1. Finance Committee
April 2019

2. Forecast – 12 month rolling
February 2019 Financial Report
AGENDA
February Highlights
Forecast – FY 19
Forecast – 12 month rolling +

3. Inpatient activity continues to be strong. Outpatient under budget.
February 2019 Financial Report
Volume Highlights
Inpatient activity continues to be strong. Outpatient under budget.
Acute days 10.1% > budget in FEB; 5.7% > budget YTD; 4.1% > PY.
ALOS > budget 5.7% YTD.
Post Acute days > budget 1.2% in FEB; 0.8% > budget YTD; 2.3% > PY.
Clinic Visits 8.7% < budget in FEB; 4.8% < budget YTD; 1.6% < PY.
ER visits 12.2% < budget in FEB; 8.1% < budget YTD; 2.7% < PY.
Physician wRVU’s 4.0% > budget in FEB; 5.2% > budget YTD; 10.7% > PY.
Inpatient activity continued to be strong in February, however outpatient activity was below budget.
Acute Patient days were 10.1% above budget for the month, 5.7% YTD, and 4.1% above prior year.
Acute discharges increased in February and were above budget for the month. YTD, the discharges are at budget. The average length of stay (ALOS) continues to be above budget.
Post acute days were at budget for the month and over YTD for the fy19 and 2.2% above prior fiscal year.
Clinic visits were 8.7% below budget for the month, 4.2% below YTD, and 1.6% below prior YTD.
ER visits continue to be below budget and below prior year.
Physician wRVUs were above budget in February and continue to be above budget YTD and prior YTD.

4. Supplemental Revenue $0.9 million above budget.
February 2019 Financial Report
Highlights
NPSR under budget by $1.9 million. YTD still looking at $27-29 million annual shortfall.
Supplemental Revenue $0.9 million above budget.
Expenses over budget by $2.2 million.
Operating Income $3.2 million under budget in FEB.
EBIDA under budget by 3.7% in FEB and 0.5% under budget YTD.
Net Income $5.4 million over budget YTD due to long term portion of Pension Expense.
NPSR was under budget by 1.9 million partially offset by Supplementals over budget by 0.9 million (AH parcel tax adjustment). Overall Revenues were 1.0 million under budget.
February expenses were over budget by $2.2 million from pharmaceuticals, repairs and maintenance items, and benefit budget allocation.
Net Operating income was $3.2 million under budget for the month. YTD Net Operating Income was $1.7 million above budget.
Overall net income was under budget by $2.2 million for the month and over budget by $5.4 million YTD. (Reason: YTD Pension expense lower than the budget and will be adjusted based on the actuarial report in June, $8.7 million.)

5. Gross Patient Service Revenue < budget in FEB.
February 2019 Financial Report
Revenue Highlights
Gross Patient Service Revenue < budget in FEB.
NPSR 3.0% above prior year.
Supplemental revenue > budget – mainly due to an adjustment in parcel tax revenue.
NPSR Collection % is 0.3% less than PY – mainly due to charge increase of 2.4%
Here is a closer look at the revenues which we’ve already discussed.
Outpatient revenues were under budget which has been a trend for most of the fiscal year. This was offset by Inpatient and professional revenue that were above budget. YTD gross charges are 4.8% above prior year.
Net Patient Services revenue was under budget and the shortfall is consistent with the lower collection % in the current fiscal year. The annual shortfall is estimated to be between $27 – 29 million.
Supplemental Revenue was above budget by 0.9 million due to Alameda Hospital parcel tax which was higher than anticipated.
Just to note that the Medi-Cal managed care GME program has not yet been approved.

6. FTE per Adj Occ Bed < budget in FEB, YTD, and prior year.
February 2019 Financial Report
Expense Highlights
FTEs < budget by 205 FTEs or 4.6% in FEB and YTD 208 FTEs under or 4.7%.
Labor expense, excluding benefits, were at budget in FEB and $11 million > YTD
FTE per Adj Occ Bed < budget in FEB, YTD, and prior year.
Worked Hours per APD < budget by 1.7% in FEB and under budget YTD and PY
YTD Operating Expense 2.2% < budget and 1.2% > prior year.
FTEs were under budget by 205 FTEs or 4.6% in February. The Worked hours per adjusted patient day were below budget and below prior year which is great.
Total Labor expenses (excluding benefits) were at budget in February. Salaries and wages included a retro wage increase for UAPD that was retro to 2017.
Actual benefits in February were consistent with the prior months’ activity. The $852 thousand under budget was due to how the budget was spread over the fiscal year.
Pharmaceuticals were over budget from the transition from Cardinal to McKesson. We expected to realize better pricing under the GPO agreement long-term. In addition, there was higher utilization of specialty drugs (for example – multiple sclerosis patients, $25k per treatment) and drug manufacturer shortages causing AHS to purchase off-contract (for example – Pfizer shortages when their plants in Puerto Rico were damaged by the hurricane)
Repair and maintenance were over budget from facility repairs at San Leandro and bio-medical equipment repairs and maintenance.
The team continues to work on expense management and are doing a great job.
Just a note on this slide…. Salaries and wages year to date have averaged 3.4% below budget. However I am continuing to use 1.4% for the projection for the rest of the year.
While FTEs have been under, staffing has been back filled with OT, so hopefully as key positions get filled, we will see a reduction in overtime and continue with salary the average salary savings.

7. February 2019 Financial Report
Balance Sheet and Line of Credit
Below are the key Balance Sheet metrics and the forecast for the Line of Credit.
Both Net and Gross AR days have increased for the month. In order to be in the best position for SAPPHIRE go live, Staff across the organization are working hard at resolving issues, such as EBEW errors, that prevent claims from going out.
Days in AP increased slightly to 33.0 but are down from 42.8 at year end.
We continue to be compliant and expect to be compliant with the terms of our line of credit agreement with the county at the end of the year. This graph shows an uptick at year end as we were trying to make sure that we would be in a good spot if some of the larger liabilities in our reimbursement reserves required pay back by year-end. This was kind of a worse case scenario for year end….. However, I want to point out that we have the potential to face significant cash flow issues in 2020

8. February 2019 Financial Report Reserves
As you can see, that while we have an overall receivable from our supplemental programs and cost reports. However, we have not been settled for Medi-Cal FFS IP, DSH and SNCP under the old waivers since We have been told by CAPH that CMS has told the state that they need to settle all of the old waiver years by the end of the current waiver which ends in December 2020.
If they intend to settle these years by the end of 2020, we have a significant liability and it will create significant cash flow difficulties given the level of our NNB.
While we have reserved for these issues from a financial statement perspective, we do not have cash put aside for this issue.

9. February 2019 Financial Report Cash Collections
Overall cash collected has been consistently higher than prior year, and YTD through the end of February cash is $38 million over the prior year, a larger increase than the comparison of net revenue. ($12.2 million over prior year to date)

10. Original amounts based on FY19 budget.
February 2019 Financial Report
FY 19 Year End Forecast Assumptions
Original amounts based on FY19 budget.
Gross IP revenues increased 2% monthly based on increased days from ED virtual bed implementation.
Gross Physician revenues increased by 6% monthly.
NPSR Collection % adjusted for budget shortfall and virtual beds.
Adj. to Waiver and Supplemental Revenues based on interim review.
Salary savings applied at 2.4% for normal vacancies, reduced OT, benchmarking and not filling overhead positions based on YTD.
Benefits adjusted for salary change and lower Workers’ Comp.
Purchased Services reduced additional $2 million from budget.
Pharmaceuticals projected at budget next 6 months.
Supplies and Repairs/Maintenance/Utilities expected to be at budget for next 4 months.
Other/Admin and General reduced additional $1 million from budget.
These are the assumptions for the most current projection to year end.

11. February 2019 Financial Report FY 19 Year End Forecast
Based on the assumptions and continued expense control efforts, we believe that we will be very close to meeting out FY 18 budget. This projection does not include any further adjustment for capital cost transfers at this time as it just confuses the operating margin without the transfers being in the budget.
In this current projection, the Operating Income variance from budget without the capital cost adjustment would be a negative $516,000, with an EBIDA margin of 4.5% right at budget
Management continues to be vigilant in regards to expenditure management and will work to close that gap.

12. February 19 Actuals plus FY 19 projections.
February 2019 Financial Report
12 Month Rolling Projection Assumptions
February 19 Actuals plus FY 19 projections.
Jul 18– Jan 19 actuals = start point for Jul 19 – Jan 20
FY 20 Gross Patient Service Revenue and Contractuals increased 2% for 2.2% NPSR increase.
OP and MD volume reductions of 2% in Sep and 10% in Oct for EPIC go-live
Supplemental Waiver Revenues decreased to 90% of amounts per Waiver, lower amounts for both GPP and Prime ($21 million < FY 19 budget).
Mcal GME projected at last estimate if approved ($10 mill < FY 19 budget).
Measure A increased at 2%, AHD tax at pre election level.
Capitation HPAC increased 1%.
Salaries increased 3.5%. Includes $5mil EPIC training in Aug and Sep plus additional Go-Live support of $4.6 mill and $1.2 mil in Oct and Nov
84 EPIC system staff capitalized until Jan 2020
Purchased service cost increased $140K Jul/Aug and $375K forward for EPIC expense.
Pharmaceuticals increased 4.28%.
Supplies increased 3.5%.
Outside Medical Services, Depreciation at budget amounts.
Does not assume any budgetary cuts or changes in services.
So the 12 month rolling forecast is now at a point that shows the challenges that AHS will be facing in FY 20.
The big change here is that the projection includes estimates for the impact of EPIC training and go-live.
There are no assumptions included for the movement of Rehab to San Leandro and the combination of SLH onto the Highland license.
This 12 month rolling forecast includes these assumptions…
I want to underscore a few points regarding the projections –
As you recall we expected the EBIDA margin to decline in FY 20 when the SAPPHIRE project was presented.
The roughly $30 million in supplemental revenue loss is becoming clearer as new supplemental programs are not rising to the level needed to offset decline in the waiver. The $20 million reduction in waiver revenues assumes that the DSH cuts that have been pushed back actually do take effect. We need continued advocacy to eliminate entirely or continue to push these reductions out further .
No Foundation revenues are included to offset SAPPHIRE operating costs at this point.
This does not reflect the 7 mill transfer out or transfer in of the capital strategic reserve dollars effective the end of this year as they will likely be balance sheet transfers.
EPIC training costs and implementation costs reflected are higher than shown in the original TCO based on recalculations, however they fall within the operating contingency, and there are likely savings in capital costs.
We have not yet finalized the impact on cash/NNB associated with this projection into 2020 which is being worked on as part of budget process.

13. February 2019 Financial Report 12 Month Rolling Projection
Without changes going forward, with costs continuing to increase but supplemental revenues going down, there will be a continued reduction to the operating and EBIDA margins. As you can see, the 12 month EBIDA margin is at 0%. Without change to revenues or expenses, this will continue to go down, ending the year with a negative EBIDA. With Supplemental revenues going down over 30 mill, and known bargaining unit increases and inflation increases for expense – even assuming that we continue on the current under budget trend as a starting point – we are likely to be facing a significant GAP in revenue and expense in FY 20. As always, we continue to look for all revenue opportunities and expense reductions…. And as we work through the budget process we will be working to fill that gap.