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MMC Case Analysis

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CASE STUDY

Major Medical Center

 

 

For the Major Medical Center financial statements on the following pages, complete the following:

  1. Read the auditor’s opinion letter. Are any flags raised?
  2. Review the financial statements. Search for unusual items. What things catch your eye on the balance sheet, operating statement, and cash flow statement?
  3. Review the Notes. Do any of them raise cause for concern?
  4. Calculate the following ratios: common size, current, quick, days of cash on hand, receivables turnover, average collection period, fixed asset turnover, total asset turnover, debt, debt to equity, times-interest-earned, operating margin, total margin, Return on assets (ROA), and Return on net assets(RONA).
  5. What do you think of Major Medical Center’s financial status?

 

 

I.N. SINCER AND OLD, CPAs

2650 East 38th Street

New York, New York 10089

 

Report of the Independent Auditors

 

Board of Trustees

Major Medical Center

 

We have audited the accompanying statements of financial position of Major Medical Center (the “Medical Center”) as of December 31, 2012 and 2011, and the related state of operation, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Medical Centers management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Major Medical Center at December 31, 2012 and 2011, and the results of its operations, changes in net assets, and cash flows for the years then ended, in conformity with generally accepted accounting principles.

 

April 30, 2013

I.N. SINGER AND OLD, CPAs

 


Major Medical Center

            Statements of Financial Position

                                                                                                                                    December 31

                                                                                                                                  ____________________

                                                                                                                                    2012                2011

                                                                                                                                    (In Thousands)                        ____________________________________________________________________________________

            Assets

Current Assets

Cash and cash equivalents                                                                   8,065               $9,065

Assets limited as to use -compensating balance

for letters of credit                                                                            1,000               ____

Short-term investments                                                                                    1,387                 1,283

Receivables for patient care, net of allowance for

doubtful accounts (2012-$27,232; 2011-$31,934)                         49,719             47,614

Pledges receivable                                                                               1,814               2,205

Inventories, at average cost                                                                  1,690               2,326

Due from third-party reimbursement programs                                                6,539               ____

Receivables for government grants                                                      ___                  467

Other                                                                                                   2,234                           3,415

Total Current Assets                                                                            72,448              66,315

Assets limited as to use:

Sinking fund                                                                                        14,487             13,410

Compensating balance for standby letters   of credit                                923               ____

15,410             13,410

Long-term investments                                                                                                  1,132                 618

Due from affiliates, net                                                                                                 3,417               3,543

Pledges receivable, net of allowance for uncollectible pledges

(2012 – $2,218; 2011 – $4,453)                                                                         1,889               1,468

Property, plant, and equipment net                                                                  98,555             89,777

Deferred financing costs                                                                                    1,323               ____

Other                                                                                                                 2,065               1,043

                        $196,239       $176,174

Liabilities and Net Assets

Current Liabilities

Current portion of long-term debt                                                       $11,608                  $11,488

Accounts payable and accrued expenses                                                         29,489         25,311                 Accrued salaries and related liabilities                                                             25,572        20,096

Due to third-party reimbursement programs, net                                                ____           1,874

Advances on government grants                                                             1,587           ___

Total Current liabilities                                                                                    68,256        58,769

Long term debt, less current portion                                                                55,539                        47,709

Accrued post-retirement benefits                                                                        6,023                          6,017

Other noncurrent liabilities                                                                               16,445                        17,014

Total Liabilities                                                                                                            146,263           129,509

Commitments and contingencies

 

Net Assets

Unrestricted                                                                                         40,582             38,014             Temporarily restricted                                                                             8,262                          7,519             Permanently restricted                                                                            1,132                          1,132                         Total Net Assets                                                                          49,976              46,665

                                                                                                                                  $196,239          $176,174                  __________________________________________________________________________________

See accompanying notes.

 

 

Major Medical Center

   Statements of Operations   

   _______________________________________________________________________________

                                                                                                            Year ended December 31                                                                                                                   _______________________

2012                2011

_______________________

(In Thousands)

______________________________________________________________________________

            Operating Revenue                 

Net patient service revenue                                                                  $402,921         369,512

Other revenue                                                                                          13,356           13,850

Net assets released from restrictions                                                    __ 4,708                2,863

Total Operating Revenue                                                            420,985           386,225

            Operating Expenses                                                                            

Salaries and wages                                                                               207,141           196,453

Employee benefits                                                                                 44,456                        44,860

Supplies and expenses                                                                         137,505                         117,838            Depreciation and amortization                                                               22,541                         18,856            Research                                                                                                  2,457                            2,214

Interest                                                                                                    4,456                            5,253

Total Operating Expenses                                                        418,556                          385,474                   

Operating Income                                                                                    2,429                                 751

Net assets released from restrictions used for capital acquisitions                         139                        146

Increases in unrestricted net assets                                                       $2,568                                $897

________________________________________________________________________________

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Medical Center

Statements of Changes in Net Assets

           ____________________________________________________________________________________

Net Assets

                                                                                                _____________________________________

                                                                                                                        Temporarily   Permanently                                                                                       Unrestricted      Restricted        Restricted

                                                                                                _____________________________________

                                                                                                                        (In Thousands)

___________________________________________________________________________________

Net Assets as December 31, 2010                                $37,117            $3,023                                $1,132

Increase in unrestricted net assets                                       897                   ___                                  ___

Restricted contributions, grants, another receipts                             ___             7,253                                    ___

Investment income restricted for specific purposes                       ___                    252                      ___

Net assets released from restrictions for:

Operating expenses                                                            ___                (2,863)                      ___

Capital asset acquisitions                                       ___                  (146)                        ___

Change in net assets                                                           897                             4,496                                   ___

Net Assets at December 31, 2011                                38,014                             7,519                                   1,132

Increase in unrestricted net assets                                2,568                    ___                                    ___

Restricted contributions, grants, and other receipts         ___                  5,421                                      ___

Investment income restricted for specific purposes        ___                     169                                      ___

Net assets released from restrictions for:

Operating expenses                                             ___                  (4,708)                      ___

Capital asset acquisitions                                 ______                              (139)                      ___

Change in net assets                                                     2,568_                            __743_                    ___

Net Assets on December 21, 2012                               $40,582                           $8,262                  $1,132

            __________________________________________________________________________________

See accompanying notes.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Major Medical Center

Statements of Cash Flows

       ______________________________________________________________________________________

            Year Ended December 31

                                                                                                                        ________________________

                                                                                                                                    2012                2011

                                                                                                                        _______________________

                                                                                                                                    (In thousands)

_____________________________________________________________________________________

Operating Activities                                                                                        

Operating income                                                                                            $2,429                          $751

Change in temporarily restricted net assets                                                            743             4,496

3,172               5,247

Adjustments to reconcile change in net assets to cash provided by operations:

Depreciation and amortization                                                                  22,541       18,856

Investment income earned on assets limited as to use                                        (774)               (698)

Changes in operating assets and liabilities:

(Increase) decrease in receivables for patient care                                         (2,105)              7,589

(Increase) decrease in due from third-party reimbursement programs               (8,413)           4,500

Increase in accounts payable and accrued expenses

and accrued salaries and related liabilities                                                9,654          1,412

Net effect of increases and decreases in other assets and liabilities           2,286          (8,707)

Cash provided by operations                                                                               26,361           28,199

Investing Activities     

Acquisitions of property, plant, and equipment, net                                             (10,043)       (12,998)

Less amounts provided by restricted funds                                                                      139               146

Increase in investments                                                                                                        (618)             (70)

Cash used in investing activities                                                                                      (10,552)     (12,922)

Financing Activities    

Net payment from (to) affiliates                                                                                            126         (1,773)               Increase in deferred financing costs                                                                      (1,323)

Repayments of long-term debt                                                                              (13,326)        (9,510)

Deposits into sinking fund, as required by mortgage loan agreement                         (303)

Increase in compensating balances for standby letters of credit                                          (1,923)

(Increase) decrease in pledges receivable                                                                  (30)        (3,190)

Cash used in financing activities                                                                                       (16,779)      (14,473)

Net (decrease) increase in cash and cash equivalents                                                (940)          804

Cash and cash equivalents at beginning of year                                                                    9,005        8,201

Cash and cash equivalents at end of year                                                                          $8,065       $9,005

_____________________________________________________________________________________

       See accompanying notes.
Accompanying Notes to Financial Statements

  1. Organization and Summary of Significant Accounting Policies

Organization

Major Medical Center (the “Medical Center”) is a not-for-profit corporation. The Medical Center      provides health care and related services. The accompanying financial statements do not include the accounts of the Research Foundation, a not-for-profit corporation that solicits funds and awards grants to the Medical Center for research purposes, nor for Hospital Support, Inc., which provides certain support services.

 

Temporarily and Permanently Restricted Net Assets

Temporarily restricted net assets are those whose use by the Medical Center has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by the Medical Center in perpetuity. When a donor restriction expires (i.e., when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified as unrestricted net assets and reported in the statements of operations as net assets released from restrictions. Donor restricted contributions whose restrictions are met within the same year as received are reflected as temporarily restricted contributions and net assets released from restrictions in the accompanying financial statements.

 

Receivables for Patient Care

Patient accounts receivable from third-party programs for which the Medical Center receives payment under reimbursement formulas or negotiated rates are stated at the estimated net amounts receivable from such payors, which are generally less than the established charges of the Medical Center.

 

Investments

Investments consist of U.S. Treasury bonds and notes, certificates of deposit, and money market funds. Investments are carried at fair value. Amounts classified as long-term investments, consisting primarily of money market funds, represent permanently restricted net assets.

 

Investment Gains, Losses, and Income

Investment income, which includes real gains and losses, earned on permanently restricted and temporarily restricted funds upon which restrictions have been placed by donors, is added to temporarily restricted funds. All other investment income is reflected in the accompanying statements of operations.

 

Property, Plant, and Equipment

Property, plant, and equipment purchased are carried at cost, and those acquired by gifts and bequests are carried at appraised or fair market value established at the date of acquisition. Capitalized leases are recorded at the fair market value at the inception of the leases. The carrying amounts of assets and the related accumulated depreciation are removed from the accounts when such assets are disposed of, and any resulting gain or loss is included in operations. Depreciation of assets used in operations is recorded on the straight-line method over the estimated useful lives of the assets. Capitalized leases are amortized over the lease term.

 

Pledges

Unconditional promises to give cash and other assets are reported at their net present value at the date the promise is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. Pledges receivables, discounted at 10 percent, are expected to be paid as follows (in thousands):

Less than one year                                           $ 1,814

One year to five years                                                    3,145

In excess of five years                                     ___962___

5,921

Less allowance for

uncollectible pledges receivable                    (2,218)

$ 3,703         

__________________________________________________________

 

Assets Limited as to Use

Assets classified as limited as to use represent assets whose use is restricted for specific purposes under terms of agreements.

 

Accrued Post-Retirement Benefits

The Medical Center accounts for post-retirement health care and life insurance benefits on the accrual basis of accounting.

 

Uncompensated Care

As a matter of policy, the Medical Center provides significant amounts of partially or totally uncompensated patient care. For accounting purposes, such uncompensated care is treated either as charity care or bad debt expense. The Medical Center has defined charity care for accounting and disclosure purposes as the difference between its customary charges and the sliding scale rates given to patients in need of financial assistance. Since payment of this difference is not sought, charity care allowances are not reported as revenue. Patients who do not qualify for sliding scale fees and all uninsured inpatients who do not qualify for Medicaid assistance are billed at the Medical Center’s full rates. Uncollected balances for these patients are categorized as bad debts. Total uncompensated care for all patient services approximated $22 million and $20 million in 2012 and 2011, respectively.

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Management believes that the amounts recorded based on estimates and assumptions are reasonable, and any differences between estimates and actual should not have a material impact on the Medical Center’s financial position.

 

Operating Income

Transactions deemed by management to be ongoing, major, or central to the provision of health care services are reported as operating revenue and expenses, and are included in operating income. Operating income also includes investment income and realized gains and losses from the sale of investments.

 

Tax Status

The Medical Center is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Medical Center has been classified as an organization that is not a private foundation under Section 509(a)(1). Contributions received by the Medical Center qualify as tax-deductible charitable contributions.

 

2. Third-Party Reimbursement Programs

 

The Medical Center has agreements with third-party payers that provide for payments to the Medical Center at amounts different from its established charges. Payment arrangements include prospectively determined rates per discharge, reimbursement of costs, discounted charges, and per diem payments. Patient service revenue is recorded at the Medical Center’s established charges when patient services are performed. Adjustments for differences between established charges and payment amounts are deducted directly from receivables for patient care and patient service revenue in the year incurred.

Federal and state regulations provide for certain retrospective adjustments to current and prior years’ payment rates based on industry wide and hospital-specific data. The Medical Center has estimated the potential impact of such retrospective adjustments based on information presently available, and adjustments are accrued on an estimated basis in the period the services are rendered and are adjusted in future periods as final settlements are determined. Management believes that amounts recorded in the accompanying financial statements will not be materially affected upon the final settlement of such retrospective adjustments.

 

Hospitals are reimbursed for Medicare inpatient services under the national prospective payment system (“PPS”) and other methodologies of the Medicare program for patient services. Such Medicare payments are based on a blend of national industry and hospital specific data. The Medicaid program pays rates determined by the state, primarily on a basis of prospectively determined rates per discharge. The Medical Center is paid by non-Medicare/Medicaid payers based on negotiated contract amounts or, if such contracts do not exist, at the Medical Center’s established charges. In addition, the state has requested a waiver from the federal government that will allow it to enroll substantially all of its Medicaid participants into Medicaid managed care programs. The ultimate outcome and effect of these changes and proposals on the Medical Center’s future operations cannot presently be determined. In 2012, net revenue from the Medicare and Medicaid programs accounted for 44 percent and 23 percent, respectively, of total net patient service revenue.

 

3. Assets Limited as to Use

 

A summary of assets limited as to use is as follows at December 31:

                                    ________________________________________________________________

                                                                                                            2012                            2011

                                                                                                      _____________________________

(In Thousands)

                                    ________________________________________________________________

                                       Sinking Funds:                       

Cash and cash equivalents                   $276                            $249

U.S. government and

agency obligations                            14,211                         13,161

Total Sinking Funds                                         14,487                         13,410

Collateral for Standby Letters of Credit:

Cash and cash equivalents                      582                           _____

Corporate bonds                                  1,341                          _____

Total Collateral for Standby

                                                Letters of Credit                                     1,923                         _____

Total Assets Limited as to Use                           $16,410                                 $13,410

                                    __________________________________________________________________

 

4. Property, Plant, and Equipment

 

A summary of property, plant, and equipment is as follows at December 31:

                                    __________________________________________________________________

                                                                                                            2012                            2011

                                                                                                      _______________________________

(In Thousands)

                                    __________________________________________________________________

Land                                                                $ 4,980                                      $ 4,980

Buildings                                                          58,827                                      58,827

Equipment                                                       164,592                       140,707

228,399                                    204,514

Less accumulated depreciation                                     141,502                      125,148                                                                                                                         86,897                                   79,366

                                    Projects in progress                                            11,658                                      10,411

$98,555                        $89,777

___________________________________________________________________

 

Approximately $45,673,000 and $45,706,000 of fully depreciated assets are included in buildings and equipment at December 31, 2012 and 2011, respectively. Substantially all property, plant, and equipment is pledged as collateral under various loan agreements.

 

Capitalized equipment leases, included in property, plant, and equipment, are as follows at December 31:

                                    __________________________________________________________________

                                                                                                            2012                            2011

                                                                                                   ________________________________

(In Thousands)

                                    __________________________________________________________________

Assets recorded under capital leases                $67,434                                   $51,695

Less accumulated amortization                                       35,911                                  27,108

$31,523                                   $24,587

 

 

 

5. Long-Term Debt

A summary of long-term debt is as follows at December 31:

_________________________________________________________________

                                                                                                2012                            2011

                                                                                             __________________________________

(In Thousands)

                                    _________________________________________________________________

                                    FHA Section 242 insured

mortgage loan (a)                     $20,865                       $ __

FHA Section 241

mortgage loan (a)                       10,941                       12,125

                                    2005 mortgage loan (b)                                         2,216                                 2,758

1998 insured mortgage loan (a)                             __                          15,492

Various mortgages, having

interest rates ranging from 3.5%

to 10.0%, maturing at various

dates  through 2008                                        2,020                                    2,892

Capitalized leases (c)                           31,105                                     25,930

67,147                         59,197

Less current portion                             11,608                                      11,488

$55,539                       $47,709

                                    _________________________________________________________________

 

a)      As a condition of these borrowings, the Medical Center is required to establish and maintain a sinking fund. Amounts deposited into the sinking fund, together with investment earnings therein, are available for principal payments and purchases of specified levels of capital assets. Assets on deposit in the sinking fund at December 31, 2012 and 2011, are in compliance with the required amounts.

 

b)      Annual principal payments for all long-term debt, excluding capital leases and required sinking fund balances for the next five years, are as follows:

 

 

 

 

 

 

                                    ____________________________________________________________

                                                                                                                            Required

                                                                                    Principal                     Sinking Fund

                                                                                    Payments                        Balance

                                                                                    __________________________________

(In Thousands)

                                    _____________________________________________________________

 

2013                            $2,789                         $15,461

2014                              4,688                          14,937

2015                              4,157                           14,162

2016                              4,089                           13,129

2017                             3,746                           11,831

______________________________________________________________

 

 

 

c). Future minimum payments, by year and in the aggregate, under capitalized leases consisted of the following at December 31, 2012 (in thousands):

______________________________________________________________

2013                                                                $11,102

2014                                                                    9,852

2015                                                                    8,204

2016                                                                    4,744

2017                                                                    1,518

Thereafter                                                               850

Total minimum lease payments                                      36,270

Less amounts representing interest                      (5,165)

Present value of lease payments                                  $31,105

______________________________________________________________

6. Retirement and Similar Benefits

 

The Medical Center provides retirement and similar benefits to its union employees through several defined benefit multi-employer pension plans and to its nonunion employees through a noncontributory defined benefit pension plan and tax-deferred annuity plans. Payments to the defined benefit multi-employer union plans are made in accordance with contractual arrangements under which contributions are generally based on gross salaries and are funded on a current basis. The Medical Center contributes amounts to the nonunion plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974. The Medical Center’s pension expense under all existing plans aggregated approximately $10,202,000 and $10,683,000 for the years ended December 31, 2012 and 2011, respectively.

 

7. Other Post-Retirement Benefits

 

In addition to the pension plans and the tax-sheltered annuity plans described in Note 6, the Medical Center sponsors a defined benefit health care plan that provides post-retirement medical, dental, and life insurance benefits to certain full-time employees hired prior to July 1,2004, and who have worked 10 years and attained age 65 while in service with the Medical Center. The plan contains cost-sharing features such as deductibles and coinsurance.

Effective in May 2012, the Medical Center changed the type of the plan from basic hospi­tal plus major medical to a point-of-service plan for nonunion employees. The effects of this change have been reflected in the actuary’s calculation for the plan year ended December 31, 2012. At the end of 2012 and 2011, the accrued post-retirement benefit cost was $6,023,000 and $6,017,000, respectively. As of December 31, 2012 and 2011, the plan was unfunded.

 

8. Government Grants

 

The Medical Center receives grants from various government agencies. For the contract years ending June 30, 2013, 2014, and 2015, these grant awards are as follows:

_____________________________________________________

                                                Contract Year                                                  Amount

                                                Ending June 30:                                  (In Thousands)                                                                        _____________________________________________________ 

2013                                                    $3,791

2014                                                      3,513

2015                                                      3,765

_____________________________________________________

 

            Advances on government grants of $1,587,000 at December 31, 2012, as reflected in the accompanying statement of financial position, represent amounts received from the granting agencies in excess of claims made at that date. The receivable amount of $467,000 at December 31, 2011, represents claims made in excess of advances received from the granting agencies at that date.

 

9. Professional Liability Insurance

 

The Medical Center participates in a pooled program with certain other health care facilities (principally medical centers) for professional liability insurance. This participation is with captive insurance companies and, with the other health care facilities, in a pooled layer for additional insurance with commercial insurance companies.

 

During 2011, the Medical Center had an aggregate deposit of $2,000,000 with two of the captive insurance companies. During 2012, these deposits were replaced with two letters of credit of $1,000,000 each. The deposits were included in other current assets in the accompanying 2011 statement of financial position.

 

Malpractice claims in excess of insurance coverage have been asserted against the Medical Center by various claimants. The claims are in various stages of processing, and some may ultimately be brought to trial. Medical Center management and counsel are unable to conclude about the ultimate outcome of the actions. There are known incidents occurring through December 31, 2012, that may result in the assertion of additional claims, and other claims may be asserted arising from services provided to patients in the past. It is the opinion of Medical Center management, based on prior experience, that adequate insurance is maintained to cover all significant professional liability losses.

 

10. Transactions with Affiliates

 

The amounts due from affiliates in the accompanying statements of financial position at December 31, 2012 and 2011, include a $1,900,000 loan receivable and accrued interest thereon from Hospital Support, Inc. The loan, which does not have specified repayment terms, bears interest at the prime rate, which approximated 7.75 percent at December 31, 2012 and 2011.

 

11. Temporarily and Permanently Restricted Net Assets

Temporarily restricted net assets are available for the following purposes at December 31:

 

 

 

__________________________________________________________

                                                                                                2012                            2011

                                                                                                _________________________

                                                                                                           (In Thousands)

                                    ___________________________________________________________

Research and education                                   $ 817                           $2,502

Plant replacement and expansion         7,445                            5,017

$8,262_                                   $7,519

Permanently restricted net assets at both December 31, 2012 and 2011 consist of investments to be held in perpetuity and whose income is restricted as to use.

 

12. Other Operating Revenue

 

Other operating revenue consisted of the following for the year ended December 31:

 

____________________________________________________________

                                                                                                2012                            2011

                                                                                                ___________________________

                                                                                                          (In Thousands)

                                    _____________________________________________________________

Government grant income                 $ 1,668                          $ 5,053

Real estate rentals                                2,838                              2,651

Investment income and gains

on sale of investments             1,077                              1,044

Faculty practice and research

overhead                                  5,703                              2,079

Dining room and parking

lot income                                   996                                 958

Grants and contributions                         343                                 499

Other                                                        731                            1,566

$13,356                                    $13,850

13. Concentration of Credit Risk

 

Significant concentrations of patients accounts receivable include 30 percent and 37 percent from government-related programs, 6 percent and 8 percent from Empire Blue Cross and Blue Shield, and 27 percent and 23 percent from Cambridge Health Plans at December 31, 2012 and 2011, respectively.

At December 31, 2012, 95 percent of the Medical Center’s cash and cash equivalents balance was held at one financial institution.

 

14. Fair Value of Financial Instruments

 

The following methods and assumptions were used by the Medical Center in estimating its fair value disclosures for financial instruments: The carrying amount reported in the statements of financial position for cash and cash equivalents approximates its fair value. Short-term investments consist primarily of government and other debt securities. Fair values are based on quoted market prices. Long-term investments consist primarily of money market funds. Fair values are based on quoted market prices. Assets limited as to use consist primarily of government securities. Fair values are based on quoted market prices. Most of the long-term debt of the Medical Center was refinanced during 2006. The carrying value of the Medical Center’s long-term debt at December 31, 2012, approximates its fair value.

 

15. Contingencies

 

The Medical Center is a defendant in various legal actions arising out of the normal course of its operations, the final outcome of which cannot presently be determined. The amounts claimed would be material to the financial position of the Medical Center. Medical Center management is of the opinion that ultimate liability, if any, with respect to all of these matters will not have a material adverse effect on the Medical Center’s financial position.

Approximately 67 percent of the Medical Center’s employees are members of various unions. Of these employees, approximately 70 percent are covered by contracts expiring during 2013.