CONSOLIDATED STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 20YY (in thousands $) 2014 2015 UNRESTRICTED REVENUE Gross patient services revenue Contractual allowances Provision for bad debts Net patient services revenue Capitation and premium revenue Net assets released from restrictions Other revenue from operations Total unrestricted revenue 17,498,575 (5.103,269) (620,011) 11,775,295 689,053 28,366 1,093,765 13,586,479 13,508,428 (727,404) (610,620) 12,170,404 798,680 14,916 1,009,896 13,993,896 EXPENSES Salaries and wages Employee benefits Contract labor Total labor expenses Supplies Purchase services Depreciation Building rent and leases Medical claims (insurance product) Interest Other expenses Total expenses 5,870.246 1,202,093 102,504 7.174.843 2,153,313 1,494,036 707,707 581,579 284,449 159,228 649,186 13.204.341 6,032,464 1,207,808 101,172 7,341,444 2.233,128 1,562,676 729,180 589,476 377,444 158,792 616,200 13,608,340 385,556 OPERATING INCOME BEFORE OTHER ITEMS Restructuring costs Consolidation costs Litigation accrual Other extro dinary items OPERATING INCOME 382,138 (45,720) (42.856) (36,448) (137,532) 119,582 385,556 NONOPERATING ITEMS Investment income Equity in earnings of unconsolidated affiliates Other, including income taxes Total nonoperating items EXCESS OF REVENUE OVER EXPENSES 609,010 265,815 (43,002) 831,823 951,405 (221,640) 163,240 160,332 101,932 487,488 CONSOLIDATED BALANCE SHEET DECEMBER 31 (in thousands $) 2014 2015 ASSETS CURRENT ASSETS Cash and cash equivalents Investments Security lending collateral Assets limited as to use-current portion Patient AR Allowance for doubtful accounts Net patient AR Other receivables Inventories Assets held for sale Prepaid expenses and other current assets Total current assets 901.282 3,231,318 187,882 274,202 2,020,879 (545,300) 1,475,579 424,637 206,226 207,989 140.359 7,049,474 699,234 3,368,204 198,355 253,564 2,102.491 (555,800) 1546.691 262,296 216,388 202,948 338,088 7,085,768 ASSETS RESTRICTED AS TO USE (noncurrent portion) Held by trustees under bond agreements Self-insurance, benefit plans and other By board By donors Total limited use assets (noncurrent) Property, plant, equipment (net) Investment in unconsolidated affiliates Goodwill Other assets TOTAL ASSETS 53,652 672,537 2,891,790 308,572 3,926,551 6,592,913 2,257,555 153,773 452,923 20,433,189 52,091 773,804 2,844,107 310,846 3,980,848 6,582,396 2,281,537 288,619 459,478 20,678,646 2014 2015 239,961 1123,620 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Commercial paper (short term loans) Short-term borrowing Current portion of long-term debt Accounts payable Accrued expenses Salaries, wages, and related liabilities Current portion of self-insurance reserves Payable under loan agreements Estimated payables for 3rd party payers Other current liabilities Total current liabilities LONG-TERM DEBT-Net of current portion SELF INSURANCE RESERVES-Net of current portion Accrued pension and retiree costs OTHER LONG-TERM LIABILITIES Total liabilities 96,038 658,748 275,960 656,467 197,040 187,882 323,546 284.991 4,044,253 3,619,237 920,799 727,873 577,565 9,889,727 239,979 1,123,620 97,978 617,721 259,390 670,070 197,005 198,355 266,136 350.131 4,020,385 3,637,539 970,048 703,562 579.872 9,911,406 NET ASSETS Unrestricted net assets Noncontrolling ownership in subsidiaries Total unrestricted net assets Temporarily restricted net assets Permanently restricted net assets Total net assets TOTAL LIABILITIES AND NET ASSETS 10,125,003 38,090 10,163,093 293,306 87,063 10,543,462 20,433,189 10,243,059 142,298 10,385,357 295,055 86,828 10,767,240 20,678,646 2014 2015 Profitability Total margin Operating margin (including extrodinary items) Operating margin (excluding extrodinary items) Return on assets Liquidity Current ratio Days cash on hand Debt management Debt ratio Times interest earned Asset Management Fixed asset turnover Total asset turnover Average collection period (days in AR) Questions 1. The health system's total margin declined. Why was this? 2. What does a current ratio above 1.0 mean? 3. How many days could the hospital continue operation if it was unable to collect any additional cash? 4. Does the hospital use more debt or equity to finance its operations? How do you know? 5. How many dollars in revenue does each dollar invested in PP&E produce (on average)? 6. Why is fixed asset turnover higher than total asset turnover? CONSOLIDATED STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS YEAR ENDED DECEMBER 31, 20YY (in thousands $) 2014 2015 UNRESTRICTED REVENUE Gross patient services revenue Contractual allowances Provision for bad debts Net patient services revenue Capitation and premium revenue Net assets released from restrictions Other revenue from operations Total unrestricted revenue 17,498,575 (5.103,269) (620,011) 11,775,295 689,053 28,366 1,093,765 13,586,479 13,508,428 (727,404) (610,620) 12,170,404 798,680 14,916 1,009,896 13,993,896 EXPENSES Salaries and wages Employee benefits Contract labor Total labor expenses Supplies Purchase services Depreciation Building rent and leases Medical claims (insurance product) Interest Other expenses Total expenses 5,870.246 1,202,093 102,504 7.174.843 2,153,313 1,494,036 707,707 581,579 284,449 159,228 649,186 13.204.341 6,032,464 1,207,808 101,172 7,341,444 2.233,128 1,562,676 729,180 589,476 377,444 158,792 616,200 13,608,340 385,556 OPERATING INCOME BEFORE OTHER ITEMS Restructuring costs Consolidation costs Litigation accrual Other extro dinary items OPERATING INCOME 382,138 (45,720) (42.856) (36,448) (137,532) 119,582 385,556 NONOPERATING ITEMS Investment income Equity in earnings of unconsolidated affiliates Other, including income taxes Total nonoperating items EXCESS OF REVENUE OVER EXPENSES 609,010 265,815 (43,002) 831,823 951,405 (221,640) 163,240 160,332 101,932 487,488 CONSOLIDATED BALANCE SHEET DECEMBER 31 (in thousands $) 2014 2015 ASSETS CURRENT ASSETS Cash and cash equivalents Investments Security lending collateral Assets limited as to use-current portion Patient AR Allowance for doubtful accounts Net patient AR Other receivables Inventories Assets held for sale Prepaid expenses and other current assets Total current assets 901.282 3,231,318 187,882 274,202 2,020,879 (545,300) 1,475,579 424,637 206,226 207,989 140.359 7,049,474 699,234 3,368,204 198,355 253,564 2,102.491 (555,800) 1546.691 262,296 216,388 202,948 338,088 7,085,768 ASSETS RESTRICTED AS TO USE (noncurrent portion) Held by trustees under bond agreements Self-insurance, benefit plans and other By board By donors Total limited use assets (noncurrent) Property, plant, equipment (net) Investment in unconsolidated affiliates Goodwill Other assets TOTAL ASSETS 53,652 672,537 2,891,790 308,572 3,926,551 6,592,913 2,257,555 153,773 452,923 20,433,189 52,091 773,804 2,844,107 310,846 3,980,848 6,582,396 2,281,537 288,619 459,478 20,678,646 2014 2015 239,961 1123,620 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Commercial paper (short term loans) Short-term borrowing Current portion of long-term debt Accounts payable Accrued expenses Salaries, wages, and related liabilities Current portion of self-insurance reserves Payable under loan agreements Estimated payables for 3rd party payers Other current liabilities Total current liabilities LONG-TERM DEBT-Net of current portion SELF INSURANCE RESERVES-Net of current portion Accrued pension and retiree costs OTHER LONG-TERM LIABILITIES Total liabilities 96,038 658,748 275,960 656,467 197,040 187,882 323,546 284.991 4,044,253 3,619,237 920,799 727,873 577,565 9,889,727 239,979 1,123,620 97,978 617,721 259,390 670,070 197,005 198,355 266,136 350.131 4,020,385 3,637,539 970,048 703,562 579.872 9,911,406 NET ASSETS Unrestricted net assets Noncontrolling ownership in subsidiaries Total unrestricted net assets Temporarily restricted net assets Permanently restricted net assets Total net assets TOTAL LIABILITIES AND NET ASSETS 10,125,003 38,090 10,163,093 293,306 87,063 10,543,462 20,433,189 10,243,059 142,298 10,385,357 295,055 86,828 10,767,240 20,678,646 2014 2015 Profitability Total margin Operating margin (including extrodinary items) Operating margin (excluding extrodinary items) Return on assets Liquidity Current ratio Days cash on hand Debt management Debt ratio Times interest earned Asset Management Fixed asset turnover Total asset turnover Average collection period (days in AR) Questions 1. The health system's total margin declined. Why was this? 2. What does a current ratio above 1.0 mean? 3. How many days could the hospital continue operation if it was unable to collect any additional cash? 4. Does the hospital use more debt or equity to finance its operations? How do you know? 5. How many dollars in revenue does each dollar invested in PP&E produce (on average)? 6. Why is fixed asset turnover higher than total asset turnover