PREPARING FOR THE FUTURE OF HEALTH CARE
The University of North Carolina Health Care System 2017 ANNUAL REPORT
1 2017 ANNUAL REPORT The University of North Carolina Health Care System
Table of Contents
introduction
A New Vision for Health Care Excellence 2
System Update 4
Research Review 10
Community Benefit Report 15
financials and statistics
Letter of Transmittal 20
UNC Health Care System Reporting Structure 23
UNC Health Care System Board of Directors 24
Management’s Discussion and Analysis 25
Pro Forma Statement of Net Position 28
Pro Forma Statement of Revenues, Expenses and Changes in Net Position 29
Pro Forma Statement of Cash Flows 30
UNC Faculty Physicians Statement of Net Assets (Unaudited) 31
UNC Faculty Physicians Statement of Revenues, Expenses and Changes in Net Position (Unaudited) 32
UNC Faculty Physicians Statement of Cash Flows (Unaudited) 33
Pro Forma Selected Statistics and Ratios 34
Notes to Financials 35 2
A NEW VISION FOR HEALTH CARE EXCELLENCE
This past year was a remarkable period in the history and progress of UNC Health Care. We experienced strong performance and exceeded goals, as we embarked on exciting new initiatives and partnerships. All of these efforts were directly tied to our overarching goal of becoming the nation’s leading public academic health system.
Our 31,500 co-workers, more than 3,200 employed* physicians and approximately 5,100 volunteers across UNC Health Care allowed us to care for nearly 1.4 million North Carolinians during FY2017. These efforts and our plans for the future align well with UNC Health Care’s “New Vision for Health Care Excellence.”
FISCAL STRENGTH TO SUPPORT OUR MISSION The amazing care UNC Health Care is able to provide would not be possible without a strong financial foundation. UNC Health Care again posted record revenue in FY17, bringing in $3.9 billion in net operating revenue, up from $3.6 billion in FY16. This comes at a time when health care systems nationwide are being challenged by reductions in Medicare and Medicaid payments, taking on more risk for outcome measures, and uncertainty regarding patient coverage from the Affordable Care Act.
Our fiscal stability is a significant achievement from both the growth in revenues and the efficiencies we have realized from the Carolina Value system-wide initiative. In its first three years of existence, Carolina Value realized approximately $300 million in measured, recurring savings.
ENSURING ACCESS, DOING THE RIGHT THING FOR NORTH CAROLINA In support of our ongoing mission and service to the state, UNC Health Care continues its work on behalf of the many communities we serve across North Carolina. A prime example of this was our adding Morehead Memorial Hospital in Eden, N.C., to the UNC Health Care family.
Morehead was a struggling rural, community hospital in Rockingham County that fell into bankruptcy in 2017. UNC Health Care believed by partnering with Morehead (now UNC Rockingham Health Care) we could work with the local team and community to stabilize the hospital to sustain it well into the future. 3 2017 ANNUAL REPORT The University of North Carolina Health Care System
ASSESSING NORTH CAROLINA’S BEHAVIORAL HEALTH SERVICES A NEW VISION FOR UNC Health Care is an institution rooted in serving the state of North Carolina, and we maintain a strong connection to state government. As such, we set a high priority to do things that are both strategically and pragmatically helpful to our state. DHHS Secretary HEALTH CARE EXCELLENCE Mandy Cohen sought insight from us in the form of an assessment of the current delivery of behavioral health care services in North Carolina. The assessment reviewed services provided at DHHS’ three regional psychiatric hospitals and its Alcohol and Drug Abuse Treatment Centers (ADATCs).
This was a significant undertaking for UNC Health Care, incorporating work from more than 180 subject matter experts within our organization, providing a review of clinical and facility operations for a comprehensive report of key findings and recommendations. This assessment was provided to DHHS at no cost with one exception of minimal cost reimbursements to clinicians. This effort is part of our pledge to the State of North Carolina to improve the health of our citizens and to help address what has become a health crisis in our state and nation.
NATIONAL RECOGNITION We are proud to report that the UNC Medical Center in Chapel Hill was nationally ranked by US News & World Report in six adult specialties and nine pediatric specialties. Additionally, US News & World Report rated nine treatment areas at UNC REX Healthcare as “high performing.” High Point Regional Hospital was recognized as high performing in three specialty treatment areas, while UNC Nash Health Care, Johnston Health and Pardee Hospital earned “high performing” ratings in a single specialty area each. We also had four hospitals earn “A” grades for patient safety as recognized by the Leapfrog Group. UNC REX Healthcare and Pardee Hospital both earned 5-Star ratings from the Centers for Medicare & Medicaid Services.
PROUD TO BE PUBLIC WITH ACADEMIC FOCUS As an academically based health care organization, we enjoy the special relationship between the UNC School of Medicine and UNC Health Care, for the mutual benefit of the hospitals and practices we own or manage. Working with the University of North Carolina, we are able to help grow the educational activities of the School of Medicine through our medical offerings and other graduate programs for students.
At a time when some public institutions are trying hard to distance themselves from being identified as “public,” UNC Health Care and the UNC School of Medicine embrace it. We are proudly a public institution with a mission to serve the people of our great state.
On behalf of UNC Health Care, we thank you for your support. You make it possible for us to provide the people of North Carolina with access to the high-quality care and experience they deserve.
Sincerely,
A. Dale Jenkins William L. Roper, MD, MPH Chair, Board of Directors (November 2015–Present) Chief Executive Officer The University of North Carolina The University of North Carolina Health Care System Health Care System
*Includes MDs employed by hospitals, physician practices and UNC School of Medicine 4 System Update
The people of UNC Health Care have worked tirelessly to optimize the care they provide to North Carolinians. In 2017, leaders brought this work into new focus, with an ambitious, wide-ranging effort to place the system at the top of national rankings for quality, safety and cost-effectiveness.
The organization’s vision is a concept designed to make UNC Health Care nothing less than the nation’s leading public academic health system.
Specifically, UNC Health Care leaders envision the system reaching the nation’s top 10 percent in all of the following areas:
Provider Health and Patient- Timeliness Cost- Safety and staff well-being centeredness and efficiency effectiveness engagement 5 2017 ANNUAL REPORT The University of North Carolina Health Care System That vision begins with the doctors, nurses and other outstanding customers by engaging providers and staff in quality improvement team members who care for North Carolinians every day. It also and care delivery transformation activities. incorporates a broad matrix of project managers, IT professionals, business and finance experts, and others who collaborate to find An example of one key initiative supported by PQI/PHS is the and operationalize efficiencies, large and small. Primary Care Improvement Collaborative. In 2017, this included more than 50 practices and 300 providers across the system. The “Our system is trying to coordinate and reduce the costs of care,” Collaborative is a hub within the system focusing on practice said Amy Higgins, UNC Health Care system vice president for transformation, better outcomes and an enhanced patient strategic planning and network development. “By coordinating experience in the primary care setting. The collaborative’s purpose across the system, you have better communication and better care. is to deliver on the promise to reach the decile performance With a large system, you have the capabilities to better coordinate nationally in high-value care. things by weaving them together.” “Engaging providers and staff is a critical driver of our success UNC Health Care has grown substantially in the past six years. to date. Committees that include individual physician practices The total number of employees expanded from 14,000 in 2011 to are developing strategies for population health and quality approximately 31,500 in 2017. During the same time frame, the improvement,” said Robb Malone, PharmD, PQI/PHS vice number of licensed beds rose from 1,530 to about 3,400, surgeries president. “Everything is examined, from the measures we choose doubled from 60,000 to about 120,000 and net patient revenues to monitor and manage to our patients’ access to care to standard grew from $2 billion to $4.9 billion. work and workflows to case management.”
Along with increasing size comes greater opportunity to find and A unique culture and effective organizational structure successfully disseminate improved protocols and workflows. Engines of change promote quality patient care and service delivery efficiencies like UNC Health Alliance and UNC Senior Alliance are making throughout UNC Health Care. As an example, to date, 41 of UNC inroads in several key clinical areas. The system’s Practice Quality Health Care’s primary care practices have received the National and Innovation and Population Health Services divisions work Committee for Quality Assurance (NCQA) highest recognition for across the system to improve access to care and closely manage patient-centered primary care, which means that all patients have a patient cases, among other endeavors. personal care provider; the practice is physician-directed; care takes a whole-person approach; all care is coordinated and/or integrated; No stone is left unturned in seeking better care, lowering costs or and there is a focus on quality, safety and enhanced access. both. Although the vision is relatively new, plenty of success stories have already been written. By the end of 2018, these divisions will be working together to make all primary care practices NCQA-recognized, and UNC Health Care leaders are looking to meet or exceed the 90th Practice Quality and Innovation national percentile for 13 different ambulatory care measures. and Population Health Services Efforts to transform care delivery are well under way, with goals on four of those measures—colorectal cancer screening, aspirin use The system’s Practice Quality and Innovation and Population in atherosclerotic cardiovascular disease, depression screening and Health Services divisions (PQI/PHS) were established in 2015 management, and falls screening—already met. to help consolidate core population health services and deliver solutions for physician entities across UNC Health Care. This In 2018 and into the future, UNC Health Care will pursue its team has the scalable infrastructure to grow alongside the system vision of leading the nation in how care is delivered and at what and serve as a strategic services partner. PQI/PHS empowers its cost, all to the benefit of the people of North Carolina.
$4.9B net patient revenues 3 million 31,500 in 2017 approximate number of approximate number of employees system-wide clinical visits across the system in 2017 6 UNC Health Alliance Leads Innovation to collaborate, leading to better patient experiences and better health outcomes.” UNC Health Alliance is a high-value, clinically integrated network One example of this improvement has been noted by the Personal of providers that partners with UNC Health Care and independent, Health Advocate program, which provides centralized case community physicians. management services to the highest-risk populations participating in our value-based contracts. Individual patient care plans are The Health Alliance is focused on testing and developing industry developed, barriers to care are identified, and comprehensive best practice programs to coordinate care across the continuum, resources are provided to promote care across the continuum. improve quality of care delivery and improve the patient’s overall To date, within a subset of the Next Generation ACOs high-risk experience and health outcomes while keeping costs affordable. To patients, there has been a reduction of unnecessary ED use by 24 be successful in achieving this triple aim, hospitals, community percent, hospitalization by 38 percent, and readmission to the providers, skilled nursing facilities, home health agencies and other hospital by 11 percent. care providers must align to coordinate care and address key barriers to providing the highest quality care. UNC Health Alliance is the “We are pleased with our progress to date,” said Dr. Malone. “This vehicle through which these goals can be achieved. work is challenging but ultimately rewarding, as the positive impact to our patients has been undeniable.” “Working with primary care and specialty providers, hospitals and community partners, we are working to improve care for Dr. Glickman leads a considerable focus on advancing care for patients with key clinical conditions such as COPD, Congestive vulnerable populations. “We have become able to better identify Heart Failure and depression, as well as coordinating care during patients with the highest medical needs and structure programs, important transitions such as when a patient leaves the hospital services and interventions that help meet patient needs, including to go home,” said Mark Gwynne, DO, senior medical director, psychosocial barriers to care,” Dr. Glickman said. “Drivers of poor UNC Health Alliance. “This work unites providers throughout the outcomes and high costs are things like food insecurity and lack continuum of care and ensures that we provide the highest-value of transportation.” care possible.” To address the challenge some patients face to secure safe, reliable transportation, the Senior Alliance has partnered with ride service UNC Senior Alliance Reaches companies to provide transportation to medically necessary Vulnerable Patients appointments. So far, about 100 high-need patients have used the service on approximately 500 separate occasions. UNC Senior Alliance is a sister organization to UNC Health Alliance. While the Health Alliance works with commercial UNC Senior Alliance leaders plan to focus next on building out insurers, the Senior Alliance partners with the Centers for Medicare post-acute and palliative care strategies, to ensure that patients and Medicaid Services to test innovative care models to improve receive the appropriate care they need after discharge from the health outcomes for Medicare beneficiaries. hospital or Emergency Department.
In January 2017, the Senior Alliance was established as a Next Generation Accountable Care Organization (ACO). Carolina Value Finds Efficiency
“We chose the Next Generation ACO model because it affords In its first three years of existence, Carolina Value, a system- us greater clinical flexibility to coordinate care across the health wide initiative to improve efficiency and performance, realized care system and provide high-quality, cost effective patient care,” approximately $300 million in measured recurring savings. said Seth Glickman, MD, MBA, president and executive medical director, UNC Health Alliance. “We are introducing new services Beginning in 2014, system leaders partnered with consulting firm and providing easier ways for providers in different care settings Huron Healthcare to improve operations and strengthen financial
$300M 89% measured recurring savings percentage of UNC primary realized through 500 care practices that received Carolina Value number of medical visit rides National Committee arranged through for Quality Assurance’s highest UNC Senior Alliance recognition for primary care 7 2017 ANNUAL REPORT The University of North Carolina Health Care System stability. That partnership wrapped up in 2017—but the work it set in motion continues.
“Carolina Value was designed to improve our processes and care delivery system-wide to improve care and save costs,” said Cam Enarson, MD, MBA, vice dean for Strategic Initiatives, who co- lead Carolina Value. “It improved the health of the people of North Carolina and increased our effectiveness across all system entities.”
Impacts came across 13 different solution areas, from IT to the operating room. Changes were, at times, subtle, but made substantial differences over time.
In one example, observers noticed that inpatient locations were excessively scattered in relation to care providers. Some doctors walked up to two miles each day to see patients. Consolidating Carolina Value focused on evaluating similar patients into specific locations gave care teams more time to treat more patients, with as many as 100 additional hospital and innovating around 13 main discharges per month, making more room for sick patients. areas, including:
Another significant impact came in scheduling medical Care Access appointments. In pilot locations, no-shows were reduced to less than 5 percent. Clinical Documentation Clinical Operations Plenty has been accomplished, but the work is not over. The Human Resources Carolina Value team merged with the UNC Health Care Information Technology Operational Efficiency team to address ongoing improvement needs. Labor “Two units were merged and will make Carolina Value an Non-Labor enduring success,” said Matthew Smith, associate vice president Perioperative of Finance for UNC Hospitals and co-leader of Carolina Value. Physician Services “The challenges that started when Carolina Value began still exist, so to be a top academic medical center, it’s imperative to continue Revenue Cycle our work.” School of Medicine Shared Services Strategy and Advisory Planning Continues for New UNC School of Medicine Building
The new UNC School of Medicine building is moving through the planning phases, with building construction scheduled to begin in 2019.
After demolition of Berryhill Hall, which has served as the school’s home since 1970, leaders will break ground on the new facility, which is currently slated for a 2021 opening. Although officials
28,000 number of Medicare 93% 86% beneficiaries cared for percentage of patients in UNC Hospitals percentage of School of through the UNC Senior who are now closer to their care Medicine students who Alliance ACO providers following a reconfiguration are North Carolina through Carolina Value residents 8
The School of Medicine launched its new curriculum, Translational Education at Carolina (TEC), in 2014. Now it is set to graduate its first class, comprising 180 physicians that school leaders say will be uniquely prepared for the modern health care landscape. East Approach From Bell Tower Bridge 9 2017 ANNUAL REPORT The University of North Carolina Health Care System Funded by the Duke Endowment, a private philanthropic foundation dedicated to helping people and strengthening communities in North Carolina and South Carolina, the first class of three graduates this spring.
TEC Moving Forward
In spring 2018, the UNC School of Medicine celebrates a milestone stress that the design is still subject to change, the estimated $100 nearly four years in the making. million project will be significantly larger than its predecessor and comprise approximately 150,000 square feet of simulation, active The school launched its new curriculum, Translational Education learning, laboratory and common space. at Carolina (TEC), in 2014. Now it is set to graduate its first class, comprising 180 physicians who school leaders say will be uniquely prepared for the modern health care landscape. Shaping a Rural Workforce “We believe they will be much better prepared to meet the Physician shortages remain acute in North Carolina’s more rural needs of modern health care delivery, including having a better areas. In April 2017, the UNC School of Medicine created the understanding of health system science, stronger leadership skills, Office of Rural Initiatives to combat these shortages. The office robust teamwork skills for interprofessional practice and stronger will consolidate and strengthen efforts to increase the number of critical thinking skills for lifelong learning as physicians,” said doctors in the state’s underserved communities. Dr. Byerley.
“The things we’ve done in the past to create a rural workforce have TEC transforms medical education by integrating basic sciences been insufficient,” said Julie Story Byerley, MD, MPH, vice dean and clinical skills. There are three phases of TEC: the foundation for education for the UNC School of Medicine. “This has increased phase, which blends coursework in basic sciences and organ systems; our investment in rural workforce cultivation.” the application phase, comprising core clinical rotations in one of four locations around the state; and the individualization phase, The new office is led by Robert Bashford, MD, a professor of containing elective and research opportunities. psychiatry who has long worked to put more doctors in rural North Carolina. Medical Students Work to Improve Care
A First for FIRST Quality improvement is a team effort. At the UNC School of Medicine, medical students are part of that team, working Fully Integrated Readiness for Service Training (FIRST) is a pathway throughout the year to help physician practices strengthen care for to medical school graduation that takes three years instead of the their patients. customary four. This spring, the inaugural class—Thane Campbell, Thomas D’Angelo, and Kyle Melvin—will graduate. Across 70 adult and pediatric practices, 86 medical students helped providers make better use of their electronic medical records and Graduating FIRST students all enter the family medicine residency increase rates of colorectal cancer and mammography screening, program in Chapel Hill in hopes they will eventually settle and among other improvements. practice in North Carolina. “Medical students are adding value to the UNC Physicians “It’s an enhanced program designed to inspire service to the Network,” said Dr. Byerley. “They are working in practice and underserved,” said Dr. Byerley. doing quality improvement projects.”
2021 Scheduled year of opening 71% for new School of percent decline in emergency admissions Medicine building among patient group enrolled in Personal Health Advocate program 10 Research Review
A Powerful Research Network
Before a research finding can be converted into life-saving treatments, scientists must confirm it is safe and effective for humans. UNC Research and UNC Health Care work together to do this—often benefiting scientists and patients alike in the process. For investigators in Chapel Hill, this means a chance to work with an expanded group of volunteers from around the state. In turn, patients who were once limited by distance can now take part in UNC research trials close to home.
Breakthroughs in Diagnosing Autism
In fiscal year 2017, three separate UNC School of Medicine studies garnered widespread attention for developing new tools that can diagnose autism spectrum disorders earlier and with more accuracy.
An estimated one out of every 68 children in the United States will develop autism. To date, identifying high-risk children before their second birthday, when behavioral characteristics of autism begin to emerge, has proved challenging. Earlier diagnosis is critically important for autism spectrum disorders, given that infant brains are more susceptible to treatments.
All three of the studies used magnetic resonance imaging (MRI) technology to gain insight into the brain functions of very young children.
Cerebrospinal Fluid as a Predictive Tool for Autism
Cerebrospinal fluid provides a protective layer around the brain. School of Medicine research shows this fluid also can predict the presence and severity of autism in children as young as six months of age.
MRI exams found that many toddlers diagnosed with autism at two years of age had more cerebrospinal fluid earlier in life. The more cerebrospinal fluid present at six months, the more severe the autism symptoms at 24 months.
“We don’t expect there’s a single mechanism that explains the cause of the condition for every child,” said lead study author Mark Shen, PhD, postdoctoral fellow at the UNC Carolina Institute for Developmental Disabilities. “But we think improper [cerebrospinal fluid] flow could be one important mechanism.” 11 2017 ANNUAL REPORT The University of North Carolina Health Care System An Algorithm for Detecting Autism
Scientists devised a method that predicts, with 80 percent accuracy, which infants will later develop autism.
In the study, published in February in the journal Nature, researchers conducted MRI scans on hundreds of infants, ranging in age from six months to 24 months. Using the resulting data, researchers wrote an algorithm that can identify babies who are most likely to meet criteria for autism at 24 months of age.
Thanks to participation in the study, Katherine Kollins said her son, Grayson, has received treatment and now attends school in a typical classroom, according to a report from North Carolina television station WRAL. RESEARCH COLLABORATION THROUGHOUT UNC HEALTH CARE “Grayson has grown into a very sweet, easy to talk to, likeable guy,” Kollins said. Researchers at UNC Health Care work alongside colleagues and patients, both in North Carolina and beyond, to advance biomedical knowledge and fuel discoveries that improve MRI Mapping of the Brain the health of people everywhere. These are some of the programs and organizations that contribute to the research for Autism Detection and innovation at UNC Health Care.
Different brain regions synchronize with one another in different • Center for Innovation ways. When scientists gained a better understanding of how The Center for Innovation promotes the development of that occurred in babies, it helped them better understand which patient-centered innovations designed to address issues toddlers were more likely to develop autism. related to cost efficiency, quality of care, innovative health care delivery, and alignment of incentives among Sleeping infants underwent MRI exams for a closer view into brain industry participants. activity across 230 different regions. Based on this information, a computer program correctly predicted 81 percent of babies who • North Carolina Translational and Clinical Sciences would later meet the criteria for autism. (NC TraCS) NC TraCS works to accelerate clinical and translational According to researchers, this was the first study of its kind in six- research discoveries from the lab to the clinic. It also month-olds and should be replicated. offers grants, research training and early career mentoring programs for researchers, as well as, community outreach to create a presence in all 100 North Carolina counties. Phone App Studies Postpartum Depression • Carolina Kickstart Carolina Kickstart focuses on launching biomedical In April, the School of Medicine launched an Android version startups based on UNC research. of PPD ACT, a mobile app, which was previously only available for iOS devices, beginning a national conversation about • REX Health Ventures postpartum depression. REX Health Ventures helps with the development of innovative technologies and companies in the health The app is actually a study that surveys women about the condition, care sector. inviting them to share experiences and even submit DNA samples for further study. As a result, women and researchers both gain better understanding of postpartum depression.
“In addition to gathering valuable data, PPD ACT is also starting a much-needed dialogue to help eradicate the stigma often associated $2.6 billion total economic impact from UNC research and UNC startup companies 12 with PPD, and to encourage more providers to thoroughly screen for and treat PPD,” said patient Jamie Belsito.
During its first year, approximately 14,000 women enrolled in the study—a considerable number for an app of its kind.
Synthetic Cells and Microneedles: New Frontiers in Diabetes Treatment
New technologies developed at UNC Health Care could bring a welcome change for people living with type 1 and type 2 diabetes.
One research team devised “artificial beta cells,” a synthetic cell that automatically releases DIABETES EXPERT LEADS insulin when glucose levels rise. The cells mimic insulin-secreting cells that are damaged TO FDA APPROVAL or destroyed in type 1 diabetes and many cases of type 2 diabetes. In lab testing, artificial OF NEW TREATMENT beta cell injections normalized blood glucose in diabetic mice for as many as five days.
UNC School of Medicine scientists Meanwhile, a separate discovery could take the pain out of diabetes testing and injections. played a role in the U.S. Food and Drug Administration’s decision Zhen Gu, PhD, a scientist in the UNC-NC State Joint Biomedical Engineering Program, to approve in November 2016 patented a discovery that uses microneedles—hundreds of which fit on a patch the size the drug Xultophy 100/3.6. A of a coin—to automatically sense blood sugar and release the right amount of insulin at formulation combining the long- the right time. acting insulin degludec and the drug liraglutide, Xultophy 100/3.6 “The technology is painless, and it also lessens human error,” Dr. Gu said, “so that you is a daily injection manufactured receive more accurate blood-sugar control.” by Novo Nordisk and referred to as IDegLira. UNC Health Care led clinical trials that showed IDegLira Landmark Findings for Anorexia to be safe and effective for patients with type 2 diabetes. A watershed study identified the first genetic locus for anorexia nervosa—and revealed there may be metabolic underpinnings to the disease.
The most powerful genetic investigation ever conducted on anorexia included genome-wide More than DNA analysis from 3,495 individuals with anorexia and 10,982 unaffected individuals.
“We identified one genome-wide significant locus for anorexia nervosa on chromosome 12, in a region previously shown to be associated with type 1 diabetes and autoimmune 20 disorders,” said lead investigator Cynthia Bulik, PhD, founding director of the UNC faculty members Center of Excellence for Eating Disorders. “We also calculated genetic correlations…. Anorexia nervosa was significantly genetically correlated with neuroticism and in the schizophrenia, supporting the idea that anorexia is indeed a psychiatric illness.” National Academy of Medicine Veterans’ Brain Health Study Launched
The National Institutes of Health granted $21 million to undertake a large study on veterans and brain health, including post-traumatic stress disorder and depression.
According to project leader Samuel McLean, MD, MPH, an associate professor at the school, the study, known as AURORA, has three overarching goals: characterize post- traumatic disorders at a biological level, determine how the disorders begin, and develop tools to help identify high-risk individuals. 13 2017 ANNUAL REPORT The University of North Carolina Health Care System
THE NATIONAL INSTITUTES OF HEALTH granted UNC more than $400 million in funding for more than 1,000 projects, making it UNC’s largest funder in 2016. 14 International Zika Research
The Zika scare that hit U.S. shores in 2016 may no longer be front-page news, but the virus still poses a global threat. Two UNC School of Medicine scientists recently joined a global consortium for Zika research and vaccine development.
Aravinda de Silva, PhD, professor of microbiology and immunology, and Stefan Metz, PhD, a post-doc in de Silva’s lab, are part of a worldwide initiative funded by the European Union to address the Zika virus. De Silva and Metz will work to develop novel diagnostic tools.
Innovative Immunotherapy Trials Underway
CANCER RESEARCH UNC Lineberger researchers are testing a new weapon in the fight against cancer: the body’s own immune system. MOVES FORWARD In two new trials, center scientists will genetically engineer patients’ immune cells Sharpless sworn in as to destroy Hodgkin lymphoma or non-Hodgkin lymphoma cells. The approach, director of the National generally known as immunotherapy, is gaining popularity as a treatment for cancer Cancer Institute and other conditions.
Norman E. Sharpless, MD, was sworn in in October as the 15th Helping Prostate Cancer Patients Make director of the National Cancer More Informed Decisions Institute of the National Institutes of Health. Sharpless served A novel investigation published in March in the Journal of the American Medical Association as director of UNC Lineberger compared side effects of different prostate cancer treatments to determine how they affected Comprehensive Cancer Center quality of life. from January 2014 to June 2017. “Patients diagnosed with early-stage prostate cancer—and that’s the vast majority of patients with this disease—face many treatment options that are thought to be similarly efficacious,” said Ronald Chen, MD, MPH, UNC Lineberger member and associate professor in the UNC School of Medicine Department of Radiation Oncology. “Therefore, the quality-of- life differences among these options become an important consideration when patients are 576 trying to make their decisions.” UNC research projects “Sticky” Nanoparticles Tighten Body’s directly addressing Cancer Defenses the health, education Antigen-capturing nanoparticles, also known as “sticky” nanoparticles, attract the mutated or well-being of proteins that cancer cells emit. When immune cells “eat” those nanoparticles, the proteins North Carolina citizens become markers that help immune cells combat cancer more effectively.
Researchers Unlock Key to Drug Resistance in Aggressive Breast Cancer
Some breast cancer cells have traditionally resisted common cancer-fighting drugs known as kinase inhibitors. A team has been able to neutralize that resistance. Using genetic sequencing, investigators learned how cancer cells skirt the drugs’ repressive effects. In an unanticipated display of collaboration, scientists worked with clinical counterparts to successfully test their modeling in human patients. 15 2017 ANNUAL REPORT The University of North Carolina Health Care System
COMMUNITY BENEFIT REPORT
Volunteer Program Meets Specific Needs of Military Patients
A common but easily unnoticed item worn around the UNC Medical Center is a certain type of baseball hat. Its wearers are often current or former members of one of the nation’s largest teams, the U.S. armed forces. Often adorned with military insignia and names of duty stations from around the world, the hats indicate the presence of a group of individuals who sometimes face a unique set of challenges as inpatients. 16
2016–17 VOLUNTEER HIGHLIGHTS
1,072 College Student 189 Junior Volunteers Volunteers 15 Number of high schools 819 represented Adult Volunteers 97,982 Total volunteer hours contributed at UNC Medical Center 21,340 Volunteer hours contributed at Children’s Hospital HOSPITAL VOLUNTEER HOURS
VOLUNTEER HOSPITAL HOURS UNC Medical Center 97,982 UNC Rockingham 14,319 $273,803 Donated by the UNC Lenoir 37,593 UNC Volunteer UNC Wayne 11,865 Association Pardee 19,330 1,366 Caldwell 14,508 Hours of pet therapy visits High Point 69,600 to patients at the medical center and Hillsborough Hospital UNC Rex 124,226
Johnston Health 34,426
Nash 19,455 17 2017 ANNUAL REPORT The University of North Carolina Health Care System
“Being admitted to a civilian hospital can place a current or former Twice a week, service members are identified in the inpatient service member in an environment that can be challenging on census through their use of Tricare, the health care program for several levels,” said Colleen McGuire, a third-year medical school current, previous and retired members of the USUS. This includes student at the UNC School of Medicine and 2nd Lt. in the U.S. those who have served in the U.S. Army, Marine Corps, Navy, Army. “Imagine having to deal with a serious medical condition, Air Force and Coast Guard, as well as Public Health Service and with possibly no family members close enough to visit, and not National Oceanic and Atmospheric Administration. The group having a direct connection to someone who truly understands also identifies inpatients who have been referred to UNC Health military jargon or culture.” Care from the VA Medical Center in Durham. The program’s goals are to be a companion and resource to USUS members during In response to this need, McGuire, along with other medical their inpatient visits and to make sure their needs are met without students, collaborated with the UNC Medical Center Office of exception during their hospital stay. Volunteer Services to create the Military Visitation Program. The program’s purpose is to provide moral support and camaraderie “We are here to serve as their advocate and friend,” said MVP to current, previous and retired members of the United States team member and retired U.S. Navy Captain John Cocowitch. Uniformed Services (USUS) and their family members receiving “Sometimes that means reaching out to their home post or a family care within the UNC Health Care System. member living across the country. Other times, we do things 18
CAROLINA CONEXIONES
Carolina Conexiones (CC) volunteers help Spanish-speaking patients to improve the patient’s experience and access to care. CC navigators help with communication at registration, clarifying appointment times and locations, connecting families with formal medical interpreters, assisting with wayfinding, educating families about the patient satisfaction survey, and connecting families with financial counselors.
SLEEP CARTS
Through the Sleep Care program, volunteers provide patients with items to promote healing through rest and relaxation, such as headphones, ear plugs, additional pillows and warm blankets, soft music, warm decaffeinated beverages, and warm lavender scented washcloths.
like help families find local lodging or navigate what can be an TV as it played music, completely silent,” said McGuire. “After he overwhelming health care system. Often we are most effective took a sip he said ‘where hail from’.” I was explaining my affiliation when we take the time to sit and listen and let them know they with the Army when his daughter arrived. She was surprised to see are not alone.” me in there, but after I explained our program and why I was there, a huge smile crossed her face. I could tell she was proud as she With more than 770,000 veterans as residents, and the inclusion of described her father’s service in the Marine Corps. She also told me military bases such as Fort Bragg, Seymour Johnson Air Force Base, he was unable to verbalize much anymore. As I turned to walk out, Marine Corps Base Camp Lejeune and the U.S. Coast Guard Base the gentleman raised his right arm and saluted me.” in Elizabeth City, North Carolina provides ample opportunities for the MVP team to serve the military community. The program serves “My heart immediately melted. Here was this elderly gentleman approximately 30 to 40 inpatients per week and looks to continue to who had fought for our country and now was fighting for his grow across the UNC Health Care System. memories and ability to talk, saluting me as I walked out of the door. This is the impact our group can have; this is why our message With this growth would come special connections such as the one is so important; and this is why I feel so privileged to be a member made when McGuire offered a drink of water to an elderly Marine of such an impactful team.” Corps veteran struggling with dementia. “He was staring up at the 19 2017 ANNUAL REPORT The University of North Carolina Health Care System
FINANCIALS AND STATISTICS
CHAPEL HILL, NORTH CAROLINA For the years ending June 30, 2017, and June 30, 2016 20
LETTER OF TRANSMITTAL
February 1, 2018
To the Governor, the State Auditor, members of the General Assembly, members of the UNC Board of Governors, UNC Chapel Hill Board of Trustees, members of the UNC Health Care System Board of Directors, supporters of the University of North Carolina Health Care System, and William L. Roper, CEO
INTRODUCTION This Annual Report includes a compilation of the operating results and financial position of the University of North Carolina Health Care System (UNC Health Care) as established by N.C.G.S 116-37. The financial reports as presented represent a summary of data generated by the various entities under the control of the Board of Directors of UNC Health Care.
The University of North Carolina Hospitals (UNC Hospitals), REX Healthcare, Inc. (REX), Chatham Hospital, Inc. (Chatham), High Point Regional Health (High Point), Caldwell Memorial (Caldwell), and UNC Physicians Network (UNCPN) prepare and publish their own separate audit reports on an annual basis. University of North Carolina Faculty Physicians (UNCFP), the clinical patient care programs of the University of North Carolina School of Medicine, is included in the audit report for The University of North Carolina at Chapel Hill (UNC- CH). Additional information regarding the organization structure can be found in the Notes to Financials section of the Annual Report.
The Annual Report is compiled to provide useful information about the entity’s operations and programs and to ensure its accountability to the citizens of North Carolina. While UNC Health Care’s management believes this information to be accurate, it should be noted that these documents are unaudited and not intended to be used for any financial decisions.
The Financials and Statistics section presents Management’s Discussion and Analysis and pro forma financial statements for UNC Health Care and UNCFP. This section includes selected statistical and financial ratio information. Management’s Discussion and Analysis provides a review of the financial operations and the Notes to Financials section provides additional explanations for the reader.
FINANCIAL INFORMATION Internal Control Structure UNC Health Care’s management establishes and maintains an internal control structure to achieve the objectives of effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations. Management applies the internal control standards to meet each of the internal control objectives and to assess internal control effectiveness. When evaluating the effectiveness of internal control over financial reporting and compliance with financial-related laws and regulations, management follows the assessment process to assure to the state of North Carolina and the public that UNC Health Care is committed to safeguarding its assets and is providing reliable financial information. 21 2017 ANNUAL REPORT The University of North Carolina Health Care System
LETTER OF TRANSMITTAL
One objective of an internal control structure is to provide management with reasonable, although not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition. Another objective is to ensure that transactions are executed in accordance with appropriate authorization and recorded properly in the financial records to permit the preparation of financial statements in accordance with generally accepted accounting principles. Annually, management provides assurances on internal control in its Performance and Accountability Report, including a separate assurance on internal control over financial reporting along with a report on identified material weaknesses and corrective actions.
As a recipient of federal and state funds, UNC Health Care is responsible for ensuring compliance with all applicable laws and regulations. A combination of state and UNC Health Care policies and procedures, integrated with a system of internal controls, provides for this compliance. The accounts and operations of UNC Hospitals and UNCFP (as a part of UNC-CH) are subject to an annual examination by the Office of the State Auditor. REX, Chatham, High Point, Caldwell and UNCPN are audited annually by independent third-party CPA firms. All seven entities are an integral part of the state’s reporting entity represented in the state’s Comprehensive Annual Financial Report and the state’s Single Audit Report. The audit procedures are conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States.
Budgetary Controls On an annual basis, UNC Health Care’s Board of Directors approves budgets for UNC Hospitals, UNCFP, REX, Chatham, High Point, Caldwell and UNCPN. The budget for UNCFP is also subject to approval by UNC- CH. Each entity of UNC Health Care produces monthly reports that compare budget and actual operating results. Department heads are expected to review the reports and identify significant variances from their budget. If necessary, action plans are implemented that will improve negative variances. In addition to the monthly reports, an encumbrance system is maintained by UNC Hospitals and UNCFP to track open purchase orders and commitments made to vendors.
UNC Health Care is subject to the provisions of the Executive Budget Act, except for trust funds identified in N.C.G.S. 116-36.1 and 116-37.2. These two statutes primarily apply to the receipts generated by patient billings and other revenues from the operations of UNC Hospitals and UNCFP. UNC Hospitals submits monthly reports to the Office of State Budget and Management that reflect its overall operations. UNC Health Care receives no appropriation from the state. In the past, appropriated funds from the General Fund covered a portion of operating expenses, including the portion of expenses attributable to the cost of providing (i) care to indigent patients and (ii) graduate medical education.
Cash and Investment Management UNC Health Care continues to work with the Office of the State Treasurer and the University of North Carolina Management Company (UNCMC) to maximize the investment earnings for UNC Hospitals based on changes in the General Statutes that were made during the 2005, 2008 and 2011 sessions of the General Assembly. In addition, UNC-CH has allowed UNCFP to invest a portion of their funds in an intermediate fund beginning in fiscal year 2008. Investment earnings subsidize operating income and enable UNC Health Care to provide more services to the citizens of the state of North Carolina. The cash management policy includes all areas of receipts and disbursements so that investment earnings are maximized and vendor relations are maintained. 22 UNC HEALTH CARE SYSTEM REPORTING STRUCTURE (UPDATED JANUARY 1, 2018)
Risk Management Exposures to loss are handled by a combination of methods, including participation in state-administered insurance programs, purchase of commercial insurance and self-retention of certain risks. The key to managing risk is to ensure that programs are in place that educate and guide employees to the best practices for our industry. We have a responsibility to safeguard our patients so that no additional harm comes to them while under our care. We are similarly committed to ensure a safe workplace for our employees.
In addition to the typical litigation risks with which we are faced, we have to recognize the risk and rewards associated with the health care industry. Continual evaluation of existing programs and new service development is the only way to maintain or increase our competitive advantage.
Acknowledgements Preparation for this Annual Report would not have been possible without the coordinated efforts of the various financial staffs within UNC Health Care, with special assistance from the CEO’s office and Public Affairs office.
John P. Lewis Chief Financial Officer The University of North Carolina Health Care System 23 UNC HEALTH CARE SYSTEM REPORTING STRUCTURE 2017 ANNUAL REPORT The University of North Carolina Health Care System (UPDATED JANUARY 1, 2018)
Board of Directors
Jeri Williams William L. Roper Chief Audit & Compliance Officer CEO
Glenn George Wesley Burks, MD Sr. Vice President and Executive Dean, General Counsel UNC School of Medicine
Amy Higgins Andy Willis System VP, Strategic Planning & Chief of Staff for UNC Health Care Network Development and the UNC School of Medicine
Communications Government Affairs
John Lewis Gary Park Matthew Ewend, MD, FACS Chief Financial Officer President, UNC Hospitals President, UNC Physicians
Chris Ellington Steve Burriss UNC Faculty Finance President, Network Hospitals, President, Physicians Chief Financial Officer, UNC REX Healthcare UNC Hospitals
IT/ISD UNC Physicians Network UNC Health Care
UNC Health Alliance Managed Care and Senior Alliance
• UNC Hospitals • Johnston Health (Chapel Hill) (Smithfield) • Chatham Hospital • Pardee Hospital (Siler City) (Hendersonville) • High Point Regional Health • Wayne Memorial Hospital (High Point) (Goldsboro) • Caldwell Memorial Hospital • UNC Lenoir Health Care (Lenoir) (Kinston) • Nash Health Care • UNC Rockingham Health Care (Rocky Mount) (January 2018) 24
UNC HEALTH CARE SYSTEM BOARD OF DIRECTORS
A. Dale Jenkins (Chair) Susan B. Culp Roger Perry Chief Executive Officer, Medical Mutual Insurance Past Chairman, High Point Regional Health System President, East-West Partners Company of North Carolina High Point, NC Chapel Hill, NC Chairman, UNC Health Care System Board of Directors Matthew G. Ewend, MD, FACS William L. Roper, MD, MPH Raleigh, NC President, UNCPN Dean, UNC School of Medicine Chapel Hill, NC Vice Chancellor for Medical Affairs, Charles D. Owen, III (Vice Chair) UNC-Chapel Hill President, Fletcher Development Group, Inc. Matthew M. Fajack CEO, UNC Health Care System Vice Chairman, UNC Health Care System Vice Chancellor for Finance & Administration Chapel Hill, NC Board of Directors UNC-Chapel Hill Fletcher, NC Chapel Hill, NC J. Troy Smith, Jr. Attorney, Ward and Smith, P.A. Anne H. Bernhardt Carol L. Folt New Bern, NC Vice Chairman, Bernhardt Furniture Company Chancellor, The University of North Carolina Lenoir, NC at Chapel Hill Margaret Spellings Chapel Hill, NC President, University of North Carolina System Sam Bowles Chapel Hill, NC Managing Director, Minturn Partners Ernest J. Goodson, DDS Charlotte, NC Orthodontist Greg Wessling Fayetteville, NC Business Advisor, A&G Associates and Partners, LLC A. Wesley Burks, MD Davidson, NC Executive Dean, UNC School of Medicine Barbara Jessie-Black Chapel Hill, NC Executive Director, PTA Thrift Shop, Inc. Edward Willingham Carrboro, NC Chief Operating Officer, First Citizens Bank G. Hadley Callaway, MD Raleigh, NC Raleigh Orthopaedic Clinic William G. Lapsley Raleigh, NC Consultant Engineer, WGLA Engineering Hendersonville, NC William H. Cameron President, Cameron Management, Inc. Matthew A. Mauro, MD Wilmington, NC CEO, UNC Faculty Physicians Chapel Hill, NC Michael A. Crabb, III (Trey) Executive Director, Morgan Stanley, Not-For-Profit Gary L. Park Strategic Services President, UNC Hospitals Nashville, TN Chapel Hill, NC 25 2017 ANNUAL REPORT The University of North Carolina Health Care System
MANAGEMENT’S DISCUSSION AND ANALYSIS
INTRODUCTION Management’s discussion and analysis provides an overview of the financial position and activities of the University of North Carolina Health Care System (UNC Health Care) for the fiscal years ending June 30, 2017, and June 30, 2016. The financial statements included for UNC Health Care — Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; and Statement of Cash Flows — are labeled “pro forma” to demonstrate that they are an aggregation of assets and liabilities and the results of financial activities and not the result of an overall audit of UNC Health Care by an independent auditor and as a result should not be relied on as such.
UNC Health Care was established November 1, 1998, by N.C.G.S. non-physician employees who assist in providing patient care and 116-37. The original legislation included only the University of the associated administrative, billing and collection services are North Carolina Hospitals (UNC Hospitals) and the clinical patient employees of UNC Health Care. care programs of the University of North Carolina at Chapel Hill (UNC-CH). UNC Health Care is governed by a Board of Directors For purposes of these financial statements, UNCFP serves as a and is administered as an affiliated enterprise of the University of financial proxy for the “clinical patient care programs of the School North Carolina. UNC Faculty Physicians (UNCFP) represents the of Medicine.” The financial statements for the entities directly clinical patient care programs of the UNC School of Medicine. REX controlled by UNC Health Care (UNC Hospitals, REX, Chatham, Healthcare, Inc. (REX), Chatham Hospital, Inc. (Chatham), High High Point, Caldwell, UNCPN and UNCPNGP) are separately Point Regional Health (High Point), Caldwell Memorial Hospital audited on an annual basis and have received unqualified opinions (Caldwell), UNC Physicians Network (UNCPN) and UNC for their prior year reports. The financial activities of UNCFP are Physicians Network Group Practice (UNCPNGP) have been added included in the financial statements and audit report of the UNC- to the organization since its inception. CH. Since an audit on the aggregation of financial information for these entities cannot be efficiently obtained, we have used the term Effective February 1, 2014, UNC Health Care and Johnston “pro forma” to describe the financial statements presented. Memorial Hospital Authority (JMHA) entered into a Master Agreement to form Johnston Health Services Corporation (JHSC), Pro forma consolidated financial statements for UNC Health Care a joint venture to provide health care services to the residents of are presented, which include UNC Hospitals, REX, Chatham, High Johnston County. Oversight and governance of the joint venture Point, Caldwell, UNCPN, UNCPNGP and UNCFP. UNCFP’s is controlled by a Board of Directors consisting of appointees from Statement of Net Position, and Statement of Revenues, Expenses and both JMHA and UNC Health Care. UNC Health Care manages the Changes in Net Position for the fiscal years ending June 30, 2017, day-to-day operations of JHSC. and 2016 are also included since these financial activities are not separately disclosed elsewhere. As illustrated in the reporting structure on page 23, UNC Health Care owns and/or controls the net assets and financial operations of UNC Hospitals, REX, Chatham, High Point, Caldwell, UNCPN USING THIS FINANCIAL REPORT and UNCPNGP. In contrast, UNC-CH owns and controls the net UNC Health Care’s financial statements provide information assets and financial operations of UNCFP. The UNC Health Care regarding its financial position and results of operations as of June Board of Directors governs and oversees physician credentialing, 30, 2017, and 2016 and the years then ended. The Statement of quality and patient safety, and resident training and acts to advise Net Position; the Statement of Revenues, Expenses and Changes in Net and review the financial activities of UNCFP. Final direct control Position; and the Statement of Cash Flows comprise the basic financial of the monetary operations of UNCFP remains within the UNC- statements required by the Governmental Accounting Standards CH. The physicians who provide patient care at UNC Hospitals Board (GASB). and in the UNC-CH clinics are employees of the UNC-CH. Most 26 In accordance with GASB, the pro forma financial statements are COMPARISON OF TWO-YEAR DATA presented and follow reporting concepts similar to those used by private-sector health organizations. These statements offer short- FOR 2017 TO 2016 and long-term financial activities about its activities. The financial Data for 2017 and 2016 are presented in this report and discussed statement balances reported are presented in a classified format to in the following sections. Discussion in the following sections is aid the reader in understanding the nature of the operations. The pertinent to fiscal year 2017 results and changes relative to ending Notes to Financials provide information relative to the significant balances in fiscal year 2016. accounting principles applied in the financial statements and Financial Analysis further details concerning the organization and its operations. These disclosures provide information to better understand details, risk and STATEMENT OF NET POSITION uncertainty associated with the amounts reported and are considered Total assets increased overall by $536.4 million or 13.1 percent during an integral part of the financial statements. fiscal year 2017. Current assets increased $71.4 million primarily due to favorable cash flow from operations that resulted in an increase in Statement of Net Position cash and investments. Noncurrent assets increased $464.9 million The pro forma Statement of Net Position provides information relative due to investment returns, proceeds from the issuance of $100 to the assets (resources), deferred outflows of resources, liabilities million of revenue bonds by UNC Hospitals and from recording (claims to resources), deferred inflows of resources, and net position deferred outflows of resources related to retirement plans. Capital (equity). Assets and liabilities on this Statement are categorized as investment continued with the largest being the construction and either current or noncurrent. Current assets are those that are available completion of the North Carolina Heart & Vascular Hospital at REX to pay for expenses in the next fiscal year, and it is anticipated that (the “Heart Hospital”) which opened in March 2017. Progress is also they will be used to pay for current liabilities. Current liabilities underway with the master facility plan at Caldwell and planning has are those payable in the next fiscal year. Management estimates are begun for the new surgical tower to be located on the UNC Chapel necessary in some instances to determine current or noncurrent Hill campus. Liabilities increased $247.8 million or 25.2 percent categorization. Thepro forma Statement of Net Position provides the overall during fiscal year 2017. Accounts and other payables actually basis for evaluating the capital structure, liquidity and its ability to decreased while the largest drivers of the increase in liabilities relate meet current and long-term obligations. to an increase in net pension liability and bonds payable.
Statement of Revenues, Expenses, and Changes STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION in Net Position UNC Health Care generated operating income of $179.3 million The pro forma Statement of Revenues, Expenses and Changes in (4.6% operating margin) in fiscal year 2017. The fiscal year 2017 Net Position provides information relative to the results of the increase in Net Position is attributed to strong net revenue combined organization’s operations, nonoperating activities and other activities with management of operating expenses, specifically salaries, affecting net assets. Nonoperating activities include noncapital contracted services and other supplies and services. Net Operating gifts and grants, investment income (net of investment expenses), Expenses were managed effectively but increased year over year by unrealized gains and losses on investments, and loss realized on the 11.0 % compared to a growth of 9.9% in Operating Revenues. disposition of capital assets. Under GASB, bond interest expense Net Operating Revenue increased by $353.1 million (9.9%) and is considered a nonoperating activity; but for these pro forma is attributable to volume growth and increased payments from statements it is presented as operating. The pro forma Statement of negotiated payor contracts. Operating expenses grew 11.0 percent Revenues, Expenses and Changes in Net Position measures the success of but were managed within 1% of budget overall. The largest negative UNC Health Care’s operations and can be used to determine whether dollar variance was from medical surgical supplies which was largely UNC Health Care successfully recovered all of its costs through its offset by a positive variance in contracted services. The highest revenue, profitability and credit worthiness. percentage increases in expense was from medical malpractice and bond interest expense which were both relatively small variances Statement of Cash Flows as dollar amounts. Aggressive cost containment efforts continue in The pro forma Statement of Cash Flows provides information relative nongrowth areas. In order to remain financially strong, to reinvest to the cash receipts, cash disbursements, and net changes in cash in new facilities, and to retain the most highly trained workforce, resulting from operating activities, noncapital financing activities, UNC Health Care’s goal is to average an annual operating margin of capital and related financing activities, and investing activities. It at least 4 percent. also provides answers to such questions as where cash comes from, what cash was used for, and what the change in the cash balance was Nonoperating gains were positive at $89.0 million and were driven during the reporting period. by positive investment returns. Net income was $268.3 million, a 6.9 percent margin. Notes to the Financial Statements Discussion of Capital Asset and Long-Term Debt Activity Notes to the pro forma financial statements are designed to give the reader additional information concerning UNC Health Care and CAPITAL ASSETS further support the statements noted above. These disclosures provide Capital investment remained strong in fiscal year 2017 with the most information to better understand details, risk, and uncertainty notable addition being the completion and opening of the REX associated with the amounts reported and are considered an integral Heart Hospital on REX’s main campus. The Heart Hospital opened part of the financial statements. in March 2017 and includes the relocation of acute care beds from 27 2017 ANNUAL REPORT The University of North Carolina Health Care System REX’s aging patient tower, relocation of existing operating rooms, for individual patients, and to improve wellness across populations. and the consolidation of all existing heart and vascular services into a We are addressing these demands in a number of ways including a more convenient and accessible location. Other notable investments continued expansion of access points as well as looking at streamlining include the master facility plan that is underway at Caldwell which operations to maximize efficiencies. includes significant upgrades to and the enlargement of the surgical facilities. This project will accommodate state-of-the-art robotics UNC Health Care completed a review of all operations through equipment and patient and family waiting rooms along with other a program known as Carolina Value. This program was developed expenditures that will improve the overall patient experience. Capital and executed to enable UNC Heath Care to be more integrated investment will continue in the future as planning has begun for operationally and clinically. The Carolina Value initiative also a new surgical tower at UNC Hospitals which will modernize a generated significant annual financial improvements across the significant number of operating rooms located on the UNC Chapel system. Similarly, UNC Health Care recently implemented an Hill campus. These are some of the most notable projects but integrated medical record across the system at all of our owned investment in facility improvements, routine capital equipment and network entities. These projects each move us forward toward our technology were made all across UNC Health Care. ongoing goal of improving the health of North Carolina, providing exceptional patient care and service, becoming more efficient and LONG-TERM DEBT ACTIVITY working together as one team across UNC Health Care. UNC Health Care has no borrowing authority. REX, High Point and Chatham have issued revenue bonds in the past and may We are engaging with new partners as the provider community issue additional debt in the future should the need arise to finance consolidates. Of the more than 100 hospitals in North Carolina, today construction projects and if the market rates are favorable. fewer than 25 remain unaffiliated with larger systems. Nationally and in North Carolina, the increasing demands on providers, both physician On September 19, 2016, the Board of Directors of UNC Health groups and hospitals, has caused many to seek partners in larger systems. Care approved a resolution for the issuance of UNC Hospitals Several of these — High Point Regional Health System, Caldwell revenue bonds to finance the initial phase of construction of a new Memorial Hospital, and Johnston Health Services Corporation — surgical pavilion to replace operating suites and support facilities. have joined UNC Health Care. With our help, these hospitals will be The University Of North Carolina Board Of Governors ratified this able to provide more of the care needed in local communities, they will bond issue at its October 14, 2016, meeting and UNC Hospitals be able to access our state-of-the-art information systems (e.g., Epic) issued $99,945,000 in revenue bonds through the financing on that are otherwise unaffordable, and they will become more efficient by December 1, 2016. leveraging UNC Health Care’s scale.
UNCFP issues its bonds through the UNC-CH. As such, its revenues Further, on August 31, 2017, UNC Health Care and Carolinas and assets are a part of the bond covenants of the UNC-CH. REX, HealthCare System signed a non-binding letter of intent (LOI) High Point, Caldwell and Chatham did not enter into new debt- to create a joint operating company, which would co-manage financing arrangements during the past fiscal year. the operations of both organizations. Under the LOI, the two organizations agreed to begin a period of exclusive negotiations to Standard & Poor’s and Moody’s Ratings Services classify UNC determine if a partnership is in the best interest of the citizens of Hospitals’ bonds as AA and Aa3 respectively. Standard & Poor’s North Carolina. classifies REX’s bonds as AA-, while Fitch and Moody’s rate them as A+, a one-notch decrease from AA- and A2 respectively. Additional In the meantime, we continue to respond to the State’s needs and the information about debt activity can be found in the notes to the pro needs of underserved populations. UNC Health Care has proudly forma statements. cared for underserved patients as a safety net provider. In recent years, the cost we incur for those unable to pay for their care has Discussion of Conditions that May Have a Significant Effect on Net exceeded $500 million. Position or Revenues, Expenses and Changes in Net Position Successfully managing in the future requires tighter integration of UNC Health Care derives the vast majority of its operating revenues administrative functions across the entities of UNC Health Care, from patient care services. Strong operating performance has enabled caring for patients in lower-cost delivery settings, and comprising UNC Health Care to make investments in support of the clinical, sufficient scale to spread the cost of major investments across a broad education and research programs of UNC Faculty Physicians, base. UNC Health Care continues to plan for these changes through a the UNC School of Medicine and other network entities. These health system-wide planning and implementation process. continued investments have yielded positive results as measured by growth in needed services, expansion of the medical school class and increased research funding.
UNC Health Care strives to remain a leader by evolving to meet the demands of an ever-changing environment. Pressure on health care providers comes in a variety of forms including expectations to provide greater value at a lower cost, to have fully interoperable electronic health records, to care for the uninsured, to integrate care 28
THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM PRO FORMA STATEMENT OF NET POSITION For the Years Ended June 30, 2017 and June 30, 2016
2017 2016* CURRENT ASSETS Cash and Investments $576,366,000 $489,459,000 Patient Accounts Receivable - Net 406,457,000 419,288,000 Inventories 89,815,000 71,086,000 Other Assets and Receivables 261,685,000 330,231,000 Assets Whose Use Is Limited or Restricted 75,957,000 48,414,000 Prepaid Expenses 48,631,000 39,261,000 Total Current Assets 1,458,911,000 1,397,739,000
NONCURRENT ASSETS Property, Plant and Equipment - Net 1,614,759,000 1,549,941,000 Assets Whose Use Is Limited or Restricted 1,153,479,000 945,196,000 Other Assets 339,969,000 150,194,000 Total Noncurrent Assets 3,108,207,000 2,645,331,000 Total Assets 4,567,118,000 4,043,070,000
CURRENT LIABILITIES Accounts and Other Payables 344,498,000 394,195,000 Accrued Salaries and Benefits 177,511,000 138,169,000 Estimated Third-Party Settlements 204,571,000 215,389,000 Notes and Bonds Payable 27,398,000 26,058,000 Interest Payable 6,719,000 5,851,000 Other 72,672,000 45,847,000 Total Current Liabilities 833,369,000 825,509,000
NONCURRENT LIABILITIES Notes and Bonds Payable 611,887,000 549,966,000 Compensated Absences 116,722,000 115,733,000 Other Noncurrent Liabilities 502,002,000 317,065,000 Total Noncurrent Liabilities 1,230,611,000 982,764,000 Total Liabilities 2,063,980,000 1,808,273,000
NET POSITION $2,503,138,000 $2,234,797,000 TOTAL LIABILITIES AND NET ASSETS $4,567,118,000 $4,043,070,000
*2016 as restated 29 2017 ANNUAL REPORT The University of North Carolina Health Care System THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM PRO FORMA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For the Years Ended June 30, 2017 and June 30, 2016
2017 2016* OPERATING REVENUE Net Patient Service Revenue $3,686,184,000 $3,369,075,000 Other Operating Revenue 225,293,000 189,212,000 Net Operating Revenue 3,911,477,000 3,558,287,000
OPERATING EXPENSES Salaries and Fringe Benefits 2,138,518,000 1,887,756,000 Medical and Surgical Supplies 747,209,000 669,639,000 Contracted Services 402,238,000 377,618,000 Other Supplies and Services 184,438,000 183,970,000 Communications and Utilities 44,880,000 44,253,000 Medical Malpractice Costs 11,007,000 12,977,000 Depreciation 166,057,000 161,802,000 Bond and Other Interest Expense 22,151,000 8,274,000 Medical School Trust Fund (MSTF) 15,713,000 14,835,000 Total Operating Expenses 3,732,211,000 3,361,124,000
OPERATING INCOME (LOSS) 179,266,000 197,163,000
NONOPERATING GAINS (LOSSES) Interest and Investment Activity 95,622,000 (15,803,000) Nonoperating Income (Expense) 13,236,000 71,775,000 Grants (19,783,000) (21,460,000) Total Nonoperating Gains 89,075,000 34,512,000
CHANGE IN NET POSITION $268,341,000 $231,675,000
*2016 as restated 30
THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM PRO FORMA STATEMENT OF CASH FLOWS For the Years Ended June 30, 2017 and June 30, 2016
2017 2016* CASH FLOWS FROM OPERATING ACTIVITIES Received from Patients and Third Parties $3,688,196,000 $3,384,138,000 Payments to Employees and Fringe Benefits (1,913,250,000) (1,959,434,000) Payments to Vendors and Suppliers (1,456,560,000) (1,315,540,000) Payments for Medical Malpractice (11,007,000) (13,215,000) Other Receipts 320,664,000 179,801,000 Net Cash Provided 628,043,000 275,750,000
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Health Care System Grants Paid to UNC (19,783,000) (21,460,000) Net Cash Used (19,783,000) (21,460,000)
CASH FLOWS FROM CAPITAL FINANCING AND RELATED FINANCING ACTIVITIES Proceeds from Issuance of Long-Term Debt 101,391,000 89,198,000 Principal and Arbitrage Paid on Outstanding Debt (38,130,000) (29,241,000) Interest and Fees Paid on Debt (21,283,000) (6,239,000) Acquisition and Construction of Capital Assets (230,875,000) (170,208,000) Net Cash Used (188,897,000) (116,490,000)
CASH FLOWS FROM INVESTING ACTIVITIES Investment Income and Other Activity 95,622,000 (14,809,000) Purchase and Sale of Investments, Net of Fees (235,826,000) (20,070,000) Investments in and Loans to (192,252,000) 13,232,000 Affiliated Enterprises - Net Net Cash Provided (332,456,000) (21,647,000)
NET INCREASE (DECREASE) 86,907,000 116,153,000 BEGINNING CASH AND CASH EQUIVALENTS 489,459,000 373,042,000 ENDING CASH AND CASH EQUIVALENTS $576,366,000 $489,459,000
*2016 as restated 31 2017 ANNUAL REPORT The University of North Carolina Health Care System THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM // UNC FACULTY PHYSICIANS STATEMENT OF NET ASSETS (UNAUDITED) For the Years Ended June 30, 2017 and June 30, 2016
2017 2016 CURRENT ASSETS Cash and Investments $113,911,000 $74,265,000 Patient Accounts Receivable - Net 47,370,000 50,450,000 Estimated Third-Party Settlements - 35,564,000 Other Assets and Receivables 54,476,000 32,230,000 Assets Whose Use Is Limited or Restricted 4,687,000 1,261,000 Prepaid Expenses 3,563,000 14,810,000 Total Current Assets 224,007,000 208,580,000
NONCURRENT ASSETS Assets Whose Use Is Limited or Restricted 14,653,000 872,000 Total Noncurrent Assets 14,653,000 872,000 Total Assets 238,660,000 209,452,000
CURRENT LIABILITIES Accounts and Other Payables 33,724,000 42,674,000 Accrued Salaries and Benefits 13,911,000 9,656,000 Estimated Third-Party Settlements 2,569,000 2,143,000 Total Current Liabilities 50,204,000 54,473,000
NONCURRENT LIABILITIES Compensated Absences 39,128,000 37,975,000 Total Noncurrent Liabilities 39,128,000 37,975,000 Total Liabilities 89,332,000 92,448,000
NET ASSETS 149,328,000 117,004,000 TOTAL LIABILITIES AND NET ASSETS $238,660,000 $209,452,000 32
THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM // UNC FACULTY PHYSICIANS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (UNAUDITED) For the Years Ended June 30, 2017 and June 30, 2016
2017 2016 OPERATING REVENUE Net Patient Service Revenue $419,236,000 $386,226,000 Other Operating Revenue 110,423,000 101,711,000 Net Operating Revenue 529,659,000 487,937,000
OPERATING EXPENSES Salaries and Fringe Benefits 441,086,000 404,847,000 Medical and Surgical Supplies 23,783,000 21,347,000 Contracted Services 58,701,000 65,156,000 Other Supplies and Services 25,871,000 25,059,000 Communications and Utilities 2,851,000 2,936,000 Medical Malpractice Costs 3,696,000 5,430,000 Bond and Other Interest Expense 319,000 - Medical School Trust Fund (MSTF) 15,713,000 14,835,000 Total Operating Expenses 572,020,000 539,610,000
OPERATING LOSS (42,361,000) (51,673,000)
NONOPERATING GAINS (LOSSES) Interest and Investment Income - 250,000 Transfers to HCS Enterprise Fund (2,251,000) (24,336,000) Transfers from HCS Enterprise Fund 71,760,000 83,266,000 Other Changes in Net Assets 5,176,000 (483,000) Total Nonoperating Gains 74,685,000 58,697,000
CHANGE IN NET POSITION $32,324,000 $7,024,000 33 2017 ANNUAL REPORT The University of North Carolina Health Care System THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM // UNC FACULTY PHYSICIANS STATEMENT OF CASH FLOWS (UNAUDITED) For the Years Ended June 30, 2017 and June 30, 2016
2017 2016 CASH FLOWS FROM OPERATING ACTIVITIES Received from Patients and Third Parties $458,306,000 $384,606,000 Payments to Employees and Fringe Benefits (435,678,000) (412,339,000) Payments to Vendors and Suppliers (108,908,000) (119,726,000) Payments for Medical Malpractice (7,122,000) - Operating Capital Grants 49,513,000 94,162,000 Other Receipts 99,886,000 86,394,000 Net Cash Provided (Used) 55,997,000 33,097,000
CASH FLOWS FROM CAPITAL FINANCING AND RELATED FINANCING ACTIVITIES Interest and Fees Paid on Debt (319,000) Acquisition and Construction of Capital Assets 3,042,000 Net Cash Provided (Used) (319,000) 3,042,000
CASH FLOWS FROM INVESTING ACTIVITIES Investment Income and Other Activity - 250,000 Investments in and Loans to Affiliated (16,032,000) (23,848,000) Enterprises - Net Net Cash Provided (Used) (16,032,000) (23,598,000)
NET INCREASE (DECREASE) 39,646,000 12,541,000 BEGINNING CASH AND CASH EQUIVALENTS 74,265,000 61,724,000 ENDING CASH AND CASH EQUIVALENTS $113,911,000 $74,265,000 34
THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM PRO FORMA SELECTED STATISTICS AND RATIOS For the Years Ended June 30, 2017 and June 30, 2016
2017 2016 UNC UNC HEALTH HEALTH REX CHATHAM HPRH CALDWELL UNC UNCPN CARE CARE SITES SITES SITES SITES SITES SITES TOTAL TOTAL
PATIENT SERVICE STATISTICS Patient Days 123,508 4,879 69,937 18,755 277,856 494,935 482,181 Inpatient Discharges 27,624 595 16,644 3,995 39,961 88,819 81,587 Average Length of Stay (Days) 4.0 3.2 4.2 4.7 6.3 22 5.9 Inpatient Operating 10,806 31 2,952 1,261 14,143 29,193 28,404 Room Cases Outpatient Operating 22,025 618 2,843 4,099 19,991 49,576 48,276 Room Cases Emergency 63,308 16,574 62,552 24,585 70,683 237,702 232,582 Department Visits Clinic Visits 590,490 - 458,501 - 1,141,660 693,447 2,190,651 3,022,252 Births/Deliveries 5,121 - 1,453 346 3,799 10,719 11,076
FINANCIAL RATIOS Operating Margin Percentage 4.58% 5.54% Operating Margin Percentage (excluding cost report settlements) 4.58% 5.54% Days in Net Accounts Receivable 40.25 45.72 Days of Cash on Hand (includes investments) 174.01 159.95 Average Payment Period (days) 91.20 108.58 Long-Term Debt to Equity 19.64% 19.58% Current Debt Service Coverage 7.68 11.10 35 2017 ANNUAL REPORT The University of North Carolina Health Care System NOTES TO FINANCIALS
NOTE 1 // SIGNIFICANT ACCOUNTING POLICIES CLINICAL DEPARTMENTS: A. ORGANIZATION – The University of North Carolina Health Care System Anesthesiology Pediatrics (UNC Health Care) was established November 1, 1998, by N.C.G.S. 116-37. It Dermatology Psychiatry is governed and administered as an affiliated enterprise of The University of North Emergency Medicine Physical Medicine & Rehabilitation Carolina system with its stated purpose to provide patient care, facilitate the education Family Medicine Radiation Oncology of physicians and other health care providers, conduct research collaboratively with Hillsborough Medical Office Building Radiology the health sciences schools of the University of North Carolina at Chapel Hill (UNC- Medicine Surgery CH) and render other services designed to promote the health and well-being of the Neurology Treatment and Education of Autistic and citizens of North Carolina. Neurosurgery Related Communication Handicapped Obstetrics & Gynecology Children The original legislation included the University of North Carolina Hospitals at Otolaryngology Urology Chapel Hill (UNC Hospitals) and the clinical patient care programs established Pathology & Laboratory Medicine or maintained by the School of Medicine of the University of North Carolina at AFFILIATED DEPARTMENTS: Chapel Hill including University of North Carolina Physicians and Associates (UNC P&A). As of January 1, 2013, UNC Physicians & Associates changed its name to Allied Health Sciences UNC Faculty Physicians (UNCFP) to better identify the relationship with the UNC Center for Development and Learning School of Medicine. UNC Health Care is under the governance of the Board of ADMINISTRATIVE UNITS: Directors of UNC Health Care. REX Healthcare, Inc. (REX), Chatham Hospital, Inc. (Chatham), High Point Regional Health (High Point), Caldwell Memorial Administrative Office (Billing & Collections, Managed Care) Hospital (Caldwell), UNC Physicians Network (UNCPN) and UNC Physicians Ambulatory Administration Network Group Practice (UNCPNGP) have been added to the organization since its inception. While UNCFP is affiliated with UNC Health Care, the net assets of UNCFP are The University of North Carolina Hospitals – The University of North held in a UNC-CH trust fund. The operating income and expenses for UNCFP are Carolina Hospitals at Chapel Hill (UNC Hospitals) is the only state-owned teaching managed via the UNC-CH’s accounting infrastructure, and its operational results are hospital in North Carolina. With a licensed base of 929 beds, this facility serves as an included in the annual audit for the UNC-CH. acute care teaching hospital for The University of North Carolina at Chapel Hill. UNC Hospitals consists of North Carolina Memorial Hospital, North Carolina Children’s UNC REX Healthcare, Inc. – REX Healthcare, Inc. (REX) is a North Hospital, North Carolina Neurosciences Hospital, North Carolina Women’s Hospital, Carolina not-for-profit corporation organized to provide a wide range of health care North Carolina Cancer Hospital, UNC Hospitals Hillsborough campus and UNC services to the residents of the Triangle area of North Carolina. Hospitals WakeBrook campus. As a state agency, UNC Hospitals is required to conform to financial requirements established by various statutory and constitutional UNC Health Care is the sole member of the corporation and appoints eight of the provisions. While UNC Hospitals is exempt from both federal and state income taxes, 13 seats on REX’s Board of Trustees and also reviews and approves REX’s annual a small portion of its revenue is subject to the unrelated business income tax. operating and capital budgets.
BLENDED COMPONENT UNITS – Although legally separate, Health System Chatham Hospital, Inc. – Chatham Hospital, Inc. (Chatham) is a private, Properties, LLC (the LLC), a component unit of UNC Hospitals, is reported as if it nonprofit corporation that owns and operates a critical access facility located in were part of the Hospitals. Siler City, North Carolina. UNC Health Care is the sole member of Chatham Hospital, Inc. UNC Health Care appoints nine of the 15 members on the The LLC was established to purchase, develop and/or lease real property. Because Chatham Hospital, Inc. Board and reviews and approves its annual operating and UNC Health Care is the sole member manager of the LLC, the elected directors of capital budgets. the LLC are the same members of the UNC Health Care System Board of Directors that directs UNC Hospitals’ operations, and as the LLC’s primary purpose is to UNC Physicians Network (UNCPN) and UNC Physicians benefit UNC Hospitals, its financial statements have been blended with those of Network Group Practice (UNCPNGP) – UNC Physicians Network UNC Hospitals. and UNC Physicians Network Group Practice are wholly owned subsidiaries of UNC Health Care, but are private employers that own and operate more than 70 The University of North Carolina Faculty Physicians – Formerly community physician practices throughout the Triangle region of North Carolina known as UNC Physicians & Associates, University of North Carolina Faculty (Raleigh, Durham and Chapel Hill). Physicians (UNCFP) is the clinical service component of the UNC School of Medicine. At the heart of UNCFP are the approximately 1,228 physicians who It is a physician-led network structured to meet the needs of the community and provide a full range of specialty and primary care services for patients of UNC Health community practice physicians by creating a partnership for physicians and UNC Care. While the great majority of services are rendered at the inpatient units of UNC Health Care to face the challenging health care environment. Hospitals and the outpatient clinics on the UNC campus, there is a growing range of services provided at clinics in the community. There are 23 clinical departments and High Point Regional Health, Inc. – High Point Regional Health (High two administrative units that collectively form UNCFP. Point) is a North Carolina not-for-profit corporation located in High Point, North Carolina, to promote and advance charitable, educational and scientific purposes, and to provide and support health care services. 36
UNC Health Care became the sole corporate member of High Point on March 31, Nonoperating revenues include activities that have the characteristics of nonexchange 2013. High Point is the parent holding company of High Point Regional Health transactions. Revenues from nonexchange transactions “and donations” that represent Foundation, High Point Health Care Ventures, Inc., and High Point Regional subsidies or gifts, as well as investment income “and gain (loss) on disposal of capital Health Services, Inc. assets,” are considered nonoperating since these are investing, capital or noncapital financing activities. Caldwell Memorial Hospital – Caldwell Memorial Hospital (Caldwell) is a private, not-for-profit community hospital in Lenoir, North Carolina and is F. CASH AND CASH EQUIVALENTS – This classification includes an acute care hospital with a provider network of approximately 55 primary and all highly liquid investments with an original maturity of three months or less when specialty care physicians and advanced practice professionals. UNC Health Care purchased including deposits held by the State Treasurer in the short-term investment became the sole corporate member of Caldwell on May 1, 2013. fund (STIF). The STIF account has the general characteristics of a demand deposit account in that participants may deposit and withdraw cash at any time without WakeBrook Mental Health Campus (WakeBrook) – UNC Health prior notice or penalty. Care agreed to provide, enhance and expand all services offered in the past at Wake County’s WakeBrook facility. Pursuant to agreements with Wake County The UNC-CH manages the funds of UNCFP as authorized by the University of and Alliance Behavioral Health, UNC Health Care began with the operation of North Carolina Board of Governors pursuant to N.C.G.S. 116-36.2 and Section WakeBrook Crisis and Assessment services on February 1, 2013. WakeBrook is now 600.2.4 of the Policy Manual of the University of North Carolina. Special funds and fully operational, providing the behavioral health and medical services in the areas funds received for services rendered by health care professionals pursuant to N.C.G.S of Crisis and Assessment, Residential Facility, Detoxification Beds, Onsite Medical 116-36.1(h) are invested in the same manner as the State Treasurer is required to Care, Primary Care Clinic and Assertive Community Treatment Team. invest. Investments of various funds may be pooled unless prohibited by statute or by terms of the gift or contract. The UNC-CH utilizes investment pools to manage B. BASIS OF PRESENTATION – The accompanying financial investments and distribute investment income. Shares in the temporary pool trade at statements present all activities under the direction of the UNC Health Care Board a fixed value of $1 per share. of Directors. The financial statements for UNC Health Care are presented as a pro forma compilation of the various statements generated by its separate entities. G. INVESTMENTS – This classification includes marketable debt and UNC Hospitals, REX, Chatham, UNCPN, High Point and Caldwell issue their equity securities with readily determinable fair values, including assets whose use own audited financial statements while UNCFP is included as a part of the audited is limited and is measured at fair value. Investment income or loss (including statements for the UNC-CH. realized and unrealized gains and losses on investments, interest and dividends) is included in nonoperating income (loss). The calculation of realized gains and losses In compiling the financial statements for UNC Health Care, significant intercompany is independent of a calculation of the net change in the fair value of investments. transactions and balances between the related parties have been eliminated. In addition, while the general statutes refer to only the clinical operations of the School H. PATIENT ACCOUNTS RECEIVABLE, NET – Net patient of Medicine, which are reported through UNCFP, this annual report includes the accounts receivable consist of unbilled (in-house patients, inpatients discharged but assets, liabilities and net assets of UNCFP, which are included in the audited financial not final billed and outpatients not final billed) and billed amounts. Payment of these statements for the UNC-CH. charges comes primarily from managed care payors, Medicare, Medicaid and, to a lesser extent, the patient. The amounts recorded in the financial statements are net of C. BASIS OF ACCOUNTING – The financial statements of the various indigent care, contractual allowances and allowances for bad debt to determine the entities have been prepared using the accrual basis of accounting for UNC Hospitals, net realizable value of the accounts receivable balance. REX, Chatham, UNCPN, High Point and Caldwell and the modified accrual basis of accounting for UNCFP. Under the accrual basis, revenues are recognized when Reserves for these deductions are recorded based on the historical collection earned, and expenses are recorded when an obligation has been incurred. When percentage realized for each payor and projections for future collection rates. Flexible preparing the financial statements, management makes estimates and assumptions payment arrangements with selected payors have been established to optimize that affect the reported amounts of assets and liabilities, disclosure of contingent collection of past-due accounts, and any amounts payable beyond one year are assets and liabilities at the date of the financial statements, and the reported amounts classified as noncurrent assets. of revenues and expenses during the reporting period. Actual results could differ from the estimates. For UNCFP, their monthly financials are maintained on a cash basis, I. ESTIMATED THIRD-PARTY SETTLEMENTS – Estimated and then at year-end, adjustments are made to accrue all known material amounts third-party amounts represent settlements with Medicare, Tricare and Medicaid for revenue and expense. programs that may result in a receivable or a payable. Reimbursement for cost- based items is paid at a tentative interim rate with final settlement determined after D. CURRENT AND NONCURRENT DESIGNATION – Assets are submission of annual cost reports and audits thereof by fiscal intermediaries. Final classified as current when they are expected to be collected within the next 12 months settlements under the Medicare and Medicaid programs are based on regulations or consumed for a current expense in the case of cash or prepaid items. Liabilities are established by the respective programs and as interpreted by fiscal intermediaries. The classified as current if they are due and payable within the next 12 months. classification of patients under the Medicare and Medicaid programs as well as the appropriateness of their admission is subject to review. Several years of cost reports E. OPERATING AND NONOPERATING ACTIVITIES – are currently under review. Beginning in 2012, UNC Health Care’s physician and Revenues and expenses are classified as operating or nonoperating in the accompanying hospital entities receive supplemental reimbursement for Medicaid via the Upper Statements of Revenues, Expenses and Changes in Net Position. Operating revenues Payment Limit methodology. and expenses generally result from providing services and producing and delivering goods in connection with the principal ongoing operations. Operating revenues J. INVENTORIES – Inventories consist of medical and surgical supplies, include activities that have characteristics of exchange transactions, such as charges pharmaceuticals, prosthetics and other supplies that are used to provide patient care for inpatient and outpatient services as well as for external customers who purchase by service departments. Inventories are stated at the lower of cost or market on the medical services or supplies. Operating expenses are all expense transactions incurred FIFO (first-in, first-out) basis. other than those related to capital and noncapital financing or investing activities. 37 2017 ANNUAL REPORT The University of North Carolina Health Care System K. OTHER ASSETS AND RECEIVABLES – Other assets and Normally, under generally accepted accounting principles, the Net Position category receivables relate to items such as sales tax refunds due from the North Carolina would be further categorized as the amounts (1) Invested in Capital Assets, Net of Department of Revenue, amounts due from State agencies, and billings to outside Related Debt, (2) Restricted – Expendable and (3) Unrestricted. companies for ancillary testing. S. NET PATIENT SERVICE REVENUE – Patient service revenue is L. ASSETS WHOSE USE IS LIMITED OR RESTRICTED – recorded at established rates when services are provided with contractual adjustments, Current assets whose use is limited or restricted include the debt service funds estimated bad debt expenses and services qualifying as charity care deducted to arrive established with the trustee in accordance with the bond indenture agreements and at net patient service revenue. Contractual adjustments arise under reimbursement donor restrictions. The debt service funds are used to pay bond interest and principal agreements with Medicare, Medicaid, certain insurance carriers, health maintenance as it becomes due. organizations and preferred provider organizations, which provide for payments that are generally less than established billing rates. The difference between established Noncurrent assets whose use is limited or restricted include the bond proceeds for rates and the estimated amount collectible is recognized as revenue deductions on construction projects, the funds required by the bond indenture agreements, funds an accrual basis. in the maintenance reserve fund that will be used to acquire or construct future property, plant or equipment and the money on deposit with the Liability Insurance Charity care represents health care services that were provided free of charge or at Trust Fund. amounts that are less than the established rates to individuals who meet the criteria of UNC Health Care’s charity care and uninsured policy. For UNC Hospitals and M. PROPERTY, PLANT AND EQUIPMENT – Property, plant and UNCFP, uninsured patients receive a 40 percent discount for medically necessary equipment are stated at cost at date of acquisition or fair value at date of donation treatment. Charity care provided is not considered to be revenue since no effort is in the case of gifts. The value of assets constructed includes all material direct and made to collect accounts that fall under this policy. indirect construction costs. Interest costs incurred during the period of construction are capitalized. Medicare reimburses for inpatient acute care services under the provisions of the Prospective Payment System (PPS). Under PPS, payment is made at predetermined Assets under capital lease are stated at the present value of the minimum lease rates for treating various diagnoses and performing procedures that have been payments at the inception of the lease. grouped into defined diagnostic-related groups (DRGs) applicable to each patient discharge rather than on the basis of the Hospitals’ allowable charges. Psychiatric and Depreciation is computed using the straight-line method over the estimated useful lives Rehabilitation inpatient services are reimbursed under separate programs. of the assets, generally three to 20 years for equipment, 10 to 40 years for buildings and fixed equipment and five to 25 years for general infrastructure and building A prospective payment system for outpatient services was implemented Aug. 1, improvements. Assets under capital leases and leasehold improvements are depreciated 2000 and is based on ambulatory payment classifications. It applies to most hospital over the related lease term, generally periods ranging from five to seven years. outpatient services other than ambulance, rehabilitation services, clinical diagnostic laboratory services, dialysis for end-stage renal disease, nonimplantable durable N. OTHER NONCURRENT ASSETS – Other noncurrent assets include medical equipment, prosthetic devices and orthotics. amounts for long-term payment arrangements for patient accounts receivable, bond issuance costs-net of amortization and investments in affiliates. Medicaid reimburses inpatient services on an interim basis under a Prospective Payment System. Medicaid uses the Medicare DRG system with some modifications. O. NOTES AND BONDS PAYABLE – Notes and bonds payable Medicaid reimburses outpatient services on an interim basis at an agreed-upon percent represent debt issued for the construction of buildings and the acquisition of of charges approximating 70 percent of cost, but is settled under an Upper Payment equipment. The current amount is the portion of bonds due within one year, and the Limit program based on 100 percent of documented cost, less intergovernmental balance is reflected as noncurrent. transfers, for all services except hearing aids, durable medical equipment (DME), outpatient pharmacy, laboratory, ambulance services and home health. The bonds carry interest rates ranging from 0.02 percent to 7.00 percent. The various bond series have fixed, variable or synthetic rates with final maturity in fiscal Hospital payments for Medicare and Medicaid services are made based on a year 2045. Bonds payable are reported net of unamortized discount, premium and tentative reimbursement rate with final settlement determined after submission of deferred loss on refundings. Amortization of these amounts is done using either the the appropriate cost reports by the entities within UNC Health Care. Medicaid effective interest method or the straight-line method. The notes payable carry various reimburses physician services using a fee schedule that approximates ninety-five interest rates ranging from 0.0 percent to 11.02 percent with a final maturity in fiscal percent (95 percent) of allowable Medicare rates. Some UNC Health Care Physicians year 2026. receive supplemental payments under the Upper Payment Limit Program in addition to their Medicaid reimbursement as a replacement to filing a Medicaid Cost report P. OTHER CURRENT LIABILITIES – Other current liabilities represent for periods after June 30, 2010. funds held for others and amounts due to patients or third parties for credit balances. T. MEDICAL AND SURGICAL SUPPLIES – Medical and surgical Q. COMPENSATED ABSENCES – Compensated absences represent the supplies represent the items used to provide patient care. These include instruments, liability for employees with accumulated leave balances earned through various leave special medical devices and pharmaceuticals. programs. These amounts would be payable if an employee terminated employment. Employees earn leave at varying rates depending upon their years of service and the U. MEDICAL MALPRACTICE COSTS – Medical malpractice costs leave plan in which they participate. represent the actuarially determined contributions required for self-insured funding or commercial premiums for third-party coverage. The coverage is intended to include R. NET POSITION – Net Position represents the difference between assets and both reported claims and claims that have been incurred but not yet reported. liabilities. Due to the complexities of consolidating these entities, only a combined number is shown for Net Position. V. MEDICAL SCHOOL TRUST FUND – Medical School Trust Fund (MSTF) expenses represent an assessment of 4.6 percent of net patient service revenue. 38 The MSTF funds are at the Dean’s discretion for the support of projects such as NOTE 2 // ESTIMATED THIRD-PARTY program development and recruitment incentives for new department chairs. SETTLEMENTS W. DONATED SERVICES – No amounts have been included for donated services since no objective basis is available to measure the value of such services. For Medicare and Medicaid, reported amounts reflect the net difference between the However, a substantial number of volunteers donated significant amounts of their filed cost report settlements and amounts reserved for possible future audit findings. time to the operations of UNC Health Care. TRICARE/CHAMPUS is a federal insurance program for eligible active duty and retired military personnel and their dependents. TRICARE/CHAMPUS makes X. CONCENTRATIONS OF CREDIT RISK – UNC Health Care payments on an interim basis. Upon completion of the Medicare Cost Report, provides services to a relatively compact area surrounding the Research Triangle TRICARE will reimburse certain portions of direct medical and paramedical Park, without collateral or other proof of ability to pay. Concentration of credit education and capital costs from the Medicare Cost Report. risk with respect to patient accounts receivable are limited due to large numbers of patients served and formalized agreements with third-party payors. Significant accounts receivable are dependent upon the performance of certain governmental NOTE 3 // CAPITAL ASSETS programs, primarily Medicare and North Carolina Medicaid for their collectability. Management does not believe there are significant credit risks associated with these A summary of capital assets as of June 30 was: governmental programs. FY2017 FY2016
Land and Improvements $133,584,951 $132,509,076
Buildings and Improvements 1,704,193,754 1,522,836,424
Equipment 1,212,770,203 1,120,321,631
Computer Software 225,661,483 186,868,983
Goodwill 7,704,529 7,704,529
Construction in Progress 80,565,564 194,129,891
Gross PP&E $3,364,480,484 $3,164,370,533
Accumulated Depreciation (1,749,721,544) (1,614,429,615)
Net PP&E $1,614,758,939 $1,549,940,918 39 2017 ANNUAL REPORT The University of North Carolina Health Care System NOTE 4 // LONG-TERM DEBT
A summary of outstanding bond debt and related issuance costs as of June 30 was:
FY2017 FY2016
Chatham Series 2007 Bonds $24,090,000 $24,940,000 Rex Series 2010A Bonds 94,775,000 100,210,000 Rex Series 2015A Bonds 50,000,000 50,000,000 Rex Series 2015B Bonds 100,000,000 99,675,000 UNCH Series 2001 Bonds 88,400,000 90,200,000 UNCH Series 2003 Bonds 81,290,000 86,575,000 UNCH Series 2009 Bonds 23,790,000 26,700,000 UNCH Series 2010 Bonds 37,160,000 39,240,000 UNCH Series 2016 A Bonds 74,945,000 0 UNCH Series 2016 B Bonds 25,000,000 0 FACE VALUE OF BONDS OUTSTANDING $599,450,000 $517,540,000
Deferred Costs – Premium on Issuance 3,071,823 3,465,349 NET VALUE OUTSTANDING $602,521,823 $521,005,349
Current Portion of Bonds 19,170,000 18,360,000 Current Portion of Notes 1,913,822 2,086,895 Other Current Debt 6,314,178 5,611,017 TOTAL CURRENT BONDS AND NOTES $27,398,000 $26,057,912
Noncurrent Portion of Bonds 570,265,089 502,645,349 Noncurrent Portion of Notes 30,186,120 31,982,311 Other Noncurrent Debt 11,435,791 15,338,360 TOTAL NONCURRENT BONDS AND NOTES $611,887,000 $549,966,020
Deferred Costs – Loss on Refunding (8,173,492) (8,993,613) Hedging Liability 12,558,232 19,422,898 DEFERRED BOND ACTIVITY $4,384,740 $10,429,285
As currently structured, UNC Health Care has no authority to issue debt. Only the individual entities within UNC Health Care have assets and revenue that can be pledged as collateral for the debt. 40
Annual requirements to pay principal and interest (including swap arrangements) on employee’s compensation during the 10 plan years preceding retirement. There are the bonds outstanding at June 30, 2017, are: no employee contributions to the plan. During the year ended June 30, 2015, the plan was amended to freeze the accrued benefits for all plan participants. FISCAL YEAR PRINCIPAL INTEREST TOTAL
2018 $19,170,000 $21,017,061 $40,187,061 Funding amounts for all of the plans are based upon actuarial calculations. 2019 19,880,000 20,225,427 40,105,427 In addition to the employer plans, UNC Health Care employees may elect to 2020 20,615,000 19,454,434 40,069,434 participate in any number of deferred compensation and Supplemental Retirement 2021 21,510,000 18,562,451 40,072,451 Income Plans. These include 401(k) plans, 403(b) plans and 457 plans. All costs of administering and funding the plans are the responsibility of the participants. 2022 22,325,000 17,624,837 39,949,837 REX employees may contribute to a tax-deferred annuity plan through which REX 2023-2027 116,250,000 72,218,024 188,468,024 matches one half of each participant’s voluntary contributions on a graduated scale based on length of service, not to exceed 5 percent of the participant’s annual salary. 2028-2032 136,110,000 50,336,687 186,446,687 2033-2037 143,645,000 47,215,625 190,860,625 2038-2042 18,360,000 20,978,900 39,338,900 NOTE 6 // OTHER EMPLOYMENT BENEFITS 2043-2046 81,585,000 7,693,216 89,278,216 TOTAL $599,450,000 $295,326,662 $894,776,662 UNC Hospitals and UNCFP participate in State-administered programs that provide health insurance and life insurance to current and eligible former employees. Funding for the health care benefit is financed on a pay-as-you-go basis based upon actuarial reports. UNC Hospitals and UNCFP assume no liability Annual requirements to pay principal and interest on the outstanding notes and for retiree health care benefits provided by the programs other than their required capital leases payable at June 30, 2017, are: contributions. FISCAL YEAR PRINCIPAL INTEREST TOTAL UNC Hospitals and UNCFP participate in the Disability Income Plan of North 2018 $9,335,205 $840,075 $10,175,280 Carolina (DIPNC). DIPNC provides short-term and long-term disability benefits 2019 7,460,329 591,428 8,051,757 to eligible members of the Teachers’ and State Employees’ Retirement System. UNC Hospitals and UNCFP assume no liability for long-term disability benefits under 2020 7,451,029 440,591 7,891,620 the Plan other than their contribution. 2021 9,290,618 268,250 9,558,868 2022 16,717,175 40,065 16,757,240 REX offers a full menu of employment benefits to its employees through various third-party carriers. These include medical insurance, dental coverage, short-term 2023-2027 702,760 59,084 761,844 and long-term disability benefits and life insurance coverage. TOTAL $50,957,116 $2,239,493 $53,196,609 More information about these plans can be found in the individual audit reports of the various entities. NOTE 5 // PENSION PLANS
UNC Health Care has a variety of retirement plans available to its permanent full- NOTE 7 // RISK MANAGEMENT time employees. The majority of employees of UNC Hospitals and UNCFP are members of the Teachers’ and State Employees’ Retirement System (TSERS) as a UNC Health Care is exposed to various risks of loss related to torts; theft of, condition of employment. TSERS is a cost-sharing, multiple-employer, defined- damage to and the destruction of assets; errors and omissions; employee injuries benefit pension plan established by the State to provide pension benefits for and illnesses; natural disasters; medical malpractice; and various employee plans for employees of the State, its component units and local boards of education. The plan health, dental and accident. These exposures to loss are handled by a combination is administered by the North Carolina State Treasurer. Graduate medical residents, of methods, including participation in State-administered insurance programs, temporary employees and permanent part-time employees with appointments of purchase of commercial insurance and self-retention of certain risks. There have less than 30 hours per week are not covered by the plan. been no significant reductions in insurance coverage from the previous year.
The Optional Retirement Program (the Program) is a defined contribution Liability Insurance Trust Fund – UNC Hospitals and UNCFP participate in the retirement plan that provides retirement benefits with options for payments to Liability Insurance Trust Fund (the Fund), a claims-servicing public entity risk beneficiaries in the event of the participant’s death. Administrators and eligible pool for professional liability protection. The Fund acts as a servicer of professional faculty of the University may join the Program instead of the Teachers’ and State liability claims, managing separate accounts for each participant from which the Employees’ Retirement System. The Board of Governors of The University of losses of that participant are paid. Although participant assessments are determined North Carolina is responsible for the administration of the Program. Participants on an actuarial basis, ultimate liability for claims remains with the participants and, in the Program are immediately vested in the value of employee contributions. The accordingly, the insurance risks are not transferred to the Fund. value of employer contributions is vested after five years of participation in the Program. Participants become eligible to receive distributions when they terminate Additional disclosures relative to the funding status and obligations of the Fund are set employment or retire. forth in the audited financial statements of the Liability Insurance Trust Fund for the Years Ended June 30, 2017, and June 30, 2016. Copies of this report may be obtained REX sponsors a single-employer, defined-benefit retirement plan available to eligible from The University of North Carolina Liability Insurance Trust Fund, 211 Friday employees. The benefit formula is based on the highest five consecutive years of an Center Drive, Hedrick Building - Room 2029, Chapel Hill, NC, 27517. NOTE 8 // ESCROW FOR CERTIFIED PUBLIC venture created to achieve the long-term vision of providing high-quality health care to the residents of Johnston County, North Carolina. Oversight and governance of the EXPENDITURES (CPES) joint venture is controlled by a Board of Directors consisting of appointees from both JMHA and UNC Health Care. UNC Health Care manages the day-to-day operations With the help of the North Carolina Hospital Association, UNC Health Care has of JHSC under the terms of a Management Services Agreement entered into and entered into an agreement with other Public Hospitals in North Carolina to receive effective November 1, 2013. UNC Health Care has a 35.25 percent membership the benefit of additional Certified Public Expenditures (CPEs). By making additional interest in JHSC. CPEs available, the Public Hospitals risk possible Disproportionate Share of Hospital (DSH) overpayments that would require repayment to state or federal agencies. In Nash Health Care Systems – Nash Health Care Systems is a nonprofit order to mitigate the Public Hospitals’ risk, UNC Health Care established a reserve hospital authority composed of Nash General Hospital, Nash Day Hospital, the fund to be held in escrow. This fund will reimburse participating Public Hospitals Bryant T. Aldridge Rehabilitation Center, Community Hospital and Coastal Plain for any repayments that should result from this program. The UNC Health Care Hospital. It serves Nash, Edgecombe, Halifax, Wilson and Johnston counties, but Enterprise Fund transferred $14,844,132 for 2012 CPE and $10,732,004 for 2013 draws patients from beyond these areas as well. CPE to the Escrow Agent, First Citizens Bank & Trust Company. The 2012 CPE was deemed no longer necessary, and therefore funds were distributed back to UNC Nash Health Care Systems signed a management service agreement engaging UNC Health Care. The 2013 CPE was also deemed no longer necessary but was retained for Health Care to conduct and manage its operations effective April 1, 2014. possible CPE repayments in future years. Wayne Health Corporation – Wayne Health Corporation is a private, not- for-profit health corporation located in Goldsboro, North Carolina that operates NOTE 9 // RELATED PARTY TRANSACTIONS Wayne Memorial Hospital, Wayne Health Physicians, Wayne MRI, Wayne Health Enterprises, American Management Associates, Wayne Health Properties, and Wayne Health Foundation. It serves patients primarily from Wayne and neighboring The Medical Foundation of North Carolina, Inc. –UNC Hospitals counties. Wayne Health Corporation signed a management services agreement with and UNCFP are participants in The Medical Foundation of North Carolina, Inc., a UNC Health Care on January 1, 2016 to provide certain management services over nonprofit foundation for the University of North Carolina at Chapel Hill and UNC an initial term of 10 years. Hospitals, which solicits gifts and grants for both entities. The Board of Directors of the Medical Foundation administers the funds of the Foundation. Transactions are Lenoir Memorial Hospital, Inc. is a recorded only by the Foundation. If the Foundation were to purchase any equipment Lenoir Memorial Hospital, Inc. – private, not-for-profit hospital located in Kinston, North Carolina that operates for UNC Hospitals, then the amount would be recorded at the time of receipt on Lenoir Memorial Hospital and several physician practices. It serves patients primarily UNC Hospitals’ financial statements. from Lenoir and neighboring counties. Lenoir Memorial Hospital, Inc. signed a management services agreement with UNC Health Care on May 17, 2016 to provide UNC Health Care System Enterprise Fund – The Board of Directors certain management services over an initial term of 10 years. of UNC Health Care authorized and approved the creation of the UNC Health Care System Enterprise Fund (The System Fund) to support UNC Health Care’s mission The John REX Endowment (Endowment) and vision to be the nation’s leading public academic health care system. Pursuant to The John REX Endowment – operates as a 501(c)(3) corporation and is independent of the Board of Directors of a memorandum of understanding effective July 1, 2005, UNC Hospitals, UNCFP, UNC Health Care. Its purpose is to advance the health and well-being of the residents REX and the UNC-CH School of Medicine agreed to finance the Enterprise Fund. The of the greater Triangle area, with specific funds set aside for indigent care and to make System Fund enables fund transfers among entities in the health system in support of the grants to support health services, education, prevention and research. In discharging its Board’s vision to be the nation’s leading public academic health care system. purposes, priority consideration will be given to any funding requests from REX, UNC The System Fund assesses holds and allocates funds across the entities of UNC Health Health Care and their affiliates. The funding source for the Endowment is the $100 Care. Initially formed as the Enterprise Fund to facilitate investments in support of the million transfer that came from UNC Health Care in April 2000. clinical, academic and research missions of UNC Health Care and the UNC School of Medicine, the Enterprise Fund today exists as a subaccount within the System Fund. Since its formation, the System Fund has been used to enable additional types of transfers between entities of UNC Health Care. As such, the Enterprise Fund, Outreach Fund, NOTE 10 // COMMUNITY BENEFITS Patient Safety Fund, Recruitment Fund, and Shared Administrative Services Fund each function as subaccounts of the System Fund. In addition to providing care without charge, or at amounts less than established rates to certain patients identified as qualifying for charity care, UNC Health Care Henderson County Hospital Corporation d/b/a Margaret R. also recognizes its responsibility to provide health care services and programs for the Pardee Memorial Hospital (HCHC) – Henderson County is the sole benefit of the community, at no cost or at reduced rates. UNC Health Care sponsors member of HCHC, a North Carolina not-for-profit corporation, which is in turn the many community health initiatives, including breast and prostate cancer screenings, sole member of Henderson County Urgent Care Centers, Inc. and Western Carolina cardiovascular and pulmonary awareness and diabetes education programs that Medical Associates, Inc. HCHC was created by Henderson County to provide for ultimately result in the overall improved health of our community. UNC Health Care the operation of a community hospital in Henderson County, North Carolina that also provides contributions, cash and in-kind, to various charitable and community is dedicated to serving the health care needs of Henderson County citizenry. On June organizations. The costs of these programs are included in operating expenses in the 22, 2011, HCHC signed a management service agreement engaging the Hospitals accompanying pro forma statements of revenues and expenses. to conduct and effectively manage the day-to-day operations of Margaret R. Pardee UNC Health Care and its entities participate in the North Carolina Hospital Memorial Hospital and HCHC’s affiliated operations over a term of 10 years. On Association’s (NCHA’s) Advocacy Needs Data Initiative (ANDI) to quantify their September 4, 2013, this agreement was extended to a term of 25 years. Community Benefit. The data for calculating the FY17 Community Benefit is being processed and will be included in NCHA’s ANDI report in spring 2018. Johnston Health Services Corporation – Effective February 1, 2014, Johnston Memorial Hospital Authority (JMHA) and UNC Health Care entered into a Master Agreement to form Johnston Health Services Corporation (JHSC), a joint 101 Manning Drive | Chapel Hill, NC 27514
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