Attachment 5 Medical Centers Report 17/18 UC Health is rooted in its three missions of patient care, teaching and research. They come together in a powerful way to improve the lives of people in California and beyond. From medical innovations and clinical trials to the high-quality, compassionate health care in our hospitals and clinics, UC pushes the boundaries of medicine forward. UNIVERSITY OF CALIFORNIA Medical Centers 17/18 Annual Financial Report TABLE OF CONTENTS 3 Letter from the Executive Vice President Medical Centers 4 The University of California, Davis Medical Center 8 The University of California, Irvine Medical Center 12 The University of California, Los Angeles Medical Center 16 The University of California, San Diego Medical Center 20 The University of California, San Francisco Medical Center and Children’s Hospital and Research Center Oakland 26 Management’s Discussion and Analysis 52 Report of Independent Auditors Financial Statements, University of California Medical Centers 54 Statements of Net Position 56 Statements of Revenues, Expenses and Changes in Net Position 58 Statements of Cash Flows 62 Notes to Financial Statements 110 Required Supplementary Information 116 University of California Regents and Officers Letter from the Executive Vice President UC Health is remarkable in its breadth and depth. • The Leveraging Scale for Value initiative (LSfV) continues Our six health systems, including five nationally ranked to wring efficiencies in supply chain, revenue cycle, academic medical centers, not only admit almost 175,000 and information technology producing cumulative savings inpatients annually but also handle more than 4.7 million of more than $729 million. outpatient visits. Our 18 health profession schools have • UC medical centers, which do not receive direct state nearly 15,000 students enrolled, generating nearly half funds for clinical care, have worked hard to achieve of the state’s graduates in dentistry, medicine, nursing, financial stability. As a result, they can provide financial optometry, pharmacy, public health and veterinary medicine. support to our health profession schools, which in turn By every metric, UC Health continues to grow year-over-year. train the medical professionals so desperately needed Even with this impressive scale, these are worrisome times in the state. in health care. Actions at the federal level are gradually • Our efforts to share best clinical practices continues to reducing the number of Americans with health insurance, advance, as UC medical centers enter into affiliations with scaling back payments to safety net facilities under physician groups, community hospitals, specialty clinics Medicare’s Disproportionate Share Hospital (DSH) program, and Federally Qualified Health Centers (FQHCs). threatening the 340B Drug Program that makes expensive • And we continue to expand our outpatient care capacity, drugs more affordable, and offering little relief from the with the opening of the Koman Family Outpatient Pavilion growing costs of residency programs or debt forgiveness at UC San Diego Health and the new Berkeley Outpatient for students. Center in San Francisco’s East Bay, a collaboration between Although we remain concerned about these macroeconomic UCSF Health and John Muir Health. forces, we salute the notable achievements across the These are the types of accomplishments that will propel enterprise. UC Health forward, for the benefit of California, the nation • All UC academic medical centers are among the nation’s and beyond. best hospitals, as recognized by U.S. News & World Report in its 2018-2019 rankings. Two of our medical centers are in the top 10 nationally, UCSF (6) and UCLA (7). And in California, each UC academic medical center is in the top 11: UCSF (1), UCLA (2), UC Davis (5), UC San Diego (9) and UC Irvine (11). JOHN D. STOBO, EXECUTIVE VICE PRESIDENT • We are a leader in supporting the health of Medi-Cal UC HEALTH, UNIVERSITY OF CALIFORNIA enrollees. Although comprising less than 6% of the acute care beds in California, we are Medi-Cal’s third-largest provider of inpatient services. Systemwide, 36% of inpatient days are attributed to Medi-Cal, and at Davis and Irvine, it is as high as 41% and 45%, respectively. UNIVERSITY OF CALIFORNIA MEDICAL CENTERS 17/18 ANNUAL FINANCIAL REPORT 3 The University of California, Davis Medical Center Service Area and Market Share The following table presents certain historical utilization statistics for the primary and secondary service areas for the 12-month period ended December 31, 2016. Data for the 12-month period ended December 31, 2016, is the most current data available from the state of California Office of Statewide Health Planning and Development. MARKET # OF % OF MARKET AREA COUNTIES ZIP CODES POPULATION DISCHARGES SHARE Primary Sacramento, 83 2,110,793 66.5% 10.6% Placer, Yolo Secondary Alpine, 65 519,647 9.4% 5.8% Amador, Colusa, El Dorado, Nevada, Sierra, Sutter, Yuba 4 The University of California, Davis Medical Center The Davis Medical Center is the principal clinical teaching site Davis Health Cancer Care Network is comprised of community- for the University of California, Davis, School of Medicine and based cancer centers in Marysville, Merced, Bakersfield, Truckee/ the Betty Irene Moore School of Nursing at UC Davis, and it is Tahoe and the southeastern Sierra. The Davis Medical Center’s the clinical core of the UC Davis Health system. nationally recognized clinical telemedicine and rural affiliation programs have affiliations with community hospitals and Licensed as a 625-bed general acute care hospital with more Federally Qualified Health Centers (FQHCs), Adventist Health, than 30 operating rooms, the Davis Medical Center provides the Veterans Administration, Lawrence Livermore National a full range of inpatient general acute and intensive care, and Laboratory and the adjacent Shriners Hospitals for Children — a full complement of ancillary, support and ambulatory services. Northern California. The UC Davis Medical Group, supported These services are housed in about 4.9 million gross square feet by approximately 1,260 faculty and contract physicians and of facilities, most of which are located on an approximately approximately 900 residents and fellows, provides inpatient 144-acre campus in the city of Sacramento. Ambulatory care is and outpatient medical services. provided at the hospital-based clinics and at satellite clinics in Sacramento and in the surrounding communities of Auburn, Significant events during the year are highlighted below: Carmichael, Davis, Elk Grove, Folsom, Natomas, Rancho Cordova, The Davis Medical Center continues to maintain Rocklin and Roseville. an outstanding local and national reputation The Davis Medical Center serves as a tertiary and quaternary care • The Davis Medical Center is the top-ranking hospital in referral hospital for a 33-county, 65,000-square-mile service area the Sacramento metropolitan area, according to the results with a population of more than six million. Its services range from of the annual U.S. News & World Report “Best Hospitals” heart and vascular surgery to transplant and neurological surgery. 2018-2019 survey. It is the only provider of several tertiary/quaternary services between San Francisco and Portland, including Level I adult and • The Davis Medical Center ranked as one of the nation’s pediatric trauma care. It is also home to the region’s only nationally best hospitals for 2018-2019 in 11 adult medical specialties, ranked comprehensive children’s hospital and a National Cancer including cancer care; cardiology and heart surgery; diabetes Institute-designated comprehensive cancer center. and endocrinology; ear, nose and throat; geriatrics; gynecology; nephrology; neurology and neurosurgery; orthopedics; The Davis Medical Center participates in a variety of cooperative pulmonology; and urology, according to the annual U.S. News outreach activities with regional health care providers. The UC & World Report “Best Hospitals” 2018-2019 survey. UNIVERSITY OF CALIFORNIA MEDICAL CENTERS 17/18 ANNUAL FINANCIAL REPORT 5 • U.S. News & World Report also released ratings for common Regional outreach and strategic initiatives types of care or procedures for 2018-2019, and ranked the We are continuing to enhance our ability to provide the right Davis Medical Center as high performing in abdominal aortic care, at the right time, in the right place to support our ongoing aneurysm repair, aortic valve surgery, chronic obstructive commitments both to our academic mission and our strong pulmonary disease, colon cancer surgery, heart bypass operational and financial performance. Responding to our surgery, heart failure and lung cancer surgery. UC Davis was Community Needs Assessment research, we continue to increase also designated as high performing in gastroenterology and affiliations with regional health care providers through seamless gastrointestinal surgery in the medical specialties rankings. transfer and repatriation processes — supported by electronic • U.S. News & World Report also ranked the Davis Children’s health record interoperability, virtual delivery of health care Hospital among the nation’s top children’s hospitals in five expertise and regional partnerships — to ensure access to specialties in its 2018-2019 rankings, including neonatology, tertiary and quaternary services at the Davis Medical Center diabetes and endocrinology, and nephrology. Together with when needed. We are also increasing our partnerships with