Fiscal Year 2015 Budget

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1
Annual Public Meeting 2014
2
Agenda
Welcome
Richard C. Breon
President and CEO
Report on Community
Commitments
Martin Jennings
Interim Chair, Finance Advisory
Committee
Review of Fiscal Year 2015
Spectrum Health Budget
Ronald J. Knaus
Senior Vice President and CFO
Question and Answer
All
3
Community Commitments
Total margin not to exceed Moody’s and Standard & Poor’s
upper quartile
$6 million annual budget for the underserved
Open budget and pricing process
4
Spectrum Health
An Integrated Health System
Revenue $2.4 billion
Access
5
Revenue $2.1 billion
Delivery
2015 Budget (in millions)
Proj. 2014 Budget 2015
Operating revenue
Operating expenses
Operating Margin
Non-operating income
Total Margin
Operating Margin (%)
Total Margin (%)
6
$
$
4,141
3,996
145
$
121
266 $
3.5%
6.2%
4,510
4,388
122
70
193
2.7%
4.2%
2015 Budget Review
Revenue of $4.51 billion ($369 million increase, or 8.9%)
due mostly to:
■ Projected membership of Priority Health is expected to
increase 6.6%. Membership increases, combined with price
increases and product mix changes will yield a 8.6%
increase in revenue.
■ Membership will grow to over 600,000 by June 30, 2015.
■ Enrollment in Medicare will grow to 110,000 members
(13%) and Medicaid will grow to 100,000 members (23%).
7
2015 Budget Review
■
■
■
■
8
Spectrum Health Grand Rapids is expected to have
adjusted admissions increase 2.0% over 2014. A gross
price increase of 6% will yield a 1.8% net increase.
Federal payments (Medicare) are projected to be
reduced by 3%.
State payments (Medicaid) are projected to increase 1%
with additional payments due to expanded coverage.
Full time equivalents (staffing) will remain flat as growth
related to volume and complexity are offset by improved
productivity.
2015 Budget Review
■
Spectrum Health Medical Group encounters will grow 30%
due to new providers, programs and practice efficiency
initiatives.
■
Spectrum Health Regional Hospital adjusted admissions
will increase 3.8%. Our West Michigan facilities now
include Big Rapids, Fremont, Greenville, Lakeview,
Ludington, Reed City and Zeeland.
■
Home health and hospice visits will increase 6.9% as more
people are cared for in the home.
■
Will adjust hiring accordingly if volume/mix targets not met.
9
2015 Budget Review
Expenses of $4.4 billion ($391 million increase, or 9.8%)
due mostly to:
■ $172 million additional health claims from projected growth
of Priority Health.
■ $164 million of salary and benefit increases including
additional growth in programs and associated staffing.
■ $40 million of additional supplies and other expense (4.4%).
■ $15 million of additional depreciation offset by declining
interest expense.
■ Total capital expenditures will be consistent with 1.1 times
depreciation in 2015 which approximates $200 million.
10
Ratings
Moody’s
Aa3
Stable Outlook
Standard and Poor’s AA
Stable Outlook
AM Best
Positive Outlook
A-
We believe this budget will support our continued
high quality ratings.
11
Questions
12
13
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