Audit 2015 - Massac Memorial Hospital

Transcription

MASSAC COUNTY HOSPITAL DISTRICT
D/B/A MASSAC MEMORIAL HOSPITAL
FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION
AND
INDEPENDENT AUDITORS' REPORT
YEARS ENDED MARCH 31, 2015 AND 2014
Contents
Page
Independent Auditors' Report
1-3
Required Supplementary Information
Management’s Discussion and Analysis (Unaudited)
4-8
Financial Statements
Statements of Net Position
Statements of Revenues, Expenses, and Changes in Net Position
9
10
Statements of Cash Flows
11 - 12
Notes to Financial Statements
13 - 32
Other Supplementary Information
Schedules of Net Patient Service Revenue
33
Schedules of Other Operating Revenues
34
Schedules of Operating Expenses
Schedules of Statistical Information (Unaudited)
Independent Auditors' Report on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing
Standards
Schedule of Findings and Responses
35 - 37
38
39 - 40
41
Independent Auditors' Report
Board of Directors
Massac County Hospital District d/b/a
Massac Memorial Hospital
Metropolis, Illinois
We have audited the accompanying financial statements of Massac County Hospital District
d/b/a Massac Memorial Hospital, which comprise the statements of net position as of March 31,
2015 and 2014, and the related statements of revenues, expenses, and changes in net position
and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. Those
standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
Page 1
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of Massac County Hospital District d/b/a Massac Memorial Hospital as of
March 31, 2015 and 2014, and the changes in its financial position and its cash flows for the
years then ended in accordance with accounting principles generally accepted in the United
States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 4 - 8 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board who considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted
in the United States of America, which consisted of inquiries of management about the methods
of preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we obtained
during our audits of the basic financial statements. We do not express an opinion or provide
any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audits were conducted for the purpose of forming an opinion on the financial statements of
Massac County Hospital District d/b/a Massac Memorial Hospital. The schedules of net patient
service revenue, other operating revenues, operating expenses, and statistical information are
presented for purposes of additional analysis and are not a required part of the basic financial
statements.
The schedules of net patient service revenue, other operating revenues, and operating
expenses are the responsibility of management and were derived from and relate directly to the
underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audits of the basic
financial statements and certain additional procedures, including comparing and reconciling
such information directly to the underlying accounting and other records used to prepare the
basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of
America. In our opinion, the schedules of net patient service revenue, other operating revenues,
and operating expenses are fairly stated, in all material respects, in relation to the basic
financial statements as a whole.
The schedules of statistical information have not been subjected to the auditing procedures
applied in the audits of the basic financial statements, and accordingly, we do not express an
opinion or provide any assurance on them.
Page 2
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
September 15, 2015 on our consideration of Massac County Hospital District d/b/a Massac
Memorial Hospital's internal control over financial reporting and on our tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion
on internal control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards in considering Massac
County Hospital District d/b/a Massac Memorial Hospital's internal control over financial
reporting and compliance.
September 15, 2015
Page 3
Massac County Hospital District
d/b/a Massac Memorial Hospital
March 31, 2015 and 2014
This discussion of the financial performance of Massac Memorial Hospital (the "Hospital")
provides an overall review of Hospital financial activities as of and for fiscal years ended March
31, 2015, 2014, and 2013. The intent of this presentation is to provide further information on the
performance of the Hospital. We encourage readers to consider the information presented here
in conjunction with the Hospital’s financial statements, including the notes thereto to enhance
their understanding of the financial status of the Hospital.
Overview of the Financial Statements
The financial statements include the statement of net position, statement of revenues,
expenses, and changes in net position, and the statement of cash flows. These statements also
include notes that explain in more detail some of the information in the financial statements.
The statements are designed to provide a broad overview of the Hospital’s financial position.
Our statements include both short and long-term information about the activities of the Hospital.
The statement of net position includes all of the Hospital’s assets and liabilities and provides
information about the nature and amounts of investment in assets and the obligations to our
creditors (liabilities). The statement of net position also provides the basis for evaluating the
capital structure of the Hospital and assessing the liability and financial flexibility of the Hospital.
There is a large commercial loan with our local bank that was used to finance the Electronic
Medical Record ("EMR"). This will be paid off when the Medicare reimbursement is received.
All of the current year’s revenues and expenses are accounted for in the statement of
revenues, expenses, and changes in net position. This statement is a measure of the success
of the Hospital’s operations over the past year and can be used to determine whether the
Hospital has successfully recovered all of its costs through its patient service revenue and the
other revenue sources. Reports are on an accrual basis, which means the related cash could
be received or paid in a subsequent period.
The last statement is the statement of cash flows which reports cash receipts, payments, and
net changes in cash resulting from operating, investing, and financing activities. This also
provides answers as where did cash come from, what was cash used for, and what was the
change in cash balance during the reporting period.
Financial Highlights
The condensed statements of net position and the condensed statements of revenue,
expenses, and changes in net position report the net position of the Hospital and the changes in
it. The net position $18,513,106 for fiscal year ended 2015 is a way to measure the financial
health of an organization. Over time, sustained increases or decreases in the Hospital’s net
position is one indicator of whether the financial health is improving or deteriorating. Other nonfinancial factors such as the local economy, changed governmental regulations / legislation,
and population changes should be considered.
 On March 31, 2015 the condensed statements of net position presents total assets of
$35,814,939, total liabilities of $17,301,833 and a net position of $18,513,106.
Page 4
March 31, 2015 and 2014
 The condensed statements of revenues, expenses, and changes in net position indicate net
patient service revenue of $22,006,032 for the current fiscal year. This is a decrease of
$452,820 from the prior year. This change is a direct result of an estimated $3,008,000
reimbursement claimed on the Medicare Cost report for the Electronic Medical Record
(EMR).
 Operating Income of $767,867 was down compared to last year. 2014 was unusual because
of the anticipated EHR $3,008,000 payment included in operating income of $3,341,976.
Removing that unusual income item reduces 2014 to $674,512 and results in a truer year to
year comparison.
 Operating expenses increased by $2,400,286 from the prior year due to Employee Benefits
increasing $1,059,958 due to increased health insurance costs and other benefit increases.
Depreciation Expense increased $1,285,809 from the prior year as a result of the full year
depreciation of the Electronic Medical Record (EMR).
 The Hospital’s current assets exceed current liabilities by $12,280,533 again mostly due to
the $3,142,778 estimate due from third party payers (Medicare).
 Net days in accounts receivable remain strong at 50.5 for March 31, 2015.
 Days cash on hand was at 254 as of the end of the fiscal year, continuing our strong
historical position even with a slight decrease in the cash and equivalents at year end.
 Management plans to reduce Debt Load by paying off current bank loans and restructuring
long-term debt to take advantage of lower interest rates reducing future years' interest
expense.
Condensed Statements of Net Position
Assets
2015
Current Assets
Cash and cash equivalents
Assets limited as to use or restricted
Patient receivables, net
Estimated amounts due from third-party
payers, net
Supplies
Other current assets
Total Current Assets
Assets Limited as to Use or Restricted
Capital Assets, net
Other assets
Total Assets
$ 11,134,128 $
883,093
3,041,766
March 31,
2014
7,065,061 $
883,874
2,752,394
2013
7,546,596
873,839
3,249,917
3,142,778
339,541
227,319
18,768,625
4,772,364
324,743
514,246
16,312,682
182,384
322,588
540,139
12,715,463
1,044,800
1,034,657
1,031,382
15,655,052
18,045,249
18,103,323
346,462
273,167
300,119
$ 35,814,939 $ 35,665,755 $ 32,150,287
Page 5
March 31, 2015 and 2014
Liabilities and Net Position
2015
Current Liabilities
Line of credit
Current maturities of capital lease
obligations and long-term debt
Accounts payable
Accrued expenses and other current
liabilities
Estimated amounts due to third-party
payers
Deferred revenue
Total Current Liabilities
$
3,182,981 $
March 31,
2014
3,182,981 $
2013
2,791,565
626,808
703,804
624,933
280,888
655,690
453,671
1,605,915
1,681,038
1,689,762
199,000
169,584
6,488,092
299,507
169,584
6,238,931
169,584
5,760,272
Long-term Capital Lease Obligations and
Long-term Debt
Total Liabilities
10,813,741
17,301,833
11,449,905
17,688,836
11,928,852
17,689,124
Net Position
Net investment in capital assets
Restricted
Unrestricted
Total Net Position
1,031,522
1,146,138
16,335,446
18,513,106
2,787,430
1,150,809
14,038,680
17,976,919
2,727,216
1,154,108
10,579,839
14,461,163
Total Liabilities and Net Position
$ 35,814,939 $ 35,665,755 $ 32,150,287
Page 6
March 31, 2015 and 2014
Condensed Statements of Revenues, Expenses, and Changes in Net Position
March 31,
2014
2015
Operating Revenues
Net patient service revenue (net of
provision for bad debt)
Other operating revenue
Total Operating Revenues
Operating Expenses
Salaries and wages
Employee benefits
Supplies and other
Depreciation and amortization
Total Operating Expenses
Operating Income
Nonoperating Revenues and Expenses, Net
Revenues in Excess of (Less than) Expenses
Capital Grants and Contributions
Change in Net Position
Net Position, Beginning of Year
Net Position, End of Year
2013
$ 22,006,032 $ 22,458,852 $ 19,291,671
356,435
417,974
184,947
22,362,467
22,876,826
19,476,618
8,446,573
3,481,469
6,824,352
2,842,206
21,594,600
8,610,468
2,421,511
6,605,938
1,556,397
19,194,314
8,443,610
3,362,474
6,143,773
1,509,991
19,459,848
767,867
3,682,512
16,770
(231,680)
(340,536)
536,187
3,341,976
-
173,780
536,187
3,515,756
17,976,919
14,461,163
(224,628)
(207,858)
173,780
(34,078)
14,495,241
$ 18,513,106 $ 17,976,919 $ 14,461,163
Capital Assets
The EMR project is ongoing but with much small expenditures. Additions to capital assets were
approximately $250,000 with no major projects undertaken or planned.
Long-term Debt
As of March 31, 2015 and 2014, the Hospital had $14,623,530 and $15,257,918, respectively,
in short-term and long-term debt (including lines of credit and capital lease obligations) a
decrease of $634,388 as a result of a payoff of the Rural Health Clinic construction loan payoff.
The debt was incurred to update the facilities and continue to invest in equipment and
technology. It is planned to pay off the existing EHR loan of $3,182,981 when the EHR funds
are received.
Page 7
March 31, 2015 and 2014
Economic and Other Factors and Next Year's Budget
The Hospital's Board and management team consider many factors when developing the fiscal
year 2016 budget. Major variables that were considered were the unknown impact of the
Affordable Care Act ("ACA") as well as the difficulty in status of the economy.
Management included the following factors into the budget process:
 Energy Costs
 Medicare and Medicaid reimbursement rates
 Salary and benefit costs
 Malpractice insurance
 Jumps in supply costs and frequent drug shortages
 ACA repercussions leading to high deductible insurance plans
 Technology advances and requirements (EMR)
Summary
The excellent patient care and dedication of our over 220 employees continue to make the
Hospital's Board of Directors proud of all our staff involved in care provided to the members of
our community we serve on a daily basis. We also want to extend our appreciation to each
member of the Medical Staff of the Hospital for their dedication and support.
Contacting the Hospital’s Finance Department
The Hospital’s financial statements are designed to present users with a general overview of
the Hospital’s finances and to demonstrate the Hospital’s accountability. If you have questions
about the report or need added financial information, please contact the finance department at
the following address:
28 Chick Street
Metropolis, IL 62960
Page 8
March 31, 2015 and 2014
Assets
2015
Current Assets
Assets limited as to use or restricted
Patient receivables, net
Other receivables
Estimated amounts due from third-party payers, net
Supplies
Prepaid expenses
Total Current Assets
$
Internally designated for capital improvements
Restricted under bond agreement
Less amount required to meet current obligations
Total assets limited as to use or restricted, excluding current
portion
Capital Assets
Not being depreciated
Depreciable, net
Investment in Partnership
Deferred Financing Costs, net
Total Noncurrent Assets
Total Assets
11,134,128
883,093
3,041,766
13,872
3,142,778
339,541
213,447
18,768,625
2014
$
7,065,061
883,874
2,752,394
255,771
4,772,364
324,743
258,475
16,312,682
139,542
1,788,351
1,927,893
(883,093)
139,194
1,779,337
1,918,531
(883,874)
1,044,800
1,034,657
334,222
15,320,830
15,655,052
4,123,491
13,921,758
18,045,249
98,000
248,462
17,046,314
273,167
19,353,073
$
35,814,939
$
35,665,755
$
3,182,981
97,378
529,430
703,804
1,605,915
199,000
169,584
6,488,092
$
3,182,981
112,735
512,198
280,888
1,681,038
299,507
169,584
6,238,931
Liabilities and Net Position
Current Liabilities
Line of credit
Current maturities of capital lease obligations
Current maturities of long-term debt
Accounts payable
Accrued expenses and other current liabilities
Estimated amounts due to third-party payers
Deferred revenue
Total Current Liabilities
Long-term Capital Lease Obligations
Long-term Debt
Total Liabilities
Net Position
Net investment in capital assets
Restricted
Expendable - under bond agreement
Unrestricted
Total Net Position
Total Liabilities and Net Position
See notes to financial statements
$
121,112
227,847
10,692,629
17,301,833
11,222,058
17,688,836
1,031,522
2,787,430
1,146,138
16,335,446
18,513,106
1,150,809
14,038,680
17,976,919
35,814,939
$
35,665,755
Page 9
Statements of Revenues, Expenses, and Changes in Net Position
Years Ended March 31, 2015 and 2014
2015
Operating Revenues
Patient service revenue
Provision for uncollectible accounts
Net patient service revenue
Other operating revenue
Total Operating Revenues
Operating Expenses
Salaries and wages
Employee benefits
Supplies and other
Operating Income
Nonoperating Revenues (Expenses)
County tax revenue
Noncapital grants and contributions
Interest income
Interest expense
Loss on disposal of capital assets
Total Nonoperating Revenues (Expenses)
Revenues in Excess of Expenses
Capital Grants and Contributions
Change in Net Position
Net Position, Beginning of Year
Net Position, End of Year
2014
$ 23,419,766 $ 24,682,683
(1,413,734)
(2,223,831)
22,006,032
22,458,852
356,435
22,362,467
417,974
22,876,826
8,446,573
3,481,469
6,824,352
2,842,206
21,594,600
8,610,468
2,421,511
6,605,938
1,556,397
19,194,314
767,867
3,682,512
188,334
66,658
71,098
(504,463)
(53,307)
(231,680)
189,825
14,171
62,287
(606,819)
(340,536)
536,187
3,341,976
-
173,780
536,187
3,515,756
17,976,919
14,461,163
$ 18,513,106 $ 17,976,919
Page 10
2015
Cash Flows From Operating Activities
Receipts of patient service revenue
Other receipts
Payments of salaries, wages, and benefits
Payments of supplies and other expenses
Net Cash Provided by Operating Activities
Cash Flows From Noncapital Financing Activities
County tax received
Noncapital grants and contributions
Net Cash Provided by Noncapital Financing Activities
Cash Flows from Capital and Related Financing Activities
Purchases of capital assets
Borrowings from line of credit
Payments on line of credit
Payments on capital lease obligations
Payments on long-term debt
Interest paid on debt
Capital grants and contributions
Net Cash Used in Capital and Related Financing
Activities
Cash Flows from Investing Activities
Purchase of investment in partnership
Investment income
Net Cash Provided by (Used in) Investing Activities
2014
$ 23,245,739 $ 18,665,904
598,334
164,584
(11,900,990)
(10,997,614)
(6,472,066)
(6,540,942)
5,471,017
1,291,932
188,334
66,658
254,992
189,825
14,171
203,996
(505,315)
(122,092)
(512,197)
(481,074)
-
(1,337,232)
591,970
(200,554)
(180,761)
(490,034)
(583,609)
173,780
(1,620,678)
(2,026,440)
(98,000)
71,098
(26,902)
62,287
62,287
Net Increase (Decrease) in Cash and Cash
Equivalents
4,078,429
Cash and Cash Equivalents, Beginning of Year
8,983,592
9,451,817
Cash and Cash Equivalents, End of Year
$ 13,062,021 $
8,983,592
Reconciliation of Cash and Cash Equivalents to the
Current assets limited as to use or restricted
Noncurrent assets limited as to use or restricted
Total Cash and Cash Equivalents
$ 11,134,128 $
883,093
1,044,800
$ 13,062,021 $
7,065,061
883,874
1,034,657
8,983,592
(468,225)
Page 11
2015
2014
Reconciliation of Operating Income to Net Cash Provided by
Operating Activities
Operating income
$
767,867 $ 3,682,512
Adjustments to reconcile operating income to net cash
provided by operating activities
2,842,206
(667,434)
Provision for uncollectible accounts
1,413,734
2,223,831
(Increase) decrease in assets
Patient receivables
(1,703,106)
(1,726,308)
Other receivables
241,899
(253,390)
Estimated amounts due from third-party payers
1,629,586
(4,589,980)
Supplies
(14,798)
(2,155)
Prepaid expenses
45,028
279,283
Increase (decrease) in liabilities
Accounts payable
422,916
(172,783)
Accrued expenses and other current liabilities
(73,808)
(4,982)
Estimated amounts due to third-party payers
(100,507)
299,507
Net Cash Provided by Operating Activities
Supplemental Disclosure of Noncash Capital and Related
Financing Activity
Capital assets acquired through capital leases
$
5,471,017 $
$
- $
(931,899)
161,091
Page 12
March 31, 2015 and 2014
1.
Reporting Entity and Basis of Presentation
Organization
Massac County Hospital District d/b/a Massac Memorial Hospital (the "Hospital") is a 25bed public hospital, established in accordance with provisions of the Illinois Hospital
District Law and governed by a nine member Board of Directors. The Hospital is legally
separate and fiscally independent of other state and local governments. The Hospital
primarily earns revenues by providing inpatient, outpatient, and emergency care
services to patients in Metropolis, Illinois, and the surrounding area.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the
Governmental Accounting Standards Board ("GASB"), Codification of Governmental
Accounting Standards and Financial Reporting Standards (the "GASB ASC"), which is
the source of authoritative, governmental accounting principles generally accepted in
the United States of America ("GAAP"). All references to authoritative accounting
guidance contained in our disclosures are based on the general accounting topics within
the GASB ASC.
Net position of the Hospital and changes therein are classified into the following
categories/components of net position, as applicable, and reported as follows:
Net investment in capital assets - Net investment in captial assets consists of capital
assets, net of accumulated depreciation and amortization and reduced by outstanding
balances for bonds, notes, capital lease obligations, and other debt attributable to the
acquisition, construction, or improvement of those assets.
Restricted net position:
Nonexpendable – Nonexpendable net position is subject to externally imposed
stipulations which require them to be maintained permanently by the Hospital.
Expendable – Expendable net position results when constraints placed on net position
use are either externally imposed or imposed by law through constitutional provisions
or enabling legislation.
Unrestricted net position - Unrestricted net position consists of net position not meeting
the definition of the preceding categories. Unrestricted net position often has constraints
on resources imposed by management which can be removed or modified.
When both restricted and unrestricted resources are available for use, generally it is the
Hospital’s policy to use restricted resources first.
Page 13
March 31, 2015 and 2014
Reporting Entity
In evaluating how to define the Hospital for financial reporting purposes, management
has considered all potential component units. The decision to include a potential
component unit in the reporting entity was made by applying the criteria set forth in
guidance issued by the GASB. The basic, but not the only, criterion for including a
potential component unit within the reporting entity is the governing body's ability to
exercise oversight responsibility. The most significant manifestation of this ability is
financial interdependency. Other manifestations of the ability to exercise oversight
responsibility include, but are not limited to, the selection of governing authority, the
designation of management, the ability to significantly influence operations, and the
accountability for fiscal matters. The other criterion used to evaluate potential
component units for inclusion or exclusion from the reporting entity is the existence of
special financing relationships, regardless of whether the Hospital is able to exercise
oversight responsibilities. The Hospital has no component units which meet the GASB
ASC criteria.
During fiscal year 2009, the Hospital formed Massac Memorial Hospital Foundation, Inc.
(the "Foundation"). Since its formation in fiscal year 2009, the Foundation has incurred
no activity through March 31, 2015. As the Foundation begins operations in future years,
Hospital management will need to evaluate accounting for the Foundation as a
component unit of the Hospital.
2.
Summary of Significant Accounting Policies
Method of Accounting
The financial statements of the Hospital have been prepared on the accrual basis of
accounting.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
The Hospital considers all short-term investments with an original maturity of three
months or less at the time of purchase to be cash equivalents.
Page 14
March 31, 2015 and 2014
Assets limited as to use or restricted include assets which have been internally
designated by the Hospital’s Board of Directors and assets which are restricted by debt
agreements. Board designated assets remain under the control of the Board of
Directors, which may at its discretion later use the funds for other purposes. Assets
limited as to use or restricted that are available for obligations classified as current
liabilities are reported in current assets.
Restricted funds are used to differentiate funds which are limited by third-parties to
specific uses from funds on which third-parties place no restriction or which arise as a
result of the operation of the Hospital for its stated purposes. Resources set aside for
Board designated purposes are not considered to be restricted. Resources restricted by
third-parties for specific operating purposes are reported in nonoperating revenues to
the extent expended within the period.
Patient Receivables
Patient receivables are uncollateralized obligations for services rendered reported at net
realizable amounts due from patients, third-party payers, and others. As a service to the
patient, the Hospital bills third-party payers directly and bills the patient when the
patient's liability is determined. Patient accounts receivable are due in full when billed.
The Hospital provides an allowance for uncollectible accounts equal to the estimated
losses that will be incurred in the collection of patient accounts receivables. This
estimate is based on historical experience with each of its major payer sources to
estimate the appropriate allowance for uncollectible accounts and provision for
uncollectible accounts. Management regularly reviews data about these major payer
sources in evaluating the sufficiency of the allowance for uncollectible accounts.
For receivables associated with services provided to patients who have third-party
insurance coverage, the Hospital analyzes contractually due amounts and provides an
allowance for uncollectible accounts and a provision for uncollectible accounts, if
necessary.
For receivables associated with self-pay patients, the Hospital assesses the self-pay
patient's ability to pay in the period of service and provides an allowance for
uncollectible accounts and a provision for uncollectible accounts, if necessary, for
patients who are unable or unwilling to pay for the portion of the bill for which they are
financially responsible. The difference between the standard rates (or the discounted
rates, if negotiated) and the amounts actually collected after all reasonable collection
efforts have been exhausted is charged against the allowance for uncollectible
accounts.
Page 15
March 31, 2015 and 2014
The Hospital’s process for calculating the allowance for uncollectible accounts for selfpay patients has not significantly changed from March 31, 2014 to March 31, 2015. The
Hospital has not significantly changed its charity care or uninsured discount policies
during fiscal year 2015.
Supplies
Supplies are stated at the lower of cost or market. Cost is determined by the average
cost method and market is considered the lower of prevailing replacement cost or net
realizable value.
Capital Assets
Purchased capital asset acquisitions in excess of $5,000 are capitalized and recorded at
cost, while maintenance and repairs are expensed as incurred. When assets are sold or
otherwise disposed of, the related cost and accumulated depreciation are removed from
the accounts. Any gain or loss arising from such disposition is included as income or
expense in the year of disposition.
Donations of capital assets are recorded as contributions at fair value at the date of the
donation. Such donations are reported as increases in unrestricted net position unless
the donor has restricted the donated asset for a specific purpose. Assets donated with
explicit restrictions regarding their use and contributions of cash that must be used to
acquire capital assets are reported as restricted contributions. Absent donor stipulations
regarding how long those donated assets must be maintained, the Hospital reports
expirations of donor restrictions when the donated or acquired capital assets are placed
in service as instructed by the donor. Amounts restricted to capital acquisitions are
reported after nonoperating revenues and expenses in the statements of revenues,
expenses, and changes in net position.
Depreciation is computed using the straight-line method over the estimated useful lives
of the assets. Capitalized leases are amortized over the shorter of the life of the related
asset or the term of the lease.
The estimated lives for computing depreciation and amortization on capital assets are:
Classification
Years
Land improvements
Buildings and improvements
Equipment
10-15
5-40
3-25
Page 16
March 31, 2015 and 2014
Investment in Partnership
During the year ended March 31, 2015, the Hospital invested $98,000, for a 49 percent
interest of Massac County Surgery Center LLC (the "Center") that was formed to build
and operate an ambulatory surgery center in Metropolis, Illinois. The Hospital's
investment in the Center is carried at cost. Distributed earnings from accumulated
earnings of the Center are recorded as income in the period received. Distributed
earnings in excess of accumulated earnings are considered a return of investment and
recorded as a reduction of the cost of the investment. Management does not believe
impairment exists because the Hospital did not identify any events or changes in
circumstances that might have a significant adverse effect on the value of the
investment.
Deferred Financing Costs
Costs incurred in connection with financing activities are deferred and amortized to
interest expense using the straight-line method over the terms of the related debt
agreements. Deferred financing costs of $469,677 are included in noncurrent assets in
the accompanying statements of net position, net of accumulated amortization of
$221,215 and $196,510, as of March 31, 2015 and 2014, respectively. Amortization of
deferred financing costs totaled $24,705 and $26,951 for the years ended
March 31, 2015 and 2014, respectively.
Long-Lived Asset Impairment
The Hospital evaluates the recoverability of the carrying value of long-lived assets
whenever events or circumstances indicate the carrying amount may not be
recoverable. If a long-lived asset is tested for recoverability and the undiscounted
estimated future cash flows expected to result from the use and eventual disposition of
the asset are less than the carrying amount of the asset, the asset cost is adjusted to
fair value and an impairment loss is recognized as the amount by which the carrying
amount of a long-lived asset exceeds its fair value. No asset impairment was recognized
during the years ended March 31, 2015 and 2014.
Compensated Absences
Hospital policies permit most employees to accumulate vacation benefits that may be
realized as paid time off or, in limited circumstances, as a cash payment. Expense and
the related liability are recognized as vacation benefits when earned whether the
employee is expected to realize the benefit as time off or in cash. Compensated
absence liabilities are computed using the regular pay and termination pay rates in
effect at the statement of net position date plus an additional amount for compensationrelated payments such as social security and Medicare taxes computed using rates in
effect at that date. The cost of paid leave is included in accrued expenses and other
current liabilities on the statements of net position.
Page 17
March 31, 2015 and 2014
Deferred Revenue
Deferred revenue consists of payments received for the Illinois Hospital Medicaid
Assessment Program. These payments will be recognized as income in the period in
which they are earned.
Operating Revenues and Expenses
The Hospital’s statements of revenues, expenses, and changes in net position
distinguishes between operating and nonoperating revenues and expenses. Operating
revenues result from exchange transactions associated with providing health care
services. Nonexchange revenues, including taxes, grants, contributions received for
purposes other than capital asset acquisition, and interest income, are reported as
nonoperating revenues. Operating expenses are all expenses incurred to provide health
care services.
Net Patient Service Revenue Recognition
The Hospital has agreements with third-party payers that provide for payments to the
Hospital at amounts different from its established rates. Net patient service revenue is
reported at the estimated net realizable amounts from patients, third-party payers and
others for services rendered, and includes estimated retroactive adjustments under
reimbursement agreements with third-party payers. Retroactive adjustments are
accrued on an estimated basis in the period the related services are rendered and
adjusted in future periods as final adjustments are determined.
The Hospital recognizes patient service revenue associated with services provided to
patients who have third-party payer coverage on the basis of contractual rates for the
services rendered, as noted above. For uninsured patients that do not qualify for charity
care, the Hospital recognizes revenue on the basis of its standard rates for services
provided or on the basis of discounted rates, if negotiated. On the basis of historical
experience, a certain portion of the Hospital’s uninsured patients will be unable or
unwilling to pay for the services provided. As a result, the Hospital records a provision
for uncollectible accounts related to uninsured patients in the period the services are
provided. This provision for uncollectible accounts is presented on the statements of
revenues, expenses, and changes in net position as a component of net patient service
revenue.
Third-Party Rate Adjustments and Revenue
Revenue from the Medicare and Medicaid programs accounted for 77 and 71 percent of
net patient service revenue for the years ended March 31, 2015 and 2014, respectively.
These revenues are based on cost reimbursement principles and are subject to audit
and retroactive adjustment by the respective third-party fiscal intermediaries. Laws and
regulations governing these programs are extremely complex and subject to
interpretation. As a result, there is at least a reasonable possibility that recorded
estimates will change by a material amount in the near term.
Page 18
March 31, 2015 and 2014
Net patient service revenue for the year ended March 31, 2015, increased
approximately $787,000 due to prior-year retroactive adjustments in excess of amounts
previously estimated.
Charity Care and Community Benefits
The Hospital provides care to patients who meet certain criteria under its charity care
policy without charge or at amounts less than its established rates. Because the Hospital
does not pursue collection of amounts determined to qualify as charity care, they are not
reported as revenue. Lost gross patient service revenue from charity care totaled
$465,209 and $626,365 for the years ended March 31, 2015 and 2014, respectively.
The Illinois legislature passed a bill titled the "Hospital Uninsured Patient Discount Act"
(the "Act"). Effective April 1, 2009, this Act requires hospitals to provide certain
mandated discounts from charges to the uninsured in Illinois. Charges are to be
discounted to 135 percent of cost. Furthermore, a hospital may not collect more than 25
percent of an uninsured family's gross income in any one year. In addition, the Hospital
must annually file a copy of Worksheet C, Part I, of its Medicare Cost Report with the
Attorney General.
In addition, the Hospital provides services to other medically indigent patients under
certain government reimbursed public aid programs. Such programs pay providers
amounts which are less than established charges for the services provided to the
recipients, and for some services the payments are less than the cost of rendering the
services provided.
The Hospital’s total estimated cost of uncompensated care relating to these services
and other services during the years ended March 31, is as follows:
2015
Charity care
$
State Medicaid and other public aid programs
Uncollectible accounts
$
228,000 $
2,546,000
681,000
3,455,000 $
2014
419,000
4,226,000
1,023,000
5,668,000
The uncompensated care cost of state Medicaid and other public aid programs is
determined by computing the cost of providing that care less amounts paid by the
programs.
The Hospital also commits significant time and resources to endeavors and critical
services which meet otherwise unfulfilled community needs. Many of these activities are
sponsored with the knowledge that they will not be self-supporting or financially viable.
Page 19
March 31, 2015 and 2014
Electronic Health Records Incentive Program
Enacted as part of the American Recovery and Reinvestment Act of 2009, the Electronic
Health Records Incentive Program provides for one-time incentive payments under both
the Medicare and Medicaid programs to eligible hospitals and physicians that
demonstrate meaningful use of certified electronic health records technology ("EHR").
Payments under the Medicare program are generally made for up to four years based
on a statutory formula. Payments under the Medicaid program are generally made up to
four years based upon a statutory formula, as determined by the state, which is
approved by the Centers for Medicare and Medicaid services. Payments under both
programs are contingent on the Hospital continuing to meet escalating meaningful use
criteria and any other specific requirements that are applicable for the reporting period.
The final amount for any payment year under both programs is determined based upon
an audit by the fiscal intermediary. Events could occur that would cause the final
amounts to differ materially from the initial payments under the program.
The Hospital recognizes revenue ratably over the reporting period starting at the point
when management is reasonably assured it will meet all of the meaningful use
objectives and any other specific grant requirements applicable for the reporting period.
During the year ended March 31, 2014, the Hospital completed the stage 1
requirements under the Medicaid program and recorded revenue of approximately
$200,000, which is included in other operating revenue within the statement of
revenues, expenses, and changes in net position. No stage requirements under the
Medicaid program were completed during the year ended March 31, 2015.
County Tax Revenue
The Hospital records tax revenue received from Massac County, Illinois. The property
taxes are recognized as revenue in the period that the County collects and remits the
receipts to the Hospital. The taxes are received by the Hospital primarily in January.
Grants and Contributions
Contributions are recorded as received. All contributions are available for unrestricted
use unless specifically restricted by the third-party. When a restriction expires, restricted
contributions are reclassified to unrestricted net position and reported in the statements
of revenues, expenses, and changes in net position as net position released from
restrictions. Third-party restricted contributions in which the restrictions are met within
the same year as received are reported as unrestricted contributions in the
accompanying financial statements.
Page 20
March 31, 2015 and 2014
Advertising
The Hospital expenses advertising costs as they are incurred. Advertising costs included
in supplies and other expenses in the statements of revenues, expenses, and changes
in net position totaled $36,297 and $47,638 for the years ended March 31, 2015 and
2014, respectively.
Income Taxes
The Hospital is exempt from federal income taxes as a political subdivision under
Section 115 of the Internal Revenue Code ("IRC") and a similar provision of state law.
Accordingly, the Hospital is not required to file income tax returns.
Reclassifications
Certain amounts in the 2014 financial statements have been reclassified to conform to
the current year presentation.
Subsequent Events
The Hospital has evaluated subsequent events through September 15, 2015, the date
the financial statements were available to be issued. As discussed note 6 and 7, the line
of credit and certain debt of the Hospital was paid in full and the accounts closed during
the year ending March 31, 2016.
Recent Accounting Pronouncements
In February 2015, GASB issued Statement No. 72, Fair Value Measurement and
Application. This statement addresses the accounting and financial reporting issues
related to fair value measurements. The definition of fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. This statement provides guidance for
determining a fair value measurement for financial reporting purposes and for applying
fair value to certain investments and disclosures related to all fair value measurements.
The Hospital is required to implement this Statement for the year ended March 31,
2016.
3.
Cash and Deposits
Custodial credit risk is the risk that in the event of a bank failure, the government's
deposits may not be returned to it. State law allows collateralization of deposits in
excess of federal depository insurance. The Hospital's deposit policy for custodial credit
risk is to obtain a pledge of collateral for deposits substantially in excess of federal
depository insurance. As of March 31, 2015, $1,641,439 of the Hospital's bank balance
of $13,192,022 was exposed to custodial risk. None of the Hospital’s deposits were
either uninsured or uncollateralized as of March 31, 2014.
Page 21
March 31, 2015 and 2014
The Hospital’s carrying amounts of cash and deposits at March 31, are as follows:
2015
Checking and savings accounts
$ 11,134,128 $
Assets limited as to use or restricted - current
883,093
Assets limited as to use or restricted noncurrent
1,044,800
$ 13,062,021 $
Total Checking and Savings Accounts
4.
2014
7,065,061
883,874
1,034,657
8,983,592
Patient Receivables
Patient receivables, net, at March 31, consist of the following:
2015
Medicare
Medicaid
Other third-party payers
Self-pay
$
Less allowance for uncollectible
accounts
$
2014
1,294,210 $
1,459,648
1,244,631
2,423,260
6,421,749
1,562,573
646,315
1,838,843
2,862,571
6,910,302
3,379,983
3,041,766 $
4,157,908
2,752,394
Page 22
March 31, 2015 and 2014
5.
Capital Assets
Capital asset activity for the years ended March 31, is as follows:
2015
Beginning
Balances
Capital Assets Not Being
Depreciated
Land
Construction in progress
$
Capital Assets Being Depreciated
Land improvements
Equipment
$
43,000
180,806
223,806
Ending
Balances
Decreases
$
- $
(4,013,075)
(4,013,075)
65,980
268,242
334,222
1,054,078
19,121,429
7,607,717
27,783,224
54,292
4,240,896
4,295,188
(2,292,713)
(5,066,729)
(7,359,442)
1,054,078
16,883,008
6,781,884
24,718,970
416,984
7,228,316
6,216,166
13,861,466
80,833
829,166
1,932,207
2,842,206
(2,294,119)
(5,011,413)
(7,305,532)
497,817
5,763,363
3,136,960
9,398,140
13,921,758
1,452,982
(53,910)
15,320,830
$ 18,045,249
$ 1,676,788
Less accumulated depreciation
Land improvements
Equipment
Total Capital Assets Being
Depreciated, net
Total Capital Assets, net
22,980
4,100,511
4,123,491
Increases
$ (4,066,985) $15,655,052
2014
Beginning
Balances
Capital Assets Not Being
Depreciated
Land
Construction in progress
Capital Assets Being Depreciated
Land improvements
Equipment
Less accumulated depreciation
Land improvements
Equipment
Total Capital Assets Being
Depreciated, Net
Total Capital Assets, Net
$
16,480
2,983,261
2,999,741
Increases
$
6,500
1,117,250
1,123,750
Ending
Balances
Decreases
$
-
$
22,980
4,100,511
4,123,491
1,054,078
19,070,921
7,283,651
27,408,650
50,508
324,066
374,574
-
1,054,078
19,121,429
7,607,717
27,783,224
333,061
6,400,591
5,571,416
12,305,068
83,923
827,725
644,750
1,556,398
-
416,984
7,228,316
6,216,166
13,861,466
15,103,582
(1,181,824)
-
13,921,758
-
$18,045,249
$ 18,103,323
$
(58,074) $
Page 23
March 31, 2015 and 2014
Construction in progress at March 31, 2014, consisted mainly of the Meditech computer
system project. The total cost to complete the project was approximately $4,000,000
and was completed during the year ended March 31, 2015. At March 31, 2014,
$3,907,620 in total costs were incurred. The project was funded through a line of credit
and internal funds.
Interest of approximately $73,000 was capitalized during the year ended March 31,
2015, as part of the Meditech computer system project as the line of credit was used to
finance the project.
Salaries of approximately $57,000 were capitalized during the year ended March 31,
2014, as part of the Meditech computer system project as employees were involved in
developing the software package.
6.
Line of Credit
The Hospital has a line of credit agreement (the "Agreement") of $3,500,000 due on
demand. Borrowings are charged interest at 2.75 percent, and are secured by the
Hospital's receivables and equipment. At March 31, 2015 and 2014, borrowings
outstanding under the Agreement totaled $3,182,981. During the year ending March 31,
2016, borrowings outstanding under the Agreement were paid in full.
7.
Long-term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations activity for the years ended March 31, is as
follows:
2015
Beginning
Balances
Additions
Ending
Balances
Payments
Amounts
Due Within
One Year
General Obligation
Alternative Revenue
Bonds, Series 2006
$ 9,615,000
General Obligation
Alternative Revenue
Bonds, Series 2007
1,335,000
-
(430,000)
905,000
445,000
784,256
-
(82,197)
702,059
84,430
-
(122,092)
$ (634,289)
218,490
11,440,549
RHC Note Payable
Capital Lease
Obligations
Less current
maturities
340,582
12,074,838
624,933
$11,449,905
$
$
-
$
-
$ 9,615,000
$
$
-
97,378
626,808
626,808
$10,813,741
Page 24
March 31, 2015 and 2014
2014
Beginning
Balances
Additions
Ending
Balances
Payments
Amounts
Due Within
One Year
General Obligation
Alternative Revenue
Bonds, Series 2006
$ 9,615,000
General Obligation
Alternative Revenue
Bonds, Series 2007
1,745,000
-
(410,000)
1,335,000
430,000
864,290
-
(80,034)
784,256
82,198
161,091
161,091
(180,761)
$ (670,795)
340,582
12,074,838
RHC Note Payable
Capital Lease
Obligations
Less current
maturities
360,252
12,584,542
655,690
$11,928,852
$
$
-
$
-
$ 9,615,000
$
$
-
112,735
624,933
624,933
$11,449,905
The terms and due dates of the Hospital’s long-term debt as of March 31, 2015 are as
follows:
General Obligation Alternative Revenue Bonds, Series 2006 - secured by the net
patient service revenue and property tax revenue of the Hospital and the assets
restricted under the bond indenture agreement, interest at rates of 3.85 percent to
4.50 percent, requiring semi-annual interest payments. Annual varying principal
payments are due beginning in November 2017 through November 2026 with the
remaining principal balance due at maturity in November 2031.
General Obligation Alternative Revenue Bonds, Series 2007 - secured by the net
patient service revenue and property tax revenue of the Hospital and the assets
restricted under the bond indenture agreement, interest at rates of 3.55 percent to
3.75 percent, requiring semi-annual interest payments, with annual varying principal
payments through maturity in November 2016.
RHC Note Payable - secured by receivables and equipment, interest at 2.74 percent,
required monthly payments of $8,554, maturing in October 2022. The RHC Note
Payable was paid in full in June 2015.
The general obligation bonds are alternative revenue bonds issued with the expectation
they will be payable from the Hospital's revenues. The Hospital irrevocably pledged its
full faith and credit to the punctual payment of the principal and interest payments of the
bonds. If the revenue of the Hospital is insufficient to provide for the payments on the
bonds, the Hospital can use property tax proceeds. So long as the Hospital's revenues
are sufficient, the property tax is abated annually.
Page 25
March 31, 2015 and 2014
The ordinance authorizing and providing for the issuance of the general obligation
bonds requires that certain funds be established with the trustee. Accordingly, these
funds are included as assets restricted under bond agreement in the statements of net
position. The ordinance also requires the Hospital to comply with certain restrictive
covenants including minimum insurance coverage, maintaining a historical debt-service
coverage ratio of at least 1.25 to 1 and restriction on the incurrence of additional debt.
The Hospital was in compliance with all covenants at March 31, 2015.
All of the bonds still outstanding may be redeemed at the Hospital's option on or after
November 1, 2016, at par.
Scheduled principal and interest payments on long-term debt and captital lease
obligations as of March 31, 2015 are as follows:
March 31,
2016
2017
2018
2019
2020
2021-2025
2026-2030
2031
8.
Principal
Interest
$
626,808 $
1,072,292
628,777
637,782
629,220
3,285,670
680,000
3,880,000
$ 11,440,549 $
Total
463,063 $ 1,089,871
441,976
1,514,268
401,958
1,030,735
378,082
1,015,864
354,682
983,902
1,397,373
4,683,043
702,875
1,382,875
38,025
3,918,025
4,178,034 $ 15,618,583
Board Designated Funds
The Hospital's Board of Directors has designated unrestricted net position at March 31,
as follows:
2015
Designated for capital acquisitions
9.
$
139,542 $
2014
139,194
Restricted Net Position
Restricted expendable net position at March 31, is available for the following purposes
or periods:
2015
Restricted under bond agreement
$
1,146,138 $
2014
1,150,809
Page 26
March 31, 2015 and 2014
10.
Net Patient Service Revenue
The Hospital is licensed as a Critical Access Hospital ("CAH") for Medicare
reimbursement purposes. The Hospital has agreements with other third-party payers
that provide for payments to the Hospital at amounts different from its established rates.
These payment arrangements include:
Medicare - The Hospital is reimbursed for most acute care services at cost plus
one percent, with final settlement determined after submission of annual cost
reports by the Hospital that are subject to audits by the Medicare fiscal
intermediary. The Hospital’s Medicare cost reports have been audited by the
Medicare fiscal intermediary through the year ended March 31, 2013.
Massac Memorial Medical Clinic (the "Clinic") is designated as a Certified
(Provider Based) Rural Health Clinic by the Medicare program. As a result,
clinical services rendered to Medicare program beneficiaries are reimbursed at
cost.
Medicaid - Inpatient acute care services rendered to Medicaid program
beneficiaries are paid at prospectively determined rates per discharge. These
rates vary according to a patient classification system that is based on clinical,
diagnostic, and other factors. Outpatient services rendered to Medicaid program
beneficiaries are reimbursed based on a fee schedule.
The Hospital qualified for participation in a Medicaid rural adjustment payment
program available primarily to Medicare certified critical access hospitals. The
Hospital received approximately $50,000 and $207,000, which is included in net
patient service revenue for the years ended March 31, 2015 and 2014,
respectively. The Medicaid rural adjustment payment program expired on July 1,
2014.
Other payers - The Hospital has also entered into payment agreements with
certain commercial insurance carriers and other organizations. The basis for
payment to the Hospital under these agreements includes prospectively
determined rates, per discharge, discounts from established charges, and
prospectively determined daily rates.
Page 27
March 31, 2015 and 2014
A summary of patient service revenue, contractual adjustments, and provision for
uncollectible accounts for the years ended March 31, are as follows:
2015
Total Patient Service Revenue
Charity Care
Contractual Adjustments
Medicare
Medicaid
Other
Provision for Uncollectible Accounts
2014
$ 44,384,252 $ 40,462,725
(465,209)
(626,365)
43,919,043
39,836,360
(7,895,804)
(9,791,132)
(2,812,341)
(20,499,277)
(5,712,316)
(7,310,423)
(2,130,938)
(15,153,677)
23,419,766
24,682,683
(1,413,734)
(2,223,831)
$ 22,006,032 $ 22,458,852
On July 17, 2005, the State of Illinois enacted legislation that provided for a three-year
hospital assessment program intended to qualify for federal matching funds under the
Illinois Medicaid program. The hospital assessment program was built upon 2004
legislation that established a one-year hospital assessment program, which ended on
June 30, 2005. On November 21, 2006, the federal Centers for Medicare and Medicaid
Services ("CMS") approved the hospital assessment program. On December 4, 2008,
CMS announced the federal government’s approval for a new five-year Illinois Hospital
Assessment Program (the "Assessment Program") through June 30, 2013. The
Assessment Program has been further extended through July 31, 2018.
Under the Assessment Program, each hospital is assessed tax based on that hospital’s
adjusted gross revenue. As a governmental entity, the Hospital is exempt from the
requirement to pay related taxes. The assessments in part fund additional Medicaid
payments. The legislation provides that none of the assessment funds are to be
collected and no additional Medicaid payments are to be paid until the Assessment
Program receives the required federal government approval.
As a result of participation in the Assessment Program, the Hospital recorded
approximately $1,310,000 and $1,150,000 in net patient service revenue in the
statements of revenues, expenses, and changes in net position for the years ended
At March 31, 2015 and 2014, the Hospital had receivables from the State of Illinois of
approximately $52,000 and $56,000, respectively. The Hospital recorded these amounts
in estimated amounts due from third-party payers.
Page 28
March 31, 2015 and 2014
At March 31, 2015 and 2014, the State of Illinois had released to the Hospital
approximately $170,000 in payments relating to the State’s June 30, 2015 and 2014,
fiscal years, respectively. These payments related to the periods April 1, 2015 through
June 30, 2015 and April 1, 2014 through June 30, 2014, respectively. The Hospital has
recorded these amounts in deferred revenue.
11.
Capital Grants
The Hospital was awarded $173,780 from the State of Illinois as part of the Illinois Jobs
Now! capital construction program to renovate the Clinic. The Hospital recognized
$173,780 in revenue from the grant for the year ended March 31, 2014. No capital
grants were awarded during the year ended March 31, 2015
12.
Retirement Plans
Prior to January 1, 2011, the Hospital contributed to a 457 defined contribution pension
plan covering substantially all employees. Beginning January 1, 2011, the Hospital
contributes to a 401(a) pension plan (the "Pension Plan") covering substantially all
employees who meet certain eligibility requirements. However, employees may also still
contribute to the 457 defined contribution pension plan. The plans provide retirement
benefits to plan members and their beneficiaries. Benefit provisions are contained in the
plan documents. The Hospital contributed 3 percent of annual covered payroll for the
years ended March 31, 2015 and 2014 to the Pension Plan. The Hospital also matched
10 percent of elective employee contributions to the Pension Plan. Employer
contributions to the Pension Plan totaled $221,475 and $216,637 for the years ended
13.
Risks and Uncertainties
Concentrations
Revenue from the Medicare and Medicaid programs accounted for approximately 58
percent and 19 percent, respectively, of the Hospital’s net patient service revenue for
the year ended March 31, 2015. Revenue from the Medicare and Medicaid programs
accounted for approximately 63 percent and 8 percent, respectively, of the Hospital’s
net patient service revenue for the year ended March 31, 2014.
The mix of receivables from patients and third-party payers, including estimated
amounts due from third-party payers, net, at March 31, is as follows:
2015
Medicare
Medicaid
Other third-party payers
Self-pay
69 %
13
14
4
100 %
2014
80 %
3
14
3
100 %
Page 29
March 31, 2015 and 2014
Laws and regulations governing the Medicare and Medicaid programs are complex and
subject to interpretation and change. As a result, it is reasonably possible that recorded
estimates will change materially in the near term.
Concentration of Credit Risk
Financial instruments, which potentially subject the Hospital to concentrations of credit
risk, consist principally of cash and cash equivalents, assets limited as to use or
restricted, patient receivables, and amounts due from third-party payers. The Hospital
maintains its cash primarily with one financial institution. Deposits at this bank are
insured by the Federal Deposit Insurance Corporation up to $250,000. The financial
institution has pledged collateral for the cash balances. At March 31, 2015, there were
cash balances of $1,641,439 exposed to custodial risk. The Hospital performs ongoing
credit evaluations of its payers and maintains allowances, as needed, for potential credit
losses. Although the Hospital is directly affected by the financial stability of its payer
base, management does not believe significant credit risk exists at March 31, 2015.
14.
Commitments and Contingencies
Leases
The Hospital leases office space, vehicles, a building, and equipment under
noncancellable operating and capital leases. Future minimum lease payments at
March 31, 2015 are as follows:
Years Ending March 31,
2016
2017
2018
2019
$
Implied interest
Present value of future minimum payments
Less current maturities
Long-term capital lease obligations
$
Capital
Operating
Leases
Leases
115,272 $
168,731
49,624
91,651
45,817
41,033
14,331
225,044 $
301,415
6,554
218,490
97,378
121,112
The capital leases require approximate monthly payments of $10,100 as of
March 31, 2015. The leased assets totaled $585,066 as of March 31, 2015 and 2014.
Amortization expense for the years ended March 31, 2015 and 2014 was $98,805 and
$108,283, respectively, and is included in depreciation and amortization expense. At
March 31, 2015 and 2014, accumulated amortization related to capital lease obligations
totaled $346,024 and $247,219, respectively.
Rent expense related to operating leases for the years ended March 31, 2015 and 2014
totaled approximately $161,000 and $266,000, respectively.
Page 30
March 31, 2015 and 2014
The Hospital subleases office space to outside physicians. The sublease agreements
expire at various dates through March 2019. Future minimum lease payments expected
to be received at March 31, 2015 are as follows:
Years Ending March 31,
2016
2017
2018
2019
$
$
96,527
96,527
96,527
96,527
386,108
The Hospital received approximately $104,000 related to these leases for each of the
years ended March 31, 2015 and 2014.
Purchase Commitments
The remaining balances on significant open service agreements for the use of various
equipment totaled $399,255 as of March 31, 2015. These service agreements are
expected to be substantially completed within one year.
Professional, General, and Workers Compensation Liability Insurance
The Hospital is a participant in the Illinois Provider Trust and the Illinois Compensation
Trust (“Trusts”). The Trusts, set up on a pooled risk basis, operate as common risk
management and insurance programs to provide professional and general liability
coverage as well as workers compensation coverage to member hospitals. The pool
provides general liability coverage of $2,000,000 per each occurrence, with no annual
aggregate and workers compensation coverage on an occurrence basis of $1,000,000
each with no annual aggregate. Funding to the Trusts is determined by annual actuarial
valuations based on the member hospitals’ loss experience. The contributions to the
Trusts are expensed during the year to which they relate. The Trusts’ governing
agreements specify that the Trusts will be self-sustaining through member premiums
and will reinsure through commercial carriers for claims in excess of specified stop loss
amounts.
Malpractice Insurance
The Hospital has malpractice insurance coverage to provide protection for professional
liability losses on a claims-made basis subject to a limit of $2 million per claim and no
annual aggregate limit. In addition, the Hospital has physician professional liability
coverage on a claims-made basis subject to a limit of $1 million per person and an
annual aggregate limit of $3 million. Should the claims-made policy not be renewed or
replaced with equivalent insurance, claims based on occurrences during its term, but
reported subsequently, would be uninsured. The malpractice insurance coverage is
obtained through the Illinois Provider Trust risk pool.
Page 31
March 31, 2015 and 2014
Self Insurance
The Hospital is self-insured for health and medical benefits. The self insurance plan is
responsible to pay all administration expenses and benefits up to the reinsurance limits.
Reinsurance coverage is maintained for specific individual and aggregate losses over
specified amounts. All known claims were recorded at March 31, 2015 and 2014, plus
an estimate for incurred but unreported claims of $283,188 and $316,070 for the years
ended March 31, 2015 and 2014, respectively. The Hospital is not able to determine the
exact amount of any additional unreported claims that may exist at those dates. A
summary of claims liability activity for the years ended March 31, is as follows:
Claims liability at March 31, 2013
Incurred claims
Payments on claims
Adjustment of liability
Incurred claims
Payments on claims
Adjustment of liability
$
$
200,000
1,618,010
(2,102,505)
600,565
316,070
2,307,790
(1,990,546)
(350,126)
283,188
Contingencies
The health care industry is subject to numerous laws and regulations of federal, state,
and local governments. Compliance with these laws and regulations, specifically those
relating to the Medicare and Medicaid programs, can be subject to government review
and interpretation, as well as regulatory actions unknown and unasserted at this time.
Federal government activity has increased with respect to investigations and allegations
concerning possible violations by health care providers of regulations, which could result
in the imposition of significant fines and penalties, as well as significant repayments of
previously billed and collected revenues from patient services.
Current economic conditions have made it difficult for certain of the Hospital's patients to
pay for services rendered. As employers make adjustments to health insurance plans or
more patients become unemployed, services provided to self-pay and other payers may
impact net patient service revenue. Further, the effect of economic conditions in Illinois
may have an adverse effect on cash flows related to the Medicaid program.
Litigation
The Hospital has been named in various claims and legal actions arising in the ordinary
course of its business. In the opinion of management and legal counsel, all such matters
are adequately covered by insurance, or if not so covered, are without merit or involve
such amounts that unfavorable disposition would not have a material effect on the
financial position of the Hospital.
Page 32
Massac County Hospital District d/b/a Massac Memorial Hospital
Schedules of Net Patient Service Revenue
Total
2015
Patient Service Revenue
Acute care
Skilled nursing
Special care unit
$
2,472,116
195,000
404,000
3,071,116
Inpatient
2014
$
2,589,479
146,140
347,252
3,082,871
2015
$
1,916,628
195,000
404,000
2,515,628
Operating and recovery rooms
Anesthesiology
Radiology
Laboratory and blood bank
Respiratory therapy
Physical therapy
Speech therapy
Occupational therapy
Audiology
Electrocardiology
Medical supplies
Pharmacy
Emergency services
Ambulance
New Beginnings - geriatric psychology
Clinics
Dietary
2,424,594
467,897
18,513,427
5,354,277
873,005
810,443
53,344
164,216
62,402
2,404,041
88,969
2,553,461
4,437,467
1,938,660
470,557
692,483
3,893
41,313,136
2,720,079
563,927
16,113,593
4,760,534
577,900
756,945
31,832
132,904
67,686
2,105,281
88,590
2,689,156
3,698,889
1,749,434
648,129
658,475
16,500
37,379,854
41,072
7,107
2,348,280
1,547,517
679,936
41,662
10,246
40,002
631,544
15,859
1,311,191
477,888
556
7,152,860
Total patient service revenue
Charity care
Total patient service revenue, net of
charity care
44,384,252
(465,209)
40,462,725 $
(626,365)
9,668,488
43,919,043
39,836,360
(7,895,804)
(9,791,132)
(2,812,341)
(20,499,277)
(5,712,316)
(7,310,423)
(2,130,938)
(15,153,677)
23,419,766
24,682,683
Provision for Uncollectible Accounts
(1,413,734)
(2,223,831)
Contractual Adjustments
Medicare
Medicaid
Other
Net Patient Service Revenue (Net of
Provision for Uncollectible Accounts)
See independent auditors' report
$
22,006,032
$
Outpatient
2014
$
1,848,855
146,140
299,313
2,294,308
2015
$
14,935
3,008
1,685,401
1,291,134
401,284
41,270
8,987
36,692
543,326
18,018
1,069,324
286,862
5,829
33,451
1,560
5,441,081
$
7,735,389
555,488
555,488
2014
$
2,383,522
460,790
16,165,147
3,806,760
193,069
768,781
43,098
124,214
62,402
1,772,497
73,110
1,242,270
3,959,579
1,938,660
470,557
692,483
3,337
34,160,276
$
34,715,764
740,624
47,939
788,563
2,705,144
560,919
14,428,192
3,469,400
176,616
715,675
22,845
96,212
67,686
1,561,955
70,572
1,619,832
3,412,027
1,743,605
614,678
658,475
14,940
31,938,773
$
32,727,336
22,458,852
Page 33
Schedules of Other Operating Revenues
2015
Other Operating Revenues
Rental income
Cafeteria and dietary
Purchase discounts/rebates
Employee scripts
Other
Total Other Operating Revenues
2014
$
112,334 $
71,878
17,767
151,619
2,837
104,316
69,564
18,336
225,758
$
356,435 $
417,974
Page 34
2015
Nursing Administration
Salaries and wages
Supplies and other expenses
Routine Services
Salaries and wages
Special Care Unit
Salaries and wages
Operating and Recovery Rooms
Salaries and wages
Anesthesiology
Radiology
Salaries and wages
Laboratory and Blood Bank
Salaries and wages
Respiratory Therapy
Salaries and wages
Physical Therapy
Salaries and wages
Speech Therapy
Salaries and wages
Occupational Therapy
Salaries and wages
Audiology
Salaries and wages
$
2014
771,890 $
13,473
785,363
757,593
13,634
771,227
682,743
207,207
889,950
745,053
198,981
944,034
361,405
51,368
412,773
431,848
41,227
473,075
269,421
232,900
502,321
317,099
219,499
536,598
158,685
158,685
250,570
250,570
571,623
841,694
1,413,317
543,764
820,499
1,364,263
434,294
590,725
1,025,019
469,343
567,792
1,037,135
307,314
107,467
414,781
302,092
104,859
406,951
309,566
3,551
313,117
314,973
8,477
323,450
29,707
29,707
18,585
18,585
63,613
63,613
63,267
63,267
26,856
26,856
25,278
25,278
Page 35
Electrocardiology
Salaries and wages
Medical Supplies
Salaries and wages
Pharmacy
Salaries and wages
Emergency Services
Salaries and wages
Ambulance
Salaries and wages
New Beginnings - Geriatric Psychology
Salaries and wages
Clinics
Salaries and wages
Social Services
Salaries and wages
Medical Records
Salaries and wages
Dietary
Salaries and wages
Plant Operation and Maintenance
Salaries and wages
75,895
207,398
283,293
77,681
163,612
241,293
75,354
12,479
87,833
74,967
19,208
94,175
279,553
422,344
701,897
317,277
510,278
827,555
825,383
679,396
1,504,779
730,575
692,362
1,422,937
129,750
99,753
229,503
303,670
90,491
394,161
170,484
123,364
293,848
197,688
117,524
315,212
517,032
313,770
830,802
493,393
294,244
787,637
126,027
10,803
136,830
153,868
9,525
163,393
223,885
67,589
291,474
230,592
31,191
261,783
264,482
180,902
445,384
272,772
178,814
451,586
271,784
615,824
887,608
273,149
625,267
898,416
Page 36
Housekeeping
Salaries and wages
Laundry
Salaries and wages
Administrative Services
Salaries and wages
Unassigned Expenses
Employee benefits
283,286
69,870
353,156
295,030
59,731
354,761
20,379
93,780
114,159
13,146
114,189
127,335
1,354,849
1,720,008
3,074,857
1,187,767
1,473,962
2,661,729
3,481,469
2,842,206
6,323,675
2,421,511
1,556,397
3,977,908
$ 21,594,600 $ 19,194,314
Page 37
Schedules of Statistical Information (Unaudited)
2015
Patient Days
Acute
Swing-bed
2014
2,741
484
2,672
362
25
25
35 %
33 %
Discharges
Acute
Swing-bed
711
57
869
40
Average Length of Stay
Acute
Swing-bed
3.86
8.49
3.07
9.05
24,876
23,375
Number of Beds
Percentage of Occupancy (Acute and Swing-Bed)
Outpatient Visits
Most Recent Year-End Routine Service Rates
Monitored
Semi-private
SCU
$
$
$
780 $
490 $
1,000 $
780
490
1,000
Page 38
Independent Auditors' Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards
Board of Directors
Metropolis, Illinois
d/b/a
We have audited, in accordance with the auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States, the financial
statements of Massac County Hospital District d/b/a Massac Memorial Hospital (the "Hospital"),
which comprise the statements of net position as of March 31, 2015 and 2014, and the
statements of revenues, expenses, and changes in net position and cash flows for the years
then ended, and the related notes to the financial statements, and have issued our report
thereon dated September 15, 2015.
Internal Control Over Financial Reporting
In planning and performing our audits of the financial statements, we considered the Hospital's
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinion on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the
Hospital's internal control. Accordingly, we do not express an opinion on the effectiveness of the
Hospital's internal control.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies and therefore, material weaknesses or
significant deficiencies may exist that were not identified. However, as described in the
accompanying schedule of findings and responses, we identified a certain deficiency in internal
control that we consider to be a material weakness.
Page 39
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the Hospital’s financial statements will not be
prevented, or detected and corrected on a timely basis. We consider the deficiency described in
the accompanying schedule of findings and responses as finding 2015-1 to be a material
weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Hospital's financial statements
are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the determination of financial statement amounts.
However, providing an opinion on compliance with those provisions was not an objective of our
audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no
instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards.
Hospital's Response to Findings
The Hospital’s response to the finding identified in our audit is described in the accompanying
schedule of findings and responses. The Hospital's response was not subjected to the auditing
procedures applied in the audit of the financial statements and, accordingly, we express no
opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the Hospital's internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the Hospital's
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
September 15, 2015
Page 40
Schedule of Findings and Responses
Year Ended March 31, 2015
Findings Required to be Reported by Government Auditing Standards
Finding 2015-1 - Material Audit Adjustments
Criteria: Reconciliation of general ledger accounts on a monthly basis is essential to preparing
reliable financial statements. Furthermore, reconciliations serve as an internal control over
financial reporting and the safeguarding of assets. Accurate reconciliation and review of all
statement of net position accounts, specifically cash and cash equivalents, accounts receivable,
prepaid expenses, fixed assets, accounts payable, and 3rd party payer settlements receivable
and payable are essential to preparing reliable financial statements.
Condition: Certain accounts such as cash and cash equivalents, accounts receivable, prepaid
expenses, fixed assets, accounts payable, and 3rd party payer settlements receivable and
payable were not reconciled at year end. Significant audit adjustments and uncorrected
misstatements were discovered during the audit to properly reflect cash and cash equivalents,
accounts receivable, prepaid expenses, fixed assets, accounts payable, and 3rd party payer
settlements receivable and payable. In addition, similar comments have been reported as
findings in prior years’ reports on internal control over financial reporting.
Cause: An internal review process that verifies the accuracy of general ledger account balances
on a monthly basis was not implemented. Variances were caused by inaccurate postings of
general ledger activity during the year and errors resulting from the lack of regular account
reconciliations. Prior comments concerning material weaknesses in internal control have not
been properly addressed and reconciliation procedures on a regular basis have not been
implemented. Therefore, material journal entries were necessary during the audit to adjust
these accounts to their proper balances.
Effect: Failure to periodically review account balances can result in errors on the interim
financial statements and represents a weakness in internal control in the accounting system.
Material entries were proposed during the audit to adjust year-end account balances.
Recommendation: All general ledger accounts must be reconciled and reviewed monthly.
Furthermore, the Chief Financial Officer should review reconciliations prepared by the
accounting staff to ensure that the reconciliations are completed on a timely basis and are
accurate. This will help to ensure that significant entries are made as necessary on a timely
basis. We recommend the Hospital’s staff accountant and Chief Financial Officer work
collectively on a monthly basis in the preparation and review of account reconciliations for all
statement of net position accounts to prevent any inaccuracies. We also recommend that any
unusual reconciling items be thoroughly reviewed to ensure their appropriateness.
Response: Management agrees with the finding. The Hospital's staff accountant and Chief
Financial Officer will work collectively in the monthly account reconciliation and preparation and
review of reconciliations to improve the financial reporting process going forward.
Page 41

Audit 2015 - Massac Memorial Hospital

Transcription

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