Serving Georgia’s community hospitals
for 28 years
Alliance Membership Business Meeting
October 13, 2011
Special Session Recap
Legislative Issues:
•2012 Agenda Items
•Look Back at 2011 Session
•Look Ahead to 2012 Session
Questions & Discussion
Governor’s Call
•Reapportionment
•Transportation sales tax
•Motor fuel tax
Timeline
•Began August 15, 2011
•Ended August 31, 2011
Accomplishments
•Legislative and Congressional reapportionment
maps adopted
•Date of TSPLOST vote not changed
•Motor fuel tax suspension ratified
Access
•Expand the delivery of quality healthcare available to all
Georgians regardless of their ability to pay.
•Implement funding mechanisms that provide full
reimbursement to providers of medical services to all
populations.
Community Benefits
Recognize the benefits of having community-based
organizations that re-invest in their services and
facilities in order to keep resources, jobs and quality
healthcare in Georgia communities.
Essential Services
•Continue to provide tax exemptions that allow not-forprofit hospitals to provide essential but unprofitable
services, such as emergency care, trauma, perinatal
services and training new physicians.
•Create a sustainable, statewide trauma network that
provides excellent care to victims of traumatic accidents.
•Increase funding for healthcare training, including
funding for additional medical school and graduate
medical education slots.
2011 Look Back
•Created the Department of Public Health
•Gave burn centers trauma designation
•Allow EMTs to be compensated for all trauma patients
2012 Look Ahead
•Possible minimum standards for not-for-profit
exemptions
•Transition of public health duties to new agency
Quality of Care
Continue to improve the quality of healthcare outcomes
for patients, including the goal of eradicating medication
errors and hospital infection rates while guarding
against unnecessary and ineffective legislative and
regulatory burdens.
Workforce
•Increase the supply of qualified healthcare providers
practicing in the state of Georgia through increased medical
education opportunities and thoughtful accreditation and
practice standards.
•Ensure that healthcare workers can perform their duties to
the best of their ability by allowing them to use the most
medically prudent practices and protecting their physical
safety while at work.
Regulations
•Rewrite Georgia’s open records act in a manner that
provides clarity and transparency while protecting the
ability of governmental entities to effectively carry out
their duties.
•Allow hospitals to use any federally qualified
accreditation entity.
2011 Look Back
•Provide pertussis information to parents of newborns
•Greater latitude for community service boards
•Prohibit contingency fees for Medicaid audits- VETOED
•Consolidate Georgia Composite Medical Board and Georgia Board for
Physician Workforce
•Created mechanism for Georgia Board of Nursing to license graduates of
some non-traditional nursing programs
•Imposed tougher immigration laws
2012 Look Ahead
•Rewrite of open records law
•Adoption of new federal accreditation standards
•Clarification of use of “third-arm” process in
emergency rooms
•Certification standards for surgical technicians
Medicaid & Medicare
•Improve reimbursement levels for all Medicaid &
Medicare providers, including supplemental payments
for uncompensated care from the Indigent Care Trust
Fund.
•Redesign the state’s Medicaid program in a manner that
directs the most reimbursement to providers of medical
services while lessening the administrative and
regulatory burdens on those same providers.
Private Insurance
Increase the number of patients with private
insurance through the creation of an insurance
exchange that is tailored to best suit the needs of
Georgia’s citizens and healthcare providers.
2011 Look Back
•Amended Fiscal Year 2011
• $2.24B State Funds ($12.28B Total Funds)
• No direct cuts to hospital Medicaid rates
•Fiscal Year 2012
• $2.45B State Funds ($11.22B Total Funds)
• .5% cut to Medicaid provider rates but no direct cuts
to hospital Medicaid rates
•Amended allocation methodology for Disproportionate
Share Hospital Program
2011 Look Back
•Avoided reduction in hospital provider payment add-on rate
•Allow Georgians to purchase health insurance policies
approved in other states
•Imposed prompt pay requirements on third party
administrators
•Implemented contingency rate for emergency medical
services for county inmates
•Adopted Health Care Compact
2012 Look Ahead
•DCH Budget Proposal for AFY 2012 & FY 2013
• No Medicaid or PeachCare cuts
•Redesign of Medicaid program
•Sunset of hospital provider payment in 2013
•Possible creation of individual and small business insurance exchanges
•Changes to Medicare & Medicaid programs as part of federal budget
deal & Affordable Care Act
•Reform the state’s tax system in a manner that does not impact
the ability of not-for-profit hospitals to fulfill their mission of
caring for patients and serving their communities.
•Encourage the continued strength and growth of the healthcare
job market through tax policy that allows hospitals to expand
services and provide tens of thousands of career opportunities.
•Implement tax policy that discourages unhealthy behavior, like
the use of tobacco, rather than imposing financial hardships on
healthcare providers.
2011 Look Back
•Increased nursing home provider fees and
reimbursement rates for SOURCE patients
•Debated recommendations by Special Council on Tax
Reform and Fairness for Georgians
2012 Look Ahead
•Continue discussion of state revenue structure
Industry Consolidation in the Era of
Health Reform
Industry Consolidation in the Era of Healthcare Reform
October 13, 2011
Healthcare M&A Trends & Activity
Current Situation
Trends
Commentary

Weak Economy




Rate Reductions





Higher Expenses



Competitive Environment




Increased M&A Activity



Lower patient volumes as patients defer elective services
Increased charity care/bad debt expense due to high unemployment and the loss/reduction of insurance
Unfavorable changes in payer mix away from commercial payers due to elevated levels of unemployment
Medicare/Medicaid rates reductions going forward
Challenged State budgets further affecting Medicaid rates
Commercial insurer leverage pressuring reimbursement rates
State insurance exchanges likely driving reimbursement below commercial payers
Reduced ability to cost shift
Higher interest expense due to credit deterioration
Costs of implementing physician alignment initiatives
IT investments
Unfunded pension liabilities
Deferred maintenance - need to revitalize aging plants
Increased volume shift from inpatient to outpatient
Increased competition from specialty hospitals/providers
Position for healthcare reform – clinical integration
Economies of scale and greater access to capital for larger organizations
Synergies and operational efficiencies, rationalization of services
Increased negotiating leverage
Access to quality infrastructure, care management capabilities, and sophisticated IT platforms
____________________
Source: Wall Street research.
1
Healthcare M&A Trends & Activity
Healthcare Reform – “Volume to Value”
New Delivery Model
Reform Readiness Strategies
Quality Improvements

Bundled Payments/Risk-based Compensation

Fee-for-service model replaced with single
payment for all services related to treatment
Reduce preventable readmissions and hospital
acquired infections

Core measures, HCAHPS

Driver of clinical integration & volume reduction

Begins in 2013 for Medicare
Consolidation
Pay-for-Performance


New payment models based on cost savings and
quality improvements

Sector-wide shift towards consolidation
accelerated by reform

Spread fixed costs over larger revenue base

Improve access to capital
Physician Integration
Reduced reimbursement rates for readmissions
and hospital acquired infections

Physician and medical group acquisitions
Cost Controls
Accountable Care Organizations

Predicated on theory that costs decrease through
increased coordination across continuum of care

Shared savings incentives

Begins in 2012

Efficiency and savings initiatives

Commercial payer rates have likely peaked and
government rates are set to decline
Investments in Technology
____________________
Sources: Wall Street research.
2

Meaningful use standards

Potential for long-term cost savings
Healthcare M&A Trends & Activity
Impact of Debt Ceiling Agreement on Providers
Timeline
Commentary
Phase
9/16: First Committee meeting
Immediate
Discretionary
Cuts

Immediate discretionary cuts of $917 billion over ten years

Medicare and Medicaid are exempt
10/1: Discretionary cuts take effect
11/23: Committee votes
Jan. ’13: Automatic cuts take effect
Deficit
Reduction
Committee
Automatic Cuts
if No Agreement

Committee to identify $1.2 - $1.5 trillion in additional cuts

$130 - $160 billion in Medicare cuts estimated

$50 - $100 billion in Medicaid cuts estimated

Automatic cuts kick-in if no agreement is reached

Medicare cuts limited to 2% across the board; Medicaid exempt

Excludes ~$500 billion of cuts from health care reform

Reform subsidies/implementation funding may be targeted

Medicare payments to teaching hospitals may be targeted
Providers face significant reimbursement cuts during the second or potential
third phase of the $2.1 - $2.4 trillion deficit reduction deal.
____________________
Sources: Wall Street research and industry publications.
3
Healthcare M&A Trends & Activity
Relationship Between Scale and Credit
Number of Hospitals in Systems(1)
Distribution of Credit Ratings(2)
3,000
25
2,900
20
2,800
2,700
21
21
18
17
14
15
2,600
15
14
10
2,500
3
5
2,400
13
12
10
6
4
1
2
1
0
2,300
2000
2001
2002
2003
2004
2005
2006
2007
2008
AA+/AA
2009
AA-
A+
A
A-
Systems
Scale & Credit Ratings(3)
BBB+
BBB
BBB-
SG
Stand-Alones
Volume & Profitability(4)
60%
60%
100%
97%
87%
87%
90%
40%
40%
76%
80%
70%
50%
50%
Profits
% of Systems Rated “A” or Higher
15
12
70%
30%
30%
20%
20%
60%
10%
10%
50%
0%
0%
$250M - $500M
$250MM-$500MM
$500M - $1BN
$500MM-$1BN
$1BN
- $2BN
$1BN-$2BN
0%
0%
$2BN+
$2BN+
Operating Revenues
5%
5%
10%
10%
15%
15%
20%
20%
Admissions
____________________
(1) Source: American Hospital Association.
(2) Source: Standard & Poor’s 2010 Not-for-Profit Healthcare Medians.
(3) Source: Moody’s Investor Services.
(4) Source: The New England Journal of Medicine. “The Next Wave of Corporate Medicine – How We All Might Benefit.” David M. Cutler. August 2009.
4
25%
25%
30%
30%
35%
Healthcare M&A Trends & Activity
Factors Driving Consolidation
Unprecedented combination of macro-economic influences, industry pressures and market
dynamics driving consolidation.
Access to Full
Continuum of Care
Risk Bearing
Capabilities
Access to Capital
Management
Expertise
Investments in
Technology
Managed Care
Expertise
Economies of Scale
CONSOLIDATION
Physician Integration
Operating
Efficiencies
Physician
Recruitment &
Retention
Purchasing Leverage
Weak Economy
Low Interest Rate
Environment
5
Private Equity
Healthcare M&A Trends & Activity
Hospital and Health Care System Strategic Response
Hospitals and healthcare systems across the U.S. are evaluating their strategic options.
Multi-State
Systems
Regional
Systems
Independent
Standalone
Hospitals







Market by market strategic assessment; portfolio analysis - invest, partner, divest or swap
Take advantage of opportunities to grow in existing markets where viewed as favorable partner
Growth in contiguous as well as new markets
Clinical integration through physician acquisitions
Monetize non-core assets and re-deploy capital in markets with greater chance of success
Own across continue of care or partner to provide ancillary services (home health, post-acute, etc.)
Conversion to investor-owned
 Assess wherewithal to be a consolidator or proactively approach most favorable partner(s)
 Formation of “super regional” systems
 JV strategies to pursue growth, defend market share, build networks (acute & ambulatory
surgery)
 Sale of assets to raise capital for strategic investments in core market(s)
 Clinical integration through physician acquisitions
 Conversion to investor-owned
 Approaching systems viewed as most favorable partner with skill, scale, share and resources
 Develop new regional systems with other independent hospitals
 Leveraging a competitive partnering process to maximize value of assets and ensure most
attractive terms including purchase price, capital commitments, continuity of services
 Developing specialty service provider in the market – “carving out a niche”
6
Healthcare M&A Trends & Activity
Quarterly Deal Volume by Healthcare Service
Behavioral Health
Home Health
Hospitals
Labs, MRI, Dialysis
256% Increase Since Q1 ’10
4.5
4
16
4
4
35
14
14
3.5
3
3
11
12
9
10
2.5
2
2
6
1
4
10
0.5
2
5
0
0
0
Q1:10
Q2:10
Q3:10
Q4:10
Q1:11
Q2:11
Q1:10
Long Term Care
Q2:10
Q3:10
Q4:10
Q1:11
24
Q2:11
11
12
10
9
8
8
8
9
6
4
4
2
0
Q1:10
Managed Care
16
14
24
15
6
0
24
18
20
7
18
16
25
9
8
2
1.5
32
30
Q2:10
Q3:10
Q4:10
Q1:11
Q2:11
Q1:10
Physician Groups
Q2:10
Q3:10
Q4:10
Q1:11
Q2:11
Rehabilitation
90% Increase Since Q1 ’10
40
35
36
38
35
7
35
7
7
27
30
25
8
28
6
4
15
3
10
2
5
1
5
0
0
0
Q2:10
Q3:10
Q4:10
Q1:11
Q2:11
3
15
2
1
Q1:10
Q2:10
Q3:10
Q4:10
Q1:11
9
10
1
Q2:11
3
13
12
5
5
4
4
18
20
20
Q1:10
27
25
5
20
6
29
30
3
2
2
2
1
1
0
Q1:10
Q2:10
Q3:10
Q4:10
Q1:11
Q2:11
Q1:10
Q2:10
Q3:10
Q4:10
Q1:11
Q2:11
Transaction volume has accelerated significantly in the Hospital and Long Term Care sectors since the passage of
health care reform in early 2010.
____________________
Source: Irving Levin.
7
Healthcare M&A Trends & Activity
Historical Perspective
Announced Hospital Transactions
200
183
180
?
160
139
140
120
112
110
100
86
83
73
80
59
58
60
51
57
58
60
2006
2007
2008
52
38
40
20
0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2009
2010
2Q '11
2012
Annualized

Mergers between 1994 and 2000 structured to enhance leverage with payors

In 2008/2009 financial crisis, hospitals internally focused on surviving short term

Healthcare reform has been an additional catalyst for hospital M&A in 2010 and 2011

Today, there is a general perception that benefits of scale include more than just increased negotiating leverage with key
vendors

Scale and skill are necessary to achieve the efficiencies required for success in the new era of health care reform
____________________
Source: Irving Levin.
8
Healthcare M&A Trends & Activity
Valuation Perspectives
Below average trading multiples encouraging growth through acquisitions while assets are “under-valued”.
Historical Hospital Sector Valuations (EV/EBITDA)
14.0x
Median
6.7x
7.1x
7.3x
1 Year
5 Year
10 Year
12.0x
10.0x
8.0x
6.0x
2012E EV/EBITDA(1)
3/11
12/10
9/10
6/10
3/10
12/09
9/09
6/09
3/09
12/08
9/08
6/08
3/08
12/07
9/07
6/07
3/07
12/06
9/06
Hospital Acquisition Multiples
1.6x
5.6x
1.4x
6.0x
5.8x
Price/Revenue
6.2x
6.0x
5.8x
5.6x
5.4x
5.2x
5.0x
4.8x
4.6x
4.4x
6/06
3/06
12/05
9/05
6/05
3/05
9/04
12/04
6/04
3/04
12/03
9/03
6/03
3/03
9/02
6/02
3/02
12/01
9/01
6/01
3/01
2.0x
12/00
4.0x
Average: 5.5x
5.4x
5.0x
5.0x
1.2x
1.0x
0.8x
0.6x
0.4x
0.2x
0.0x
CYH
HMA
LPNT
THC
HCA
VHS
2003
2004
____________________
Source: Wall Street Research.
(1) As of September 30, 2011; Enterprise Value = MV of Equity + Short-term Debt + Long-term Debt + Preferred Equity + Minority Interest - Cash & Marketable Securities.
9
2005
2006
2007
2008
2009
2010
Healthcare M&A Trends & Activity
Not-for-Profit vs. For-Profit Buyers & Sellers
Buyers
100%
58%
Sellers
55%
37%
33%
100%
60%
90%
90%
80%
80%
70%
70%
60%
63%
67%
60%
50%
40%
40%
56%
42%
17%
30%
83%
70%
60%
58%
50%
42%
45%
30%
30%
20%
20%
10%
10%
0%
0%
2006
2007
2008
Non-Profit
2009
44%
40%
40%
2006
2010
For-Profit
2007
2008
Non-Profit
____________________
Sources: Irving Levin.
10
2009
For-Profit
2010
Healthcare M&A Trends & Activity
For-Profit Hospital Management Companies
The universe of for-profit hospital management companies is shifting.
Financial sponsors are changing their view of hospital management companies in response to the pressures
of health care reform. New players are emerging while others are exiting the industry.
11
Healthcare M&A Trends & Activity
Significant Private Equity Investments in the Hospital Sector
($ in Millions)
Date
Sponsor
Company
Focus
$ Commitment
Chairman/CEO
CFO
Hospitals
Owned
5/2/2001(1)
Welsh Carson
Ardent Health Services (1)
Urban
$330
David Vandewater
Clint Adams
8
4/12/2002(2)
Willis Stein
Merit Health Systems
Urban
$100
Tyree Wilburn
John Thompson
2
1/5/2004
Vestar
Essent Healthcare
Rural
$80
Michael Browder
Steven Wylie
3
5/7/2004(3)
TPG (3)
IASIS Healthcare
Urban
$590 (5)
Carl Whitmer
John Doyle
18
7/23/2004(4)
Blackstone (4)
Vanguard Health Systems
Urban
$749 (5)
Charles Martin
Phillip Roe
26
5/4/2005
GTCR
Capella Healthcare
Rural
$200
Daniel Slipkovich
Denise Warren
15
11/4/2005
GS Private Equity
Signature Hospital
Rural
$150
James Dalton/Charles Miller
Steven Paterson
2
7/24/2006
Bain/KKR/Merrill Lynch
HCA
Urban
$4,966 (5)
Richard Bracken
Milton Johnson
164
1/21/2008
CCMP
Legacy Hospital Partners
Urban
$500
Dan Moen
Bill Hibbitt
5
7/15/2009
Warburg Pincus
RegionalCare Hospital Partners
Rural
$300
Marty Rash
John Bakewell
4
Urban
$400 (5)
Ralph de la Torre
James Renna
6
Urban
$200 (5)
Sam Lee
Michael Heather
5
Urban
$400 (5)
Leo Brideau
Tony Speranzo
3/25/2010
8/16/2010
Leonard Green
Prospect Medical
2/21/2011
____________________
(1)
Formerly Behavioral Healthcare Corp.
(2)
Date on which Merit, set up as an investment vehicle, bought its first hospital.
(3)
TPG acquired IASIS from JLL in a transaction that valued IASIS at $1.3 billion. TPG owned 74.4% of IASIS post transaction.
(4)
Blackstone acquired Vanguard in a transaction valued at $1.75 billion. Blackstone owned 66% of Vanguard post transaction.
(5)
Commitment equals amount of equity invested at transaction.
12
NA
Healthcare M&A Trends & Activity
Private Equity Firms Highly Interested in Hospital Sector
Industry Specific
General/Macroeconomic
 Highly fragmented industry
 Non-cyclical
 Favorable demographics
 Stable, predictable, growing
population
 Large component of GDP
 Capital intensive
 Weak economy
 Public market valuations low
 Availability of seasoned mgmt talent
 Low interest rates
 Precedent successes (HCA, Triad, etc)
Factors Driving
Private Equity
Investments
Financing
Health Care Reform
 Efficient debt markets
 Low-cost of capital
 Reduces uncompensated care
 Demands efficient delivery model
 Available cash for acquisitions
 Strong fundraising environment as
investors search for alternative to
stock market
 Opportunity to effectively assume risk
and capture more total healthcare
dollars spent
 Ability to turnaround operations and
make acquisitions accretive
13
Healthcare M&A Trends & Activity
Public Hospital Management Companies - Leverage
The cost of borrowing in the high yield debt market has been near all-time lows.
25%
HY Master II Index
"BB"
"B"
Healthcare
20%
Current
8.63%
6.96%
8.92%
8.19%
Average
10.24%
8.11%
10.03%
8.49%
15%
10%
5%
0%
12/31/99
12/20/00
12/13/01
12/3/02
11/25/03
11/11/04
11/2/05
US High Yield Master II Index
10/24/06
BB
B
10/15/07
10/7/08
9/25/09
9/15/10
8/23/11
Healthcare
Leverage is a Common Way to Fund Acquisitions(1)

Healthcare companies issued over 7% of all high yield debt in 2010



Vanguard - $1,990 million in three sales since 2010
UHS - $1,600 million in 2010
Tenet - $1,525 million in two sales since 2009



Capella - $500 million in 2010
HCA - $4,460 million in four sales since 2009
Ardent - $325 million in 2010
Hospitals tend to move through cycles of levering up to make acquisitions, then spend the next few years using their free cash
flow to de-lever and create balance sheet capacity for the next round of acquisition growth.
____________________
(1) Source: Bank of America Merrill Lynch research.
14
Healthcare M&A Trends & Activity
For-Profit/Not-For-Profit Transactions
Investor-owned companies showing increased flexibility in partnership arrangements with not-for-profits.
Increasing willingness of NFP’s to partner with investor-owned companies.
Considerations

For-Profit Hospital Companies are Expanding
into New States
Investor-owned partnerships offer:


Access to alternative sources of capital
Purchase price often sufficient to establish
substantial community foundations

Capital commitments for capital projects

Commitment to maintain services

Shared governance

Sophisticated management

IT services and capabilities

Acceptance of existing charity care policies

Willingness to comply with Catholic ERD’s

Quality data indicates comparable outcomes

For-profits entering new markets

Massachusetts
New Jersey
Connecticut
Rhode Island
Recent Transactions
Acquirer
Formerly focused on select markets such as
Sunbelt States, but now expanding into new
regions, including Northeast
15
Target
State
Purchase Price
RI
$77M
CT
$200M
MA
$103M
Healthcare M&A Trends & Activity
For-Profit/Not-for-Profit Joint Ventures
The blurring lines between not-for-profits and investor-owned companies…
Date
9/1/2011
2/20/2011
1/31/2011
For-Profit
Not-for-Profit
State
TX
Structure Overview

Multi 
NC
5/27/2010
FL
4/15/2010
TX
Vanguard acquired 51% interest in Valley Baptist for $210 million
80%/20%; Ascension manages day-to-day operations

97%/ 3%; Lifepoint manages day-to-day operations

Duke benefits from referrals

HMA acquired 60% interest in three Shands hospitals in Florida

LHP and THR partnered to acquire Wilson N. Jones Memorial

Governance is split 50%/50%
____________________
Sources: Irving Levin.
16
Healthcare M&A Trends & Activity
Ten Largest Hospital Transactions, 2006-2011Q2
Seven of the ten largest hospital transactions have occurred in the last 18 months.
Purchase
Price
Number of
Hospitals
2006
$33bn
176
2007
$6.8bn
51
2010
$3.3bn
16
2010
$1.7bn
44
2010
$1.3bn
8
2010
$830m
6
2009
$570m
20
2011
$475m
2
2010
$363m
5
2010
$355m
3
Year
Acquirer
Target
____________________
Sources: Irving Levin.
17
Healthcare M&A Trends & Activity
Payor/Provider Partnerships
Highmark Acquires West Penn Allegheny
UnitedHealth Acquires 2,300 Doctors in CA

Highmark acquiring West Penn for a total
consideration of approximately $500 million

UnitedHealth Group acquired Irvine, CA-based
Monarch HealthCare in September 2011

Defensive maneuver

2,300 physicians in a range of specialties

Attempt by Highmark to prop up the only
competition to rival UPMC, the region’s largest
provider in a two hospital town

Strengthens presence of United’s Optum health
services business line in southern California

Other similar transactions include Humana’s
acquisition of Concentra and WellPoint’s
acquisition of CareMore Health Group

West Penn is a five hospital system that has
operated at a loss for the past five years
Increased collaboration between insurance companies, hospitals and physicians is redefining the
approach to healthcare delivery and population health management.
____________________
Source: Company filings.
18
Healthcare M&A Trends & Activity
Trinity Health + Loyola University Health System
Transaction Highlights

Announcement Date: March 4, 2011

Closing Date: June 30, 2011

Offer Price: $475m(1)

Overview of the Organizations
Price/revenue multiple: 0.43x. This compares to an
average price/revenue multiple of 0.70x for Q1 ’11(1)

Structure: Membership Substitution

Transaction Summary: Trinity Health (“Trinity”)
acquired Loyola University Health System (“LUHS”)
from Loyola University of Chicago (“LUC”)

Largest hospital transaction closed in 2011 YTD

Example of unique transaction involving a community
hospital system acquiring an academic medical center
4th largest Catholic
health system in US
Only Catholic
AMC in Illinois
Aa2/AA/AA
Baa3
Revenue
$7.1 bn
$1.1 bn
Discharges
331,587
39,938
7,833
820
8,000+
1,000
800
1,824
Business
Bond Rating
Licensed Beds
Physicians
Students
Universities are increasingly questioning the need to own academic medical centers given uncertainty of
healthcare reform and significant capital demands.
____________________
(1) Source: Irving Levin.
19
Healthcare M&A Trends & Activity
Evolving Policies at State Governments
Florida

Commission on Taxpayer Funded Hospital Districts established in March 2011

Created to assess and make recommendations on the role of hospitals districts and whether it is in the
public’s best interest to have government entities operating hospitals
New Jersey

Committee appointed to study a plan to dismantle the University of Medicine and Dentistry of New
Jersey and replace it with an enhanced delivery system in Newark

Committee will report its findings to the Governor in September 2011
Massachusetts

For-profit hospital companies have been actively acquiring stand-alone not-for-profits, a trend that is
not expected to cease anytime soon, nor one that is necessarily unwelcome by the State government

Massachusetts’ unique health insurance model (e.g. RomneyCare) positions it as a testing ground for
health care reform readiness strategies
Illinois

Illinois’s Department of Revenue is scrutinizing, and in some instances revoking, hospitals’ property tax
exemption due to alleged inadequate charitable care levels
State and local governments are beginning to view for-profit hospitals as a welcome new source of tax
revenue.
____________________
Sources: Industry publications and periodicals.
20
Healthcare M&A Trends & Activity
Strategies for Growth and/or Repositioning
In the current period of rapid transition there are new and innovative solutions to support and fund growth and/or
reposition ancillary services and non-core business lines.
Acute Care
Ancillary and Other Services
Outsourcing &
Infrastructure
Rationalize Portfolio
Urban
Academic
Ambulatory
Surgery Centers
Skilled Nursing
Facilities
Physician Services
Divest
Suburban
Sole Provider
Imaging Centers
LTACHs
Nurse Staffing
Joint Venture
Rural
Children’s
Radiation Therapy
Home Health
HCIT
2010
Dialysis
Examples Include:
Hospice
Behavioral Health
Clinical Labs
Strategies
Traditional
In Market
Acquisition
Non-Traditional
New Market
Acquisition
JV’s w/
NFP
JV’s w/ NFP
Consortium
National ForProfit Affiliation
Consortium JV’s
w/ Private Equity
JV’s w/
For-Profit
JV’s w/ Private
Equity
For-Profit
Conversion
21

100% Sale

Sale of majority equity
interest

Convert selected assets
into new for-profit
venture
Healthcare M&A Trends & Activity
ASCs - Select Partnerships with Not-For-Profits
Health System/Hospital
Adventist Health
Ascension Health
Baylor
Bon Secours
Catholic Health Partners
Catholic Healthcare West
Centura Health
CHRISTUS Health
Cookeville Reg Med Cntr
Covenant Health
INTEGRIS Health
Kennedy Health
Legacy Health
McLaren Health
Memorial Hermann
Meridian Health
Mountain States Hlth Allnc
North KS City Hospital
NorthShore Univ Hlth
Providence Health System
Scripps Health
SSM Healthcare
St. John Health System
St. John's Mercy
Christ Hospital
Williamson Med Cntr
Geographic Focus
Health System/Hospital
12 States
19 States and D.C.
Mutliple TX Markets
Seven states
Four States
Three States
Colorado
Eight states
Middle Tennessee
Eastern Tennessee
Oklahoma
New Jersey
Portland, Oregon
Michigan
Houston, Texas
New Jersey
Northeast Tennessee
Kansas City, MO
Chicago, IL
Five states
San Diego, CA
Four states
Oklahoma
Missouri
Cincinnati, OH
Franklin, TN
Sutter Health
CA Pacific Medical Center
University of CA San Diego
Redlands Comm Hosp
Loyola Univ Hlth Systm
Baylor College of Medicine
Holy Spirit
Mainline Health
Baptist Health System
Vanderbilt University
Shands Hospital
Florida Hospital
Owensboro Health System
Northeast GA Medical Ctr
Muskogee Reg Med Ctr
Norman Reg Hospital
Geographic Focus
Multiple CA Markets
San Francisco, CA
San Diego, CA
Redlands, CA
Oakbrook Terrace, IL
Houston, TX
Camp Hill, PA
Paoli, PA
Memphis, TN
Nashville, TN
Jacksonville, FL
Winter Park, FL
Owensboro, KY
Gainesville, GA
Muskogee, OK
Norman, OK
Health systems can attract external capital
while enhancing and implementing their
outpatient surgery strategies through joint
ventures and/or affiliation agreements.
____________________
Source: Company filings.
22
Healthcare M&A Trends & Activity
Closing Remarks
We encourage you to….

Take a proactive approach to determining the fate of your organization in the new era of healthcare
reform

Analyze operational performance based on Medicare only reimbursement and ability to bring costs in line

Critically assess your strategic position in the market

Ascertain what you believe will be the end game in your market and how your organization fits in

Evaluate all strategic alternatives for all assets and services across the continuum of care

Think outside the box

Be open to discussions with all parties

Develop a comprehensive strategic plan as soon as possible
23
Notice to Recipient
Confidential
These materials have been prepared by one or more subsidiaries of Bank of America Corporation for the client or potential client to whom such materials are directly addressed and delivered (the
“Company”) in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with
us. These materials are based on information provided by or on behalf of the Company and/or other potential transaction participants, from public sources or otherwise reviewed by us. We assume
no responsibility for independent investigation or verification of such information (including, without limitation, data from third party suppliers) and have relied on such information being complete
and accurate in all material respects. To the extent such information includes estimates and forecasts of future financial performance prepared by or reviewed with the managements of the Company
and/or other potential transaction participants or obtained from public sources, we have assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). No representation or
warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the
present or the future. These materials were designed for use by specific persons familiar with the business and affairs of the Company and are being furnished and should be considered only in
connection with other information, oral or written, being provided by us in connection herewith. These materials are not intended to provide the sole basis for evaluating, and should not be
considered a recommendation with respect to, any transaction or other matter. These materials do not constitute an offer or solicitation to sell or purchase any securities and are not a commitment by
Bank of America or any of its affiliates to provide or arrange any financing for any transaction or to purchase any security in connection therewith. We assume no obligation to update or otherwise
revise these materials. These materials have not been prepared with a view toward public disclosure under state or federal securities laws or otherwise, are intended for the benefit and use of the
Company, and may not be reproduced, disseminated, quoted or referred to, in whole or in part, without our prior written consent. These materials may not reflect information known to other
professionals in other business areas of Bank of America and its affiliates.
Bank of America Corporation (the parent company of Banc of America Securities LLC and Merrill Lynch & Co., Inc.) and its affiliates (collectively, the “BAC Group”) comprise a full service securities
firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment,
corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of corporations and
individuals, domestically and offshore, from which conflicting interests or duties, or a perception thereof, may arise. In the ordinary course of these activities, parts of the BAC Group at any time may
invest on a principal basis or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions, for their own accounts or the accounts of
customers, in debt, equity or other securities or financial instruments (including derivatives, bank loans or other obligations) of the Company, potential counterparties or any other company that may
be involved in a transaction. Products and services that may be referenced in the accompanying materials may be provided through one or more affiliates of Bank of America. We may share
information which we have obtained from the Company or which relates to our relationship with the Company with one or more affiliates of Bank of America.
We have adopted policies and guidelines designed to preserve the independence of our research analysts. These policies prohibit employees from offering research coverage, a favorable research
rating or a specific price target or offering to change a research rating or price target as consideration for or an inducement to obtain business or other compensation. We are required to obtain, verify
and record certain information that identifies the Company, which information includes the name and address of the Company and other information that will allow us to identify the Company in
accordance with the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) and such other laws, rules and regulations.
We do not provide tax advice. Accordingly, any statements contained herein as to tax matters were neither written nor intended by us to be used and cannot be used by any taxpayer for the
purpose of avoiding tax penalties that may be imposed on such taxpayer. If any person uses or refers to any such tax statement in promoting, marketing or recommending a partnership or other
entity, investment plan or arrangement to any taxpayer, then the statement expressed herein is being delivered to support the promotion or marketing of the transaction or matter addressed and
the recipient should seek advice based on its particular circumstances from an independent tax advisor. Notwithstanding anything that may appear herein or in other materials to the contrary,
the Company shall be permitted to disclose the tax treatment and tax structure of a transaction (including any materials, opinions or analyses relating to such tax treatment or tax structure, but
without disclosure of identifying information or, except to the extent relating to such tax structure or tax treatment, any nonpublic commercial or financial information) on and after the earliest to
occur of the date of (i) public announcement of discussions relating to such transaction, (ii) public announcement of such transaction or (iii) execution of a definitive agreement (with or without
conditions) to enter into such transaction; provided, however, that if such transaction is not consummated for any reason, the provisions of this sentence shall cease to apply.
Copyright 2008 Bank of America Corporation.
Tax Policy Discussion
•Introduction & Overview
•Community Specific Examples
•Implications of Tax Policy
•Not-for-Profit Mission
•Not-for-Profit Value
•Community Benefit Standards
Caring for
Patients
Payments
Caring for
Patients
Dividends
Payments
Caring for
Patients
Payments
Reinvestment
Serving Our
Communities
Tax
Exemption
Reinvestment
Community Benefit Studies
•Pershing Yoakley Associates
•Cleverly & Associates
•Medlytix
Study Parameters
•Used FY '09 data from hospital financial surveys (HFS),
audited financial statements and community benefit reports
•Only 990 allowable costs
•Only 1/3 of bad debt based on Medlytix study of federal
charity standards
•No uncompensated Medicare costs included
•No costs attributable to essential services
•Taxes estimations for sales & use, property and
income taxes
Value Versus Exemptions
•$1.15 Billion in Community Benefits
•$288 Million in Estimated Tax Exemptions
•$862 Million Return on Investment
$1 state & local exemptions = $4 community benefit
Reinvestment
•2 year growth in net fixed assets
•Revenue to net fixed assets
Georgia NFP hospitals reinvest a substantial portion of
their earnings back into community-based facilities and
services as compared to national norms and
investor-owned hospitals.
Reserves
•Cash & reserves available $5.38 Billion
•Cash & reserve needs $7.68 Billion
•Shortage of $2.30 Billion
NFP hospitals do not have excess reserves; in fact,
current reserves are not sufficient to meet established
working capital and replacement needs.
Economic Impact
•Over 100,000 jobs
•Almost $6 Billion in salaries and benefits annually
•Healthcare access is an important concern for
relocating businesses
•Healthcare is one of only two industries with job
growth during the recession
Economically viable hospitals are good for the
economic development of Georgia
Essential Services
•15 of the state’s 16 trauma centers
•State’s busiest emergency departments
•95% of residency slots
•Majority of NICU beds
NFP hospitals provide the bulk of the state’s
essential but unprofitable services.
Studies Conclusions
•$1 state & local exemptions = $4 community benefit
•Georgia NFP hospitals reinvest a substantial portion
of their earnings back into community-based facilities
and services
•NFP hospitals do not have excess reserves
•Economically viable hospitals are good for the
economic development of Georgia
•NFP hospitals provide the bulk of the state’s essential
but unprofitable services.
•State & Federal Minimums
•Illinois Experience
•Local Control
One Size Does NOT Fit All
•Gainesville
•Jesup
•Savannah
Northeast Georgia Health System
• NGHS is a not-for-profit community health system dedicated to
improving the health and quality of life of the people of northeast
Georgia and receives no tax support from local government for
indigent care.
Northeast Georgia Health System
• NGHS is the largest employer in Hall County
• Hall County is home to 47 Fortune 500 companies and the overall
economic health is strong
• 9.6% of families live below the poverty level
• 19% are uninsured (www.healthyhall.com)
Healthy Hall Community Partnership
• To better understand the healthcare needs of
the community, the Healthy Hall Partnership
was convened by NGMC in 1998 to oversee a
comprehensive local health needs assessment
process.
• The assessment identified as a critical issue in
Hall County the impact that access
to the healthcare system had on the
health status of county residents.
Community Health Needs Assessment
• Some of the resounding priories identified were:
– The need for expanded access to effective disease
prevention services, health screening and disease
management strategies for all in Hall County, including
those with low incomes and no insurance;
– Expanded access to dental services, especially for
uninsured, low income children;
– The need to decrease utilization of the
emergency department for non-emergent
health care.
HALL COUNTY MODEL FOR SERVING MEDICALLY
INDIGENT
Health Access
Initiative
Hall County
Health Department
Primary &
Prenatal Care
The Longstreet Clinic
Volunteer Physicians
and Professionals
Specialty Care
Good News
Clinics
Northeast Georgia
Health System, Inc.
Inpatient &
Outpatient Care
Primary &
Dental Care
Good News Clinics
• NGMC helps support Good News Clinics (GNC), a
non-profit, faith-based charitable clinic that
provides free healthcare services to indigent
people in Hall County who do not have insurance
or cannot qualify for government-sponsored
programs.
• NGMC has been a partner with Good News
Clinics since it was founded by private physicians
in 1992.
• GNC receives no State or federal funding.
• GNC is the largest free clinic in the State.
Good News Clinics
Impact
• During the past 3 years, Good News Clinics has
had:
– 28,806 medical visits
– 22,041 dental visits
– 30,723 lab visits
• Additionally, the GNC dispensary has filled
202,596 prescriptions valued at $11.9 million.
Good News Clinics
• A study conducted by Phaedra Corso, PhD and Angela
Fertig, PhD, researchers at the Department of Health
Policy and Management at the University of Georgia,
researched the economic benefits associated with two
free clinics in Georgia, one of which was the Good
News Clinics.
• According to the study in both communities and clinics,
– The costs associated with non-urgent ED care decreased
14% to 20% for a sample of patients in the year after they
enrolled in the free healthcare clinic compared to the year
before enrollment in the clinic
– In-patient related costs declined by 20% to 34% in both
clinics
Good News Clinics and Health Access Initiative
• Hall County residents rank 10th best for overall
“Health Outcomes” according to data reported in
February 2010 by the Robert Wood Johnson
Foundation and the University of Wisconsin
Population Health Institute.
– This ranking can reasonably be attributed to nontraditional collaborative initiatives with community
partners that NGMC has long engaged in and
supported to remove barriers to healthcare services
for low-income populations.
Total Contributions to Good News Clinics
Since 2006
Payouts
Amount
February 2007
12,000.01
February 2007
187,999.99
FY08, 1st contribution
131,731.00
FY08, 2nd contribution
102,530.00
FY08, year-end contribution
95,854.00
FY09, 1st contribution
150,771.00
FY09, 2nd contribution
118,279.00
FY09, year-end contribution
81,585.00
FY10, 1st contribution
132,343.00
FY10, 2nd contribution
124,736.00
FY10, year-end contribution
FY11, 1st contribution
90,181.00
262,463.00
$1,490,473.00
Health Access Initiative
• HAI, a partnership of the Hall County Medical
Society, private physicians, and NGMC, grew out
of the efforts and findings of the Healthy Hall
Partnership.
• HAI was founded in 2002 to provide a more
efficient model of specialty care delivery. In
January 2003, HAI’s first executive director was
hired and HAI became incorporated shortly
thereafter.
Health Access Initiative
• With the leadership of physicians and the involvement
of NGMC, HAI has successfully developed a
sustainable, comprehensive, well coordinated health
delivery system that manages care, promotes early
intervention and integrates primary specialty, ancillary
and hospital services for the uninsured.
• A network of more than 200 physicians provides care
for HAI enrollees at no charge.
• HAI enrolls adult (18-64 years old) residents of Hall
County who are uninsured, at or below 150% of federal
poverty level and not eligible for other public
programs.
Health Access Initiative
Operating Costs and Funding Sources
• HAI’s operating budget for 2009 was $264,425; The
Medical Center Foundation provided 90% of funds.
NGMC also provides HAI with office space and covers
the cost of utilities.
– Emergency Department utilization October ’09 - July ’10 –
Non HAI patients (self-pay and all payers) used the ED 25
times more frequently than HAI patients and self-pay
patients were hospitalized twice as often as HAI patients.
– Inpatient admits – Self-pay patients were hospitalized
twice as often as HAI patients. All payers (non HAI) were
hospitalized 3.4 times the rate of HAI patients.
– Outpatient services utilization – HAI patients obtained
needed healthcare services via outpatient (95.2%) for most
of their encounters at NGMC.
NGHS Projections for Fiscal Year 2012
Provider Tax
$3,000,000
Indigent/Charity Care (at cost)
$28,000,000
Bad Debt (High deductible/copays) (at cost)
$18,600,000
Partnership for Medically Indigent
Loss on Medicaid Patients
$1,700,000
$16,500,000
Property Tax on non-exempt Holding
$650,000
Sales Tax on non-24 hour Services
$160,000
Other Defined Community Benefit
$3,100,000
$71,710,000
Wayne Memorial Hospital
Interesting Facts
•
•
•
•
84 Beds
400 Employees
$100,000,000 Community Benefit
5th Largest Employer in County
Sales Tax Exemption
If we lost the sales tax exemption,
it would cost us $900,000.
Making Up the Difference
Examples of what would have to be eliminated:
–
–
–
–
–
Certified Athletic Trainer
Local Sponsorships
Community Wide Health Fairs
Health Related Community Education
Rural Health Clinic in Long County (Only place to
go in county to access health care services)
Mission Driven Community Impact
An Overview
GA Alliance of Community Hospitals
October 2011
87
St. Joseph’s/Candler
Who We Are
– St. Joseph’s Hospital
• Founded in 1875 by 5 Sisters of Mercy to care for sick
mariners and the poor
• The Sisters were and are known as the caregivers for
poorest of the poor
• Sponsored by the Sisters of Mercy
– Candler Hospital
• Candler Hospital is Georgia's first hospital (chartered in
1804) and the second oldest continuously operating hospital
in the United States.
– Founded by Bishop Warren Candler
• Affiliated with the Methodist Church
– Merged on April 1, 1997
88
Our Approach to Community Benefits
Rooted in God’s Love, we treat illness and
promote wellness for all people
• Our community benefit activities are an
extension of our mission
• We have a responsibility to the community
we serve
89
Our Approach to Community Benefits
Rooted in God’s Love, we treat illness and promote
wellness for all people
• Extensive outreach to fulfill our responsibility
– We provide and report charity care, government payor
shortfalls, etc., but these numbers alone do not
adequately reflect what we do in the community
• Holistic approach
– More than the freedom from disease
– Health is also defined by social determinants
(housing, education, nutrition and employment)
90
Mission Governance Structure
•
•
•
•
•
•
St. Joseph’s/Candler Board of Trustees
CEO and Leadership Team
Mission/Ethics Committee of the Board
Community Benefit Coordinator
Culture of Service Among Co-workers
Co-worker Involvement
– Reporting community benefits is on-going
– Helping with outreach efforts
91
Outreach Examples
• African American Health Information and
Resource Center
– Started in 1999, this center is part of St.
Joseph’s/Candler’s ongoing commitment to improve
the health of the African-American community and to
correct health disparities. Originally opened to bridge
the digital divide.
• Computer Classes, Technology Camp, Job Search
Assistance, Health Education and Seminars, Weight
Loss/Exercise Program, Math & Reading Tutorial, Blood
Sugar & Pressure Screenings and Case Management
Program and Summer Cooking Camp for Middle School
Students.
92
Outreach Examples
• St. Mary’s Community Center
– This center was established in 2000 in the CuylerBrownsville neighborhood to provide a variety of
services addressing basic needs as well as
opportunities for advancement.
• Food Pantry, Food Stamp Assistance, Life & Financial
Coaching, Health Education, Eye Exam and Eye Glass
Assistance, Pre-school, Senior Services, General
Education Diploma (GED) Courses, Job Search
Assistance, Computer Classes, Free Tax Preparation
and Membership in Local Advocacy Groups.
93
Outreach Examples
• St. Mary’s Health Center
– Once housed in the St. Mary’s Community
Center, the Health Center is now in a free
standing building one mile away, open 5 days
a week to serve the uninsured.
• Primary Care Ages 19-64, Mammograms, Pap
Smears, HIV Testing, Diagnostic/Imaging,
Routine Pathology, Medication Assistance,
Diabetic Counseling, Medical Supply
Assistance and Hospitalization.
94
Outreach Examples
• Good Samaritan Clinic
– Located in Garden City, the Good Samaritan clinic
opened in October 2007 to provide medical care to
Hispanic patients on Savannah’s west side. Since
opening, the GSC has seen a shift in ethnic
demographics, but remains a trusted medical home
for all their patients. SJ/C staff manages a dynamic
group of about 100 volunteer physicians, nurses and
interpreters.
• Services: Primary Care Ages 19-64, Diagnostic/Imaging,
Routine Pathology, Medication Assistance, Diabetic
Counseling, Nutrition Education, Personal Counseling
and Hospitalization..
95
Cover Slide
GACH 2011 Annual Meeting
Presented by: Wendy Stewart & Darrel Flanel
October 13, 2011
Potential Challenges Facing NFP Hospitals
Elimination of State Tax Exemption
Assumptions were based on the Pershing Yoakley & Associates study “Comparative Analysis of
Uncompensated Community Benefits Provided by NFP Hospitals with the Estimated Value of Georgia
Tax Exemptions” by: W. Edward Phillips and Susan P. Clark.
Income Tax
•Income Tax= {(Excess Revs & Gains over Exp. & Losses – (SUM of Sales Tax Exp. +
Property Tax Exp. + FUTA Exp.) – Grants/Contributions/Donations)} x 6%
Sales Tax
•Sales Tax= Supplies x 7% (excludes drugs; assumes drug exclusion remains in tact)
Property Tax
•Property Tax= PP&E x 40% x 4% (the average rate for metro Atlanta counties)
FUTA (Federal Unemployment Tax Act)
•FUTA (Federal Unemployment Tax Act)= # of Employees x $7,000 x .06
Other External Factors Include:
Medicaid cuts
Medicare cuts
Threat to tax exemption for municipal bond holders
Potential Loss of State Tax Exemption
(Dollars in thousands, except per share amounts)
Sample AA rated
UNRESTRICTED REVENUE
In Patient Revenue
3,019,503
Disproportionate Share Payment Rev
16,570
State Add-On Payment
0
Less: Contractual Adjustments
(1,618,527)
Net Patient Revenue
1,417,546
Other Operating Revenue
81,837
Net Revenue
1,499,383
Adjusted AA
Sample BBB Rated
Adjusted BBB
3,016,913
16,570
0
(1,618,527)
1,414,956
81,837
1,496,793
448,591
1,366
11,775
(54,762)
406,970
9,521
416,490
448,591
1,366
11,775
(54,762)
406,970
9,521
416,490
788,622
227,170
6,388
77,249
124,546
200,873
19,646
1,444,493
791,562
237,506
31,168
77,249
124,546
200,873
19,646
1,482,549
201,961
76,925
4,760
20,431
35,191
59,052
6,558
404,878
203,221
80,425
10,337
20,431
35,191
59,052
6,558
415,215
54,890
14,243
11,612
1,275
Investment Income
Income from Affiliates/Joint ventures
Misc Non-Operating Income
Grants/Contributions/Donations
Total Non-operating Revenue/(Expense)
Additional gain/loss
27,671
19
(863)
4,249
31,076
(486)
27,671
19
(863)
4,249
31,076
(486)
1,403
203
(1,137)
911
1,380
(2,431)
1,403
203
(1,137)
911
1,380
(2,431)
Excess Revs & Gains over Exps & Losses
85,480
44,833
10,561
224
OPERATING EXPENSES
Salaries and Wages
Supplies & Drugs
Rental and Lease Expense
Depreciation & Amortization
Bad Debt
Other Operating Expenses
Interest expense
Total Operating Expense
Operating Income
NON-OPERATING INCOME (EXPENSE)
REMOVAL OF STATE TAX EXEMPTIONS
Sales Tax Expense
Property Tax Expense
FUTA Expense
Income Tax Expense
Total impact of state tax exemptions
10,336
24,780
2,940
2,590
40,646
3,500
5,577
1,260
0
10,337
Adjusted Excess Revs & Gains over Exps & Losses
44,833
224
Impact to the Ratios
AA Rated Hospitals
BBB Rated Hospitals
Fiscal Year Ending
FY10 Before
FY10 After
Liquidity
Days Cash On Hand
Days Acounts Receivable
223.54
47.73
209
No Change
Profitability
Operating Margin (%)
3.60%
0.95%
MEDIAN Data Table
Liquidity
Days Cash On Hand
Days Accounts Receivable
112.93
46.96
103
No Change
Profitability
Operating Margin (%)
2.72%
0.32%
2010 Moody's Medians
Aa
A
Liquidity Ratios
Days Cash on Hand (DCOH) 228.5
179.7
Cushion Ratio (x)
25.7
16.7
Cash and Unrestricted Investments
($000) $1,043,979 $251,690
Cash-to-Debt 180.3%
127.3%
Net Days in Account Receivable
46.4
44.4
Fiscal Year Ending
FY10 Before
FY10 After
2010 S&P Medians
2010 Fitch Medians
Baa
AA
A
BBB
*NIG
AA
A
BBB
116.6
9.6
320.6
29.3
201.9
17.7
133.6
9.6
73.9
5.6
240.0
22.4
194.1
15.4
128.6
8.8
$120,433
74.2%
43.8
232.7%
44.9
145.2%
44.2
97.0%
44.7
60.8%
42.0
159.0%
43.9
113.8%
43.8
79.8%
43.8
1.00%
3.30%
5.10%
7.20%
2.80%
4.60%
1.60%
3.00%
0.00%
0.50%
4.30%
6.00%
2.60%
4.10%
1.70%
3.00%
7.50%
$339,817
3.10
4.80
51.40%
12.90%
$757,207
5.80
26.50%
10.10%
$327,003
4.20
32.60%
8.80%
$173,078
2.90
41.00%
5.80%
$126,057
1.90
52.60%
9.00%
5.00
3.00
34.40%
8.90%
3.70
3.40
41.90%
7.70%
2.60
4.00
48.40%
11.0
9.1
9.9
10.2
12.1
9.6
10.2
10.5
Profitability Ratios
Operating Margin
Excess Margin
4.50%
7.60%
2.60%
5.30%
Capital and Cash Flow Ratios
Operating Cash Flow Margin 10.80%
10.00%
Net Patient Revenues ($000) $1,443,658 $492,141
MADS Debt Service Coverage (x)
6.30
4.60
Debt to Cash-Flow
2.40
3.30
LT Debt to Capitalization 31.10%
38.60%
Age of Plant
9.4
10.1