Analyze my capitated managed care agreement with the city and tell me the full cost profit / loss. Should we renew the contract for the next year at present rates, or should we ask for a rate increase and if so, how much rate increase do we need to cover our full cost.

ABLE I

Hays County IDS Balance Sheet as of December 31, 2016: Assets

Assets 2016

Current Assets

Cash and cash equivalents $ 816,875

Marketable securities 8,100,500

Accounts receivable less allowances 17,250,000

Inventories at cost 2,368,000

Other current assets 8,992,500

Total Current Assets 37,527,875

Land and improvements 11,250,000

Buildings 50,509,500

Fixed equipment 5,063,250

Movable equipment 4,466,750

Property, Plant, and Equipment 91,289,500

Less accumulated depreciation (38,376,231)

Total Property, Plant, and Equipment 52,913,269 TOTAL ASSETS 90,441,144

Current Liabilities

Current portion of long-term debt $ 10,151,000

Accounts payable and accrued expenses 8,400,000

Estimated amounts due to third-party payers 8,423,750

Other current liabilities 10,500,000

Total Current Liabilities 37,474,750

Long-term debt, net of current portion 25,000,000 TOTAL LIABILITIES 62,474,750

Net Assets

Unrestricted 742,625

Temporarily restricted 16,000,000

Permanently restricted 11,223,769

TOTAL NET ASSETS 27,966,394

TOTAL LIABILITIES AND NET ASSETS $ 90,441,144

TABLE II

Hays County IDS Actual Expenses ($) through December 31, 2017

Wages, Taxes, Benefits (90% variable, 10% fixed) $ 76,725,792

Professional Fees and Commissions (fixed) 7,000,000

Drugs (variable) 8,000,000

Medical and Other Supplies (variable) 8,500,000

Food (variable) 7,500,000

Purchased Services (variable) 6,500,000

Repairs and Maintenance (fixed) 8,000,000

Utilities (fixed) 9,000,000

Interest (fixed) 8,021,440

Depreciation (fixed) 3,000,000

TOTAL EXPENSES $142,247,232

Table III

Selected Industry Financial and Productivity Ratios for Urban Hospital ($175400 million revenue)

Financial Ratios

Hays Optum

County 2015*

Hospital Liquidity Ratios

Current ratio 1.87 Collection period ratio 47.60 Days cash-on-hand, short-term sources 18.80 Days cash-on-hand, all sources 91.60** Capital Structure Ratios

Net asset financing ratio 56.30 Debt service coverage ratio 2.17** Efficiency Ratios

Total asset turnover ratio 0.87 Age of plant ratio 11.47 Fixed asset turnover ratio 2.59 Current asset turnover ratio 4.22 Inventory turnover ratio 51.38 Profitability Ratios

Excess margin 5.10 Operating margin 4.14 Return on net assets 9.50 Operating Indicators

Length of stayacute 4.10 Occupancy rateacute 52.30

Productivity Ratios Cost per acute discharge equivalents $11,076 Salaries per acute discharge equivalents $4,270 Nursing Service

RNs as a percent of total nursing 56.9 LPNs as a percent of total nursing 4.0 Nursing assistants as a percent of total nursing 39.1 Full-Time Equivalent Employees (FTEs)

Per occupied bed 4.86 Salary per FTE $62,306

*See Optum (2017) for 2015 data. **Optum 2014 data (see Optum 2016). Optum number is adjusted for acute discharge equivalents. See Health Forum (2015) for nursing personnel data adjusted for Bureau of Labor Statistics (2017).

Table Iv-A

Hays County IDS Discharges

Service (LOS) 2013 2014 2015 2016 2017

Acute (4) 6,777 6,354 5,931 5,931 5,931

SNF (30) 239 243 247 251 255

Rehab (20) 155 157 159 162 164

Home Health 7,298 6,082 4,866 3,650 3,650

Emergency 27,915 30,062 32,207 34,354 36,500

Outpatient 16,826 18,355 19,884 22,942 26,000

LOS = length of stay; SNF = skilled nursing facility

Table Iv-b

Percentage of Discharges by Payer

2013 2014 2015 2016 2017

Medicare 24 25 26 27 28

Medicaid 22 24 26 28 30

Commercial 5 4 3 2 1

Managed Carediscount 39 39 39 33 32

Managed Carecapitation 0 0 0 5 5

Bad Debt 2 2 2 3 2

Charity 2 2 2 1 2

Table Iv-c

2017 Charges per Discharge/Visit ($)

HCH St. Teresa

Acute 40,000 38,200

SNF 30,000 28,000

Rehab 40,000 38,000

Home Health 400 300

Emergency 1,600 1,500

Outpatient 600 500

SNF = skilled nursing facility

TABLE! Hays County IDS Balance Sheet as of December 31, 2016: Assets Assets 2016 Current Assets Cash and cash equivalents Marketable securities Accounts receivable less allowances Inventories at cost Other current assets Total Current Assets $ 816,875 8,100,500 17,250,000 2,368,000 8,992,500 37,527,875 Land and improvements Buildings Fixed equipment Movable equipment Property, Plant, and Equipment Less accumulated depreciation Total Property, Plant, and Equipment TOTAL ASSETS 11,250,000 50,509,500 5,063,250 4,466,750 91,289,500 (38,376,231) 52,913,269 90,441,144 Current Liabilities Current portion of long-term debt Accounts payable and accrued expenses Estimated amounts due to third-party payers Other current liabilities Total Current Liabilities Long-term debt, net of current portion TOTAL LIABILITIES $ 10,151,000 8,400,000 8,423,750 10,500,000 37,474,750 25,000,000 62,474,750 U.S. or applicable copyright law. Net Assets Unrestricted Temporarily restricted Permanently restricted TOTAL NET ASSETS TOTAL LIABILITIES AND NET ASSETS 742,625 16,000,000 11,223,769 27,966,394 $90,441,144 Case Study: Hays County Integrated Delivery System 403 TABLE II Hays County IDS Actual Expenses ($) through December 31, 2017 Wages, Taxes, Benefits (90% variable, 10% fixed) Professional Fees and Commissions (fixed) Drugs (variable) Medical and Other Supplies (variable) Food (variable) Purchased Services (variable) Repairs and Maintenance (fixed) Utilities (fixed) Interest (fixed) Depreciation (fixed) TOTAL EXPENSES $ 76,725,792 7,000,000 8,000,000 8,500,000 7,500,000 6,500,000 8,000,000 9,000,000 8,021,440 3,000,000 $142,247,232 TABLE III Selected Industry Financial and Productivity Ratios for Urban Hospital ($175-400 million revenue) Optum 2015* Hays County Hospital 1.87 47.60 18.80 91.60** 56.30 2.17** 0.87 11.47 2.59 4.22 51.38 Financial Ratios Liquidity Ratios Current ratio Collection period ratio Days cash-on-hand, short-term sources Days cash-on-hand, all sources Capital Structure Ratios Net asset financing ratio Debt service coverage ratio Efficiency Ratios Total asset turnover ratio Age of plant ratio Fixed asset turnover ratio Current asset turnover ratio Inventory turnover ratio Profitability Ratios Excess margin Operating margin Return on net assets Operating Indicators Length of stay-acute Occupancy rate-acute Productivity Ratios Cost per acute discharge equivalents Salaries per acute discharge equivalents Nursing Service RNs as a percent of total nursing LPNs as a percent of total nursing Nursing assistants as a percent of total nursing Full-Time Equivalent Employees (FTES) Per occupied bed Salary per FTE 5.10 4.14 9.50 4.10 52.30 $11,0767 $4,2707 56.9+ 4.0 39.1 4.86 $62,306 *See Optum (2017) for 2015 data. **Optum 2014 data (see Optum 2016). Optum number is adjusted for acute discharge equivalents. See Health Forum (2015) for nursing personnel data adjusted for Bureau of Labor Statistics (2017). TABLE! Hays County IDS Balance Sheet as of December 31, 2016: Assets Assets 2016 Current Assets Cash and cash equivalents Marketable securities Accounts receivable less allowances Inventories at cost Other current assets Total Current Assets $ 816,875 8,100,500 17,250,000 2,368,000 8,992,500 37,527,875 Land and improvements Buildings Fixed equipment Movable equipment Property, Plant, and Equipment Less accumulated depreciation Total Property, Plant, and Equipment TOTAL ASSETS 11,250,000 50,509,500 5,063,250 4,466,750 91,289,500 (38,376,231) 52,913,269 90,441,144 Current Liabilities Current portion of long-term debt Accounts payable and accrued expenses Estimated amounts due to third-party payers Other current liabilities Total Current Liabilities Long-term debt, net of current portion TOTAL LIABILITIES $ 10,151,000 8,400,000 8,423,750 10,500,000 37,474,750 25,000,000 62,474,750 U.S. or applicable copyright law. Net Assets Unrestricted Temporarily restricted Permanently restricted TOTAL NET ASSETS TOTAL LIABILITIES AND NET ASSETS 742,625 16,000,000 11,223,769 27,966,394 $90,441,144 Case Study: Hays County Integrated Delivery System 403 TABLE II Hays County IDS Actual Expenses ($) through December 31, 2017 Wages, Taxes, Benefits (90% variable, 10% fixed) Professional Fees and Commissions (fixed) Drugs (variable) Medical and Other Supplies (variable) Food (variable) Purchased Services (variable) Repairs and Maintenance (fixed) Utilities (fixed) Interest (fixed) Depreciation (fixed) TOTAL EXPENSES $ 76,725,792 7,000,000 8,000,000 8,500,000 7,500,000 6,500,000 8,000,000 9,000,000 8,021,440 3,000,000 $142,247,232 TABLE III Selected Industry Financial and Productivity Ratios for Urban Hospital ($175-400 million revenue) Optum 2015* Hays County Hospital 1.87 47.60 18.80 91.60** 56.30 2.17** 0.87 11.47 2.59 4.22 51.38 Financial Ratios Liquidity Ratios Current ratio Collection period ratio Days cash-on-hand, short-term sources Days cash-on-hand, all sources Capital Structure Ratios Net asset financing ratio Debt service coverage ratio Efficiency Ratios Total asset turnover ratio Age of plant ratio Fixed asset turnover ratio Current asset turnover ratio Inventory turnover ratio Profitability Ratios Excess margin Operating margin Return on net assets Operating Indicators Length of stay-acute Occupancy rate-acute Productivity Ratios Cost per acute discharge equivalents Salaries per acute discharge equivalents Nursing Service RNs as a percent of total nursing LPNs as a percent of total nursing Nursing assistants as a percent of total nursing Full-Time Equivalent Employees (FTES) Per occupied bed Salary per FTE 5.10 4.14 9.50 4.10 52.30 $11,0767 $4,2707 56.9+ 4.0 39.1 4.86 $62,306 *See Optum (2017) for 2015 data. **Optum 2014 data (see Optum 2016). Optum number is adjusted for acute discharge equivalents. See Health Forum (2015) for nursing personnel data adjusted for Bureau of Labor Statistics (2017)