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Board of Directors
September 28, 2017
COVENANT HEALTH AND COMMUNITY SERVICES, INC.
BOARD OF DIRECTORS MEETING September 28, 2017 at 8:30 a.m.
Conference Call: 1 (719) 457-6209
Passcode: 170672# AGENDA
(p. 1)
CONVENING OF MEETING TOM OWENS
MINUTES OF THE COVENANT HEALTH
AND COMMUNITY SERVICES BOARD OF
DIRECTORS MEETING OF JULY 27, 2017 (pp. 2-4) ***** TOM OWENS
COVENANT CARE AUGUST 2017 AND
YTD FINANCIAL STATEMENTS (pp. 5-17) ***** ODIN BERG
FOCUSED DISCUSSION
INTRODUCTIONS: COO;
VP, FINANCE (pp.18-19 ) JEFF MISLEVY
WFCC UPDATE JEFF MISLEVY
QRSC COMMITTEE REPORT KARA BENEDICT
FOUNDATION NAME CONSOLIDATION AARON WEST
PRESIDENT’S REPORT JEFF MISLEVY
OTHER BUSINESS AS SUBMITTED TOM OWENS
ADJOURNMENT TOM OWENS
NOTES: **** DENOTES VOTE OR OTHER ACTION REQUIRED
1
Covenant Health and Community Services, Inc.
BOARD OF DIRECTORS MEETING
July 27, 2017
MINUTES
MEMBERS PRESENT: Carey King
Don Haferkamp
Jamie Campbell
Jeff Mislevy
JT Young
Patrice Villemure
Rodney Guttmann
Roger Poitras
Susan Davis
Steve Sarros
Teresa Dos Santos
Tom Owens
Xan Smith
MEMBERS ABSENT: Bill Greenhut
Brett Parra
Janet Kinney
Kent Skolrood
Wanda Kaye Hambrick
LEADERSHIP STAFF: Todd Fisher
Odin Berg
Amy Bajjaly
Aaron West
Rhonda Jordan
Kara Benedict
INTRODUCTION
Mr. Owens convened the meeting at 8:34 a.m. and thanked everyone for attending.
MINUTES
Mr. Owens called for a motion to approve the minutes of the Covenant Health and Community
Services Board Meeting of May 25, 2017.
A motion was made and passed.
FINANCIAL REPORTS
Covenant Care June 2017 Consolidated Financial Report
2
COVENANT HEALTH AND COMMUNITY SERVICES, INC.
BOARD OF DIRECTORS
July 27, 2017
cont.
Mr. Berg reported the following financial highlights:
Covenant Health and Community Services: operating margin for the month was| ($64,097);
YTD operating loss was ($472,257)
Covenant Hospice: operating margin for the month was $89,490; YTD operating margin was
$304,493
Peoples Home Health: operating margin for the month was $151,036; YTD operating margin
was $1,173,920
Covenant Hospice Foundation: net income of ($433); YTD net income was $355,109.
After discussion, Mr. Owens called for a motion to approve the Covenant Care June 2017 and YTD
Financial Report.
A motion was made and passed.
FOCUSED DISCUSSION
West Florida Care Center
Mr. Mislevy gave an overview of recent discussions with West Florida Hospital (WFH) administration
regarding the potential relocation of Covenant’s inpatient hospice unit. Relocating the unit to the first
floor would improve the status of patient rooms and clinical spaces as well as provide an opportunity
for better brand visibility. Ongoing dialogue with WFH administration included lease space and terms,
and build-out requirements. Mr. Owens emphasized the positive impact of the strategically-aligned
growth initiative for both entities. Mr. Mislevy explained that more information would be provided as
negotiations progressed.
Ratification of Covenant At Home, Inc. Management Board
Mr. Berg explained that the bylaws of Covenant At Home, Inc. had been approved by its original
directors in 2016. Likewise, Covenant At Home board members approved and elected the following
2017 Slate of Officers at its annual meeting:
COVENANT AT HOME, INC. OFFICERS:
Odin Berg, Chair
James Smith, MD, Vice Chair
Jeff Mislevy, Treasurer
Todd Fisher, Secretary
At the advice of legal counsel, the above-stated 2017 Slate of Officers for Covenant At Home, Inc.’s
Management Board required ratification by Covenant Health and Community Services, Inc.’s Board of
Directors.
3
COVENANT HEALTH AND COMMUNITY SERVICES, INC.
BOARD OF DIRECTORS
July 27, 2017
cont.
After discussion, Mr. Owens called for the ratification of the 2017 Management Board for Covenant
At Home, Inc.
The motion was made and passed.
Quality, Risk, Safety and Compliance Committee Report
Mr. Owens gave an update on the committee’s recent activities. The committee met regularly to
monitor the implementation and outcomes of the Plan of Correction for Alabama and Florida service
areas. Mr. Owens noted that the ongoing remediation and resource commitment had a financial impact
as well. Ms. Benedict provided a detailed report on the progress made as a result of the Plan of
Correction efforts. Also, a summary of the Navigant Report findings was presented for review and
discussion. Ms. Benedict explained that the Quality Assurance/Process Improvement Committee
continued to review and audit quality outcomes.
Memory Care Update
Mr. Fisher provided an update on the new memory care assisted living facility, The Residence.
Renovation of the building was underway and completion of construction was expected by late
October. Opening of The Residence was scheduled for January 1, 2018. The total capital budget for the
project was $2,430,150. This new 22-bed facility would provide housing for residents and a portfolio
of services for Alzheimer’s and dementia patients and their caregivers. Mr. West presented various
donor opportunities that were available to support The Residence and other community-based memory
care programs and services.
ADJOURNMENT
There being no further business to discuss, the meeting was adjourned at 9:40 a.m.
__
Submitted By: Carey King, Secretary
4
August 2017 Consolidated Financial Statements: CEO/CFO REPORT
August 2017 marked the 9th consecutive month of positive operating and overall financial performance
1. Covenant Care, consolidated results:August: Operating margin of $45,077; net income of $51,234YTD: Operating margin of $696,633; net income of $1,348,282.
2. Covenant Hospice results: Covenant Hospice realized an August Operating Income of $11,340 (+0.2%); net non-operating revenue of ($5,218) produced a Net Income of $6,122 (0.1%). YTD Operating Margin is $582,378 (+1.6%) and YTD Net Income is $957,841 (+2.6%).
3. Peoples Home Health results:Peoples Home Health, achieved an August Operating Income of $173,544 (+15.5%).YTD Operating Margin is $1,499,715 (+17.0%). (Peoples non-operating revenues or expenses are immaterial.)
4. Covenant Health & Community Services (d/b/a “Covenant Care”):Covenant Health & Community Services had an August operating loss of ($45,955) and a YTD operating loss of ($590,408). CHCS YTD expenses include $221,363 in compensation costs, and $364,993 in legal and consulting expenses.
5. Covenant Hospice Foundation:Covenant Hospice Foundation realized an August Net Loss of ($14,013). YTD Net Income is $56,472.
6. Construction-in-progress (“CIP”): As of 08/31/17, CIP for the two outstanding construction projects is $2,776,668:
o Sacred Heart Hospital, hospice inpatient center: $1,634,015 (opened September 5, 2017)o Covenant Alzheimer’s Services, The Residence memory care center: $1,142,653
5
August 2017 Consolidated Financial Statements
STATISTICAL HIGHLIGHTS
SUMMARY OF AUGUST STATISTICS:
Covenant Hospice key statistics:--Average Daily Census: 770 (August); 778 (YTD)
--Average Length of Stay: 59.8 (August); 54.7 (YTD)--Total admissions: 399 (August); 3,454 (YTD) [Average per month – 432]--Inpatient admissions: 207 (August); 1,697 (YTD) [Average per month – 212]--Deaths: 346 (August); 2,978 (YTD) [Average per month – 372]
Peoples Home Health key statistics: --Medicare & Medicare-like episodes: 413 (August); 3,389 (YTD) [Average per month – 424]--Home health visits: 7,708 (August); 57,062 (YTD) [Average per month – 7,133]--Average Medicare episode payment: $2,370 (YTD actual); $2,347 (2017 budget) --YTD 30-day readmissions: 16%
Total Covenant Care activity: Admissions, August: 399 end-of-life admissions; 413 homebound admissions; 812 total admissions.Admissions, YTD: 3,454 end-of-life admissions; 3,280 homebound admissions; 6,734 total admissionsAverage daily census, August: 770, hospice ADC; 804, home health ADC; 1,574, total ADC Average daily census, YTD: 778, hospice ADC; 781, home health ADC; 1,559, total ADC
6
Covenant CareMonth of August 2017 - Financial Results
COVENANT CARE
COMBINED STATEMENT OF OPERATIONS
AUGUST 31, 2017 AUGUST
COMBINED BUDGET VARIANCE % VARIANCE 2016
NET PATIENT/FAMILY CARE/PROGRAM REVENUE 5,724,546 6,490,546 (766,000) -11.8% 5,587,610
TOTAL PATIENT/FAMILY CARE EXPENSES 4,020,511 4,464,918 (444,407) -10.0% 4,332,481
CONTRIBUTIONS FROM OPERATIONS 1,704,035 2,025,628 (321,593) -15.9% 1,255,129
CONTRIBUTION % 29.8% 31.2% -1.4% 22.5%
GENERAL & ADMINISTRATIVE EXPENSES
Other Direct 734,117 954,372 (220,255) -23.1% 866,614
Payroll 796,836 918,582 (121,747) -13.3% 658,265
Benefits 128,006 162,706 (34,700) -21.3% 108,962
Allocation from CHCS - - - 0.0% -
TOTAL G&A EXPENSES 1,658,958 2,035,660 (376,702) -18.5% 1,633,841
OPERATING MARGIN 45,077 (10,032) 55,109 -549.3% (378,712)
OPERATING MARGIN % 0.8% -0.2% 0.9% -6.8%
NON-OPERATING REVENUES
Contributions and fundraising 46,225 63,571 (17,346) -27.3% 48,674
Other Non-Operating Revenues 53,051 27,341 25,711 94.0% (4,321)
Development/Fundraising Expense (52,604) (77,434) 24,829 -32.1% (51,176)
Other Non-Operating Expense (40,515) (35,809) (4,707) 13.1% (33,255)
Contributions to Affiliates - - - 0.0% -
NET NON-OPERATING REVENUE 6,157 (22,331) 28,488 -127.6% (40,078)
EXCESS OF REVENUE OVER EXPENSES 51,234 (32,363) 83,597 -258.3% (418,790)
BUDGET ANALYSIS
7
Covenant CareYTD August 2017 - Financial Results
COVENANT CARE
COMBINED STATEMENT OF OPERATIONS
AUGUST 31, 2017 YTD AUGUST
COMBINED BUDGET VARIANCE % VARIANCE 2016
NET PATIENT/FAMILY CARE/PROGRAM REVENUE 45,325,513 50,877,583 (5,552,070) -10.9% 43,463,223
TOTAL PATIENT/FAMILY CARE EXPENSES 30,655,321 35,294,610 (4,639,289) -13.1% 31,819,536
CONTRIBUTIONS FROM OPERATIONS 14,670,192 15,582,973 (912,781) -5.9% 11,643,686
CONTRIBUTION % 32.4% 30.6% 1.7% 26.8%
GENERAL & ADMINISTRATIVE EXPENSES
Other Direct 6,471,688 7,173,966 (702,278) -9.8% 7,356,382
Payroll 6,365,161 7,093,538 (728,376) -10.3% 4,183,006
Benefits 1,136,710 1,306,614 (169,905) -13.0% 747,926
Allocation from CHCS - - - 0.0% -
TOTAL G&A EXPENSES 13,973,559 15,574,117 (1,600,559) -10.3% 12,287,314
OPERATING MARGIN 696,633 8,856 687,777 7766.5% (643,628)
OPERATING MARGIN % 1.5% 0.0% 1.5% -1.5%
NON-OPERATING REVENUES
Contributions and fundraising 739,313 537,817 201,496 37.5% 636,096
Other Non-Operating Revenues 803,814 317,728 486,086 153.0% 609,367
Development/Fundraising Expense (622,496) (638,145) 15,649 -2.5% (715,671)
Other Non-Operating Expense (268,981) (236,202) (32,779) 13.9% (362,583)
Contributions to Affiliates - - - 0.0% -
NET NON-OPERATING REVENUE 651,650 (18,802) 670,452 -3565.8% 167,208
EXCESS OF REVENUE OVER EXPENSES 1,348,282 (9,947) 1,358,229 -13655.2% (476,420)
BUDGET ANALYSIS
8
(134,962)
(197,384)
103,825
44,484
(111,015)
107,219 19,409
(378,712)
(643,204)
(455,023)
(171,692)
76,441 93,112
69,544
137,588
11,181
77,764 73,853 99,633
45,077
(27,934) (23,042) (22,815)(143,720)
(260,130)
253,953
143,839
(268,074)
269,094
7,228
(418,790)
(558,877)
(460,704)
(52,305)
972,858
57,601 36,018
347,579
211,698
39,642
166,916
252,684
51,234
140,454 136,277
14,726
$(800,000)
$(600,000)
$(400,000)
$(200,000)
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
Jan2016
Feb2016
Mar2016
Apr2016
May2016
Jun2016
Jul2016
Aug2016
Sep2016
Oct2016
Nov2016
Dec2016
Jan2017
Feb2017
Mar2017
Apr2017
May2017
Jun2017
Jul2017
Aug2017
Sep2017PROJ
Oct2017PROJ
Nov2017PROJ
Operating Margin Net Income
Covenant Care: June 2016 - September 2017 Actual & Projected - Consolidated Operating Margin & Net Income
9
Covenant Care – Balance SheetCOVENANT CARE
CONSOLIDATED STATEMENT OF CONDITION
AUGUST 31, 2017
AUG. 31, 2017
COMBINED
ASSETS
CASH & EQUIVALENTS 4,506,298
TOTAL INVESTMENTS 21,136,986
TOTAL CASH & INVESTMENTS 25,643,284
GROSS ACCOUNTS RECEIVABLES 13,472,781
RECEIVABLE ALLOWANCES (1,347,619)
NET ACCOUNTS RECEIVABLES 12,125,162
OTHER CURRENT ASSETS 4,614,372
TOTAL CURRENT ASSETS 42,382,818
LAND 1,936,722
BUILDINGS & IMPROVENTS 12,627,696
LEASEHOLD IMPROVEMENTS 2,269,009
FURNITURE, FIXTURES & EQUIPMENT 9,317,630
CONSTRUCTION IN PROGRESS 2,782,744
28,933,800
LESS ACCUMULATED DEPRECIATION (12,774,420)
NET PROPERTY & EQUIPMENT 16,159,380
TOTAL INTANGIBLE ASSETS 9,531,190
TOTAL ASSETS 68,073,388
LIABILITIES & FUND BALANCE
CURRENT LIABILITIES
CURRENT PORTION OF LONG-TERM DEBT 448,784
ACCOUNTS PAYABLE 3,172,365
ADVANCES AGAINST ACCOUNTS RECEIVABLE 5,203,711
OTHER ACCRUALS 3,749,689
TOTAL CURRENT LIABILITIES 12,574,549
LONG-TERM LIABILITIES
MORTGAGE PAYABLE 6,046,303
OTHER LONG TERM LOANS 11,529,180
LESS CURRENT PORTION (448,784)
LONG-TERM CHARITABLE ANNUITIES 14,305
TOTAL LONG-TERM LIABILITIES 17,141,003
TOTAL LIABILITIES 29,715,552
NET ASSETS:
UNRESTRICTED 34,934,692
BOARD DESIGNATED 885,711
TEMPORARILY RESTRICTED 2,537,433
TOTAL NET ASSETS 38,357,836
TOTAL LIABILITIES & NET ASSETS 67,300,720
10
Covenant CareAugust 2017 Balance Sheet Ratios & Bond Covenants
BOND FINANCIAL COVENANTS August 31, 2017
REQ.
Ratio of Maximum Debt to Tangible Net Worth < 2.5:1 AMOUNTS MET?
This bond covenant measures the relationship of all debt, if due and payable today, to Covenant Hospice's net worth 0.56 Y
Minimum Tangible Net Worth > $6,500,000 This bond covenant calls for a minimum tangible net worth. Net worth related to intangible assets are excluded. $34,003,820 Y
Minimum Fixed Charge Coverage of 1.10:1.0 This bond covenant compares fixed charges, including lease expense, to the earnings aviailable to pay these charges 2.62:1.0 Y
Liquidity of $5,000,000 or more This ratios measures the amount of cash or "near cash" to meet immediate or short-term obligations $5,232,865 Y
BALANCE BALANCE
08/31/2017 12/31/2016
CASH ON HAND 146 119
DAYS REVENUE OUTSTANDING 67 72
DAYS REVENUE, EXCLUDING FLORIDA MEDICAID MANAGED CARE 49 57
DAYS PAYABLE OUTSTANDING 52 33
DEBT TO FUND BALANCE 0.8 0.8
CURRENT ASSETS TO CURRENT LIABILITIES 3.0 3.1
11
Covenant CareYear-to-date Capital Expenditures
Capital Expenditures, YTD 2017
Software…………………………………………..…………$19,800Bay Medical IPC, furniture…………………..………..$9,528Providence Hospital IPC, furniture…………..….$18,329LED TVs, various locations……………………....…...$6,000Other…………………………………………………..…..…$20,417
Total $74,068
Capital Expenditures, Construction in Progress, YTD 2017
Sacred Heart IPC………………………………………$1,634,015The Residence, Memory Care Center….……$1,142,653
Total $2,776,668
[2017 Budget - $1,245,850;unspent CapEx primarily relates to IS and leasehold improvement costs]
[2017 Budget - $4,730,000; estimated total project costs are currently tracking to budget.]
12
Covenant CareMedicare Regulatory Changes for Fiscal Year 2018 - Hospice
Key changes related to finance for hospices:
• Structure of U-shaped curve reimbursement system is unchanged for FY18
• Components of U-shaped curve—Tier 1 per diem, Tier 2 per diem and Service Intensity Add-on (“SIA”) payment—each will increase about 1%. General Inpatient Rates will also increase 1%:
• Tier 1 FY18 National Rate - $192.80 (Escambia County - $166.29) [FY18 increase of about $200,000]• Tier 2 FY18 National Rate - $151.41 (Escambia County - $129.61) [FY18 increase of about $100,000]• SIA FY18 National Rate - $40.68/hour (Escambia County - $35.09) [FY18 increase of about $5,000]• General Inpatient Rate - $743.55 (Escambia County - $648.36) [FY18 increase of about $100,000]
• The Aggregate Cap on hospice payments per patient also will increase 1%, to a national average rate of $28,689.04[Most recent Covenant cap calculations, November, 2016: FL - $11,413; AL - $12,783] Covenant is in compliance.
• For FY18, quality and service adjustments will be made only to hospices who do not submit quality and satisfaction data—Hospice Item Set (“HIS”) & Consumer Assessment of Healthcare Providers & Systems (“CAHPS”)
• During the regulatory comment period, many hospices requested that the SIA payments be automatic—currently, hospices must bill to be paid. CMS acknowledged the request, but did not change the requirement
• Many hospice providers noted comments in the Federal Register regarding possible future changes for levels of referral source documentation required in the admitting hospice’s medical record
• Separately, the Medicare Payment Advisory Commission (“MedPAC”)—an advisory committee to CMS—has expressed concern over the last 2 years about overpayments and misaligned incentives for post-acute care providers. A unified post-acute care payment system is under consideration, started in FY21. (Post-acute care providers include SNFs, HHAs, IRFs, LTCHs and hospice providers.)
13
Medicare Regulatory Changes for Calendar Year 2018 –Home Health
Key changes related to finance for Medicare-certified home health agencies:
NOTE: CY18 rule is not final. Proposed preliminary rule was issued 07/25/17.
The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that updates the Medicare Home Health Prospective Payment System (HH PPS) rates and wage index for calendar year (CY) 2018. The proposed policies included in the rule include:
• 0.4 percent decrease (-$80 million) in payments to HHAs in CY 2018.
• For CY 2019 payments, CMS proposes to implement an alternative case-mix adjustment methodology, the Home Health Groupings Model (HHGM). The HHGM would use 30-day periods, rather than 60-day episodes, and rely more heavily on clinical characteristics and other patient information (e.g., principal diagnosis, functional level, comorbid conditions, referral source, and timing) to place patients into more meaningful payment categories.
• For the HH Quality Reporting Program (QRP), CMS is proposing to adopt for the CY 2020 payment determination three measures to meet the requirements of the IMPACT Act and new standardized data elements. To reduce provider burden, CMS is proposing to remove or modify current OASIS items.
• CMS is also proposing changes to the Home Health Value-Based Purchasing (HHVBP) Model.
14
Three-year Projection Model versus Traditional Budgeting Model
Described below is a long-term projection process that will replace the traditional one-year budgeting process.
• In the past, Covenant Care has utilized a traditional budgeting model, involving a one-year time horizon, a submission of individual department budget requests--subject to an approval process and requiring aggregation to determine total organizational impact--and a fixed set of assumptions that make subsequent changes difficult to flow through the budgeting system.
• A long-term (three-year) projection process is proposed to replace this system for the 2018-2020 time period. This system will flex to a limited number of key inputs that can be modified as necessary.
• Covenant is collaborating with Saltmarsh, Cleaveland & Gund on the development of the model, utilizing a proprietary system made available to Covenant.
• Using a flexible modeling tool will allow for a broader range of scenarios to be analyzed. The tool will also allow for periodic roll-forwards of the projections as internal and external assumptions change.
• Using a three-year time horizon will provide a better perspective on the development of major projects and new service lines, by revealing results for both the development and mature stages. Major capital expenditures items will be easier to evaluate in the context of a three-year return.
• Timeline for presentation to Board for review and approval is still targeted for the November 2017 meeting.
15
West Florida Relocation Pro Forma
Expected Census Scenario
2018 - 2023COVENANT HOSPICE, INC.
WEST FLORIDA INPATIENT CENTER
PROFORMA FINANCIAL STATEMENT
2018 2019 2020 2021 2022
YR 1 YR 2 YR 3 YR 4 YR 5
Total Year Total Year Total Year Total Year Total Year
INCOME STATEMENT
Patient Revenue:
Skilled Inpatient Revenue 2,609,281$ 2,648,608$ 2,675,089$ 2,703,203$ 2,744,814$
Routine Home Care Revenue 20,697$ 21,009$ 21,219$ 21,431$ 21,917$
Consulting/Primary Physician (1) 21,601$ 21,601$ 21,925$ 22,253$ 22,587$
Total Patient Revenue 2,651,579$ 2,691,217$ 2,718,232$ 2,746,887$ 2,789,318$
Charity/Unfunded Care 124,624$ 126,487$ 127,757$ 129,104$ 131,098$
Contractual Adjustments - Normal 159,095$ 161,473$ 163,094$ 164,813$ 167,359$
Contractual Adjustments - Sequestration 42,425$ 43,059$ 43,492$ 43,950$ 44,629$
Total Deductions from Revenue (2) 326,144$ 331,020$ 334,343$ 337,867$ 343,086$
Net Patient Revenue 2,325,434$ 2,360,197$ 2,383,889$ 2,409,020$ 2,446,232$
Operating Expenses
Direct Payroll, including Benefits (3) 1,131,931$ 1,148,883$ 1,143,699$ 1,150,024$ 1,163,626$
Patient Care Expenses (4) 139,735$ 141,132$ 142,543$ 143,969$ 145,409$
Facility Lease (5) 291,600$ 303,264$ 315,395$ 328,010$ 341,131$
Depreciation/Amortization (6) 177,143$ 177,143$ 177,143$ 177,143$ 177,143$
Other Direct Expenses (7) 37,200$ 37,944$ 38,703$ 39,477$ 40,266$
Environmental, Dietary, Linen (8) 38,940$ 39,719$ 40,513$ 41,323$ 42,150$
All Allocated Overhead Charges (9) 50,000$ 50,500$ 51,005$ 51,515$ 52,030$
Total Operating Expenses 1,866,549$ 1,898,584$ 1,909,001$ 1,931,461$ 1,961,755$
Net Operating Income ( Loss ) 458,886$ 461,613$ 474,888$ 477,559$ 484,477$
Operating Margin 19.7% 19.6% 19.9% 19.8% 19.8%
Non-Operating:
Net Other non-operating Income/(Expense) -$ (19,938)$ (18,631)$ (17,300)$ (15,946)$
Increase/(Decrease) to Net Assets 458,886$ 441,675$ 456,257$ 460,259$ 468,530$
Per Patient Day Operating Expenses
Direct Payroll, including Benefits 269.67 273.71 272.47 273.98 277.22
Patient Care Expenses 33.29 33.62 33.96 34.30 34.64
Facility Lease 69.47 72.25 75.14 78.14 81.27
Other Direct Expenses 8.86 9.04 9.22 9.40 9.59
All Allocated Overhead Charges 11.91 12.03 12.15 12.27 12.40
Total Operating Expenses 393.20 400.65 402.94 408.10 415.12
STATISTICAL BASIS:
Days 365 365 365 365 365
Number of Beds 13 13 13 13 13
Occupancy 88% 88% 88% 88% 88%
Patient Days 4198 4198 4198 4198 4198
Average Daily Census 11.5 11.5 11.5 11.5 11.5
Average Length of Stay (10) 8.0 8.0 8.0 8.0 8.0
Number of Admissions 525 525 525 525 525
Patient Mix: Skilled Inpatient 97% 97% 97% 97% 97%
Routine Home Care 3% 3% 3% 3% 3%
An additional annual contribution margin of $194,544 is generated by WFH patients receiving home hospice care, either directly upon discharge from the hospital or upon discharge from the hospice unit..
16
West Florida Relocation Pro Forma “Worst Case” Census Scenario
2018 - 2023COVENANT HOSPICE, INC.
WEST FLORIDA INPATIENT CENTER
PROFORMA FINANCIAL STATEMENT
2018 2019 2020 2021 2022
YR 1 YR 2 YR 3 YR 4 YR 5
Total Year Total Year Total Year Total Year Total Year
INCOME STATEMENT
Patient Revenue:
Skilled Inpatient Revenue 1,815,152$ 1,842,510$ 1,860,931$ 1,880,489$ 1,909,436$
Routine Home Care Revenue 14,398$ 14,615$ 14,761$ 14,909$ 15,247$
Consulting/Primary Physician (1) 15,026$ 15,026$ 15,252$ 15,481$ 15,713$
Total Patient Revenue 1,844,576$ 1,872,151$ 1,890,944$ 1,910,878$ 1,940,395$
Charity/Unfunded Care 86,695$ 87,991$ 88,874$ 89,811$ 91,199$
Contractual Adjustments - Normal 110,675$ 112,329$ 113,457$ 114,653$ 116,424$
Contractual Adjustments - Sequestration 29,513$ 29,954$ 30,255$ 30,574$ 31,046$
Total Deductions from Revenue (2) 226,883$ 230,275$ 232,586$ 235,038$ 238,669$
Net Patient Revenue 1,617,693$ 1,641,876$ 1,658,358$ 1,675,840$ 1,701,727$
Operating Expenses
Direct Payroll, including Benefits (3) 1,131,931$ 1,148,883$ 1,143,699$ 1,150,024$ 1,163,626$
Patient Care Expenses (4) 97,207$ 98,179$ 99,161$ 100,152$ 101,154$
Facility Lease (5) 291,600$ 303,264$ 315,395$ 328,010$ 341,131$
Depreciation/Amortization (6) 177,143$ 177,143$ 177,143$ 177,143$ 177,143$
Other Direct Expenses (7) 37,200$ 37,944$ 38,703$ 39,477$ 40,266$
Environmental, Dietary, Linen (8) 38,940$ 39,719$ 40,513$ 41,323$ 42,150$
All Allocated Overhead Charges (9) 50,000$ 50,500$ 51,005$ 51,515$ 52,030$
Total Operating Expenses 1,824,021$ 1,855,631$ 1,865,618$ 1,887,645$ 1,917,500$
Net Operating Income ( Loss ) (206,327)$ (213,755)$ (207,261)$ (211,804)$ (215,774)$
Operating Margin -12.8% -13.0% -12.5% -12.6% -12.7%
Non-Operating:
Net Other non-operating Income/(Expense) -$ (19,938)$ (18,631)$ (17,300)$ (15,946)$
Increase/(Decrease) to Net Assets (206,327)$ (233,693)$ (225,892)$ (229,105)$ (231,720)$
Per Patient Day Operating Expenses
Direct Payroll, including Benefits 387.65 393.45 391.68 393.84 398.50
Patient Care Expenses 33.29 33.62 33.96 34.30 34.64
Facility Lease 99.86 103.86 108.01 112.33 116.83
Other Direct Expenses 12.74 12.99 13.25 13.52 13.79
All Allocated Overhead Charges 17.12 17.29 17.47 17.64 17.82
Total Operating Expenses 550.66 561.22 564.37 571.64 581.58
STATISTICAL BASIS:
Days 365 365 365 365 365
Number of Beds 13 13 13 13 13
Occupancy 62% 62% 62% 62% 62%
Patient Days 2920 2920 2920 2920 2920
Average Daily Census 8.0 8.0 8.0 8.0 8.0
Average Length of Stay (10) 8.0 8.0 8.0 8.0 8.0
Number of Admissions 365 365 365 365 365
Patient Mix: Skilled Inpatient 97% 97% 97% 97% 97%
Routine Home Care 3% 3% 3% 3% 3%
An additional annual contribution margin of $135,344 is generated by WFH patients receiving home hospice care, either directly upon discharge from the hospital or upon discharge from the hospice unit..
17
Mike Hamaker, COO
Born and raised in Lansing, Michigan, Hamaker has lived in Nebraska, Texas, Iowa, PA and MA following his
career in healthcare. Mike is married to Pamela who he met in college for 35 years. Mike and Pamela have 3
boys ages 20 – 27, all in the Midwest.
Mike is a graduate of Hillsdale College in Hillsdale, Michigan and subsequently, received his MHA in Iowa.
Mike started his career as a pharma rep with Wyeth Labs, and soon converted to branch management with a
national for-profit Home Health agency. Since that time, Mike has held progressive positions as, Executive
Director of Genesis at Home, President and Vice-President of Home Care and Hospice for WellSpan Health
System, and most recently as the COO of Post-Acute Care (including hospice & home care) with Lahey Health
System.
“My role as COO is to serve our employees and patients on behalf of the CEO of Covenant Care while ensuring
the care and services we are delivering are the very best in the industry. I believe Covenant Care can and is a
large regional Home Health and Hospice, and I would like to see us expand that foot print so that more people
can experience our services. I believe our size also allows us to have a national voice in this industry and be
innovators. This is the perfect time to be in Home Care and Hospice since the inception of this type of care.
Most recently, my experiences with large health systems have made it clear that providing for the needs of the
acute setting and doing it with excellence, positions us for the future of Value-Based Purchasing, Medicare
Shared Savings and ACO work.”
Introduction: COO
18
Introduction: VP, Finance
Martin Franklin, Vice President, Finance
Marty is a strategic executive leader with over 20 years of progressively responsible financial management and
accounting experience in the health care industry and more recently, with hospice and home health services.
CPA and CMA with proven strengths in leadership, staff management and development, and technical
accounting and finance knowledge. As an agent of change, “I relish my role in always looking for ways to
improve myself, my team, and my organization to ensure achievement of our strategic goals.” Very adept with
systems including start-ups and complex implementations/integrations, and just recently completed the
successful implementation of a cloud-based ERP system. Experience in successful mergers and acquisitions
including due diligence, valuations, and joint ventures, closed three transactions in 30 days recently. Wide range
of industry experience including public accounting and healthcare, as well as privately-held for-for profits and
not-for-profits.
19
WFCC Update
Jeff Mislevy
20
Foundation: Name Consolidation
Aaron West
21
QRSC Committee Report
Kara Benedict
22
President’s Report
Jeff Mislevy
23
COVENANT HOSPICE, INC.
BOARD OF DIRECTORS MEETING September 28, 2017
CONSENT AGENDA
(p. 24)
CONVENING OF MEETING TOM OWENS
MINUTES OF THE COVENANT HOSPICE
BOARD OF DIRECTORS MEETING
OF JULY 27, 2017 (pp.25-26) ***** TOM OWENS
COVENANT CARE AUGUST 2017 AND
YTD FINANCIAL STATEMENTS (pp. 5-17) ***** ODIN BERG
OTHER BUSINESS AS SUBMITTED TOM OWENS
ADJOURNMENT TOM OWENS
NOTES: **** DENOTES VOTE OR OTHER ACTION REQUIRED
24
Covenant Hospice, Inc.
BOARD OF DIRECTORS MEETING
July 27, 2017
MINUTES
MEMBERS PRESENT: Carey King
Don Haferkamp
Jamie Campbell
Jeff Mislevy
JT Young
Patrice Villemure
Rodney Guttmann
Roger Poitras
Susan Davis
Steve Sarros
Teresa Dos Santos
Tom Owens
Xan Smith
MEMBERS ABSENT: Bill Greenhut
Brett Parra
Janet Kinney
Kent Skolrood
Wanda Kaye Hambrick
LEADERSHIP STAFF: Todd Fisher
Odin Berg
Amy Bajjaly
Aaron West
Rhonda Jordan
Kara Benedict
INTRODUCTION
Mr. Owens convened the meeting at 9:40 a.m.
MINUTES
Mr. Owens called for a motion to approve the minutes of the Covenant Hospice, Inc. Board Meeting of
May 25, 2017.
A motion was made and passed.
FINANCIAL REPORTS
Covenant Care June 2017 Consolidated Financial Report
25
COVENANT HOSPICE, INC.
BOARD OF DIRECTORS
July 27, 2017
cont.
Mr. Berg reported the following financial highlights:
Covenant Health and Community Services: operating margin for the month was| ($64,097);
YTD operating loss was ($472,257)
Covenant Hospice: operating margin for the month was $89,490; YTD operating margin was
$304,493
Peoples Home Health: operating margin for the month was $151,036; YTD operating margin
was $1,173,920
Covenant Hospice Foundation: net income of ($433); YTD net income was $355,109.
After discussion, Mr. Owens called for a motion to approve the Covenant Care June 2017 and YTD
Financial Report.
A motion was made and passed.
CORPORATE RESOLUTION
The following corporate resolution was presented for discussion and approval. A copy of the resolution
was provided on page 26 of the Board packet.
BE IT RESOLVED that the Board of Directors of Covenant Hospice, Inc. does hereby
authorize Odin Berg, Chief Financial Officer, and his successors in office to negotiate, on
terms and conditions that he may deem advisable, a contract or contracts with the
Alabama Medicaid Agency, and to execute said contract or contracts on behalf of the
Corporation. And further we do hereby give him the power and authority to do all things
necessary to implement, maintain, amend or renew said contract.
After discussion, the above-stated corporation resolution was approved.
ADJOURNMENT
There being no further business to discuss, the meeting was adjourned at 9:42 a.m.
__
Submitted By: Carey King, Secretary
26
COVENANT HOSPICE FOUNDATION, INC.
BOARD OF DIRECTORS MEETING September 28, 2017
CONSENT AGENDA
(p.27)
CONVENING OF MEETING TOM OWENS
MINUTES OF THE COVENANT HOSPICE
FOUNDATION BOARD OF DIRECTORS
MEETING OF JULY 27, 2017 (pp.28-29) ***** TOM OWENS
COVENANT CARE AUGUST 2017 AND
YTD FINANCIAL STATEMENTS (pp. 5-17) ***** ODIN BERG
FOUNDATION NAME CONSOLIDATION AARON WEST
OTHER BUSINESS AS SUBMITTED TOM OWENS
ADJOURNMENT TOM OWENS
NOTES: **** DENOTES VOTE OR OTHER ACTION REQUIRED
27
Covenant Hospice Foundation, Inc.
BOARD OF DIRECTORS MEETING
July 27, 2017
MINUTES
MEMBERS PRESENT: Tom Owens
Rodney Guttmann
Xan Smith
Carey King
Jeff Mislevy
Sue Straughn
MEMBERS ABSENT: Bill Greenhut
Bob Peterson
John Fogg
LEADERSHIP STAFF: Todd Fisher
Odin Berg
Aaron West
Amy Bajjaly
Rhonda Jordan
Kara Benedict
INTRODUCTION
Mr. Owens convened the meeting at 9:40 a.m.
MINUTES
Mr. Owens called for a motion to approve the minutes of the Covenant Hospice Foundation, Inc.
Board of Directors Meeting of May 25, 2017.
A motion was made and passed.
FINANCIAL REPORTS
Covenant Care June 2017 Consolidated Financial Report
Mr. Berg reported the following financial highlights:
Covenant Health and Community Services: operating margin for the month was| ($64,097);
YTD operating loss was ($472,257)
Covenant Hospice: operating margin for the month was $89,490; YTD operating margin was
$304,493
Peoples Home Health: operating margin for the month was $151,036; YTD operating margin
was $1,173,920
Covenant Hospice Foundation: net income of ($433); YTD net income was $355,109.
28
COVENANT HOSPICE FOUNDATION, INC.
BOARD OF DIRECTORS
July 27, 2017
cont.
After discussion, Mr. Owens called for a motion to approve the Covenant Care June 2017 and YTD
Financial Report.
A motion was made and passed.
ADJOURNMENT
There being no further business to discuss, the meeting was adjourned at 9:42 a.m.
__
Submitted By: Carey King, Secretary
29