Board of Directors September 28, 2017 · 2017-09-26 · JT Young Patrice Villemure Rodney Guttmann Roger Poitras Susan Davis Steve Sarros ... and $364,993 in legal and consulting

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


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.


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


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)


MINUTES OF THE COVENANT HOSPICE


OF JULY 27, 2017 (pp.25-26) ***** TOM OWENS






24

Covenant Hospice, Inc.


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


Brett Parra

Janet Kinney

Kent Skolrood

Wanda Kaye Hambrick


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.


FINANCIAL REPORTS


25

COVENANT HOSPICE, INC.

BOARD OF DIRECTORS

July 27, 2017

cont.





$304,493


was $1,173,920



Financial Report.


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


__


26

COVENANT HOSPICE FOUNDATION, INC.

BOARD OF DIRECTORS MEETING September 28, 2017

CONSENT AGENDA

(p.27)


MINUTES OF THE COVENANT HOSPICE

FOUNDATION BOARD OF DIRECTORS

MEETING OF JULY 27, 2017 (pp.28-29) ***** TOM OWENS



FOUNDATION NAME CONSOLIDATION AARON WEST




27

Covenant Hospice Foundation, Inc.


July 27, 2017

MINUTES

MEMBERS PRESENT: Tom Owens

Rodney Guttmann

Xan Smith

Carey King

Jeff Mislevy

Sue Straughn


Bob Peterson

John Fogg


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.


FINANCIAL REPORTS






$304,493


was $1,173,920


28

COVENANT HOSPICE FOUNDATION, INC.

BOARD OF DIRECTORS

July 27, 2017

cont.


Financial Report.


ADJOURNMENT


__


29

Board of Directors September 28, 2017 · 2017-09-26 · JT Young Patrice Villemure Rodney Guttmann Roger Poitras Susan Davis Steve Sarros ... and $364,993 in legal and consulting

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