Vanguard Health Systems Reports Second Quarter Fiscal 2013 Results
Vanguard Health Systems Reports Second Quarter Fiscal 2013 Results
Business Wire
NASHVILLE, Tenn. -- January 30, 2013
Vanguard Health Systems, Inc. (NYSE: VHS) today announced financial and
operating results for its second fiscal quarter of 2013.
Second Quarter Fiscal 2013 Key Metrics (all percentage changes compare Q2
FY2013 to Q2 FY2012):
Consolidated and Same Store:
* Net income attributable to Vanguard Health Systems, Inc. stockholders was
$12.2 million, or $0.14 per diluted share, compared to net income of $15.7
million, or $0.20 per diluted share, during the prior year period
* Adjusted EBITDA was $137.8 million
* Patient revenue per adjusted discharge increased 1.5 percent
* Discharges decreased 1.4 percent
* Adjusted discharges increased 1.4 percent
Year to Date Fiscal 2013 Key Metrics (all percentage changes compare six
months FY2013 to six months FY2012):
Consolidated:
* Net income attributable to Vanguard Health Systems, Inc. stockholders was
$26.1 million, or $0.31 per diluted share, compared to a net loss of $6.0
million, or $(0.08) per diluted share, during the prior year period
* Adjusted EBITDA increased 4.9 percent to $271.0 million
Same Store:
* Patient revenue per adjusted discharge increased 2.3 percent
* Discharges decreased 1.8 percent
* Adjusted discharges decreased 0.2 percent
A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net
income (loss) attributable to Vanguard Health Systems, Inc. stockholders for
the quarters and six-month periods ending December 31, 2011 and 2012 is
included in this release.
Second Quarter Analysis
Consolidated total revenues increased $37.7 million during the second quarter
of fiscal 2013 compared to the prior year period. Net patient service revenues
increased $33.2 million as a result of a 1.4 percent increase in adjusted
discharges and a 1.5 percent increase in patient revenue per adjusted
discharge. Emergency room visits increased 6.0 percent and observation cases
increased 8.0 percent. Health plan premium revenues increased slightly during
the second quarter of fiscal 2013 compared to the prior year period.
Uncompensated care as a percentage of net patient revenues (prior to
uncompensated care deductions) was 21.3 percent during the second quarter of
fiscal 2013 compared to 20.0 percent during the prior year period primarily
due to an increase in uninsured discharges as a percentage of total
discharges.
Fiscal Year to Date Analysis
Consolidated total revenues increased $72.1 million during the six months
ended December 31, 2012 compared to the prior year period, primarily due to
the acquisition of Valley Baptist Health System in September 2011. Same store
net patient service revenues increased 1.6 percent during the six months ended
December 31, 2012 resulting from a 2.3 percent increase in patient revenue per
adjusted discharge combined with a 0.2 percent decrease in adjusted
discharges. Same store emergency room visits increased 3.8 percent and same
store observation cases increased 9.1 percent during the six months ended
December 31, 2012 compared to the prior year period. Health plan premium
revenues, on a same store basis, decreased 10.4 percent during the six months
ended December 31, 2012 compared to the prior year period. Phoenix Health
Plan's revenues were negatively impacted by a combination of program changes
adopted by Arizona Health Care Cost Containment System (“AHCCCS”) beginning
April 1, 2011 and continuing during our fiscal year 2012, including capitation
payment rate decreases, program eligibility restrictions and health plan
profitability limitations for certain member groups.
Same store uncompensated care as a percentage of net patient revenues (prior
to uncompensated care deductions) was 20.2 percent during the six months ended
December 31, 2012 compared to 18.0 percent during the prior year period
primarily due to an increase in uninsured discharges as a percentage of total
discharges.
Balance Sheet and Cash Flows
As of December 31, 2012, we had cash of $357.8 million and total debt of
$2,703.2 million.
Cash flows from operating activities improved by $81.1 million during the six
months ended December 31, 2012 compared to the prior year period. Changes in
net operating assets and liabilities negatively impacted operating cash flows
by $92.9 million during the six months ended December 31, 2012 compared to a
negative impact of $172.2 million during the prior year period. We made $98.2
million of interest and income tax payments during the six months ended
December 31, 2012, which was $16.6 million higher than these payments during
the prior year period.
Capital expenditures increased 36.4 percent to $187.2 million during the six
months ended December 31, 2012 compared to the prior year period due to
increased spending related to the Detroit Medical Center specified capital
project commitments and the start of construction of a new hospital in New
Braunfels, Texas.
Outlook for Fiscal Year 2013
We are confirming our previously issued fiscal year 2013 outlook for ranges of
projected Adjusted EBITDA, projected net income attributable to Vanguard
Health Systems, Inc. stockholders, projected diluted earnings per share and
projected capital expenditures.
Earnings Conference Call
We will host a conference call at 11:00 a.m. EST on January 31, 2013. All
interested parties are invited to access a live webcast of the conference call
on the Investor Relations Section of our website at http://vanguardhealth.com.
If you are unable to participate during the live webcast, the webcast will be
available on a replay basis for 90 days.
We own and operate 28 acute care and specialty hospitals and complementary
facilities and services in metropolitan Chicago, Illinois; metropolitan
Detroit, Michigan; metropolitan Phoenix, Arizona; San Antonio, Texas;
Harlingen and Brownsville, Texas; and Worcester and metropolitan Boston,
Massachusetts. Our strategy is to develop locally branded, comprehensive
health care delivery networks in urban markets.
Cautionary Statement about Forward-Looking Information
This press release contains “forward-looking statements” within the meaning of
the federal securities laws that are intended to be covered by safe harbors
created thereby. Forward-looking statements are those statements that are
based upon management's plans, objectives, goals, strategies, future events,
future revenue or performance, capital expenditures, financing needs, plans or
intentions relating to acquisitions, business trends and other information
that is not historical information. These statements are based upon estimates
and assumptions made by our management that, although believed to be
reasonable, are subject to numerous factors, risks and uncertainties that
could cause actual outcomes and results to be materially different from those
projected. When used in this press release, the words “estimates,” “expects,”
“anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,”
“continues” or future or conditional verbs, such as “will,” “should,” “could”
or “may,” and variations of such words or similar expressions are intended to
identify forward-looking statements. These factors, risks and uncertainties
include, among others, the following: our high degree of leverage and interest
rate risk; our ability to incur substantially more debt; operating and
financial restrictions in our debt agreements; our ability to generate cash
necessary to service our debt; weakened economic conditions and volatile
capital markets; potential adverse impact of pre-payment and post-payment
claims reviews by governmental agencies; our ability to grow our business and
successfully implement our business strategies, including growing our
ambulatory care services platform; our ability to successfully integrate
hospitals or ambulatory care facilities acquired in the future or to recognize
expected synergies from such acquisitions; potential acquisitions could be
costly, unsuccessful or subject us to unexpected liabilities; conflicts of
interest that may arise as a result of our control by a small number of
stockholders; the highly competitive nature of the health care industry; the
geographic concentration of our operations; governmental regulation of the
health care industry, including Medicare and Medicaid reimbursement levels in
general and with respect to the impact of the Budget Control Act of 2011 and
other future deficit reduction plans; a reduction or elimination of
supplemental Medicare and Medicaid payments on which we depend, including
disproportionate share payments, indirect medical education/graduate medical
education payments, upper payment limit programs and other similar payments;
pressures to contain costs by managed care organizations and other insurers
and our ability to negotiate acceptable terms with these third party payers;
our ability to attract and retain qualified management and health care
professionals, including physicians and nurses; the currently unknown effect
on us of the major federal health care reforms enacted by Congress in March
2010, including the Patient Protection and Affordable Care Act, as amended by
the Health Care and Education Reconciliation Act of 2010, or other potential
additional federal or state health care reforms, including that states may opt
out of the Medicaid expansion; potential adverse impact of known and unknown
governmental investigations and audits; increased compliance costs from
further government regulation of the health care industry and our failure to
comply, or allegations of our failure to comply, with applicable laws and
regulations; our failure to adequately enhance our facilities with
technologically advanced equipment; the availability of capital to fund our
corporate growth strategy and improvements to our existing facilities;
potential lawsuits or other claims asserted against us; our ability to
maintain or increase patient membership in and to control the costs of our
managed health care plans; failure of AHCCCS to renew its contract with, or
award future contracts with similar terms and scope to, Phoenix Health Plan;
Phoenix Health Plan's ability to comply with the terms of its contract with
AHCCCS; our inability to manage health plan claims expense within our health
plans; reductions in the enrollment of our health plans; changes in general
economic conditions nationally and regionally in our markets; our exposure to
the increased amounts of and collection risks associated with uninsured
accounts and the co-pay and deductible portions of insured accounts;
dependence on our senior management team and local management personnel;
volatility of professional and general liability insurance for us and the
physicians who practice at our hospitals and increases in the quantity and
severity of professional liability claims; our ability to achieve operating
and financial targets and to maintain and increase patient volumes and control
the costs of providing services, including salaries and benefits, supplies and
other operating expenses; technological and pharmaceutical improvements that
increase the cost of providing, or reduce the demand for, health care services
and shift demand for inpatient services to outpatient settings; a failure of
our information systems; delays in receiving payments for services provided,
especially from governmental payers; changes in revenue mix, including changes
in Medicaid eligibility criteria and potential declines in the population
covered under managed care agreements; costs and compliance risks associated
with Section 404 of the Sarbanes-Oxley Act of 2002; material non-cash charges
to earnings from impairment of goodwill associated with declines in the fair
market value of our reporting units; cash payments that may be necessary to
fund an underfunded defined benefit pension plan of the DMC; volatility of
materials and labor costs for, or state efforts to regulate, potential
construction projects that may be necessary for future growth; our reliance on
payments from our subsidiaries, which may be restricted by our credit
agreement and the indentures governing our senior notes; changes in accounting
practices; our ability to demonstrate meaningful use of certified electronic
health record technology and to receive the related Medicare or Medicaid
incentive payments; and other risk factors described in our Annual Report on
Form 10-K and other filings with the Securities and Exchange Commission.
Our forward-looking statements speak only as of the date made. Except as
required by law, we undertake no obligation to publicly update or revise any
forward-looking statements contained herein, whether as a result of new
information, future events or otherwise. You are cautioned not to rely on such
forward-looking statements when evaluating the information contained in this
press release. In light of significant uncertainties inherent in the
forward-looking statements included in this press release, you should not
regard the inclusion of such information as a representation by us that the
objectives and plans anticipated by the forward-looking statements will occur
or be achieved or, if any of them do, what impact they will have on our
financial condition, results of operations or cash flows.
We use our company website to provide important information to investors about
the company, including the posting of important announcements regarding
financial performance and corporate developments.
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except share and per share amounts)
Quarter ended December 31,
2011 2012
Patient service revenues $ 1,428.1 96.8 % $ 1,481.5 97.9 %
Less: Provision for doubtful (141.5 ) (9.6 ) (161.7 ) (10.7 )
accounts
Patient service revenues, net 1,286.6 87.2 1,319.8 87.2
Premium revenues 188.8 12.8 193.3 12.8
Total revenues 1,475.4 100.0 1,513.1 100.0
Salaries and benefits 702.4 47.6 698.1 46.1
(includes stock compensation)
Health plan claims expense 147.3 10.0 149.8 9.9
Supplies 227.9 15.4 232.5 15.4
Purchased services 133.4 9.0 148.2 9.8
Rents and leases 18.7 1.3 18.8 1.2
Other operating expenses 131.3 8.9 145.1 9.6
Medicare and Medicaid EHR (21.3 ) (1.4 ) (14.5 ) (1.0 )
incentives
Depreciation and amortization 65.8 4.5 67.8 4.5
Interest, net 43.2 2.9 49.7 3.3
Acquisition related expenses 0.4 — 0.1 —
Other (1.8 ) (0.1 ) (1.8 ) (0.1 )
Income from continuing 28.1 1.9 19.3 1.3
operations before income taxes
Income tax expense (11.3 ) (0.8 ) (7.2 ) (0.5 )
Income from continuing 16.8 1.1 12.1 0.8
operations
Loss from discontinued (0.3 ) — — —
operations, net of taxes
Net income 16.5 1.1 12.1 0.8
Net loss (income) attributable (0.8 ) (0.1 ) 0.1 —
to non-controlling interests
Net income attributable to
Vanguard Health Systems, Inc. $ 15.7 1.1 % $ 12.2 0.8 %
stockholders
Earnings per share
attributable to Vanguard
Health Systems, Inc.
stockholders
Basic earnings per share $ 0.21 $ 0.15
Diluted earnings per share $ 0.20 $ 0.14
Weighted average shares
outstanding (in thousands):
Basic 75,325 77,421
Diluted 78,732 79,625
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Operations (Unaudited)
(In millions, except share and per share amounts)
Six months ended December 31,
2011 2012
Patient service revenues $ 2,779.6 95.5 % $ 2,945.4 98.7 %
Less: Provision for doubtful (267.7 ) (9.2 ) (331.3 ) (11.1 )
accounts
Patient service revenues, net 2,511.9 86.3 2,614.1 87.6
Premium revenues 399.8 13.7 369.7 12.4
Total revenues 2,911.7 100.0 2,983.8 100.0
Salaries and benefits 1,367.4 47.0 1,378.3 46.2
(includes stock compensation)
Health plan claims expense 312.0 10.7 284.1 9.5
Supplies 441.5 15.2 458.6 15.4
Purchased services 260.4 8.9 295.4 9.9
Rents and leases 36.7 1.3 37.8 1.3
Other operating expenses 264.4 9.1 289.3 9.7
Medicare and Medicaid EHR (24.4 ) (0.8 ) (25.8 ) (0.9 )
incentives
Depreciation and amortization 128.4 4.4 133.4 4.5
Interest, net 89.0 3.1 100.5 3.4
Debt extinguishment costs 38.9 1.3 — —
Acquisition related expenses 12.6 0.4 0.1 —
Other (4.2 ) (0.1 ) (6.9 ) (0.2 )
Income (loss) from continuing
operations before income (11.0 ) (0.4 ) 39.0 1.3
taxes
Income tax benefit (expense) 3.9 0.1 (12.1 ) (0.4 )
Income (loss) from continuing (7.1 ) (0.2 ) 26.9 0.9
operations
Income (loss) from
discontinued operations, net (0.4 ) — 0.1 —
of taxes
Net income (loss) (7.5 ) (0.3 ) 27.0 0.9
Net loss (income)
attributable to 1.5 0.1 (0.9 ) —
non-controlling interests
Net income (loss)
attributable to Vanguard $ (6.0 ) (0.2 )% $ 26.1 0.9 %
Health Systems, Inc.
stockholders
Earnings (loss) per share
attributable to Vanguard
Health Systems, Inc.
stockholders
Basic earnings (loss) per $ (0.08 ) $ 0.32
share
Diluted earnings (loss) per $ (0.08 ) $ 0.31
share
Weighted average shares
outstanding (in thousands):
Basic 75,090 76,559
Diluted 75,090 79,205
VANGUARD HEALTH SYSTEMS, INC.
Supplemental Financial Information (Unaudited)
Reconciliation of Adjusted EBITDA to Net Income (Loss)
Attributable to Vanguard Health Systems, Inc. Stockholders
(In millions)
Quarter ended Six months ended
December 31, December 31,
2011 2012 2011 2012
Net income
(loss)
attributable to $ 15.7 $ 12.2 $ (6.0 ) $ 26.1
Vanguard Health
Systems, Inc.
stockholders
Interest, net 43.2 49.7 89.0 100.5
Income tax
expense 11.3 7.2 (3.9 ) 12.1
(benefit)
Depreciation and 65.8 67.8 128.4 133.4
amortization
Non-controlling 0.8 (0.1 ) (1.5 ) 0.9
interests
Loss (gain) on
disposal of 0.4 1.9 (0.8 ) 1.0
assets
Equity method (0.6 ) 0.2 (0.7 ) (0.4 )
loss (income)
Stock 3.9 2.7 4.6 4.9
compensation
Realized losses — — — 0.2
on investments
Acquisition 0.4 0.1 12.6 0.1
related expenses
Debt
extinguishment — — 38.9 —
costs
Impairment and
restructuring — — (0.1 ) —
charges
Pension credits (1.6 ) (3.9 ) (2.6 ) (7.7 )
Discontinued
operations, net 0.3 — 0.4 (0.1 )
of taxes
Adjusted $ 139.6 $ 137.8 $ 258.3 $ 271.0
EBITDA(1)
____________________
(1) Adjusted EBITDA is defined as income (loss) before interest expense (net
of interest income), income taxes, depreciation and amortization,
non-controlling interests, gain or loss on disposal of assets, equity method
income or loss, stock compensation, realized gains or losses on investments,
acquisition related expenses, debt extinguishment costs, impairment and
restructuring charges, pension expense (credits) and discontinued operations,
net of taxes. Adjusted EBITDA is not intended as a substitute for net income
(loss) attributable to Vanguard Health Systems, Inc. stockholders, operating
cash flows or other cash flow data determined in accordance with accounting
principles generally accepted in the United States. Due to varying methods of
calculation, Adjusted EBITDA as presented may not be comparable to similarly
titled measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions)
June 30, 2012 December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents $ 455.5 $ 357.8
Restricted cash 2.4 5.7
Accounts receivable, net of allowance for
doubtful accounts of $366.5 and $382.1,
respectively 702.1 666.4
Inventories 97.0 96.6
Deferred tax assets 89.6 71.0
Prepaid expenses and other current assets 236.4 197.1
Total current assets 1,583.0 1,394.6
Property, plant and equipment, net of 2,110.1 2,145.3
accumulated depreciation
Goodwill 768.4 772.7
Intangible assets, net of accumulated 89.0 87.8
amortization
Deferred tax assets, noncurrent 71.2 82.9
Investments in securities 51.8 57.9
Escrowed cash for capital commitments 20.3 —
Other assets 94.3 97.2
Total assets $ 4,788.1 $ 4,638.4
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 390.6 $ 369.1
Accrued salaries and benefits 226.0 220.5
Accrued health plan claims and settlements 67.8 63.0
Accrued interest 73.2 73.4
Other accrued expenses and current 219.9 162.8
liabilities
Current maturities of long-term debt 11.2 12.6
Total current liabilities 988.7 901.4
Professional and general liability and 304.8 305.7
workers compensation reserves
Unfunded pension liability 269.9 229.9
Other liabilities 174.7 123.1
Long-term debt, less current maturities 2,695.4 2,690.6
Commitments and contingencies
Redeemable non-controlling interests 53.1 55.3
Equity:
Vanguard Health Systems, Inc.
stockholders' equity:
Common stock 0.8 0.8
Additional paid-in capital 403.3 405.0
Accumulated other comprehensive loss (48.4 ) (46.5 )
Retained deficit (60.6 ) (34.5 )
Total Vanguard Health Systems, Inc. 295.1 324.8
stockholders' equity
Non-controlling interests 6.4 7.6
Total equity 301.5 332.4
Total liabilities and equity $ 4,788.1 $ 4,638.4
VANGUARD HEALTH SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
Six months ended
December 31,
2011 2012
Operating activities:
Net income (loss) $ (7.5 ) $ 27.0
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Loss (income) from discontinued operations 0.4 (0.1 )
Depreciation and amortization 128.4 133.4
Amortization of loan costs and accretion of principal 8.4 6.6
on notes
Acquisition related expenses 12.6 0.1
Stock compensation 4.6 4.9
Deferred income taxes (5.9 ) 7.0
Debt extinguishment costs 38.9 —
Other (1.1 ) 1.2
Changes in operating assets and liabilities, net of (172.2 ) (92.9 )
the impact of acquisitions
Net cash provided by operating activities — continuing 6.6 87.2
operations
Net cash provided by (used in) operating activities — (0.4 ) 0.1
discontinued operations
Net cash provided by operating activities 6.2 87.3
Investing activities:
Acquisitions and related expenses, net of cash (208.8 ) (7.2 )
acquired
Capital expenditures (137.2 ) (187.2 )
Proceeds from sales of investments in securities 42.3 76.1
Purchases of investments in securities (30.4 ) (79.1 )
Net reimbursements from restricted cash and escrow — 17.8
fund
Other investing activities (0.7 ) 1.3
Net cash used in investing activities (334.8 ) (178.3 )
Financing activities:
Payments of long-term debt and capital leases (460.7 ) (5.5 )
Proceeds from the issuance of common stock 67.5 —
Payments of IPO related costs (6.9 ) —
Payments of tender premiums on note redemptions (27.6 ) —
Other financing activities (1.6 ) (1.2 )
Net cash used in financing activities (429.3 ) (6.7 )
Net decrease in cash and cash equivalents (757.9 ) (97.7 )
Cash and cash equivalents, beginning of period 936.6 455.5
Cash and cash equivalents, end of period $ 178.7 $ 357.8
Supplemental cash flow information:
Net cash paid for interest $ 81.0 $ 93.8
Net cash paid for income taxes $ 0.6 $ 4.4
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited)
(In millions)
Quarter ended December 31, 2011
Acute Care % of Health % of
Services Revenues Plans Revenues Eliminations Consolidated
Patient
service $ 1,297.1 100.0 % $ — — % $ (10.5 ) $ 1,286.6
revenues,
net(1)
Premium — — 188.8 100.0 — 188.8
revenues
Total 1,297.1 100.0 188.8 100.0 (10.5 ) 1,475.4
revenues
Salaries and
benefits
(excludes 689.2 53.1 9.3 4.9 — 698.5
stock
compensation)
Health plan
claims — — 157.8 83.6 (10.5 ) 147.3
expense(1)
Supplies 227.9 17.6 — — — 227.9
Other
operating 271.2 20.9 12.2 6.5 — 283.4
expenses
Medicare and
Medicaid
(21.3 ) (1.6 ) — — — (21.3 )
EHR
incentives
Segment 130.1 10.0 9.5 5.0 — 139.6
EBITDA(2)
Less:
Interest, net 43.8 3.4 (0.6 ) (0.3 ) — 43.2
Depreciation
and 64.6 5.0 1.2 0.6 — 65.8
amortization
Equity method (0.6 ) — — — — (0.6 )
income
Stock 3.9 0.3 — — — 3.9
compensation
Loss on
disposal of 0.4 — — — — 0.4
assets
Acquisition
related 0.4 — — — — 0.4
expenses
Pension (1.6 ) (0.1 ) — — — (1.6 )
credits
Income from
continuing
operations $ 19.2 1.5 % $ 8.9 4.7 % $ — $ 28.1
before income
taxes
___________________
(1) We eliminate in consolidation those patient service revenues earned by our health
care facilities attributable to services provided to enrollees in our owned health plans
and eliminate the corresponding medical claims expenses incurred by our health plans for
those services.
(2) Segment EBITDA is defined as income (loss) from continuing operations before income
taxes less interest expense (net of interest income), depreciation and amortization,
equity method income or loss, stock compensation, gain or loss on disposal of assets,
realized gains or losses on investments, acquisition related expenses, debt
extinguishment costs, impairment and restructuring charges and pension expense (credits).
Management uses Segment EBITDA to measure the performance of our segments and develop
strategic objectives and operating plans for those segments. Segment EBITDA eliminates
the uneven effect of non-cash depreciation of tangible assets and amortization of
intangible assets, much of which results from acquisitions accounted for under the
purchase method of accounting. Segment EBITDA also eliminates the effects of changes in
interest rates, which management believes relate to general trends in global capital
markets, but are not necessarily indicative of the operating performance of our segments.
Management believes that Segment EBITDA provides useful information to investors,
lenders, financial analysts and rating agencies about the financial performance of our
segments. Additionally, management believes that investors and lenders view Segment
EBITDA as an important factor in making investment decisions concerning us. Segment
EBITDA is not a substitute for net income (loss), operating cash flows or other cash flow
statement data determined in accordance with accounting principles generally accepted in
the United States. Segment EBITDA, as presented, may not be comparable to similar
measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) (continued)
(In millions)
Quarter ended December 31, 2012
Acute Care % of Health % of
Services Revenues Plans Revenues Eliminations Consolidated
Patient
service $ 1,329.3 100.0 % $ — — % $ (9.5 ) $ 1,319.8
revenues,
net(1)
Premium — — 193.3 100.0 — 193.3
revenues
Total 1,329.3 100.0 193.3 100.0 (9.5 ) 1,513.1
revenues
Salaries and
benefits
(excludes 685.3 51.6 10.1 5.2 — 695.4
stock
compensation)
Health plan
claims — — 159.3 82.4 (9.5 ) 149.8
expense(1)
Supplies 232.4 17.5 0.1 0.1 — 232.5
Other
operating 301.1 22.7 11.0 5.7 — 312.1
expenses
Medicare and
Medicaid
(14.5 ) (1.1 ) — — — (14.5 )
EHR
incentives
Segment 125.0 9.4 12.8 6.6 — 137.8
EBITDA(2)
Less:
Interest, net 50.3 3.8 (0.6 ) (0.3 ) — 49.7
Depreciation
and 66.7 5.0 1.1 0.6 — 67.8
amortization
Equity method 0.2 — — — — 0.2
loss
Stock 2.7 0.2 — — — 2.7
compensation
Loss on
disposal of 1.9 0.1 — — — 1.9
assets
Acquisition
related 0.1 — — — — 0.1
expenses
Pension (3.9 ) (0.3 ) — — — (3.9 )
credits
Income from
continuing
operations $ 7.0 0.5 % $ 12.3 6.5 % $ — $ 19.3
before income
taxes
__________________
(1) We eliminate in consolidation those patient service revenues earned by our health care
facilities attributable to services provided to enrollees in our owned health plans and
eliminate the corresponding medical claims expenses incurred by our health plans for those
services.
(2) Segment EBITDA is defined as income (loss) from continuing operations before income
taxes less interest expense (net of interest income), depreciation and amortization,
equity method income or loss, stock compensation, gain or loss on disposal of assets,
realized gains or losses on investments, acquisition related expenses, debt extinguishment
costs, impairment and restructuring charges and pension expense (credits). Management uses
Segment EBITDA to measure the performance of our segments and develop strategic objectives
and operating plans for those segments. Segment EBITDA eliminates the uneven effect of
non-cash depreciation of tangible assets and amortization of intangible assets, much of
which results from acquisitions accounted for under the purchase method of accounting.
Segment EBITDA also eliminates the effects of changes in interest rates, which management
believes relate to general trends in global capital markets, but are not necessarily
indicative of the operating performance of our segments. Management believes that Segment
EBITDA provides useful information to investors, lenders, financial analysts and rating
agencies about the financial performance of our segments. Additionally, management
believes that investors and lenders view Segment EBITDA as an important factor in making
investment decisions concerning us. Segment EBITDA is not a substitute for net income
(loss), operating cash flows or other cash flow statement data determined in accordance
with accounting principles generally accepted in the United States. Segment EBITDA, as
presented, may not be comparable to similar measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) (continued)
(In millions)
Six months ended December 31, 2011
Acute Care % of Health % of
Services Revenues Plans Revenues Eliminations Consolidated
Patient
service $ 2,531.0 100.0 % $ — — % $ (19.1 ) $ 2,511.9
revenues,
net(1)
Premium — — 399.8 100.0 — 399.8
revenues
Total revenues 2,531.0 100.0 399.8 100.0 (19.1 ) 2,911.7
Salaries and
benefits
(excludes 1,344.5 53.1 18.3 4.6 — 1,362.8
stock
compensation)
Health plan
claims — — 331.1 82.8 (19.1 ) 312.0
expense(1)
Supplies 441.4 17.4 0.1 — — 441.5
Other
operating 538.6 21.3 22.9 5.7 — 561.5
expenses
Medicare and
Medicaid (24.4 ) (1.0 ) — — — (24.4 )
EHR incentives
Segment 230.9 9.1 27.4 6.9 — 258.3
EBITDA(2)
Less:
Interest, net 89.9 3.6 (0.9 ) (0.2 ) — 89.0
Depreciation
and 126.1 5.0 2.3 0.6 — 128.4
amortization
Equity method (0.7 ) — — — — (0.7 )
income
Stock 4.6 0.2 — — — 4.6
compensation
Gain on
disposal of (0.8 ) — — — — (0.8 )
assets
Acquisition
related 12.6 0.5 — — — 12.6
expenses
Debt
extinguishment 38.9 1.5 — — — 38.9
costs
Impairment and
restructuring (0.1 ) — — — — (0.1 )
charges
Pension (2.6 ) (0.1 ) — — — (2.6 )
credits
Income (loss)
from
continuing $ (37.0 ) (1.5 )% $ 26.0 6.5 % $ — $ (11.0 )
operations
before income
taxes
__________________
(1) We eliminate in consolidation those patient service revenues earned by our health care
facilities attributable to services provided to enrollees in our owned health plans and
eliminate the corresponding medical claims expenses incurred by our health plans for those
services.
(2) Segment EBITDA is defined as income (loss) from continuing operations before income
taxes less interest expense (net of interest income), depreciation and amortization, equity
method income or loss, stock compensation, gain or loss on disposal of assets, realized
gains or losses on investments, acquisition related expenses, debt extinguishment costs,
impairment and restructuring charges and pension expense (credits). Management uses Segment
EBITDA to measure the performance of our segments and develop strategic objectives and
operating plans for those segments. Segment EBITDA eliminates the uneven effect of non-cash
depreciation of tangible assets and amortization of intangible assets, much of which
results from acquisitions accounted for under the purchase method of accounting. Segment
EBITDA also eliminates the effects of changes in interest rates, which management believes
relate to general trends in global capital markets, but are not necessarily indicative of
the operating performance of our segments. Management believes that Segment EBITDA provides
useful information to investors, lenders, financial analysts and rating agencies about the
financial performance of our segments. Additionally, management believes that investors and
lenders view Segment EBITDA as an important factor in making investment decisions
concerning us. Segment EBITDA is not a substitute for net income (loss), operating cash
flows or other cash flow statement data determined in accordance with accounting principles
generally accepted in the United States. Segment EBITDA, as presented, may not be
comparable to similar measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Segment Information (Unaudited) (continued)
(In millions)
Six months ended December 31, 2012
Acute Care % of Health % of
Services Revenues Plans Revenues Eliminations Consolidated
Patient
service $ 2,633.8 100.0 % $ — — % $ (19.7 ) $ 2,614.1
revenues,
net(1)
Premium — — 369.7 100.0 — 369.7
revenues
Total 2,633.8 100.0 369.7 100.0 (19.7 ) 2,983.8
revenues
Salaries and
benefits
(excludes 1,354.4 51.4 19.0 5.1 — 1,373.4
stock
compensation)
Health plan
claims — — 303.8 82.2 (19.7 ) 284.1
expense(1)
Supplies 458.5 17.4 0.1 — — 458.6
Other
operating 600.3 22.8 22.2 6.0 — 622.5
expenses
Medicare and
Medicaid
(25.8 ) (1.0 ) — — — (25.8 )
EHR
incentives
Segment 246.4 9.4 24.6 6.7 — 271.0
EBITDA(2)
Less:
Interest, net 101.6 3.9 (1.1 ) (0.3 ) — 100.5
Depreciation
and 131.3 5.0 2.1 0.6 — 133.4
amortization
Equity method (0.4 ) — — — — (0.4 )
income
Stock 4.9 0.2 — — — 4.9
compensation
Loss on
disposal of 1.0 — — — — 1.0
assets
Realized
losses on 0.2 — — — — 0.2
investments
Acquisition
related 0.1 — — — — 0.1
expenses
Pension (7.7 ) (0.3 ) — — — (7.7 )
credits
Income from
continuing
operations $ 15.4 0.6 % $ 23.6 6.5 % $ — $ 39.0
before income
taxes
__________________
(1) We eliminate in consolidation those patient service revenues earned by our health care
facilities attributable to services provided to enrollees in our owned health plans and
eliminate the corresponding medical claims expenses incurred by our health plans for those
services.
(2) Segment EBITDA is defined as income (loss) from continuing operations before income
taxes less interest expense (net of interest income), depreciation and amortization,
equity method income or loss, stock compensation, gain or loss on disposal of assets,
realized gains or losses on investments, acquisition related expenses, debt extinguishment
costs, impairment and restructuring charges and pension expense (credits). Management uses
Segment EBITDA to measure the performance of our segments and develop strategic objectives
and operating plans for those segments. Segment EBITDA eliminates the uneven effect of
non-cash depreciation of tangible assets and amortization of intangible assets, much of
which results from acquisitions accounted for under the purchase method of accounting.
Segment EBITDA also eliminates the effects of changes in interest rates, which management
believes relate to general trends in global capital markets, but are not necessarily
indicative of the operating performance of our segments. Management believes that Segment
EBITDA provides useful information to investors, lenders, financial analysts and rating
agencies about the financial performance of our segments. Additionally, management
believes that investors and lenders view Segment EBITDA as an important factor in making
investment decisions concerning us. Segment EBITDA is not a substitute for net income
(loss), operating cash flows or other cash flow statement data determined in accordance
with accounting principles generally accepted in the United States. Segment EBITDA, as
presented, may not be comparable to similar measures of other companies.
VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited)
Quarter ended
CONSOLIDATED AND SAME STORE: December 31,
2011 2012 % Change
Number of hospitals at end of period 28 28
Licensed beds at end of period 7,064 7,064
Discharges 71,961 70,980 (1.4 )%
Adjusted discharges 129,089 130,924 1.4
Average length of stay 4.39 4.47 1.8
Patient days 316,075 317,369 0.4
Adjusted patient days 566,997 585,394 3.2
Patient revenue per adjusted discharge $ 9,506 $ 9,647 1.5
Inpatient surgeries 16,910 16,345 (3.3 )
Outpatient surgeries 31,876 31,444 (1.4 )
Observation cases 17,750 19,170 8.0
Emergency room visits 299,075 317,069 6.0
Health plan member lives 249,500 236,000 (5.4 )
Health plan claims expense percentage 78.0 % 77.5 %
Uncompensated care as a percent of net
patient revenues (prior to uncompensated 20.0 % 21.3 %
care deductions)
Net patient revenue payer mix:
Medicare 28.2 % 27.1 %
Medicaid 13.9 13.4
Managed Medicare 11.1 11.7
Managed Medicaid 8.7 10.2
Managed care 34.5 34.1
Commercial 1.2 1.5
Self-pay 2.4 2.0
Total 100.0 % 100.0 %
Discharges by payer:
Medicare 29.5 % 29.1 %
Medicaid 11.8 9.8
Managed Medicare 12.1 12.7
Managed Medicaid 16.4 18.2
Managed care 22.8 22.3
Commercial 0.5 0.5
Self-pay 6.9 7.4
Total 100.0 % 100.0 %
VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited) (continued)
Six months ended
CONSOLIDATED: December 31,
2011 2012 % Change
Number of hospitals at end of period 28 28
Licensed beds at end of period 7,064 7,064
Discharges 140,122 142,461 1.7 %
Adjusted discharges 254,345 262,430 3.2
Average length of stay 4.37 4.44 1.6
Patient days 612,154 632,924 3.4
Adjusted patient days 1,111,161 1,165,919 4.9
Patient revenue per adjusted discharge $ 9,397 $ 9,525 1.4
Inpatient surgeries 32,987 32,937 (0.2 )
Outpatient surgeries 61,852 62,575 1.2
Observation cases 34,107 38,398 12.6
Emergency room visits 591,914 632,104 6.8
Health plan member lives 249,500 236,000 (5.4 )
Health plan claims expense percentage 78.0 % 76.8 %
Uncompensated care as a percent of net
patient revenues (prior to 19.0 % 21.5 %
uncompensated care deductions)
Net patient revenue payer mix:
Medicare 27.4 % 27.3 %
Medicaid 14.3 13.5
Managed Medicare 10.7 11.5
Managed Medicaid 9.6 10.1
Managed care 34.8 34.1
Commercial 1.3 1.5
Self-pay 1.9 2.0
Total 100.0 % 100.0 %
Discharges by payer:
Medicare 28.9 % 28.5 %
Medicaid 11.2 9.7
Managed Medicare 12.2 12.5
Managed Medicaid 17.1 18.4
Managed care 23.0 22.5
Commercial 0.5 0.5
Self-pay 7.1 7.9
Total 100.0 % 100.0 %
VANGUARD HEALTH SYSTEMS, INC.
Selected Operating Statistics
(Unaudited) (continued)
Six months ended
SAME STORE: December 31,
2011 2012 % Change
Number of hospitals at end of period 26 26
Licensed beds at end of period 6,198 6,198
Total revenues, including premium $ 2,771.4 $ 2,769.0 (0.1 )%
revenues (in millions)
Net patient service revenues (in $ 2,382.7 $ 2,420.8 1.6
millions)
Discharges 130,868 128,520 (1.8 )
Adjusted discharges 241,323 240,792 (0.2 )
Average length of stay 4.34 4.42 1.8
Patient days 567,700 567,483 —
Adjusted patient days 1,046,849 1,063,223 1.6
Patient revenue per adjusted discharge $ 9,383 $ 9,598 2.3
Inpatient surgeries 30,205 28,921 (4.3 )
Outpatient surgeries 58,605 57,401 (2.1 )
Observation cases 31,799 34,683 9.1
Emergency room visits 565,499 586,747 3.8
Health plan claims expense percentage 78.2 % 76.8 %
Uncompensated care as a percent of net
patient revenues (prior to 18.0 % 20.2 %
uncompensated care deductions)
Net patient revenue payer mix:
Medicare 26.7 % 26.3 %
Medicaid 14.1 13.4
Managed Medicare 10.9 11.7
Managed Medicaid 10.3 10.5
Managed care 35.0 34.7
Commercial 1.4 1.5
Self-pay 1.6 1.9
Total 100.0 % 100.0 %
Discharges by payer:
Medicare 28.6 % 28.3 %
Medicaid 10.0 9.3
Managed Medicare 12.7 13.1
Managed Medicaid 18.2 18.0
Managed care 23.3 23.0
Commercial 0.5 0.6
Self-pay 6.7 7.7
Total 100.0 % 100.0 %
Contact:
Vanguard Health Systems, Inc.
Investor Contact:
Gary Willis, 615-665-6098
Senior Vice President and Chief Accounting Officer
gwillis@vanguardhealth.com
or
Media Contact:
Suzanne Towry, 615-665-6016
Director of Media Relations
setowry@vanguardhealth.com
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