Rating Agency Update Annual Investor Update Wednesday ... · This presentation may contain...
Transcript of Rating Agency Update Annual Investor Update Wednesday ... · This presentation may contain...
Marshfield Clinic Health System
Rating Agency Update Wednesday, October 5, 2018 Annual Investor Update
Tuesday, January 29, 2019
Disclaimer
This presentation may contain statements and information that could be considered “forward-looking statements” within the meaning of federal securities law. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which are inherently uncertain and outside our control. Forward-looking statements include, among other things, statements regarding our future financial performance, business prospects, future growth and operating strategies, objectives and results. These forward‐looking statements are based on our current plans and expectations as of the date made. Although they are believed to be reasonable, they are subject to a number of known and unknown uncertainties and risks inherent in the operation of health care facilities, including, but not limited to, federal and state regulation of healthcare providers, changes in reimbursement policies of state and federal government and managed care organizations, general economic and capital market conditions and competition in the healthcare industry in our market, that could significantly affect our current plans and expectations and future financial position and results of operations. Investors are cautioned not to unduly rely on such forward‐looking statements. The information provided in this presentation is provided as of January 29, 2019. If you are viewing this presentation after that date, there may have been events that occurred subsequent to such date that would have a material adverse effect on the information that was presented. Marshfield Clinic Health System does not undertake any responsibility to update any information set forth in this presentation. For more information on these and other risk factors, as well as information on Marshfield Clinic Health System and its organization structure, please refer to our most recent bond official statement and other disclosure filings on the Electronic Municipal Market Access (EMMA) website maintained by the Municipal Securities Rulemaking Board.
Marshfield Clinic Health System
Presenters
Gordon Edwards Chief Financial Officer
Larry D. Wiemer II Treasurer & Chief Investment Officer
Discussion Topics
MCHS Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Strategic Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Update on Operating and Financial Results . . . . . . . 20
Summary and Q&A . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Marshfield Clinic Health System
MCHS Overview
Marshfield Clinic Health System
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OUR DRIVING
FORCE
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Marshfield Clinic Health System: Key Points
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• Physician led, large multi-specialty physician group serving Wisconsin for over 100 years
• Clinically-driven leader in rural markets
• Profitable, fully integrated health plan with growing membership
• Demonstrated success with profitably integrating acute care services
• Exceptional quality and patient experience outcomes
• Currently rated A-/stable by both S&P (December 2018) and Fitch (August 2017)
MCHS is an integrated regional health care system, delivering on its promise to create healthy communities through
accessible, affordable, compassionate health care.
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10,000+ Employees
Care Delivery
5 Hospitals
$2.4 Billion Revenue
86 Specialties
Health Plan
50+
Locations in 34 Communities
235,000 Members served by
Security Health Plan
$1.3 Billion Premium Revenue
$270+ Million
Community Benefit
1,200 Medical Providers $1.8 Billion
Care Delivery Revenue
System
- OUR MISSION -
WE ENRICH LIVES Marshfield Clinic Health System
Integrated Health System
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FY 2018 Revenue $2.4 Billion
$1.3 Billion $1.8 Billion
Health Plan Care Delivery
$700 million between entities
100,000+ members in the “Sweet Spot”
(10% increase since 2013)
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Strong Market Presence
Primary service area population of approximately 1.1 million
• Primary Care Market Leader
• Specialty Physician Market Leader
• Acute Care market share Third in Market
• Health Plan market share Market Leader (SHP Core Market)
Care Delivery Service Area (SHP Core Market)
Health Plan Service Area
$2,115.0
$2,198.0
$2,430.0
$2,000
$2,100
$2,200
$2,300
$2,400
$2,500
2016 2017 2018
Total Net Revenue
Significant Revenue Growth
11 Source: FYE 2016 - 2018 Audited consolidated financial statements
(Dollars in 000’s)
2016-2018 Actual Compound Annual Growth Rate (CAGR) of 7.2%
Sources of Revenue
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As System matures, sources of revenue are becoming more diversified
42% 42% 37%
3% 6% 13%
44% 45%
44%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY16 FY17 FY18
Other
Philanthropy/Research
Premium
Acute
Ambulatory
Strategic Priorities
Marshfield Clinic Health System
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Strategic Priorities
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2016 Focus: CMS MSSP Quality Payment Program
Entity Score
Marshfield Clinic 98.5%
Baylor Scott & White 98.4%
Cleveland Clinic 96.3%
Johns Hopkins 92.4%
UCLA 89.9%
Ranked in Top 5% of all participants (#18 out of 432 participants)
Source: https://data.cms.gov
2017 Focus: MACRA Quality Payment Program
Tied for First Place in Country
Metric Score
Quality > 100%
Clinical Practice Improvement 100%
Advancing Care information (f/k/a Meaningful use)
100%
Overall MIPS Score 100%
Exceptional Quality Scores: Care Delivery
Entire System now accredited by The Joint Commission
Exceptional Quality Scores: Security Health Plan
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Security Health Plan is consistently among the nation’s highest-rated plans
Security Health Plan has been rated 4 or better in each category since NCQA ratings began in 2015
4.5 Rating 4.0 Rating 4.0 Rating
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Stewardship: Driving the Future Initiatives
Through fiscal year 2018, implemented initiatives totaling $63.5 million
• Represents 55% of the two year target
• Expect approximately $29.5 million in fiscal year 2019
• Management continues to identify, evaluate and implement additional opportunities
Market Dynamics • MCHS has established a strong market
presence via a comprehensive network of employed physicians, ambulatory services and health plan
• Operating in a predominately rural service area
• Competitive health plan market, no dominant national player
Our Acute Care Strategy • Economics and long-term sustainability in rural
markets requires vertical integration
• Actively integrating acute care within our existing ambulatory network
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Smart Growth: Amplify Integration and Expansion
Currently Operating an integrated campus
Currently providing Oncology and Specialty services
In Development/Under Construction
Affiliation Discussions (not all inclusive)
Key:
Marshfield
Park Falls
Ladysmith Minocqua
Wausau Eau Claire
Neillsville
Rice Lake
Beaver Dam
Stevens Point
(ETA 2020) (Acquired 9/18)
(Acquired 7/17)
(Opened 7/18)
(Acquired 12/18)
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Smart Growth: Health Plan
Year over Year Growth of 8.3%
50,000
100,000
150,000
200,000
250,000
FYE September 2017 FYE September 2018
Government Commercial Other Exchange
2018 Operating and Financial Results
Marshfield Clinic Health System
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2018 In Perspective
We anticipated 2018 to be a difficult year
• Pressure on top line revenue from both payors and value based initiatives
• On boarding and integration of MMC
• Opening a new hospital in Eau Claire
• Significant Information Technology configuration/upgrades/implementation
• On-going disruption with competitors as we execute our strategies
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FY 2018 Actual Targets FY 2017 Actual
Operating Margin (1.5%) 0.6% 1.3%
EBIDA Margin 3.2% 6.5% 5.3%
Off Plan $52 million
2018 more challenging than anticipated • Difficult renewal negotiations with payors • Delayed implementation of key projects • Patient access challenges, reducing volumes on ambulatory business • Tightening labor market • Start-up of Eau Claire hospital • Increased medical claims in Q1 related to ACA uncertainty in late 2017 (adjusted 2018 premiums)
2018 In Perspective
Fiscal Year 2018 Financial Performance: Key Items
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Op Income (000's) Op Margin
12 Months ending Sept 2017 $28.1 1.3%
Driving the Future (net of fees) 27.4
MMC operating results (excluding interest) 16.3
Provider based billing 10.4
Net inflation impacts and other (41.1)
Volume mix (22.8)
Reimbursement reductions (17.8)
Acute Care Electronic Health Record, implementation and training (15.1)
Increased interest on borrowings (12.0)
Eau Claire start-up and losses since opening (10.1)
12 Months ending Sept 2018 ($36.7) (1.5%)
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Additional Actions Taken
• Reduced Capital Expenditures
• Managed Impact of Additional Borrowings
• Added Leadership Resources in Key Areas
Care Delivery Volumes
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FY 2017 FY 2018 % Change
FTE’s (System-wide) 9,325 10,428 11.8%
Physicians and Allied Professionals 1,156 1,197 3.5%
Unique Patients 328,201 324,972 (1.0%)
Patient Encounters (in thousands) 3,459 3,423 (1.0%)
Worked RVU’s (in thousands) 3,736 3,717 (0.5%)
Surgeries at Acute Care Centers 5,061 10,044 98.4%
Surgeries at Ambulatory Surgery Centers 35,042 33,185 (5.3%)
Radiology Examinations 400,648 393,413 (1.8%)
Discharges 5,369 15,466 288.1%
Patient Days 23,622 78,335 231.6%
Emergency Department Visits 20,757 39,612 90.1%
Source: Audited consolidated financial statements, calculated in accordance with the terms of the Master Indenture. MMC results included starting June 30, 2017.
Selected Financial Metrics
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Operating Income Unrestricted Cash/Days Cash on Hand
Debt Service Coverage (MADS) Debt to Capitalization
$35.0 $28.1
($36.0)
1.7% 1.3%
(1.5%)
-1.5%
-0.5%
0.5%
1.5%
2.5%
$(40)
$(30)
$(20)
$(10)
$-
$10
$20
$30
$40
2016 2017 2018
$726.1 $900.7
$940.5 131.7
156.8 144.3
50.0
75.0
100.0
125.0
150.0
175.0
$300
$400
$500
$600
$700
$800
$900
2016 2017 2018
$127.0 $131.0
$140.4
4.9x
2.9x 2.5x
0x
1x
2x
3x
4x
5x
6x
7x
8x
$110
$120
$130
$140
$150
2016 2017 2018
23.2%
41.7% 46.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
2016 2017 2018
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Update: Investment Activities
Restructured Investment portfolios • Aligned individual portfolios with System objectives • Reduced market risk and improved expected long-term returns (from 4.1% to 4.8%)
27% 65% 7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Enterprise Wide Asset Allocation
Equity Fixed Income Real Assets Private Capital
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• Conservative debt structure with 60% long-term committed capital at historically low interest rates
• Variable-rate debt is well diversified in terms of product, credit provider and term
Existing Debt Profile: As of December 31, 2018
Aggregate Debt Service * MADS: $54.9 million
Key Product Type $ millions
Fixed Rate - Public $617.4
Fixed Rate - Private $78.9
Variable Rate - Public $100.0
Variable Rate - Private $223.0
Total $1,019.3
60%
8%
10%
22%
Product Mix
*: Represents cash flow MADS.
Preview: Q1 FY 2019 (Quarter ended December 31, 2018)
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Q1 2019 operating and financial results less than expected • Required disclosure to be posted to MSRB EMMA by February 27, 2019
Headwinds: • Joint Commission delays at MMC – Eau Claire
‐ Resolved effective December 31, 2018. • Health Plan losses • Access Issues
Tailwinds: • MMC enrolled in 340b drug program (effective January 1, 2019) • Transitional Services Agreement at MMC ended (effective January 1, 2019) • Driving the Future Initiatives (ongoing)
Summary & Q&A
Marshfield Clinic Health System
Strong multi-specialty physician practice
Significant market position and brand reputation
Substantial growth opportunities in acute care
services and health plan
Exceptional patient experience and quality outcomes
Significant experience with managing total cost of care
Dynamic, experienced leadership team and
engaged board
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Key Takeaways
Continue to successfully execute on strategic plan
A-/ Stable Rating
from S&P and Fitch