated Group. While, as of June 30, 2016, St. Luke’s Hospital was a member of ProMedica Health System, it was officially divested from ProMedica Health System on July 1, 2016, and now operates as an independent hospital.
ProMedica Quarterly Disclosure 11
Other Affiliations and Joint Ventures ProMedica utilizes joint ventures and other affiliation arrangements to provide health care and related services. ProMedica also participates in various management agreements with physicians who are actively engaged in the management of the various service lines to achieve high levels of quality, service and patient outcomes.
Academic Affiliation with The University of Toledo. This 50- year agreement supports the academic programs of the College of Medicine and Life Sciences (including research, education of medical students and residency programs) which is anticipated to develop ProMedica Toledo Hospital and ProMedica Toledo Children’s Hospitals into a premier academic medical center and preeminent quaternary center. The mission is to enhance the education and training of the next generation of healthcare providers for the communities ProMedica serves, through engaging in targeted, cutting edge research, and providing outstanding, high quality and cost effective patient care. As part of this affiliation, substantially all of The University of Toledo medical students, residents, fellows and other health professional learners will be placed at ProMedica facilities over a multi-year transition plan.
Since finalizing the affiliation, teams from both organizations have been working collaboratively to transition medical students, residents and some University of Toledo faculty to ProMedica Toledo and ProMedica Toledo Children’s Hospitals in the specialty areas of emergency medicine, family medicine, internal medicine, surgery and pediatrics. The comprehensive transition plan will span over the next three to five years and when completed, more than 200 University of Toledo College of Medicine faculty members, 400 residents and 700 medical students will rotate through ProMedica Toledo Hospital and ProMedica Toledo Children’s Hospitals and other learning environments within ProMedica. Refer to Recent Significant Developments for an additional update.
Community Health Center of Branch County. On February 1, 2016, ProMedica and Community Health Center of Branch County entered into a three-year Management Agreement to provide executive management personnel and consulting services to Community Health Center of Branch County, an 87- bed county hospital located in Coldwater, Michigan (CHC).
Lima Memorial Health System. ProMedica and Lima Memorial Hospital are partners in Lima Memorial Health System (“LMHS”), a joint operating company that currently controls the operations of a 328-bed acute care hospital and other related facilities owned by Lima Memorial Hospital in Lima, Ohio. LMHS is owned 50% by Lima Memorial Hospital and 50% by PHS Ventures, LLC.
Midwest Health Collaborative. In 2014, ProMedica formed a partnership with six major health systems in Ohio called the Midwest Health Collaborative (“MHC”). The collaborative includes Aultman Hospital, Cleveland Clinic, OhioHealth, Premier Health, TriHealth and ProMedica. MHC intends to create a statewide direct-to-employer network product by January 1, 2017. Utilizing population health capabilities to improve quality and utilization, MHC will work with statewide employers to improve outcomes and reduce costs.
Cleveland Clinic. Beginning with the innovation alliance in 2012, Cleveland Clinic and ProMedica continue to identify and develop innovative ways for the two organizations to work together. ProMedica and Cleveland Clinic have entered into strategic clinical alliance in the clinical service lines of oncology, heart/vascular and pediatrics in which the systems will collaborate on clinical care paths and protocols. ProMedica has entered into an exclusive agreement designating Cleveland Clinic Laboratories as its primary reference lab for highly specialized laboratory testing. Refer to Recent Significant Developments for an additional update.
ProMedica Quarterly Disclosure 12
Harbor. In January 2015, ProMedica and Harbor formed Lifestream, a joint operating company to address a growing community need for mental health services in northwest Ohio. Lifestream focuses on clinical integration where appropriate to respond to healthcare reform by implementing standard care protocols, guidelines and best practices around the management of behavioral health disorders. There is also an increased effort regarding wellness, prevention, and education aimed at reducing the stigma of a behavioral health diagnosis and empowerment of patients through awareness and outreach.
Most recently, ProMedica and Lifestream jointly initiated an evidence-based partial hospitalization program at ProMedica Defiance Regional Hospital and expect to open two more over the next year. This program addresses a gap in levels of care for behavioral health in our community.
ProMedica Foundation ProMedica Foundation serves as the fundraising entity for the benefit of ProMedica hospitals and continuing care facilities and services. Each facility supported by ProMedica Foundation is represented by an advisory board. Over the last few years, ProMedica Foundation has experienced significant growth adding major gift officers and a prospect researcher to focus on donor cultivation and solicitation.
As of June 30, 2016, ProMedica had total foundation assets of $303.6 million. Total philanthropy raised as of June 30, 2016 was $6.5 million. In 2015 approximately $18.5 million in philanthropy was raised.
ProMedica Quarterly Disclosure 13
Executive Leadership & Governance
Executive Leadership The 14-member Executive System Team (listed below) plans and administers the strategic plans of ProMedica and its subsidiary entities, subject to the policies and authority of the ProMedica Board of Trustees.
Years with Years in Name Title ProMedica Health Care
Randy Oostra President & Chief Executive Officer 19 38
Gary Akenberger(1) Interim Chief Financial Officer 34 34 Holly Bristoll Chief Academic Affiliation Officer 25 25 Dan Cassavar, MD President & Chief Medical Officer, PPG 21 27 Gary Cates Chief Philanthropy Officer 19 19 Lee Hammerling, MD Chief Physician Executive & Chief Medical Officer 20 33 Lori Johnston Chief Information Officer 20 30 Chief Legal Officer/General Counsel and Chief Construction & Property Jeff Kuhn 23 31 Management Officer Barb Petee Chief Government Relations & Advocacy Officer 30 30 John Pigott, MD Chief Innovations Officer/Strategic Business Development 25 31 Arturo Polizzi President, Toledo/Toledo Children's Hospitals 18 18 Jack Randolph President, ProMedica Insurance Corporation 35 35 Karen Strauss Chief Strategy, Marketing & HR Officer 3 3 Kevin Webb Chief Acute Care Officer 16 34 (1) On August 8, 2016, Michael Browning became Chief Financial Officer of ProMedica Health System (See Leadership Changes)
Governance The ProMedica Code of Regulations provides for a board of no fewer than three and no more than 30 trustees. The ProMedica Board is comprised of the 29 members, five of which are members of various Subsidiary ProMedica Committees Boards while the remainder are members of ProMedica’s standing Advocacy committees or represent ProMedica business units, physicians or areas Audit/Compliance requiring special expertise. A majority of members of the ProMedica Center of Nursing Excellence Board of Trustees serve for staggered three-year terms and each Board member may serve up to two three-year terms on the Board. The Compensation ProMedica Board has also established standing committees. Members Economic Development appointed to these standing committees may serve for a term of up to six Executive years, except for the Investment Committee which requires specific Finance expertise. Fund Development Governance The Subsidiary Boards exercise the powers delegated to them in their Heart and Vascular Institutes respective Code of Regulations or Bylaws and granted to them by Innovation statutory authority. The ProMedica Board appoints or approves all Insurance/Risk members to the Subsidiary Boards. Investment Retirement Plan
ProMedica Quarterly Disclosure 14
Strategy ProMedica has adopted and implemented, and continues to execute, various strategic initiatives to advance key components of its integrated healthcare delivery system in the fulfillment of its mission. ProMedica remains committed to the Integrated Delivery System structure first implemented in the 1990’s.
Highlights of ProMedica’s 2016-2018 Strategic Plan are as follows:
Provide a highly-reliable patient care & customer experience Ensure great healthcare outcomes and preferred healthcare experiences through a focus on safety, clinical quality, and service excellence, leading to affordable, convenient, coordinated, and compassionate care. Safety - Quality - Service - Transparency
Be a high-performance healthcare organization Achieve highly efficient & effective operational performance and pursue catalytic philanthropy to aid funding for major initiatives. Growth - Cost Transformation - Performance Targets - Philanthropy
Drive strategic innovation Continuously pursue innovative solutions in the delivery of care and services. Midwest Health Collaborative - ProMedica Health Network - Disruptive Business Models - Telemedicine
Be a leading community advocate for health & well-being Lead partnering relationships and healthcare advocacy efforts throughout all of our communities to improve the social determinants of health. Hunger - Infant Mortality – Diabetes - Behavioral Health - Economic Development -
Be the workplace of choice Build a workplace culture based on trust, pride, and camaraderie that improves employee engagement. Hire & Retain Talent - Leadership Development - Culture of Diversity & Inclusion
Be a leader in healthcare education & research Enhance the education and training of the next generation of healthcare providers for our communities, engage in targeted cutting-edge research and provide outstanding patient care. Academic Medical Center - Clinical Performance - Care Delivery - Cost of Care
ProMedica Quarterly Disclosure 15
RECENT SIGNIFICANT DEVELOPMENTS
Transforming ProMedica Initiatives ProMedica is taking a comprehensive systematic and system-wide view to collaboratively address key decisions for financial and operational change. That change begins with a two-year, several hundred million dollar, system-wide initiative called Transforming ProMedica. Working with Price Waterhouse Coopers, ProMedica is focused on creating impactful performance improvement across the system to improve revenue; enhance quality and customer service; increase employee and provider engagement; decrease costs, eliminate waste and redundancy; and optimize operations. Work teams are being implemented to evaluate various initiatives, including revenue integrity, supply chain, clinical services optimization and innovation, physician organization, operating model, strategic positioning and growth and management change.
In addition to these broader, longer-term initiatives, ProMedica has also outlined a plan to accelerate immediate performance improvements, including an Early Retirement Incentive package to eligible employees in July and a freeze on the Cash Balance Defined Benefit plan.
Expansion Activities
ProMedica Parkway Surgery Center The new ProMedica Parkway Surgery Center on the north campus of ProMedica Toledo Hospital opened July 2016. This 56,000 square-foot-facility features 12 operating suites and 30 patient exam rooms and also serves as the main location for ProMedica Genito-Urinary Surgeons.
Downtown Campus As ProMedica has grown over the years, system employees have become scattered throughout metro Toledo in a variety of owned and leased facilities. To increase efficiency and productivity, ProMedica is undertaking a multi-phased process through 2020 to relocate approximately 2,000 system employees to a single campus located in downtown Toledo. To date, we have acquired the properties necessary for the development of the campus, with renovations expected to take place over the next several years.
Generations Tower On April 14, 2016, a ceremonial groundbreaking for the Generations Tower, a $350 million, 13-story, 302- bed patient care tower located on the ProMedica Toledo Hospital campus was held. The tower, which will eventually replace an 86-year old existing tower has been more than 20 years in the making and will significantly transform the hospital campus.
Urgent Care Growth continues in this area of operations with a new urgent care opening in August and two more before the end of the year. ProMedica will end 2016 with seven total urgent cares strategically located across metro Toledo.
ProMedica Quarterly Disclosure 16
University of Toledo Affiliation On July 1, 2016, the Academic Affiliation between The University of Toledo (UT) College of Medicine and Life Sciences and ProMedica marked a major milestone as the first class of new residents, student learners and faculty began training and clinical rotations at ProMedica Toledo and ProMedica Toledo Children’s Hospitals. During this initial transition, ProMedica Toledo Hospital and ProMedica Toledo Children’s Hospital welcomed 32 new residents from UT representing the specialties of emergency medicine, internal medicine and subspecialties, and surgery. Additionally, approximately 350 third and fourth-year medical students will rotate through the hospitals during this academic year. A new Conference Center has opened at ProMedica Toledo Hospital and ProMedica Toledo Children’s Hospital to accommodate the growing number of learners. The space provides 11 multimedia classrooms, 29 on- call rooms and a learner lounge. Administrative office space for UT faculty will be opened at ProMedica Toledo Hospital and ProMedica Toledo Children’s Hospital in August. Epic Implementation
Epic Launch On November 2, 2015, ProMedica launched its new integrated electronic health record system in partnership with Epic. Twenty-one providers and a new consolidated billing office came online. Since that time, providers, clinical teams and operational users continue to become more proficient with the new software and workflows. Meanwhile, report teams are viewing business and clinical operations through new data-rich dashboards.
Since the November launch, ProMedica has brought all inpatient hospital service lines and ancillary services, except laboratory, live on Epic at three additional hospitals: ProMedica Defiance Regional and Fostoria Community Hospitals in March and ProMedica Flower Hospital in May. ProMedica Fostoria and Defiance Hospitals were significant accomplishments because they were still using paper charts; that transition, while operationally significant, went very smoothly. Also in May, the ProMedica Health and Wellness Center, the System’s new multispecialty flagship medical office building, went live as did ProMedica Home Health and Hospice. All key performance metrics are trending favorably.
Significant software build and training efforts were under way during the first half of 2016; an estimated 2,500 users were trained. In addition, as part of the vision to establish a single self-pay billing process, ProMedica is live with Epic through a centralized billing office. ProMedica MyChart, the Epic patient portal, now includes patients seen anywhere throughout ProMedica, with nearly 19,000 patients enrolled.
The next phase of our Epic implementation occurs November 1, 2016, when we bring four hospitals online: ProMedica Toledo, Toledo Children’s, Wildwood Orthopaedic and Spine and Bay Park Hospitals. Along with these hospital implementations, approximately 300 physicians go live in ambulatory and acute care settings. As we prepare for that phase, we also have streamlined physician training for some specialties, built templates for new specialties going live and assisted existing providers and users in becoming more confident and proficient. After the November implementation, we expect the Epic implementation to be 70% complete with full implementation by May 1, 2017. An additional upgrade will occur in August of 2017.
ProMedica Quarterly Disclosure 17
St. Luke’s Divestiture (Please see previous filings for a detailed sequence of events regarding the divestiture order)
Effective July 1, 2016, St. Luke’s officially divested from ProMedica Health System and now operates as an independent hospital. ProMedica will provide certain transition services to St. Luke’s for the next six to 12 months to ensure they are well prepared to operate as a viable and competitive hospital. This includes areas such as supply chain, accounting/accounts payable, revenue cycle and lab services. Due to the complexities of transferring a community hospital to a separate information technology (IT) system, a joint IT transition team will remain intact for 18 months to prevent any disruptions to patient care. ProMedica and St. Luke’s are committed to working together, under the supervision of the FTC, to ensure a seamless process. Other
ProMedica Innovations Via a partnership with Cleveland Clinic, ProMedica Innovations continues its dedicated work with local researchers, physicians and inventors to bring innovations to the healthcare market as efficiently as possible. ProMedica and San Diego-based Stemedica Cell Technologies, Inc. (Stemedica), along with the family of hockey legend Gordie Howe, announced plans to collaborate on research to advance the treatment of traumatic brain injury (TBI). The three-year effort will be known as The Gordie Howe Initiative to support clinical research and increase awareness about TBI with an initial focus on war veterans, athletes and automobile accident victims. The first stage of the initiative will include a US-based Phase IIa clinical trial to evaluate preliminary safety and efficacy of Stemedica’s proprietary allogeneic mesenchymal stem cells in patients with moderate to severe TBI. In addition, ProMedica Vascular Surgeon and Chief Innovations Officer John Pigott, MD, FAC, received clearance from the Food and Drug Administration (FDA) for the commercial distribution of his invention, the Flex Scoring Catheter. In cases where the blocked arteries cannot be effectively treated with traditional balloon procedures, the device cuts and weakens the artery plaque so that an inflated balloon can properly clear out the artery and blood can flow freely. ProMedica Innovations has applied with the State of Ohio to become an Entrepreneurial Signature Program for northwest Ohio. This would enable Innovations to serve as the region’s financial conduit for state funding to support new company start-ups, commercialization and innovation, and job creation in northwest Ohio. ProMedica CEO Randy Oostra and Chief Innovations Officer John Pigott, MD, received the EY Entrepreneur of the Year® 2016 Award in the Michigan and Northwest Ohio Region on behalf of ProMedica Innovations. The award recognizes outstanding entrepreneurs who demonstrate excellence and extraordinary success in such areas as innovation, financial performance, and personal commitment to their businesses and communities. ProMedica was recognized for its leadership role in helping to revitalize downtown Toledo and bring new jobs to the region, as well its work in the community addressing hunger and other social issues.
ProMedica Quarterly Disclosure 18
ProMedica and Cleveland Clinical Cancer Center Announced on August 10, 2016, ProMedica Cancer Institute (PCI) has teamed up with the world- renowned Cleveland Clinic Cancer Center to create more connections for northwest Ohio and southeast Michigan adult patients. The affiliation offers easier access to second opinions, physician consultations, breakthrough treatments and clinical trials – expanding the high level of care provided by PCI.
The first year of this affiliation will focus on sharing protocols and best practices, as well as evaluating ways for our organizations to collaborate on national clinical research. In subsequent years, the organizations will continue to align on clinical programs and research portfolios.
An immediate benefit of this relationship will streamline processes to make it easier for area patients to access second opinion consults with Cleveland cancer specialists.
Direct to Employer Initiative ProMedica’s commitment to making health care more convenient, affordable and accessible has expanded through the development of a direct to employer initiative. This initiative is designed to assist employers in promoting a healthier workforce and enhanced productivity through on-site clinics and fitness centers.
The initiative was first launched with Owens Corning in February, 2016. As part of the three-year agreement, ProMedica operates an employee health clinic and fitness center inside their world headquarters and offers a broad continuum of healthcare services including basic primary care, lab testing, workplace physicals, physical therapy, occupational therapy, nutrition counseling and a fitness center.
ProMedica expects to expand this initiative with other employers in the future.
ProMedica Veteran Connection ProMedica has partnered with Strategic Healthcare to launch the ProMedica Veteran Connection, a new initiative program designed to improve healthcare access for regional veterans who have suffered service-related injuries. The program allows veterans, who previously had to travel to VA medical centers, to receive treatment from ProMedica Physicians and facilities.
Leadership Changes
Corporate ProMedica Health System has named Michael P. Browning as Chief Financial Officer, effective August 8, 2016. Mr. Browning will replace Interim Chief Financial Officer Gary Akenberger. Mr. Akenberger assumed the role of Interim Chief Financial Officer in February. With more than 25 years of experience in healthcare finance, Mike is a strategic thinker and innovative problem solver with a proven track record of operational and financial success. Most recently, as CFO of WakeMed, in Raleigh, N.C., Mike was part of a team that led the organization in a financial turnaround from a $50 million loss in operations to an operating profit of more than $15 million within one year. Previous to that, as CFO for Parkview Health in Fort Wayne, Indiana, he was part of a team that successfully initiated and implemented strategies that improved the annual operating revenue from $800 million to more than $1.4 billion over a four-year period. This growth in revenue enabled Parkview to improve its operating income from $6 million (0.8% operating margin) in 2010 to more than $190 million (14.6% operating margin) in 2014.
Mike has a Master’s of Business Administration degree from the University of Louisville. He completed undergraduate studies at Kentucky Wesleyan College, where he majored in accounting and finance.
ProMedica Quarterly Disclosure 19
MANAGEMENT DISCUSSION AND ANALYSIS Operational Performance ProMedica’s operating performance for the first six months of 2016 has been challenging as significant expenses were incurred related to the EPIC electronic health record implementation and provider growth. Additionally, softer inpatient volumes contributed to the decline in net patient revenue. Income Statement (Detailed Financial Statements are presented in the Appendix)
ProMedica Health System Obligated Group ($000's omitted) Six Months Ended Six Months Ended June 30 June 30
2016 2015 2016 2015
Revenues Net Patient Service Revenue $ 836,642 $ 852,094 $ 774,494 $ 830,627 Member Revenue 690,671 654,832 - - Other 31,050 37,848 23,528 31,253 Total Operating Revenue 1,558,363 1,544,774 798,022 861,880
Expenses Salaries and Benefits 550,412 534,104 301,478 336,018 Supplies 114,010 114,631 96,121 104,709 Contracted Fees 160,304 141,228 74,069 76,064 Depreciation and Amortization 67,990 62,316 45,923 45,642 Interest 17,823 14,348 16,783 14,246 Other 649,691 635,493 249,982 265,641
Total Operating Expenses 1,560,230 1,502,120 784,356 842,320
Operating Income (Loss) (1,867) 42,654 13,666 19,560
Other Income 23,528 146,640 16,593 36,731
Excess (Deficiency) of Revenue over Expenses 21,661 189,294 30,259 56,291 before Unusual Items
Unusual Items – restructuring and severance costs (2,678) - - -
Excess (Deficiency) of Revenue over Expenses $ 18,983 $ 189,294 $ 30,259 $ 56,291
For the first six months ending June 30, 2016, ProMedica’s total operating revenue was $1.6 billion, an increase of $13.6 million over the comparable period in 2015. Net patient service revenue declined ($15.5) million due to reduced volumes (discharges, surgeries and ER visits) from 2015. For the Obligated Group, net patient service revenue (less bad debt) decreased due to reduced volumes, as well as St. Luke’s not being included for second quarter of 2016 ($42.1 million impact). Membership revenue increased $35.8 million due to increased membership across the majority of the product lines.
ProMedica Quarterly Disclosure 20
Net Operating income For the first six months of fiscal 2016, ProMedica’s operating income was ($1.9 million) a decline of $44.5 million when compared to the prior period in 2015. This equates to an operating margin of (.12%) compared to 2.8% for the same period in 2015. This includes a one-time benefit reduction of $15 million related to the freeze of the Cash Balance Defined Benefit Plan. Excluding the one-time benefit, operating margin would have been (1.08%). Additional costs related to restructuring and severance are included within the Unusual Items-restructuring and severance costs above Excess (Deficiency) of Revenue over Expenses. As noted above, the decline in operating income was primarily driven by significant expenses due to the implementation of the EPIC electronic health record launch ($19 million impact). Increased salaries and benefits expenses also contributed to the decline in operating performance due to provider growth. Based on compliance requirements and expanded Medicaid membership, Paramount also incurred increased salaries and benefits as they increased their full-time equivalent employees.
The Obligated Group experienced a decrease in operating expenses due to a change in methodology related to the recording of physician specialist losses based on a Specialist Community Benefit Agreement (CBA). In 2015 100% of the physician specialist losses were recorded at the Acute Care hospital where the physicians treated the patients. It was determined that the ProMedica Physicians Group, Inc. (PPG) would share the specialist losses with the Acute Care Division which resulted in 50% of these losses no longer being reported at the Acute Care Hospital. Through June 30, 2016, the Obligated Group recorded $35 million of these losses compared to $56 million through June 2015.
Continuum Philanthropy Sources of Revenue Physician 4% & Other 6% 1% As Paramount has experienced continued growth in Medicaid products from the statewide expansion of coverage, the health plan now accounts for Health Plan approximately 40% of ProMedica 40% Health System’s total operating Acute Care revenue. 49%
Total System revenue as of June 30, 2016 of $1.6 billion
The Obligated Group accounted for approximately 51% of the total system revenue for the six months ending June 30, 2016.
ProMedica Quarterly Disclosure 21
Uncompensated Care Bad debt and charity care as a percentage of operating revenue for the six months ending June 30, 2016, increased from the prior year comparable period from 4.2% to 4.9% primarily due to increases in patient deductible and coinsurance amounts in 2016.
ProMedica Health System Six Months Ended Six Months Ended (000's omitted) June 30, 2016 June 30, 2015
Charity Care $ 39,616 $ 31,205 Bad Debt 37,345 33,984 Total Uncompensated Care $ 76,961 $ 65,189 % of Total Operating Revenue 4.9% 4.2%
Acute Patient Revenue Payor Mix ProMedica has experienced a decrease of Medicare patients compared to prior year. This is primarily due to an increase in Blue Cross utilization. Also contributing is a small decrease in Medicare utilization. As a result of terminating Humana Medicare contracts in the prior year, Humana Medicare utilization decreased, but was partially offset by increases in Paramount Elite and Traditional Medicare.
Year to Date Calendar Year
June 30, 2016
2016 2015 2015 2014
Medicare (1) 43.7% 44.5% 44.3% 44.7%
Medicaid (1) 19.5% 19.5% 19.6% 18.0%
Blue Cross 12.2% 10.9% 11.0% 11.1%
Managed Care 23.3% 23.7% 23.8% 24.4%
Self-Pay 1.3% 1.4% 1.3% 1.8%
Totals 100.0% 100.0% 100.0% 100.0% (1) Includes Medicare and Medicaid HMOs.
Non-Operating Income Total Investment income for the six months ending June 30, 2016, was $28.6 million. This amount included $4.9 million of unrealized gains compared to prior year investment income of $42.3 million that include an offset of $1.7 million in unrealized losses. The total market value of swap contracts declined by $4.9 million through June, due to unfavorable net changes in the underlying indices used to establish their fair value.
ProMedica Quarterly Disclosure 22
Balance Sheet (Detailed Financial Statements are presented in the Appendix)
ProMedica Health System Obligated Group ($000's omitted) As of As of June 30, 2016 December 31, 2015 June 30, 2016 December 31, 2015
Assets *Unrestricted Cash & Investments $ 2,213,868 $ 2,282,922 $ 1,450,582 $ 1,579,889 Accounts Receivable, Net 258,256 257,031 229,573 259,832 Other Current Assets 134,946 131,293 107,072 176,025 Property, Plant and Equipment, Net 1,164,863 1,092,835 854,293 909,363 Other Assets 432,151 421,694 51,030 59,624 Total Assets 4,204,084 4,185,775 2,692,550 2,984,733
Liabilities & Net Assets Current Liabilities 637,321 630,437 405,079 433,600 Long-Term Debt 720,261 722,295 716,067 717,122 Other Liabilities 266,835 262,538 78,309 133,208 Net Assets 2,579,667 2,570,505 1,493,095 1,700,803 Total Liabilities & Net Assets $ 4,204,084 $ 4,185,775 $ 2 ,692,550 $ 2,984,733 *Includes unrestricted foundation cash
Balance Sheet and Cash Flow As of June 30, 2016, ProMedica had $2.2 billion of unrestricted cash and investments to fund operations and capital expenditures. This equated to 272.8 days cash on hand as of June 30, 2016 (on an annualized basis), compared with 286.4 days at December 31, 2015. The decline in days cash on hand is due to the increased expenses associated with the EPIC launch and the funding of other strategic initiatives.
Total debt was $903.5 million at June 30, 2016, and $909.8 million at December 31, 2015. The total debt to capitalization ratio remained steady at 27% from December 31, 2015.
ProMedica capital expenditures were $139.3 million for the six months ending June 30, 2016, compared to $107.7 million for the prior year comparable period. Net cash provided by operating activities was $53.9 million in the six months ending June 30, 2016, compared to $60 million provided by operating activities in the six months ended June 30, 2015 due to the decline in operating performance as well as prior year inherent contribution of acquired net assets from ProMedica Monroe Regional Hospital.
ProMedica Quarterly Disclosure 23
Debt The composition of ProMedica’s current debt structure, as of June 30, 2016, is summarized below:
Par Final Average Tax Series Product Outstanding Maturity Coupon Status
Series 1998 Reynolds Road $ 3,785,000 Weekly VRDBS 1/1/2019 Variable Taxable
Series 2008A 62,500,000 Direct Loan 11/15/2034 Variable Tax-Exempt
Series 2008D 53,000,000 Fixed Rate 11/15/2040 5.05% Tax-Exempt
Series 2011A 181,235,000 Fixed Rate 11/15/2041 6.12% Tax-Exempt
Series 2011B 17,445,000 Fixed Rate 11/15/2035 6.00% Tax-Exempt
Series 2011C 16,975,000 Direct Loan 11/15/2019 Variable Tax-Exempt
Series 2011D 132,395,000 Fixed Rate 11/15/2030 5.03% Tax-Exempt
Series 2011E 8,040,000 Fixed Rate 11/15/2028 4.27% Tax-Exempt
Series 2015A 273,000,000 Fixed Rate 11/15/2045 4.98% Taxable
Series 2015B 46,755,000 Fixed Rate 11/15/2045 4.00% Tax-Exempt
Series 2015C 28,140,000 Direct Loan 11/15/2051 Variable Taxable
Series 2015D 5,000,000 Direct Loan 11/15/2025 Variable Taxable
Series 2015E 38,885,000 Direct Loan 11/15/2035 Variable Taxable
Sub Total $ 867,155,000
Other* 36,390,000
$ 903,545,000
*Other debt includes capital lease obligations, and other miscellaneous notes and loans
Interest Rate Swaps: ProMedica utilizes interest-rate swaps as part of its risk management strategy to manage exposure to fluctuations in interest rates and the overall cost of its debt. Derivatives are used to manage identified and approved exposures and are not used for speculative purposes.
The following is a summary of the outstanding interest rates swaps as of June 30, 2016.
Instrument Notional Maturity YTD Gain(Loss) 6/30/2016 Debt Swapped Type Amount Date thru 6/30/2016 Mark-to-Market
Series 1998 Reynolds Road Floating to Fixed Rate $ 3,785,000 1/1/2019 $ 65,503 $ (285,327) Series 2008A Floating to Fixed Rate 62,500,000 11/15/2034 (4,959,297) (22,947,573) $ 66,285,000 $ ( 4,893,794) $ (23,232,900)
ProMedica Quarterly Disclosure 24
Fixed/Variable Debt Mix* Variable (000’s omitted) $89,000 10% Synthetic
Fixed $66,285 8% ProMedica maintains a conservative debt structure. Approximately 90% of debt is fixed rate as shown in the graph to the right.
Synthetic Fixed includes swap on 2008A Bonds and Reynolds Road 1998 Bonds. Fixed $711,870 82% Total outstanding debt as of June 30, 2016 of $903.5 million
*Excludes capital leases, other misc notes & loans of $36,390.
Recent Debt Activity On April 1, 2016, St. Luke’s Hospital was withdrawn from the Obligated Group pursuant to the terms and conditions in the Restated Master Trust Indenture dated June 15, 2011.
Ratings In August 2015, Moody’s Investor Services affirmed its Aa3 rating with a stable outlook. Standard and Poors affirmed their AA rating in September of 2015 with outlook changed from stable to negative.
ProMedica Quarterly Disclosure 25
Investments Total unrestricted cash and investments for ProMedica as of June 30, 2016, and December 31, 2015, were as follows:
Unrestricted Cash and Investments
(000's) 6/30/2016 12/31/2015
Cash and Cash Equivalents $ 388,955 18% $ 363,478 16%
Marketable Securities 177,931 8% 162,609 7%
Internally Designated Investments for Capital Acquisitions* 1,646,982 74% 1,756,835 77%
Total unrestricted assets $ 2,213,868 $ 2,282,922 *includes unrestricted foundation cash
ProMedica centralizes the management of cash and investments maximizing flexibility and allowing for efficiencies in managing liquidity. The majority of ProMedica’s investments are pooled in a master trust arrangement, with custody provided by BNY Mellon. Investments held outside of the pooled trusts are done so due to regulatory requirements or other purposes. Governance of all investments is provided by the ProMedica Investment Committee, who annually approves the investment policies.
A summary of the investment portfolios is as follows:
Segregated and ProMedica’s investment program is Restricted strategically structured to maintain Funds adequate and appropriate liquidity 22% levels, while maximizing long-term growth. ProMedica utilizes ongoing cash forecasting to ensure proper Long-term allocations between operating, short- Health Plan Operating term, and long-term funds. 7% Pool 59% Portfolios are monitored quarterly to ensure compliance against the policy along with detailed portfolio Short-term reviews. Operating Pool 12% Total investment pools as of June 30, 2016 of $2.1 billion
ProMedica Quarterly Disclosure 26
Operating Pools Asset Allocation as of June 30, 2016 US Large LT Fixed Cap 21% 16% ProMedica maintains a highly diversified investment portfolio and utilizes an independent investment advisor to assist in Large Cap setting the asset allocation, developing the Global Investment Policy Statement, performance ST Fixed 17% reporting, compliance monitoring and 13% manager selection.
Real US Smid Return Cap 5% 9% Global Int'l/EM Long/Short Equities 7% 12%
Valuations ProMedica’s investment portfolio is primarily composed of Level I and Level II securities with limited exposure to level-III type investments. The value of level- III investments as of June 30, 2016, is $54.3 million or 3% of the portfolio, and is comprised of land held for investment, the foundations beneficial interests in funded perpetuities and a nominal allocation to private capital.
1%
Liquidity 5% ProMedica maintains a high level of liquidity within the investment portfolio. Approximately Illiquid $145.6 million or 6% of investments have Quarterly liquidity provisions that may restrict their ability 6% to be liquidated in 30 days or less, and Monthly approximately $26.0 million or 1% have < 5 Days liquidity provisions greater than one year.
88%
Pension Plans ProMedica Health System provides a cash balance pension plan covering a large portion of ProMedica’s employees. ProMedica’s defined benefit cash balance plan was amended effective 1/1/2015 to no longer accept new participants and will be amended effective 12/31/2016 to freeze all benefit accruals to all active plan participants, which currently covers 8,700 employees. This resulted in a one-time benefit expense reduction of $15 million in June 2016. As of December 31, 2015, the plans projected benefit obligation for the system excluding St Luke’s Hospital, exceeded the fair value of the pension trusts by approximately $79 million. The System contributes to the plan annually based upon actuarially determined funding guidelines. As of June 30, 2016, the System funded $11.0 million to the plan. The total pension-related liability of the System, excluding St. Luke’s Hospital Corporation was $66.4 million as of June 30, 2016.
ProMedica Quarterly Disclosure 27
ProMedica Health System Financial Indicators
Profitability
June 30, 2016 June 30, 2015
Operating Margin (0.1) 2.8
Operating Cash Flow Margin 5.4 7.7
Liquidity/Leverage
June 30, 2016 Dec. 31, 2015
Days Cash on Hand 272.8 286.4
Debt-to-Capitalization 27.0 27.0
Cash to Debt 2.4 2.5
Cash to Demand Debt 8.4 7.1
ProMedica Quarterly Disclosure 28
UTILIZATION STATISTICS – SYSTEM
The following table provides details on historical data on patient volumes and long-term care occupancy rates along with current and prior year comparisons:
Year-To-Date Calendar Year June 30
2016 2015(1) 2015(1) 2014(2)
Acute Discharges 36,091 37,282 74,398 65,241
Newborn Discharges 3,752 3,869 7,734 7,354
Outpatient Surgeries 21,859 22,122 45,354 40,778
Emergency Room Visits 170,329 174,414 350,316 305,747
ALOS - Acute 4.53 4.51 4.54 4.70
% of Staffed Beds (Acute Care) 55% 56% 56% 58%
Home Health Admissions 6,332 6,077 13,557 10,543
Home Care Visits 109,940 112,434 226,251 179,576
LTC Patient/Resident Days 53,690 64,289 125,199 116,565
Inpatient Hospice Days 1,810 1,872 3,392 3,465
Occupany Rates as a Percentage of Beds:
ProMedica Lake Park (3) 0.0 26.7 24.7 44.6
ProMedica Goerlich Center 95.9 95.7 95.5 96.8
ProMedica Provincial House 92.6 95.1 93.8 85.5 ProMedica Charlotte Stephenson Manor 94.4 94.1 94.8 94.6
ProMedica Herrick Manor 80.0 94.2 93.2 88.0 ProMedica Monroe Skilled Nursing Rehab 88.4 92.5 91.8 0.0
(1) Includes results of ProMedica Monroe Regional Hospital beginning January 1, 2015 (2) Includes results of ProMedica Memorial Hospital beginning January 1, 2014 (3) ProMedica Lake Park ceased operations in December 2015
ProMedica Quarterly Disclosure 29
FINANCIAL STATEMENTS
PROMEDICA HEALTH SYSTEM Consolidating Balance Sheet (Unaudited) ((000's)
As of June 30, 2016 As of December 31, 2015 Other Other Obligated ProMedica ProMedica Obligated ProMedica ProMedica
Group Entities Including Group Entities Including Eliminations Eliminations
ASSETS
CURRENT ASSETS Cash and cash equivalents $ 51,649 $ 337,306 $ 388,955 $ 57,372 $ 306,106 $ 363,478
Marketable securities 24,779 153,152 177,931 12,563 150,046 162,609
Accounts receivable, net 229,573 28,683 258,256 259,832 (2,801) 257,031 Assets limited as to use or restricted - 1,936 1,936 - 2,338 2,338 Inventories 22,284 11,223 33,507 23,919 8,895 32,814 Securities lending collateral ------Other current assets 84,788 14,715 99,503 152,106 (55,965) 96,141 TOTAL CURRENT ASSETS 413,073 547,015 960,088 505,792 408,619 914,411
ASSETS WHOSE USE IS LIMITED Restricted funds 2,889 112,833 115,722 2,487 112,081 114,568 Bond indenture agreement funds 5,018 - 5,018 15,014 - 15,014 Internally designated for capital acquisition 1,374,154 80,514 1,454,668 1,509,954 37,410 1,547,364 Other segregated investments 16,266 321,200 337,466 13,974 334,818 348,792 TOTAL ASSETS WHOSE USE IS LIMITED 1,398,327 514,547 1,912,874 1,541,429 484,309 2,025,738
Property, plant and equipment, net 854,293 310,570 1,164,863 909,363 183,472 1,092,835
OTHER ASSETS Deferred bond issuance costs, net ------Goodwill 18,241 23,330 41,571 18,346 21,305 39,651 Other intangible assets 1,392 3,787 5,179 358 4,217 4,575 Investments in affiliated companies 6,608 52,763 59,371 8,779 48,534 57,313 Other assets 616 59,522 60,138 666 50,586 51,252 TOTAL OTHER ASSETS 26,857 139,402 166,259 28,149 124,642 152,791
TOTAL ASSETS $ 2,692,550 $ 1,511,534 4,204,084 $ 2,984,733 $ 1,201,042 $ 4,185,775
ProMedica Quarterly Disclosure 30
As of June 30, 2016 As of December 31, 2015 Other Other ProMedica ProMedica Obligated ProMedica Obligated ProMedica Entities Entities Group Group Including Including Eliminations Eliminations LIABILITIES AND NET ASSETS
CURRENT LIABILITIES Accounts payable and accrued liabilities $ 6,442 $ 114,377 $ 170,819 $ 80,437 $ 94,663 $ 175,100 Accrued compensation and benefits 53,298 66,668 119,966 65,927 59,154 125,081 Current installments of long-term debt 17,362 1,723 19,085 49,922 (28,047) 21,875 Contingent current installments of long-term debt 149,846 14,353 164,199 150,910 14,764 165,674 Estimated third-party payor settlements 41,178 5,990 47,198 45,174 242 45,416 Professional liability and workers' compensation 221 6,026 6,247 298 6,042 6,340 Accrued post-retirement health care benefits 209 - 209 209 - 209 Other 86,523 23,105 109,628 40,723 50,019 90,742 TOTAL CURRENT LIABILITIES 405,079 232,242 637,321 433,600 196,837 630,437
OTHER LIABILITIES Accrued professional liabilities and workers' compensation, less current portion 1,373 49,957 51,330 5,546 44,907 50,453 Deferred compensation 8,342 28,524 36,866 8,277 27,782 36,059 Pension 24,589 95,377 119,966 79,711 47,638 127,349 Accrued post- retirement health care benefits, - less current portion 1,580 - 1,580 1,629 1 1,630 Other 42,425 14,668 57,093 38,045 9,002 47,047 TOTAL OTHER LIABILITIES 78,309 188,526 266,835 133,208 129,330 262,538
Long-term debt, net of current installments 716,067 4,194 720,261 717,122 5,173 722,295 TOTAL LIABILITIES 1,199,455 424,962 1,624,417 1,283,930 331,340 1,615,270
NET ASSETS Unrestricted 1,490,206 973,739 2,463,945 1,698,316 757,621 2,455,937 Temporarily restricted 2,889 76,900 79,789 2,487 76,271 78,758 Permanently restricted - 35,933 35,933 - 35,810 35,810 TOTAL NET ASSETS 1,493,095 1,086,572 2,579,667 1,700,803 869,702 2,570,505
TOTAL LIABILITIES AND NET ASSETS $ 2 ,692,550 $ 1,511,534 $ 4,204,084 $ 2,984,733 $ 1,201,042 $ 4,185,775
ProMedica Quarterly Disclosure 31
PROMEDICA HEALTH SYSTEM Consolidating Statement of Operations (Unaudited) (000’s omitted)
Six Months Ended June 30, 2016 Six Months Ended June 30, 2015 Other Other ProMedica ProMedica Obligated ProMedica Obligated ProMedica Entities Entities Group Group Including Including Eliminations Eliminations Unrestricted revenues, gains, and other support:
Net patient service revenue $ 805,698 $ 68,767 $ 874,465 $ 865,592 $ 24,961 $ 890,553 Provision for bad debt (31,204) (6,619) (37,823) (34,965) (3,494) (38,459) Net patient service revenue less bad debts 774,494 62,148 836,642 830,627 21,467 852,094
Premiums Earned - 690,671 690,671 - 654,832 654,832 Net assets released 3,523 540 4,063 3,315 165 3,480 Other 20,005 6,982 26,987 27,938 6,430 34,368
Total revenues, gains, and other support 798,022 760,341 1,558,363 861,880 682,894 1,544,774
Expenses: Salaries, wages, and employee benefits 301,478 248,934 550,412 336,018 198,086 534,104 Food and drugs 59,989 30,127 90,116 63,136 24,441 87,577 Medical Expense - 436,346 436,346 - 426,062 426,062 Contracted fees 74,069 86,235 160,304 76,064 65,164 141,228 Supplies 96,121 17,889 114,010 104,709 9,922 114,631 Insurance 8,075 3,650 11,725 8,394 1,862 10,256 Utilities 9,376 5,141 14,517 10,268 3,611 13,879 Depreciation and amortization 45,923 22,067 67,990 45,642 16,674 62,316 Interest 16,783 1,040 17,823 14,246 102 14,348 Other 172,542 (75,555) 96,987 183,843 (86,124) 97,719 Total expenses 784,356 775,874 1,560,230 842,320 659,800 1,502,120
Operating income (loss) 13,666 (15,533) (1,867) 19,560 23,094 42,654
Other income: Investment Income 14,617 9,135 23,752 35,270 8,713 43,983 Net unrealized gains (losses) 6,416 (1,549) 4,867 (1,643) (44) (1,687) Change in fair value of interest rate swap (4,893) - (4,893) 1,738 58 1,796 Other 453 (651) (198) 1,366 101,182 102,548
Excess (deficiency) of revenues over expenses 30,259 (8,598) 21,661 56,291 133,003 189,294 before unusual items
Unusual Items: Restructuring and severance costs - (2,678) (2,678) - - - Total unusual items - (2,678) (2,678) - - -
Excess (deficiency) of revenues over expenses 30,259 (11,276) 18,983 56,291 133,003 189,294
Contributions and other: Net assets released from restrictions 19,643 (16,567) 3076 2,860 (1,863) 997 Transfers (to) from affiliated entities (150,708) 150,708 - (23,710) 23,710 - Other non-operating income - (14,051) (14,051) - (799) (799) Cumulative affect of change in accounting ------principle
Increase (decrease) in unrestricted net assets $ (100,806) $ 108,814 $ 8,008 $ 35,441 $ 154,051 $ 189,492
ProMedica Quarterly Disclosure 32
PROMEDICA HEALTH SYSTEM Statement of Change in Net Assets (Unaudited) (000's omitted)
Six months ended June 30, 2016 Six months ended June 30, 2015 Other Other Obligated ProMedica ProMedica Obligated ProMedica ProMedica
Group Entities Including Group Entities Including Eliminations Eliminations
Unrestricted Net Assets Excess of revenues over expenses $ 30,259 $ 11,276) $ 18,983 $ 56,291 $ 133,003 $ 189,294 Net assets released from restrictions 19,643 (16,567) 3,076 2,860 (1,863) 997 Capital Contributions from (to) non-obligated group (150,708) 150,708 - (23,710) 23,710 - affiliates, net Other (107,304) 93,253 (14,051) - (799) (799) Increase (decrease) in Unrestricted Net Assets (208,110) 216,118 8,008 35,441 154,051 189,492
Temporarily Restricted Net Assets Contributions 2,126 5,053 7,179 1,836 7,202 9,038 Investment Return 28 707 735 (1) 1,428 1,427 Net assets released from restriction (1,752) (5,081) (6,833) (1,613) (2,596) (4,209) Change in beneficial interest in net assets of ------Foundations Other - (50) (50) - (2) (2) Increase (decrease) in temporarily restricted net 402 629 1,031 222 6,032 6,254 assets
Permanently Restricted Net Assets Contributions for endowment funds ------Investment Return - 73 73 - (62) (62) Change in beneficial interests of foundations ------Other - 50 50 - 2 2 Increase (decrease) in permanently restricted net - 123 123 - (60) (60) assets
Increase (decrease) in net assets (207,708) 216,870 9,162 35,663 160,023 195,686
Net asset at beginning of period 1,700,803 869,702 2,570,505 1,771,075 681,523 2,452,598 Net asset at end of period $ 1,493,095 $ 1,086,572 $ 2,579,667 $ 1,806,738 $ 841,546 $ 2,648,284
ProMedica Quarterly Disclosure 33
PROMEDICA HEALTH SYSTEM Unaudited Consolidated Statements of Cash Flows For the Period Ended June 30, 2016 (000's omitted)
Year to Date Year to Date June 30, 2016 June 30, 2015
Cash flows from operating activities $ 9,162 $ 199,505 Increase (decrease) in net assets Adjustments to reconcile increase (decrease) in net assets to net cash provided by operating activities Depreciation and amortization 67,990 62,319 Provision for bad debts 37,823 38,459 Inherent contribution of acquired net assets - (94,944) Net assets released from restrictions (3,076) (997) Change in net unrealized (gains) losses on investments (4,867) 1,687 Realized (gains) losses on investments (11,305) (27,577) Increase (decrease) in: Accounts receivable (39,048) (53,871) Supplies and other current assets (4,055) (124) Other assets (14,165) (23,947) Increase (decrease) in: Accounts payable and accrued liabilities 13,694 (29,939) Estimated third-party payor settlements 1,752 (10,604) Net cash provided (used) by operating activities 53,905 59,967
Cash flows from investing activities Acquisition of property and equipment, net of disposals (139,321) (107,748) Less amounts released from restrictions 3,076 997 Subtotal cash outflows for property and equipment (136,245) (106,751)
Increase (decrease) in: Cash contributed in acquisition of Monroe - 14,041 Marketable securities and total assets limited as to use 114,116 40,780 Net cash provided (used) by investing activities (22,129) (51,930)
Cash flows from financing activities Proceeds of issuance of long term debt 490 1,816 Repayment of long term debt (6,789) (3,838) Net cash provided (used) by financing activities (6,299) (2,022)
Net increase (decrease) in cash and cash equivalents 25,477 6,015
Cash and cash equivalents at beginning of period 363,478 325,723 Cash and cash equivalents at end of period $ 388,955 $ 331,738
ProMedica Quarterly Disclosure 34
PROMEDICA HEALTHCARE OBLIGATED GROUP Unaudited Balance Sheet (000's omitted)
As of As of June 30, 2016 December 31, 2015
ASSETS
CURRENT ASSETS Cash and cash equivalents $ 1,649 $ 57,372 Marketable securities 24,779 12,563 Accounts receivable, net 229,573 259,832 Assets limited as to use or restricted - - Inventories 22,284 23,919 Securities lending collateral - - Other current assets 84,788 152,106 TOTAL CURRENT ASSETS 413,073 505,792
ASSETS WHOSE USE IS LIMITED Restricted funds 2,889 2,487 Bond indenture agreement funds 5,018 15,014 Internally designated for capital acquisition 1,374,154 1,509,954 Other segregated investments 16,266 13,974 TOTAL ASSETS WHOSE USE IS LIMITED 1,398,327 1,541,429
Property, plant and equipment, net 854,293 909,363
OTHER ASSETS Goodwill 18,241 18,346 Other intangible assets 1,392 358 Investments in affiliated companies 6,608 8,779 Other assets 616 666 TOTAL OTHER ASSETS 26,857 28,149
TOTAL ASSETS $ 2 ,692,550 $ 2,984,733
ProMedica Quarterly Disclosure 35
As of As of June 30, 2016 December 31, 2015
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES Accounts payable and accrued liabilities $ 6,442 $ 80,437 Accrued compensation and benefits 53,298 65,927 Current installments of long-term debt 17,362 49,922 Contingent current installments of long-term debt 149,846 150,910 Estimated third-party payor settlements 41,178 45,174 Professional liability and workers' compensation 221 298 Accrued post retirement health care benefits 209 209 Other 86,523 40,723 TOTAL CURRENT LIABILITIES 405,079 433,600
OTHER LIABILITIES Accrued professional liabilities and workers' compensation, less current portion 1,373 5,546 Deferred compensation 8,342 8,277 Pension 24,589 79,711 Accrued post-retirement health care benefits, less current portion 1,580 1,629 Other 42,425 38,045 TOTAL OTHER LIABILITIES 78,309 133,208
Long-term debt, net of current installments 716,067 717,122 TOTAL LIABILITIES 1,199,455 1,283,930
NET ASSETS Unrestricted 1,490,206 1,698,316 Temporarily restricted 2,889 2,487 Permanently restricted - - TOTAL NET ASSETS 1,493,095 1,700,803
TOTAL LIABILITIES AND NET ASSETS $ 2,692,550 $ 2,984,733
ProMedica Quarterly Disclosure 36
PROMEDICA HEALTHCARE OBLIGATED GROUP Statement of Operations (Unaudited) (000's omitted)
Six Months Ended June 30, 2016 June 30, 2015
Unrestricted revenues, gains, and other support: Net patient service revenue $ 805,698 $ 865,592 Provision for bad debt (31,204) (34,965) Net patient service revenue less bad debts 774,494 830,627
Premiums Earned - - Net assets released 3,523 3,315 Other 20,005 27,938 Total revenues, gains, and other support 98,022 861,880
Expenses: Salaries, wages, and employee benefits 301,478 336,018 Food and drugs 59,989 63,136 Contracted fees 74,069 76,064 Supplies 96,121 104,709 Insurance 8,075 8,394 Utilities 9,376 10,268 Depreciation and amortization 45,923 45,642 Interest 16,783 14,246 Other 172,542 183,843 Total expenses 784,356 842,320
Operating income (loss) 13,666 19,560
Other income: Investment Income 14,617 35,270 Net unrealized gains (losses) 6,416 (1,643) Change in fair value of interest rate swap (4,893) 1,738 Other 453 1,366 Excess (deficiency) of revenues over expenses 30,259 56,291
Contributions and other Net assets released from restrictions 19,643 2,860 Transfers (to) from affiliated entities (150,708) (23,710)
Increase (decrease) in unrestricted net assets $ (100,806) $ 35,441
ProMedica Quarterly Disclosure 37
PROMEDICA HEALTHCARE OBLIGATED GROUP Statement of Changes in Net Assets for the six months ended June 30, 2016 (Unaudited) (000’s omitted)
Six Months Ended June 30, 2016 June 30, 2015
Unrestricted Net Assets Excess of revenues over expenses $ 0,259 $ 56,291 Net assets released from restrictions 19,643 2,860 Capital Contributions from (to) non-obligated group affiliates, net (150,708) (23,710) Other (107,304) - Increase (decrease) in Unrestricted Net Assets (208,110) 35,441
Temporarily restricted Net Assets Contributions 2,126 1,836 Investment Return 28 (1) Net assets released from restriction (1,752) (1,613) Increase (decrease) in temporarily restricted net assets 402 222
Increase (decrease) in net assets (207,708) 35,663
Net asset at beginning of period 1,700,803 1,771,075 Net asset at end of period $ 1,493,095 $ 1,806,738
ProMedica Quarterly Disclosure 38
PROMEDICA HEALTHCARE OBLIGATED GROUP Unaudited Consolidated Statements of Cash Flows- Obligated Group For the Period Ended June 30, 2016 (000's omitted)
Year to Date Year to Date June 30, 2016 June 30, 2015
Cash flows from operating activities Increase (decrease) in net assets $ (207,708) $ 35,663 Adjustments to reconcile increase (decrease) in net assets to - - net cash provided by operating activities - - Inherent contribution - - Depreciation and amortization 45,923 45,642 Provision for bad debts 31,204 34,965 Net assets released from restrictions (19,643) (2,860) Change in net unrealized (gains) losses on investments (6,416) 1,643 Realized (gains) losses on investments (4,839) (21,179) Increase (decrease) in, net of acquisition: Accounts receivable (945) (43,084) Supplies and other current assets 68,953 (5,194) Other assets 1,226 (6,381) Increase (decrease) in, net of acquisition: Accounts payable and accrued liabilities (45,800) (10,773) Estimated third-party payor settlements (3,996) (6,806) Net cash provided (used) by operating activities (142,041) 21,636
Cash flows from investing activities Acquisition of property and equipment, net of disposals (75,286) (73,263) Reduction of property and equipment, due to departure of 84,499 - SLH from OB Group Less amounts released from restrictions 19,643 2,860 Subtotal cash outflows for property and equipment 28,856 (70,403)
(Increase) decrease in: Marketable securities and total assets limited as to use 142,141 (16,566) Net cash provided (used) by investing activities 170,997 (86,969)
Cash flows from financing activities Proceeds of issuance of long term debt 490 1,816 Repayment of long term debt (5,169) (3,379) Reduction of long term debt due to departure of SLH from (30,000) - OB Group Net cash provided (used) by financing activities (34,679) (1,563)
Net increase (decrease) in cash and cash equivalents (5,723) (33,764)
Cash and cash equivalents at beginning of period 57,372 69,825 Cash and cash equivalents at end of period $ 51,649 $ 36,061
ProMedica Quarterly Disclosure 39
DEBT COVENANT CALCULATIONS
ProMedica Health Care Obligated Group (000's omitted)
Trailing 12 months Debt Service Coverage Ratio As of June 30, 2016 Excess of Revenue over Expenses $ 63,664
ADJUSTED BY: Net Unrealized Gains/Losses 77,161 Depreciation and Amortization 88,960 Interest Expense 29,794 Capitalized Interest 2,793 Loss on Extinguishment of Long-Term Debt 1,789 Loss (gain) on Sales of Equipment 1,275
Net Income Available for Debt Service $ 265,436
Actual Principal and Interest $ 107,222
Debt Service Coverage Ratio 2.48
Requirement 1.10
Days Cash on Hand Cash and Cash Equivalents $ 51,649 Marketable Securities 24,779 Internally Designated for Capital Acquisition 1,374,154 Total Unrestricted Cash and Investments $ 1,450,582 Total Expenses (excluding depreciation and amortization) $ 1,553,332
Days Cash on Hand 341.8
Requirement - Greater than 60
ProMedica Quarterly Disclosure 40
Debt to Capitalization Current Installments of Long-Term Debt $ 167,208 Long-Term Debt, Less Current Portion 716,067
Total Debt $ 883,275
Unrestricted Net Assets $ 1,490,206
Debt to Capitalization .37
Requirement – Less than .60
ProMedica Quarterly Disclosure 41