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Standard & Poor’s Update
August 2005
2
Agenda
UCSF Overview
Strategic Plan and FY 2006 Operations Workplan
Financial Performance
Long Range Development Plan
Summary and Conclusions
Appendix: University of California Support
3
UCSF Overview
4
UCSF Medical Center has a proven track record of healthcare excellence
San Francisco's only university medical center.
Two hospital locations with 574 available beds (650 licensed) including
513 at Moffitt/Long and 61 at Mt. Zion as of June 30, 2005
37% percent of patients live in San Francisco; 63% percent come from
neighboring counties, throughout California, and around the world1
Principal teaching site for UCSF Schools of Medicine, Dentistry,
Pharmacy, and Nursing as well as the UCSF Graduate Division
FY 2005 included 167,822 patient days – an ADC of 460
Footnote: 1. http://www.ucsfhealth.org/common/annualReport2004.pdf.
5
UCSF Medical Center and UCSF Children’s Hospital are recognized throughout the world as leaders in Healthcare
UCSF continues to maintain an outstanding national and international
reputation1:
– nationally designated Comprehensive Cancer Center
– nationally designated Centers of Excellence in women’s health
– among the top five hospitals in the nation in the area of neurology and
neurosurgery
– one of the nation’s largest centers for kidney and liver transplants – performing
the third largest number of transplants in the US in 20032
– internationally recognized for treating the spine
UCSF Children’s Hospital is a “hospital within a hospital” with more than
150 pediatric specialists practicing in more than 50 areas of medicine2
In 2004, UCSF MC received the equivalent of a perfect score from the
Joint Commission on Accreditation of Healthcare Organization (JACHO).
Only 17 percent of hospitals received accreditations with full standards
compliance in 20032.
UCSF Faculty leaders in Patient Safety (100,000 Lives Campaign)
Footnote: 1. http:/www.ucsfhealth.org/adult/about/index.html.
2.http://www.ucsfhealth.org/common/annualReport2004.pdf.
6
UCSF Medical Center and UCSF Children’s Hospital have been named to U.S. News & World Report’s honor roll
• Hormonal disorders
• Neurology and Neurosurgery
• Pediatrics
• Respiratory disorders
• Digestive Disorders
• Ophthalmology
Footnote: 1. All rankings from US News and World Report July 18, 2005 issue; http://www.usnews.com/usnews/health/best-hospitals/honorroll.htm.
• Rheumatology
• Kidney Disease
• Ear, Nose and Throat
• Urology
• Psychiatry
• Gynecology
UCSF Hospital is ranked in the top 10 hospitals in the country
UCSF Children’s Hospital is ranked in the top 20 hospitals in the
country
Several of UCSF’s programs were also rated among the top 15 in the
nation.
7
UCSF is a leader a national leader in NIH funding and is making significant investments in research facilities
UCSF was the fourth largest recipient of National Institutes of Health (NIH)
research funds in 2004, receiving 977 research awards valued at $439
million1
Development of the new research campus at Mission Bay is underway2:
– Genentech Hall, The California Institute for Quantitative Biomedical Research
(QB3) and The Arthur and Toni Rembe Rock Hall , a research facility for
Genetics, Development and Behavioral Sciences are completed and occupied
– The Campus Community Center, Housing Complex and two parking structures
will be completed in FY 2006
– Construction on The Helen Diller Family Cancer Research Building is slated to
begin in FY06.
– The Cardiovascular and Neurosciences research buildings are in the design
phase.
Footnote: 1. http://grants2.nih.gov/grants/award/trendsrnk04all1to500.htm.
2. http://pub.ucsf.edu/missionbay.
8
UCSF is well positioned for the the future
Strong execution of the current strategic plan
Strong volume growth
Strong financial performance
Strong commitment to the future plan
Footnote: 1. http://grants2.nih.gov/grants/award/trendsrnk04all1to500.htm
2. http://pub.ucsf.edu/missionbay
9
Strategic Plan and FY 2006 Operations Workplan
10
Our strategic plan for has six main goals…
Create Capacity for targeted, profitable growth
Grow targeted services
Plan for the development of a Mothers’ and Children’s Hospital
Raise customer service/satisfaction to match recognized excellence of
clinical care and research
Target initiatives to improve operating performance, monitoring and
management
Launch enterprise-wide workforce development initiative
11
…the operations workplan for FY 2006 is tied to the Medical Center’s strategy
12
Financial Performance
13
Financial results significantly improved from 2003 to 2004 …and are even stronger in 2005
FY 2005 income before other changes in net assets of $69.3 million, $13.8
million ahead of FY 2004
Cash increased from $115.5 million at June 2004 to $144.2 million at June
2005. Days Cash on Hand increased from 44.2 to 51.3
Net Days in AR increased slightly from 64.8 days at June 2004 to 66.6
days at June 2005
14
The results over the past five years indicate sustained financial improvement…
UCSF Medical CenterNet Income - Combined
FY 2000 through FY 20051
tho
usa
nd
s
$23,409
$69,271
($25,000)
$21,842
($10,000)
$25,099
$35,022
$48,412
($16,850)
($14,871)
$55,477
($60,000)
($70,000)
($40,000)
($10,000)
$20,000
$50,000
$80,000
April-June 00 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
Budget Actual Annualized
Footnote: 1. FY 2005 financial performance is based on the unaudited financial statements while all previous periods are based on audited financial statements.
15
…as Net Income has improved so too has cash
UCSF Medical Center Cash Balance1
July 2002 – June 2005
Footnote: 1. Includes restricted and unrestricted cash.
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
'Sep-02 'Dec-02 'Mar-03 'J un-03 'Sep-03 'Dec-03 'Mar-04 'J un-04 'Sep-04 'Dec-04 'Mar-05 'J un-05
Th
ou
san
ds
16
This improved performance has resulted in stronger financial ratios
Footnote: 1. Standard & Poor’s U.S. Not-For-Profit Health Care 2004 Median Ratios; publication date 10-Jun-2004.
2. MADSC is Maximum Annual Debt Service Coverage.
3. FY 2005 financial performance is based on the unaudited financial statements.
A FY 2003 FY 2004 FY 2005
Net patient revenue 198,145$ 953,897$ 1,041,496$ 1,123,762$ Operating margin 2.0% 5.2% 5.8% 6.3%EBIDA margin 11.1% 10.7% 10.6% 11.0%
MADSC2 3.3 8.1 7.2 7.9 Debt to capitalization 36.1% 34.1% 21.2% 20.2%
Days cash on hand 176.0 35.8 44.2 51.3 Cushion ratio 12.5 6.6 7.3 8.9
Days in A/R 57.4 66.1 64.8 66.0
S&P UCSF Medical Center
Ratios/Indicators1,3
17
Trended Service Data Fiscal Years 2002 to 2005
Volume in the Medical Center’s key Service Lines continue to grow…
Footnote: 1. Excludes Well baby days
MAJOR SERVICE & AGE GROUPING
Cases 2002
Cases 2003
Cases 2004
Cases 2005
Days 2002
Days 2003
Days 2004
Days 2005
Adult (18 and over) Medical/Surgical
Cardiovascular Services 3,134 3,166 3,176 3,289 16,007 17,656 18,906 19,172
Neurosciences 2,685 2,863 2,992 3,140 14,559 16,797 19,146 19,847
Cancer Services 2,394 2,534 2,552 2,570 17,910 20,131 20,633 19,061
Orthopedic Surgery 1,361 1,366 1,501 1,589 7,757 7,292 7,856 9,637
Kidney/Liver Transplant 1,285 1,572 1,623 1,719 11,454 9,417 10,443 11,555
Adult General Surgery 1,730 1,822 1,959 2,554 11,324 12,392 11,948 13,527
Medicine 4,422 4,645 4,597 4,879 21,094 23,130 24,611 26,242
Other Surgery 342 331 424 478 1,517 1,386 1,895 2,390
17,355 18,301 18,824 20,218 101,620 108,201 115,438 121,431
Mother's and Children's (17 and under)
Obstetrics1 2,256 2,198 2,116 2,084 8,097 7,762 7,342 7,330
Neonatology 657 681 596 536 15,212 14,152 12,340 11,778
Pediatric Medicine 2,602 2,686 2,785 2,929 17,649 18,409 18,969 19,270
Pediatric Surgery 1,284 1,284 1,222 1,182 7,637 8,088 7,944 8,013
6,797 6,848 6,719 6,731 48,596 48,411 46,596 46,391
UCSF Grand Total 24,152 25,149 25,543 26,949 150,216 156,612 162,034 167,822
ADC 412 429 443 460
Annual percent increase 3.3% 4.1% 3.3% 3.8%
Sub Total Mother's & Children's
Sub Total Adult Medical/Surgical
18
…resulting in a 15% increase in the Medical Center’s average daily census
UCSF Medical CenterAverage Daily Census
FY 2001 through FY 2005
Ave
rag
e D
aily
Ce
ns
us
399
412
429
443
460
375
400
425
450
475
FY 2001 FY 2002 FY 2003 FY 2004 FY 2005
19
UCSF Medical CenterStatements of Revenue, Expenses and Net IncomeFor the Years ended June 30, 2003, 2004 and 20051
(Dollars in thousands)
Net income continues to grow
Hospital 2003 2004 2005
Net Patient Service Revenue 803,512$ 829,196$ 898,796$ Other Revenue 31,550 23,792 25,013
Total Revenue 835,062 852,988 923,809
Expenses 719,424 740,719 795,495 Depreciation 49,277 48,885 50,823 Interest 8,101 8,027 6,575
Total Expenses 776,802 797,631 852,893
Hospital Income 58,260 55,357 70,916
Clinical PracticesNet Patient Service Revenue 191,303 212,300 224,966 Other Revenue 5,202 6,233 4,584
Total Revenue 196,505 218,533 229,550
Expenses 205,961 217,962 230,584 Depreciation 392 451 611 Interest - - -
Total Expenses 206,353 218,413 231,195
Clinical Practices Income (9,848) 120 (1,645)
Net Income 48,412$ 55,477$ 69,271$
Footnote: 1. FY 2005 financial performance is based on the unaudited financial statements while all previous periods are based on audited financial statements.
20
The balance sheet has improved…
UCSF Medical CenterStatements of Net Assets
For the Years ended June 30, 2003, 2004 and 20051
(Dollars in thousands)2003 2004 2005
AssetsCurrent Assets
Cash 86,708$ 115,506$ 144,248$ Accounts Receivable 174,262 185,575 203,246 Third Party Settlements 1,642 1,330 4,604 Inventories 14,411 18,519 17,699 Other Current Assets 7,748 8,634 10,543
Total Current Assets 284,771 329,564 380,340
Property, Plant and Equipment 358,594 385,900 415,640 Other Assets 15,759 11,048 11,295
Total Assets 659,124 726,512 807,275
Liabilities and Net AssetsCurrent Liabilities
Accounts Payable & Accrued Expenses 76,784 85,838 102,200 Other Current Liabilities 5,109 7,992 4,520 Current Portion of Long-term Debt 7,776 9,544 12,492
Total Current Liabilities 89,669 103,374 119,212
Long-Term Debt, net of current portion 110,522 117,776 121,812 Third Party Settlements and Loss Contingency 55,303 59,650 78,970 Note Payable to UC 61,042 - -
Total Liabilities 316,536 280,800 319,994
Net Assets 342,588 445,712 487,281
Total Liabilities and Net Assets 659,124$ 726,512$ 807,275$
Footnote: 1. FY 2005 financial performance is based on the unaudited financial statements while all previous periods are based on audited financial statements.
21
UCSF Medical CenterStatements of Cash Flows
For the Years ended June 30, 2003, 2004 and 20051
(Dollars in thousands)
…as too has the cash balance
2003 2004 2005Sources of Cash:Income 48,412$ 55,477$ 69,271$ Depreciation 49,669 49,336 51,434 Donated Funds 7,888 8,300 5,327 Other 10,902 9,114 17,833 Long-Term Debt Proceeds 15,847 18,084 18,376
Total Sources of Cash 132,718 140,311 162,241
Uses of Cash:Changes in Working Capital (31,049) (2,290) (6,196) Capital Expenditures (46,826) (78,466) (82,882) Health Systems Support (10,291) (21,695) (33,029) Long-Term Debt Principal Payments (8,144) (9,062) (11,392)
Total Uses of Cash (96,310) (111,513) (133,499)
Change in Cash 36,408 28,798 28,742
Cash Balance, beginning of period 50,300 86,708 115,506
Cash Balance, end of period 86,708$ 115,506$ 144,248$
Footnote: 1. FY 2005 financial performance is based on the unaudited financial statements while all previous periods are based on audited financial statements.
22
Continued operational and financial success secures capital funding of the current campuses
UCSF Medical CenterEstimated Capital Expenditure
For the Years ended June 30, 2006, 2007 and 2008(Dollars in thousands)
2006 2007 2008Capital ExpendituresEquipment 25,780$ 26,000$ 31,000$ Clinical Information Systems 9,618 4,000 4,000 Construction 37,260 27,094 41,493 Bed Projects 7,398 27,784 12,507 Total Capital Expenditures 80,056$ 84,878$ 89,000$
Funding SourceEquity 77,056$ 81,878$ 86,000$ Philanthropy 3,000 3,000 3,000 Total Funding Source 80,056$ 84,878$ 89,000$
23
508
535 535
552
574
597
618
646
662
399412
429
443
460 465
485
506
525
375
425
475
525
575
625
675
725
2001 2002 2003 2004 2005 2006 2007 2008 2009
Available Beds Average Daily Census
Bed capacity will expand over the next three years
Bed Capacity & Census ProjectionFY2001 – FY2009
Long 1 10 Observation beds
MZ -- West Wing15 Med/Surg beds
Long 9 6 Med/Surg beds
Long 13 32 Med/Surg beds
Moffitt 14 N&E1
16 ICU beds
Moffitt 13 N&E 16 ICU beds
MZ East Wing 13 Med/Surg beds
Close Moffitt 14 N&E1
20 beds
Footnote: 1. Moffitt 14 N & E currently has 20 med/surg beds. In FY2008, these beds will be taken offline and replaced and re-opened with 16 ICU beds. 2. All year ending periods are June 30 th. Projection years start with FY2006 3. Increases in bed capacity between 2001 and 2005 have been accomplished through the opening of beds at Mt. Zion
Completed Projects Planned Projects
24
Long Range Development Plan
25
Seismic requirements and capacity needs must be addressed…
The Need:
– Seismic requirements (SB 1953)
• Repair Moffitt/Long by 2008
• Repair or replace Mount Zion by 2013 (OSHPD extension received).
– Increase capacity and improve functionality of hospitals
The Process:
– Joint School of Medicine and Medical Center effort
– Objective: Highly functional hospital for patients and physicians
– Objective: Link hospital services to academic programs.
26
…however current configuration and construction costs are constraints to UCSF’s growth
Constraints:
– All land is encumbered:
• Parnassus: space ceiling, access; parking
• Mount Zion: small campus; limited research space
• Mission Bay: new land is expensive and carries obligations to Redevelopment Agency.
– Community opinion: keep Emergency Department (and related hospital) on
Parnassus Heights.
– Finances: all options are expensive.
– Timing/Phasing: all options must assure uninterrupted patient care – requires
“decant” of existing volume to new facilities.
27
UCSF’s long term development plan is a bold redesign of the Medical Center’s facilities and delivery system
Programmatic Options
• Separate Cancer Hospital
• Separate Women’s and Children’s Hospital
• Separate specialty surgery hospital
Facility Options (over the next decade):
• Ambulatory Care Center at Mission Bay; new small hospital at Mission Bay;
new tower on Parnassus; maintain ambulatory care at Mount Zion.
• Ambulatory Care Center at Mission Bay; new small hospital at Mount Zion;
new tower on Parnassus.
28
Summary and Conclusions
29
UCSF has the key “Building Blocks” for long term success
Commitment to Mission, Vision, Values
Tradition of Medical Excellence – focus on safety and quality
World class faculty physicians
Excellent Senior Management team
Clear Strategic Plan and ability to execute Operations Workplan
Shared goals for all staff
Market and contracting strength
Strong Relationship with top Medical School
Strong UC and political support
30
Appendix – University of California Support
31
Regents’ Hospital Working Capital Program
• In 1989, The Regents implemented internal hospital working capital facility using Short Term Investment Pool (STIP):
• Maximum total outstanding for hospitals - 15% of unrestricted STIP.
• Maximum individual hospital outstanding - 60% of hospital gross accounts receivable.
• Can be drawn for any working capital purpose, including debt service.
32
UCSF Medical Center Available Cash from Hospital Working Capital Program
• Availability of UC Working Capital based on A/R as of June 2005:
60% X $ 258 Million Gross A/R:
= $154.7 Million
= 55 Days of Cash
• Historical Debt Service Coverage, June 2005 = 7.1 X
• Adjusted for Hospital Working Capital, June 2005 adjusted debt service
coverage = 15.7 X