INPUT DATA: Statements of Operations: (Millions of Dollars) 2012 2013 Premium revenue $313.7 $357.6 Interest revenue 2.4 3.5 Total revenues $316.1 $361.1 Operating expenses: Medical costs $263.0 $291.8 Selling and administrative 36.8 43.6 Depreciation 4.7 5.0 Total operating expenses $304.5 $340.4 Net income $11.6 $20.7 Balance Sheets: (Millions of Dollars) 2012 2013 Cash $37.2 $27.2 Short-term investments 42.7 60.9 Premiums receivable 3.7 7.4 Total current assets $83.6 $95.5 Net plant and equipment 30.0 31.7 Total assets $113.6 $127.2 Medical costs payable $44.8 $48.7 Accounts payable/accruals 15.4 17.3 Total current liabilities $60.2 $66.0 Long-term debt 17.1 4.2 Net assets (equity) 36.3 57.0 Total claims $113.6 $127.2 Other Data: (Millions of Dollars) 2012 2013 Medical loss ratio 83.8% 81.6% Administrative cost ratio 13.2% 13.6% Total commercial premium revenue $170.9 $205.6 Total Medicare premium revenue $142.8 $152.0 Total physician services expense $125.6 $127.1 Total inpatient expense $80.8 $90.1 Total other medical expense $56.6 $74.6 OUTPUT DATA: Statement of Cash Flows (2013): (Millions of Dollars) CASH FLOW FROM OPERATIONS Income from operations $20.7 Depreciation expense 5.0 Increase in premiums receivable (3.7) Increase in medical costs payable 3.9 Increase in payables/accruals 1.9 Net cash flow from operations $27.8 CASH FLOW FROM INVESTING Fixed asset acquisitions ($6.7) Increase in marketable securities ($18.2) Net cash flow from investing ($24.9) CASH FLOW FROM FINANCING Decrease in long-term debt (12.9) Net cash flow from financing ($12.9) Net increase (decrease) in cash ($10.0) Beginning cash 37.2 Ending cash (calculated) $27.2 Actual ending cash (Check figure) $27.2 Du Pont Analyses: 2012 2013 Ind. Avg. Total margin 3.67% 5.73% 2.90% Total asset turnover 2.78 2.84 3.10 ROA = PM x TATO 10.21% 16.27% 8.99% Equity multiplier 3.13 2.23 3.16 ROE = ROA x Equity multiplier 31.96% 36.32% 28.41% ROE (Check figure) 31.96% 36.32% Ratio Analyses: Total Margin 2012 2013 Sparta 10.5% Sparta 9.1% Proxima 9.1% Upper Quartile 5.5% Upper Quartile 5.5% WellLife 5.8% WellLife 4.8% Commonwealth 5.7% State median 4.8% State median 4.7% State average 3.8% Signet Healthcare 3.2% Commonwealth 3.7% Median 2.9% Signet Healthcare 3.0% Lower Quartile 1.5% Median 2.9% Proxima -0.7% Lower Quartile 1.5% State average -3.9% Operating Margin 2012 2013 Upper quartile 5.0% Upper quartile 5.0% Commonwealth 2.9% Commonwealth 4.8% Median 2.5% Median 2.5% Lower quartile 1.1% Lower quartile 1.1% Administrative Cost Ratio (Percent Administrative Expense) 2012 2013 Sparta 23.9% Sparta 26.8% State average 15.5% State average 17.4% State median 14.8% Proxima 16.4% Upper quartile 14.4% State median 15.7% Proxima 13.6% Upper quartile 14.4% Signet Healthcare 12.2% Signet Healthcare 13.4% WellLife 12.1% Commonwealth 12.8% Commonwealth 12.1% Median 12.0% Median 12.0% WellLife 11.5% Lower Quartile 9.0% Lower Quartile 9.0% Percent Inpatient Expense 2012 2013 WellLife 32.2% WellLife 30.3% Commonwealth 26.5% Commonwealth 26.5% State average 25.2% State median 24.3% State median 23.6% State average 23.3% Signet Healthcare 22.8% Proxima 23.0% Proxima 21.2% Signet Healthcare 22.4% Sparta 18.2% Sparta 18.8% Percent Physician Expense 2012 2013 WellLife 54.1% WellLife 56.9% Commonwealth 41.2% Commonwealth 37.3% Signet Healthcare 31.3% State median 31.6% State median 31.1% State average 31.3% State average 28.8% Signet Healthcare 30.3% Proxima 22.7% Proxima 24.9% Sparta 12.8% Sparta 18.6% Percent Other Medical Expense 2012 2013 Sparta 45.7% Sparta 35.0% Proxima 27.5% Proxima 30.2% Commonwealth 18.6% Commonwealth 21.9% State average 14.6% State average 12.5% State median 10.2% State median 8.9% Signet Healthcare 8.9% Signet Healthcare 7.8% WellLife 0.1% WellLife 0.1% Medical Loss Ratio (Based on the three ratios above) 2012 2013 Upper quartile 89.0% Upper quartile 89.0% WellLife 86.4% WellLife 87.3% Commonwealth 86.4% Commonwealth 85.7% Median 84.9% Median 84.9% Lower quartile 80.0% Lower quartile 80.0% Proxima 71.4% Proxima 78.1% State average 68.6% State average 67.1% State median 64.9% State median 64.5% Signet Healthcare 63.0% Signet Healthcare 62.4% Commercial Premium Revenue PMPM 2012 2013 Commonwealth $127.82 Commonwealth $127.90 Proxima 120.68 Proxima 124.27 WellLife 108.68 State median 108.95 State median 108.32 WellLife 110.19 State average 101.17 State average 102.53 Sparta 88.41 Sparta 95.06 Signet Healthcare 39.86 Signet Healthcare 27.50 Medicare Revenue PMPM 2012 2013 Commonwealth $449.37 Commonwealth $437.23 State median 426.18 State median 430.57 WellLife 406.57 WellLife 421.57 State average 365.12 State average 376.04 Sparta N/A Sparta N/A Signet Healthcare N/A Signet Healthcare N/A Proxima N/A Proxima N/A Commercial Inpatient Days per 1,000 Enrollees 2012 2013 Commonwealth 302.9 Commonwealth 266.4 State median 279.1 Sparta 248.9 State average 278.0 Proxima 248.9 Signet Healthcare 258.4 State median 248.8 Proxima 251.8 Signet Healthcare 248.8 WellLife 245.4 WellLife 246.0 Sparta 198.2 State average 237.0 Medicare Inpatient Days per 1,000 Enrollees 2012 2013 Commonwealth 1,622.4 Commonwealth 1,418.1 WellLife 1,388.4 State average 1,375.5 State median 1,380.5 State median 1,350.6 State average 1,432.1 WellLife 1,323.8 Signet Healthcare N/A Sparta N/A Proxima N/A Proxima N/A Sparta N/A Signet Healthcare N/A Commercial Physician Encounters per Member 2012 2013 Commonwealth 4.1 Commonwealth 4.0 State median 3.9 State average 3.8 State average 3.8 State median 3.7 Sparta 3.5 WellLife 3.6 Proxima 2.7 Sparta 3.6 WellLife 2.2 Proxima 2.6 Signet Healthcare 1.5 Signet Healthcare 1.4 Medicare Physician Encounters per Member 2012 2013 Commonwealth 9.9 Commonwealth 10.0 WellLife 9.8 State average 9.1 State average 9.1 WellLife 9.6 State median 8.6 State median 8.9 Sparta N/A Sparta N/A Proxima N/A Proxima N/A Signet Healthcare N/A Signet Healthcare N/A Current Ratio 2012 2013 Commonwealth 1.4 Commonwealth 1.4 Upper quartile 1.3 Upper quartile 1.3 Median 1.0 Median 1.0 Lower quartile 0.5 Lower quartile 0.5 Days Cash on Hand 2012 2013 Commonwealth 45.3 Upper quartile 32.7 Upper quartile 32.7 Commonwealth 29.6 Median 10.3 Median 10.3 Lower quartile 0.8 Lower quartile 0.8 Current Asset Turnover 2012 2013 Upper quartile 14.1 Upper quartile 32.7 Median 6.4 Median 10.3 Commonwealth 3.8 Commonwealth 3.8 Lower quartile 3.7 Lower quartile 0.8 Total Asset Turnover 2012 2013 Upper quartile 4.1 Upper quartile 4.1 Median 3.1 Median 3.1 Commonwealth 2.8 Commonwealth 2.8 Lower quartile 2.2 Lower quartile 2.2 Days Premiums Receivable 2012 2013 Upper quartile 14.0 Upper quartile 14.0 Median 8.9 Median 8.9 Lower quartile 7.0 Commonwealth 7.6 Commonwealth 4.3 Lower quartile 7.0 Debt Ratio 2012 2013 Upper quartile 81.3% Upper quartile 81.3% Median 68.4% Median 68.4% Commonwealth 68.0% Lower quartile 59.7% Lower quartile 59.7% Commonwealth 55.2% 1. Create and interpret Commonwealths statement of cash flows for 2013. What information does it provide regarding the HMOs sources and uses of cash over the past year? 2. Use the Du Pont equation to obtain a rough feel for Commonwealths financial condition as compared to national averages. What are your conclusions? 3. Conduct a financial statement and operating indicator analysis and interpret the resulting data. Use both national and state competitor data in the analysis. (Note that all ratios do not have a complete set of comparative data.)