Inspira Health Network, Inc
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Inspira Health Network, Inc. Consolidated Financial Statements and Supplementary Information December 31, 2018 and 2017 Inspira Health Network, Inc. Table of Contents December 31, 2018 and 2017 Page Independent Auditors’ Report 1 Consolidated Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations and Changes in Net Assets 5 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 Supplementary Information Consolidating Schedules for 2018: Consolidating Schedule, Balance Sheet, including Balance Sheet for the Inspira Health Network Obligated Group 34 Consolidating Schedule, Statement of Operations and Changes in Net Assets, including Statement of Operations and Changes in Net Assets for the Inspira Health Network Obligated Group 35 Consolidating Schedules for 2017: Consolidating Schedule, Balance Sheet, including Balance Sheet for the Inspira Health Network Obligated Group 36 Consolidating Schedule, Statement of Operations and Changes in Net Assets, including Statement of Operations and Changes in Net Assets for the Inspira Health Network Obligated Group 37 Independent Auditors’ Report Board of Directors Inspira Health Network, Inc. Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Inspira Health Network, Inc. (the "Network"), which comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the related consolidated statements of operations and changes in net assets, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these 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 these 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 audits 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 financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Baker Tilly Virchow Krause, LLP trading as Baker Tilly is a member of the global network of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2018 Baker Tilly Virchow Krause, LLP 1 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Inspira Health Network, Inc. as of December 31, 2018 and 2017, and the results of its operations, changes in its net assets, and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 3 to the consolidated financial statements, in 2018, the Network adopted new accounting guidance related to the Financial Accounting Standards Board Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and ASU No. 2016-14, Not-for- Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. Our opinion is not modified with respect to these matters. Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information on pages 34 through 37 is presented for the purposes of additional analysis rather than to present the financial position, results of operations and changes in net assets of the individual entities and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits 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 information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Philadelphia, Pennsylvania April 9, 2019 2 Inspira Health Network, Inc. Consolidated Balance Sheets December 31, 2018 and 2017 2018 2017 Assets Current Assets Cash and cash equivalents $ 122,036,000 $ 105,222,000 Assets limited as to use - externally designated 18,457,000 27,157,000 Patient accounts receivable, net 74,474,000 70,015,000 Supplies 6,684,000 6,652,000 Pledges receivable 3,159,000 2,219,000 Prepaid expenses and other current assets 18,781,000 18,449,000 Total current assets 243,591,000 229,714,000 Assets Limited as to Use Internally designated by Board of Directors 668,801,000 692,319,000 Externally designated by donor 2,577,000 1,143,000 Externally designated under bond indenture agreements 156,343,000 289,214,000 Under interest rate swap agreements 6,796,000 8,445,000 834,517,000 991,121,000 Property and Equipment, Net 627,771,000 441,218,000 Other Assets Pledges receivable, net 9,485,000 7,678,000 Investment in unconsolidated affiliates 13,233,000 14,781,000 Insurance recoveries receivable 4,081,000 4,466,000 Other assets 3,626,000 3,655,000 Pension asset 1,960,000 - 32,385,000 30,580,000 Beneficial Interest in Perpetual and Temporary Trusts 9,471,000 10,151,000 Total assets $ 1,747,735,000 $ 1,702,784,000 See notes to consolidated financial statements 3 Inspira Health Network, Inc. Consolidated Balance Sheets December 31, 2018 and 2017 2018 2017 Liabilities and Net Assets Current Liabilities Accounts payable and accrued expenses $ 95,459,000 $ 90,138,000 Construction accounts payable 29,217,000 13,880,000 Accrued salaries and payroll taxes 17,052,000 15,734,000 Accrued vacation and other employee benefits 20,796,000 17,520,000 Accrued interest payable 10,662,000 9,843,000 Estimated settlements due to third-party payors 50,364,000 57,816,000 Current installments of long-term debt 9,256,000 8,782,000 Total current liabilities 232,806,000 213,713,000 Accrued Retirement Benefits 8,395,000 9,527,000 Interest Rate Swap Agreements 6,796,000 8,445,000 Other Long-Term Liabilities 53,046,000 56,999,000 Long-Term Debt 530,790,000 543,476,000 Total liabilities 831,833,000 832,160,000 Net Assets Without donor restrictions 892,869,000 847,337,000 With donor restrictions 23,033,000 23,287,000 Total net assets 915,902,000 870,624,000 Total liabilities and net assets $ 1,747,735,000 $ 1,702,784,000 See notes to consolidated financial statements 4 Inspira Health Network, Inc. Consolidated Statements of Operations and Changes in Net Assets December 31, 2018 and 2017 2018 2017 Net Assets Without Donor Restrictions Revenue: Net patient service revenue $ 771,914,000 $ 733,349,000 Other revenue 34,865,000 27,175,000 Total revenue 806,779,000 760,524,000 Expenses: Salaries and wages 342,603,000 318,800,000 Employee benefits 96,025,000 95,056,000 Physician fees 35,550,000 31,016,000 Supplies and other expenses 215,507,000 201,175,000 Interest 6,193,000 7,192,000 Depreciation and amortization 45,359,000 43,866,000 Total expenses 741,237,000 697,105,000 Operating income 65,542,000 63,419,000 Nonoperating Gains, Net Interest and dividend income 13,738,000 11,702,000 Change in value of interest rate swap agreements 1,649,000 705,000 Net realized gains on sale of investments 16,808,000 21,799,000 Gain on sale of property and equipment 424,000 103,000 Excess of revenue and gains over expenses 98,161,000 97,728,000 See notes to consolidated financial statements 5 Inspira Health Network, Inc. Consolidated Statements of Operations and Changes in Net Assets December 31, 2018 and 2017 2018 2017 Net Assets