MAMMOTH HOSPITAL Management Discussion Document for the Year Ending June 30, 2019 Finance Committee & Board Meeting
CONTENTS Required Auditor’s Communication Performance 1
REQUIRED AUDITOR’S COMMUNICATION (1 OF 3) Communication with The Board 1. Auditor's responsibility under generally accepted auditing standards Responsibility for basic financial statements – management Audit consists of tests, not complete verification – we obtain reasonable, not absolute, assurance about whether the financial statements are free of material misstatements Engaged to perform audit in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, and California legal compliance Discretely presented component unit - Auxiliary 2. Significant accounting policies No material changes in fiscal 2019 3. Management judgments and accounting estimates and qualitative aspects of accounting practices Collectability of patients receivables and historical retrospective review results Third-party payor settlements and settlement related to prior year 2
REQUIRED AUDITOR’S COMMUNICATION (2 OF 3) 4. Financial statement disclosures Net patient service revenue Long-term term debt Contingencies 5. Corrected Misstatements and Uncorrected Misstatements (typically referred to as audit adjustments identified) No corrected misstatements Uncorrected misstatements: Understatement of accounts receivable and revenue due to late charges – $144,000 Overstatement of beginning net position and understatement of revenue related to outpatient revenue reconciliation – $115,000 Understatement of cash and revenue related to the county cash reconciliation to final confirm received – $66,000 In addition, there is a reclassification of additions related to South Gateway Apartments from capital assets to other long-term assets and net position classification from net investment in capital assets to unrestricted – $245,000 6. Difficulties Encountered in Performing the Audit None 3
REQUIRED AUDITOR’S COMMUNICATION (3 OF 3) 7. Disagreements with Management None 8. Management Consultations with Other Independent Accountants None noted 9. Other Matters Discussed Prior to Retention None 10. Other Matters Management’s Discussion and Analysis Internal Control over Financial Reporting letter Summary Financial Statements Other Non Audit services GASB 87, Leases – effective for the District fiscal year end June 30, 2021 4
PERFORMANCE OVERVIEW The following represent the ratios used to analyze current performance levels: Liquidity Ratios Days Cash on Hand Days in Receivable Current Ratio Profitability Operating Margin Capital Structure Debt to Equity Ratio 5
DAYS CASH ON HAND Days cash on hand from all sources is a measure of the average number of days the Hospital could operate without additional receipts. 400.0 365.2 350.0 306.6 293.1 300.0 285.8 267.8 250.0 201.3 197.3 200.0 187.4 183.5 150.0 115.0 94.7 90.4 100.0 81.3 50.0 - 2015 2016 2017 2018 2019 Mammoth Hospital CA CAH Moody's Healthcare Median for Free-standing Hospitals for A3 Management has been able to continue to increase cash balances due to operating results over the last several years. 6
NET DAYS IN AR Net days revenue in receivables is used to estimate how long a charge is held in receivables before being collected. 80.0 70.0 66.7 65.7 64.3 63.4 62.0 60.0 52.3 52.4 51.6 48.0 47.6 50.0 47.0 46.2 40.5 40.0 30.0 20.0 10.0 - 2015 2016 2017 2018 2019 Mammoth Hospital CA CAH Moody's Healthcare Median for Free-standing Hospitals for A3 Net days in AR has decreased during the current year, and is impacted by increased collection efforts. 7
CURRENT RATIO The current ratio indicates the District’s ability to meet its current obligations with current assets. A ratio of 1.0 would indicate that current assets are just sufficient to meet current obligations. 10.0 9.0 9.0 8.0 7.3 6.8 7.0 6.4 6.0 4.8 5.0 4.0 3.6 3.1 2.8 3.0 2.6 1.9 1.9 1.9 1.8 2.0 1.0 - 2015 2016 2017 2018 2019 Mammoth Hospital CA CAH Moody's Healthcare Median for Free-standing Hospitals for A3 Mammoth has maintained a current ratio of at least 4.0 over the last five years and above benchmarks. 8
OPERATING MARGIN 14.0% 12.0% 11.5% 10.0% 10.0% 8.0% 6.8% 6.2% 6.0% 5.3% 5.3% 4.3% 4.0% 4.0% 4.0% 3.1% 1.9% 1.6% 1.5% 2.0% 0.0% 2015 2016 2017 2018 2019 Mammoth Hospital CA CAH Moody's Healthcare Median for Free-standing Hospitals for A3 9
DEBT TO EQUITY 80.0 69.1 70.0 65.6 65.0 62.2 61.8 60.0 56.3 53.7 49.7 50.0 42.3 40.0 35.9 32.2 29.1 30.0 24.6 20.0 10.0 - 2015 2016 2017 2018 2019 Mammoth Hospital CA CAH Moody's Healthcare Median for Free-standing Hospitals for A3 10
NEXT STEPS AND CONCLUDING THOUGHTS Thank you for allowing us to share our observations and suggestions. We look forward to continuing to serve you. 11
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