Wednesday, 29 July 2015

HSA 525 Week 5 Homework 100% Accurate

 

APPENDIX 28-A        Metropolis Health System’s Financial Statements and Excerpts from Notes
Metropolis Health System Balance Sheet March 31, 20X3 and 20X2
Assets
Current Assets
        Cash and cash equivalents                                                   $1,150,000             $400,000 
        Assets whose use is limited                                                       825,000               825,000 
        Patient accounts receivable                                                                     8,700,000         8,950,000 
       Less allowance for bad debts                                               (1,300,000)         (1,300,000)
        Other receivables                                                                           150,000            100,000 
        Inventories of supplies                                                                  900,000           850,000 
        Prepaid expenses                                                                            200,000           150,000 
Total Current Assets                                                                           10,625,000       9,975,000 
Assets Whose Use Is Limited
   Corporate funded depreciation                                                    1,950,000        1,800,000 
   Under bond indenture agreements—held by trustee          1,425,000         1,475,000 
Total Assets Whose Use Is Limited                                                 3,375,000         3,275,000 
Less Current Portion                                                                              (825,000)          (825,000)
Net Assets Whose Use Is Limited                                                   2,550,000          2,450,000 
Property, Plant, and Equipment, Net                                           19,300,000        19,200,000 
Other Assets                                                                                                325,000               375,000 
Total Assets                                                                                           $32,800,000         $32,000,000 





Metropolis Health System Balance Sheet March 31, 20X3 and 20X2
Liabilities and Fund Balance 
Current Liabilities 
Current maturities of long-term debt                                     $525,000              $500,000 
   Accounts payable and accrued expenses                           4,900,000             5,300,000 
   Bond interest payable                                                                                    300,000                325,000 
   Reimbursement settlement payable                                        100,000               175,000 
Total Current Liabilities                                                                    5,825,000           6,300,000 
Long-Term Debt                                                                                  6,000,000          6,500,000 
Less Current Portion of Long-Term Debt                                                   (525,000)         (500,000)
Net Long-Term Debt                                                                         5,475,000          6,000,000 
Total Liabilities                                                                                     11,300,000     12,300,000 
Fund Balances 
             General Fund                                                                          21,500,000     19,700,000 
Total Fund Balances                                                                           21,500,000     19,700,000 
Total Liabilities and Fund Balances                                            $32,800,000   $32,000,000 











Metropolis Health System Statement of Revenue and Expenses for the Years Ended March 31, 20X3 and 20X2
Revenue
   Net patient service revenue                    $34,000,000                                 $33,600,000
   Other revenue                                               1,100,000                                         1,000,000
Total Operating Revenue                                                        35,100,000                                              34,600,000
Expenses 
         Nursing services                                        5,025,000                                               5,450,000
        Other professional services                   13,100,000                                          12,950,000
        General services                                          3,200,000                                              3,220,000
        Support services                                          8,300,000                                              8,340,000
        Depreciation                                                1,900,000                                                1,800,000
       Amortization                                                      50,000                                                      50,000
       Interest                                                             325,000                                                     350,000 
       Provision for doubtful accounts              1,500,000                                              1,600,000

Total Expenses                                                                                 33,400,000                                                33,760,000
Income from Operations                                                                    1,700,000                                                840,000
Nonoperating Gains (Losses) 
   Unrestricted gifts and memorials                  20,000                                                            70,000
   Interest income                                                     80,000                                                           40,000
Nonoperating Gains, Net                                                                       100,000                                                  110,000
Revenue and Gains in Excess of Expenses and Losses             $1,800,000                                            $950,000




Metropolis Health System Statement of Changes in Fund Balance for the Years Ended March 31, 20X3 and 20X2
General Fund Balance April 1st              $19,700,000              $18,750,000
Revenue and Gains in Excess of                  1,800,000                        950,000
Expenses and Losses
General Fund Balance March 31st            $21,500,000             $19,700,000


Metropolis Health System Schedule of Property, Plant, and Equipment for the Years Ended March 31, 20X3 and 20X2
Buildings and Improvements                     $14,700,000            $14,000,000 
Land Improvements                                      1,100,000                  1,100,000 
Equipment                                                    28,900,000                27,600,000 
   Total                                                                        44,700,000              42,700,000 
Less Accumulated Depreciation                   (26,100,000)         (24,200,000)
   Net Depreciable Assets                              18,600,000             18,500,000 

Land                                                                480,000                        480,000 
Construction in Progress                              220,000                       220,000 
Net Property, Plant, and Equipment                 $19,300,000                $19,200,000 






Metropolis Health System Schedule of Patient Revenue for the Years Ended March 31, 20X3 and 20X2
Patient Services Revenue
   Routine revenue                                           $9,850,000                           $9,750,000
   Laboratory                                                       7,375,000                             7,300,000
   Radiology and CT scanner                          5,825,000                             5,760,000
   OB–nursery                                                        450,000                                 445,000
   Pharmacy                                                         3,175,000                            3,140,000
   Emergency service                                       2,200,000                             2,180,000
   Medical and surgical supply and IV        5,050,000                             5,000,000
   Operating rooms                                           5,250,000                             5,200,000
   Anesthesiology                                              1,600,000                             1,580,000
   Respiratory therapy                                       900,000                                 890,000
   Physical therapy                                            1,475,000                             1,460,000
   EKG and EEG                                                   1,050,000                             1,040,000
   Ambulance services                                     900,000                    890,000
   Oxygen                                                             575,000                    570,000
   Home health and hospice                         1,675,000                             1,660,000
   Substance abuse                                           375,000                    370,000
   Other                                                                 775,000                    765,000
Subtotal                                                               48,500,000                           48,000,000
Less Allowances and Charity Care             14,500,000                           14,400,000
Net Patient Service Revenue                      $34,000,000                        $33,600,000




Metropolis Health System Schedule of Operating Expenses for the Years Ended March 31, 20X3 and 20X2
Nursing Services
   Routine Medical/Surgical                           $3,880,000                           $4,200,000
   Operating Room                                                300,000                                   325,000
   Intensive Care Units                                         395,000                                  430,000
   OB–Nursery                                                         150,000                                  165,000
   Other                                                                      300,000                                  330,000
   Total                                                                  $5,025,000                            $5,450,000
Other Professional Services
   Laboratory                                                       $2,375,000                           $2,350,000
   Radiology and CT Scanner                         1,700,000                               1,680,000
   Pharmacy                                                         1,375,000                               1,360,000
   Emergency Service                                          950,000                                   930,000
   Medical and Surgical Supply                     1,800,000                             1,780,000
   Operating Rooms and Anesthesia         1,525,000                             1,515,000
   Respiratory Therapy                                       525,000                                  530,000
   Physical Therapy                                              700,000                                  695,000
   EKG and EEG                                                      185,000                                  180,000
   Ambulance Services                                         80,000                                    80,000
   Substance Abuse                                             460,000                                  450,000
   Home Health and Hospice                         1,295,000                            1,280,000
   Other                                                                    130,000                                 120,000
   Total                                                                   $13,100,000                        $12,950,000
General Services
   Dietary                                                              $1,055,000                           $1,060,000
   Maintenance                                                     1,000,000                          1,010,000
   Laundry                                                                   295,000                              300,000
   Housekeeping                                                                470,000                 475,000
   Security                                                                50,000                                  50,000
   Medical Records                                            330,000                 325,000
   Total                                                                   $3,200,000                           $3,220,000
Support Services
   General                                                             $4,600,000                           $4,540,000
   Insurance                                                               240,000                                235,000
   Payroll Taxes                                                      1,130,000                             1,180,000
   Employee Welfare                                          1,900,000                             1,950,000
   Other                                                                       430,000                                 435,000
   Total                                                                   $8,300,000                          $8,340,000
Depreciation                                                      $1,900,000                            $1,800,000
Amortization                                                              50,000                                    50,000
Interest Expense                                                   325,000                                 350,000
Provision for Doubtful Accounts                                   1,500,000                             1,600,000
Total Operating Expenses                            $33,400,000                        $33,760,000













EXCERPTS FROM METROPOLIS HEALTH SYSTEM NOTES TO FINANCIAL STATEMENTS
Note 1—Nature of Operations and Summary of Significant Accounting Policies
General
Metropolis Hospital System (Hospital) currently operates as a general acute care hospital. The hospital is a municipal corporation and body politic created under the hospital district laws of the state.
Cash and Cash Equivalents
For purposes of reporting cash flows, the hospital considers all liquid investments with an original maturity of three months or less to be cash equivalents.
Inventory
Inventory consists of supplies used for patients and is stated as the lower of cost or market. Cost is determined on the basis of most recent purchase price.
Investments
Investments, consisting primarily of debt securities, are carried at market value. Realized and unrealized gains and losses are reflected in the statement of revenue and expenses. Investment income from general fund investments is reported as nonoperating gains.
Income Taxes
As a municipal corporation of the state, the hospital is exempt from federal and state income taxes under Section 115 of the Internal Revenue Code.
Property, Plant, and Equipment
Expenditures for property, plant, and equipment, and items that substantially increase the useful lives of existing assets are capitalized at cost. The hospital provides for depreciation on the straight-line method at rates designed to depreciate the costs of assets over estimated useful lives as follows:

         Years
Equipment                                   5 to 20
Land Improvements                20 to 25
Buildings and Improvements          40

Funded Depreciation
The hospital’s Board of Directors has adopted the policy of designating certain funds that are to be used to fund depreciation for the purpose of improvement, replacement, or expansion of plant assets.
Unamortized Debt Issue Costs
Revenue bond issue costs have been deferred and are being amortized.
Revenue and Gains in Excess of Expenses and Losses
The statement of revenue and expenses includes revenue and gains in excess of expenses and losses. Changes in unrestricted net assets that are excluded from excess of revenue over expenses, consistent with industry practice, would include such items as contributions of long-lived assets (including assets acquired using contributions that by donor restriction were to be used for the purposes of acquiring such assets) and extraordinary gains and losses. Such items are not present on the current financial statements.
Net Patient Service Revenue
Net patient service revenue is reported as the estimated net realizable amounts from patients, third-party payers, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payers. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined.
Contractual Agreements with Third-Party Payers
The hospital has contractual agreements with third-party payers, primarily the Medicare and Medicaid programs. The Medicare program reimburses the hospital for inpatient services under the Prospective Payment System, which provides for payment at predetermined amounts based on the discharge diagnosis. The contractual agreement with the Medicaid program provides for reimbursement based upon rates established by the state, subject to state appropriations. The difference between established customary charge rates and reimbursement is accounted for as a contractual allowance.
Gifts and Bequests
Unrestricted gifts and bequests are recorded on the accrual basis as nonoperating gains.
Donated Services
No amounts have been reflected in the financial statements for donated services. The hospital pays for most services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that help the hospital with specific assistance programs and various committee assignments.
Note 2—Cash and Investments
Statutes require that all deposits of the hospital be secured by federal depository insurance or be fully collateralized by the banking institution in authorized investments. Authorized investments include those guaranteed by the full faith and credit of the United States of America as to principal and interest; or in bonds, notes, debentures, or other similar obligations of the United States of America or its agencies; in interest-bearing savings accounts or interest-bearing certificates of deposit; or in certain money market mutual funds.
At March 31, 20X3, the carrying amount and bank balance of the hospital’s deposits with financial institutions were $190,000 and $227,000, respectively. The difference between the carrying amount and the bank balance primarily represents checks outstanding at March 31, 20X3. All deposits are fully insured by the Federal Deposit Insurance Corporation or collateralized with securities held in the hospital’s name by the hospital agent.

Carrying Amount
     20X3                   20X2    
U.S. Government Securities or
U.S. Government Agency Securities                        $4,325,000                           $3,575,000
Total Investments                                                             4,325,000                             3,575,000
Petty Cash                                                                                    3,000                                     3,000
Deposits                                                                                    190,000                                   93,000
Accrued Interest                                                                        7,000                                     4,000
Total                                                                                         4,525,000                             3,675,000
Consisting of 
Cash and Cash Equivalents—General Fund              1,150,000                               400,000
Assets Whose Use Is Limited 
Corporate Funded Depreciation                                                    1,950,000                             1,800,000
Held by Trustee Under                                                      1,425,000                              1,475,000       
Bond Indenture Agreements
Total                                                                                    $4,525,000                               $3,675,000
Note 3—Charity Care
The hospital voluntarily provides free care to patients who lack financial resources and are deemed to be medically indigent. Such care is in compliance with the hospital’s mission. Because the hospital does not pursue collection of amounts determined to qualify as charity care, they are not reported as revenue.
The hospital maintains records to identify and monitor the level of charity care it provides. These records include the amount of charges forgone for services and supplies furnished under its charity care policy. During the years ended March 31, 20X3 and 20X2, such charges forgone totaled $395,000 and $375,000, respectively.
Note 4—Net Patient Service Revenue
The hospital provides healthcare services through its inpatient and outpatient care facilities. The mix of receivables from patients and third-party payers at March 31, 20X3 and 20X2, is as follows:

      20X3                           20X2
Medicare                             30.0%                                       28.5%
Medicaid                             15.0                                           16.0
Patients                               13.0                                             12.5
     Other third-party payers          42.0                                             43.0  
                 Total                                     100.0%                                   100.0%
The hospital has agreements with third-party payers that provide for payments to the hospital at amounts different from its established rates. Contractual adjustments under third-party reimbursement programs represent the difference between the hospital’s established rates for services and amounts paid by third-party payers. A summary of the payment arrangements with major third-party payers follows.
Medicare
Inpatient acute care rendered to Medicare program beneficiaries is paid at prospectively determined rates-per-discharge. These rates vary according to a patient classification system that is based on clinical, diagnostic, and other factors. Inpatient nonacute care services and certain outpatient services are paid based upon either a cost reimbursement method, established fee screens, or a combination thereof. The hospital is reimbursed for cost reimbursable items at a tentative rate with final settlement determination after submission of annual cost reports by the hospital and audits by the Medicare fiscal intermediary. At the current year end, all Medicare settlements for the previous two years are subject to audit and retroactive adjustments.
Medicaid
Inpatient services rendered to Medicaid program beneficiaries are reimbursed at prospectively determined rates-per-day. Outpatient services rendered to Medicaid program beneficiaries are reimbursed at prospectively determined rates-per-visit.
Blue Cross
Inpatient services rendered to Blue Cross subscribers are reimbursed under a cost reimbursement methodology. The hospital is reimbursed at a tentative rate with final settlement determined after submission of annual cost reports by the hospital and audits by Blue Cross. The Blue Cross cost report for the prior year end is subject to audit and retroactive adjustment.
The hospital has also entered into payment agreements with certain commercial insurance carriers, health maintenance organizations, and preferred provider organizations. The bases for payment under these agreements include discounts from established charges and prospectively determined daily rates.
Gross patient service revenue for services rendered by the hospital under the Medicare, Medicaid, and Blue Cross payment agreements for the years ended March 31, 20X3 and 20X2, is approximately as follows:

20X3                                                                                      20X2
Amount               %                            Amount           %   
Medicare                             $20,850,000      43.0                          $19,900,000        42.0
Medicaid                             10,190,000           21.0                           10,200,000        21.5        All other payers                                17,460,000           36.0                           17,300,000        36.5
                                                $48,500,000                                                        100.0                       $47,400,000      100.0
Note 5—Property, Plant, and Equipment
The hospital’s property, plant, and equipment at March 31, 20X3 and 20X2, are as follows:

20X3                                                      20X2
Buildings and improvements                                        $14,700,000                                                      $14,000,000 
Land improvements                                                             1,100,000                                                           1,100,000 
Equipment                                                                              28,900,000                                                          27,600,000 
Total                                                                $44,700,000                                         $42,700,000 
Accumulated depreciation                                              (26,100,000)                                                    (24,200,000)
Net Depreciable Assets                                                    $18,600,000                                                     $18,500,000 
Land                                                                                                 480,000                                                            480,000 
Construction in progress                                               220,000                                                                       220,000 
Net Property, Plant, Equipment                                                $19,300,000                                                        $19,200,000 
Construction in progress, which involves a renovation project, has not progressed in the last 12-month period because of a zoning dispute. The project will not require significant outlay to reach completion, as anticipated additional expenditures are currently estimated at $100,000.
Note 6—Long-Term Debt
Long-term debt consists of the following:
Hospital Facility Revenue Bonds (Series 1995) at varying interest rates from 4.5% to 5.5%, depending on date of maturity through 2020.
20X3                20X2
$6,000,000      $6,500,000
The future maturities of long-term debt are as follows:
Years Ending March 31
20X2                      $ 475,000
20X3                      500,000
20X4                      525,000
20X5                      550,000
20X6                      575,000
20X7                      600,000
Thereafter          3,750,000
Under the terms of the trust indenture the following funds (held by the trustee) were established: an interest fund, a bond sinking fund, and a debt service reserve fund.
Interest Fund
The hospital deposits (monthly) into the interest fund an amount equal to one-sixth of the next semi-annual interest payment due on the bonds.
Bond Sinking Fund
The hospital deposits (monthly) into the bond sinking fund an amount equal to one-twelfth of the principal due on the next July 1.
Debt Service Reserve Fund
The debt service reserve fund must be maintained at an amount equal to 10% of the aggregate principal amount of all bonds then outstanding. It is to be used to make up any deficiencies in the interest fund and bond sinking fund.
Assets held by the trustee under the trust indenture at March 31, 20X3 and 20X2 are as follows:

20X3                                                                      20X2   
Interest Fund                    $ 300,000                                                             $ 325,000
Bond Sinking Fund              525,000                                                                 500,000
Debt Service Reserve       600,000                                                               650,000
Total                                                  $1,425,000                                            $1,475,000
Note 7—Commitments
At March 31, 20X3, the hospital had commitments outstanding for a renovation project at the hospital of approximately $100,000. Construction in progress on the renovation has not progressed in the last 12-month period because of a zoning dispute. Upon resolution of the dispute, remaining construction costs will be funded from corporate funded depreciation cash reserves.
 (Baker 405)
Baker, Judith J. Health Care Finance, 4th Edition. Jones & Bartlett Learning, 08/2013. VitalBook file.
The citation provided is a guideline. Please check each citation for accuracy before use.



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