Vanguard Health Systems, Inc. (NYSE: VHS) today announced
financial and operating results for the second fiscal quarter and
six months ended December 31, 2011.
Second Quarter Fiscal 2012 Key
Metrics (all percentage changes compare Q2 FY2012 to Q2
FY2011):
Consolidated:
- Total revenues increased 61.4
percent
- Net income attributable to Vanguard
Health Systems, Inc. stockholders was $12.1 million, or $0.15 per
diluted share, compared to a net loss attributable to Vanguard
Health Systems, Inc. stockholders of $5.0 million, or a loss per
share of $0.11, during the prior year period
- Adjusted EBITDA increased 54.7 percent
to $133.7 million
Same Hospital:
- Net patient service revenues increased
2.5 percent and health plan premium revenues declined 16.1
percent
- Adjusted discharges increased 0.9
percent
- Discharges declined 2.0 percent
Year to Date Fiscal 2012 Key
Metrics (all percentage changes compare six months YTD
FY2012 to six months YTD FY2011):
Consolidated:
- Total revenues increased 64.4
percent
- Net loss attributable to Vanguard
Health Systems, Inc. stockholders was $7.1 million, or $0.10 loss
per share, which included a pre-tax charge of $38.9 million, or
$0.34 per share net of taxes, related to the redemption of
substantially all of our outstanding 10.375% senior discount notes
due 2016 and a pre-tax charge of $12.6 million, or $0.10 per share
net of taxes, related to expenses incurred to complete our
acquisition of Valley Baptist Health System effective September 1,
2011
- Adjusted EBITDA increased 56.3 percent
to $256.5 million
Same Hospital:
- Net patient service revenues increased
2.9 percent and health plan premium revenues declined 10.1
percent
- Adjusted discharges increased 1.8
percent
- Discharges declined 1.7 percent
Discussion of Results
The increase in consolidated total revenues during the second
quarter of fiscal 2012 and during the first six months of fiscal
2012 was primarily attributable to the acquisitions of The Detroit
Medical Center (“DMC”) in January 2011 and Valley Baptist Health
System in September 2011. The increase in same hospital net patient
service revenues during the second quarter of fiscal 2012 was
primarily comprised of a 1.8 percent increase in patient revenue
per adjusted discharge and a 0.9 percent increase in adjusted
discharges. The decrease in health plan premium revenues during the
second quarter of fiscal 2012 resulted from the impact to Phoenix
Health Plan of a combination of capitation rate decreases, program
eligibility cuts and health plan profitability limitations for
certain groups of covered members adopted by the Arizona Health
Care Cost Containment System (“AHCCCS”) since the second quarter of
fiscal 2011.
Net income attributable to Vanguard Health Systems, Inc.
stockholders was $12.1 million, or $0.15 per diluted share, during
the second quarter of fiscal 2012 compared to net loss attributable
to Vanguard Health Systems, Inc. stockholders of $5.0 million, or
$0.11 per share, during the prior year period. During the first six
months of fiscal 2012, net loss attributable to Vanguard Health
Systems, Inc. stockholders was $7.1 million, or $0.10 per share,
compared to $3.8 million, or $0.09 per share, during the prior year
period. Interest expense for the second quarter of fiscal 2012 was
negatively impacted by $1.7 million ($1.0 million or $0.01 per
diluted share, net of taxes) due to the delayed timing of some of
our construction projects and the resulting impact on capitalized
interest. During the second quarter of fiscal 2012, we also made
modifications to our stock compensation estimates that resulted in
our stock compensation being negatively impacted by approximately
$2.0 million ($1.2 million or $0.02 per diluted share, net of
taxes). Adjusted EBITDA increased 54.7 percent to $133.7 million
and 56.3 percent to $256.5 million, respectively, during the second
quarter of fiscal 2012 and during the first six months of fiscal
2012. 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
ended December 31, 2010 and 2011 is included in this release.
Due to the significant acquisitions we made during fiscal 2011
and during the first six months of fiscal 2012, most cost and
expense line items are not comparable on a period over period
basis. Same hospital uncompensated care as a percentage of net
patient revenues (prior to the uncompensated care deductions)
increased from 15.9 percent during the second quarter of fiscal
2011 to 20.0 percent during the second quarter of fiscal 2012 as a
result of an increase in uninsured discharges as a percentage of
total discharges and price increases. During the second quarter of
fiscal 2012, we recognized $22.6 million of Medicare and Medicaid
electronic health record incentive payments (included in the costs
and expenses section of our statement of operations), $7.2 million
of which was included in revenues during the first quarter of
fiscal 2012 and reclassified during the current quarter.
Cash flows from operating activities decreased $120.9 million
during the first six months of fiscal 2012 compared to the prior
year period, primarily due to working capital increases of $205.5
million, including a $12.3 million increase in interest and income
tax payments, the payment of fiscal 2011 incentive compensation to
our employees and significant payment delays from certain
governmental programs that have negatively impacted our net
accounts receivable days. Capital expenditures increased 72.8
percent to $137.2 million during the first six months of fiscal
2012 compared to the prior year period. As of December 31, 2011,
our cash balance was $178.7 million, our outstanding debt was
$2,344.4 million and we had $225.6 million of borrowing capacity
under our revolving credit facility. In February 2012, we expect to
place approximately $42.0 million of cash into a restricted escrow
account to fund certain unspent DMC capital commitments related to
calendar year 2011 as required by the DMC asset purchase agreement.
Per the terms of the escrow agreement, this restricted cash will be
distributed by the escrow agent for capital expenditures related to
our 2011 capital commitments incurred subsequent to January 1, 2012
until the escrow is depleted.
Outlook for Fiscal Year
2012
We are confirming our previously issued fiscal year 2012 outlook
for ranges of projected Adjusted EBITDA ($520 million to $545
million); projected net income attributable to Vanguard Health
Systems, Inc. stockholders, excluding debt extinguishment costs and
acquisition related expenses ($56.3 million to $69.1 million); and
projected diluted earnings per share attributable to Vanguard
Health Systems, Inc. stockholders, excluding debt extinguishment
costs and acquisition related expenses ($0.71 to $0.86 per diluted
share). We are adjusting our projected fiscal year 2012 capital
expenditures to a range of $335 million to $365 million.
Earnings Conference Call
We will host a conference call at 11:00 am EST on February 1,
2012. All interested parties are invited to access a live webcast
of the conference call on Vanguard’s website at
http://investor.vanguardhealth.com or at
www.earnings.com. If you are unable to participate during
the live webcast, the webcast will be available on a replay basis
at http://investor.vanguardhealth.com 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 healthcare delivery
networks in urban markets.
Cautionary Statement about Preliminary Results and Other
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 the safe harbors created thereby. Forward-looking
statements are those statements that are based upon management’s
current plans and expectations as opposed to historical and current
facts and are often identified in this release by use of words
including but not limited to “may,” “believe,” “will,” “project,”
“expect,” “estimate,” “anticipate,” and “plan.” 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 expressed in any
forward-looking statements.
These factors, risks and uncertainties include, but are not
limited to, 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 liability related to
disclosures of relationships between physicians and our hospitals;
post-payment claims reviews by governmental agencies that could
result in additional costs to us; our ability to grow our business
and successfully implement our business strategies; our ability to
successfully integrate DMC, Valley Baptist Health System and
hospitals 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
healthcare industry; governmental regulation of the healthcare
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
including disproportionate share payments, indirect medical
education/graduate medical education payments and other similar
payments would adversely impact our liquidity, results of
operations and financial condition; 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 healthcare
professionals, including physicians and nurses; the currently
unknown effect on us of the major federal healthcare reforms
enacted by Congress in March 2010 or other potential additional
federal or state healthcare reforms; potential adverse impact of
known and unknown governmental investigations and audits; our
failure to adequately enhance our facilities with technologically
advanced equipment could adversely affect our revenues and market
position; 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 and control costs of our
managed healthcare plans; failure of AHCCCS to renew its contract
with, or award future contracts to, Phoenix Health Plan would
materially affect our business, profitability, financial condition
and results of operations; Phoenix Health Plan’s ability to comply
with the terms of its contract with AHCCCS, as noncompliance could
subject it to fines, penalties or termination of its contract,
which would materially affect our business, profitability,
financial condition and results of operations; our inability to
manage health plan claims expense within our health plans could
reduce our profitability and adversely impact our liquidity and
financial position; reductions in the enrollment of our health
plans could have an adverse effect on our business and
profitability; changes in general economic conditions nationally
and regionally in the markets served by us; 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; increased
compliance costs from further government regulation of the
healthcare industry and our failure to comply, or allegations of
our failure to comply, with applicable laws and regulations; the
geographic concentration of our operations; technological and
pharmaceutical improvements that increase the cost of providing, or
reduce the demand for, healthcare services and shift demand for
inpatient services to outpatient settings; a failure of our
information systems would adversely impact our ability to manage
our operations; 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; volatility of materials and
labor costs for, or state efforts to regulate, potential
construction projects that may be necessary for future growth;
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
those factors, risks and uncertainties detailed in our filings from
time to time with the Securities and Exchange Commission,
including, among others, our Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q.
Although we believe that the assumptions underlying the
forward-looking statements contained in this press release are
reasonable, any of these assumptions could prove to be inaccurate,
and, therefore, there can be no assurance that the forward-looking
statements included in this press release will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, 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 results of operations and financial
condition. We undertake no obligation to publicly release any
revisions to any forward-looking statements contained herein to
reflect events and circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
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,
2010 2011
Patient service revenues
$ 748.8 82.3 % $ 1,420.9 96.8 % Less: Provision for
doubtful accounts (51.2 ) (5.6 ) (141.5 ) (9.6 ) Patient service
revenues, net 697.6 76.7 1,279.4 87.2 Premium revenues 211.8
23.3 188.8 12.8 Total revenues 909.4 100.0
1,468.2 100.0 Costs and expenses: Salaries and benefits (includes
stock compensation) 375.5 41.3 702.4 47.8 Health plan claims
expense 164.8 18.1 147.3 10.0 Supplies 133.5 14.7 227.9 15.5
Purchased services 62.5 6.9 133.4 9.1 Non-income taxes 17.0 1.9
34.1 2.3 Rents and leases 11.7 1.3 18.7 1.3 Other operating
expenses 59.7 6.6 97.2 6.6 Medicare and Medicaid EHR incentive
payments - - (22.6 ) (1.5 ) Depreciation and amortization 38.6 4.2
65.8 4.5 Interest, net 35.1 3.8 43.2 3.0 Acquisition related
expenses 1.3 0.1 0.4 0.1 Other 1.9 0.2 (1.8 ) (0.2 )
Total costs and expenses 901.6 99.1 1,446.0 98.5
Income from continuing operations before
income taxes
7.8 0.9 22.2 1.5 Income tax expense (9.7 ) (1.1 ) (9.0 ) (0.6 )
Income (loss) from continuing operations (1.9 ) (0.2 ) 13.2 0.9
Loss from discontinued operations, net of taxes (2.3 ) (0.3 ) (0.3
) - Net income (loss) (4.2 ) (0.5 ) 12.9 0.9 Less: Net
income attributable to non-controlling interests (0.8 ) (0.1 ) (0.8
) (0.1 )
Net income (loss) attributable to Vanguard
Health Systems, Inc. stockholders
$ (5.0 ) (0.6 )% $ 12.1 0.8 %
Per share
data:
Basic: Continuing operations $ (0.06 ) $ 0.17 Discontinued
operations (0.05 ) (0.01 )
Net income (loss) attributable to Vanguard
Health Systems, Inc. stockholders
$ (0.11 ) $ 0.16 Diluted: Continuing operations $ (0.06 ) $
0.16 Discontinued operations (0.05 ) (0.01 )
Net income (loss) attributable to Vanguard
Health Systems, Inc. stockholders
$ (0.11 ) $ 0.15 Weighted average shares outstanding (in
thousands): Basic 44,635 75,325 Diluted 44,635
78,732
VANGUARD HEALTH SYSTEMS, INC. Condensed Consolidated
Statements of Operations (Unaudited) (In millions, except
share and per share amounts) Six months ended
December 31, 2010 2011
Patient service revenues
$ 1,442.1 81.4 % $ 2,779.6 95.5 % Less: Provision for
doubtful accounts (103.0 ) (5.8 ) (267.7 ) (9.2 ) Patient service
revenues, net 1,339.1 75.6 2,511.9 86.3 Premium revenues 432.4
24.4 399.8 13.7 Total revenues 1,771.5
100.0 2,911.7 100.0 Costs and expenses: Salaries and benefits
(includes stock compensation) 730.3 41.2 1,367.4 46.9 Health plan
claims expense 338.9 19.1 312.0 10.7 Supplies 254.5 14.3 441.5 15.2
Purchased services 113.5 6.4 260.4 8.9 Non-income taxes 33.2 1.9
68.6 2.3 Rents and leases 22.7 1.3 36.7 1.3 Other operating
expenses 117.2 6.6 195.8 6.7 Medicare and Medicaid EHR incentive
payments - - (22.6 ) (0.7 ) Depreciation and amortization 75.8 4.3
128.4 4.4 Interest, net 69.9 3.9 89.0 3.1 Acquisition related
expenses 5.0 0.3 12.6 0.4 Debt extinguishment costs - 0.1 38.9 1.3
Other 3.0 0.2 (4.2 ) (0.1 ) Total costs and expenses
1,764.0 99.6 2,924.5 100.4
Income (loss) from continuing operations
before income taxes
7.5 0.4 (12.8 ) (0.4 ) Income tax benefit (expense) (7.3 ) (0.4 )
4.6 0.1 Income (loss) from continuing operations 0.2
- (8.2 ) (0.3 ) Loss from discontinued operations, net of taxes
(2.2 ) (0.1 ) (0.4 ) - Net loss (2.0 ) (0.1 ) (8.6 ) (0.3 )
Less: Net loss (income) attributable to non-controlling interests
(1.8 ) (0.1 ) 1.5 0.1
Net loss attributable to Vanguard Health
Systems, Inc. stockholders
$ (3.8 ) (0.2 )% $ (7.1 ) (0.2 )%
Per share
data:
Basic: Continuing operations $ (0.04 ) $ (0.10 ) Discontinued
operations (0.05 ) 0.00
Net loss attributable to Vanguard Health
Systems, Inc. stockholders
$ (0.09 ) $ (0.10 ) Diluted: Continuing operations $ (0.04 ) $
(0.10 ) Discontinued operations (0.05 ) 0.00
Net loss attributable to Vanguard Health
Systems, Inc. stockholders
$ (0.09 ) $ (0.10 ) Weighted average shares outstanding (in
thousands): Basic 44,635 75,090 Diluted 44,635
75,090
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, 2010 2011 2010 2011
Net income (loss) attributable to Vanguard
Health Systems, Inc. stockholders
$
(5.0
)
$ 12.1 $ (3.8 ) $ (7.1 ) Interest, net 35.1 43.2 69.9 89.0 Income
tax expense (benefit) 9.7 9.0 7.3 (4.6 ) Depreciation and
amortization 38.6 65.8 75.8 128.4 Non-controlling interests 0.8 0.8
1.8 (1.5 ) Loss (gain) on disposal of assets 0.1 0.4 0.1 (0.8 )
Equity method income (0.2 ) (0.6 ) (0.5 ) (0.7 ) Stock compensation
1.7 3.9 2.9 4.6 Monitoring fees and expenses 1.1 - 2.5 -
Acquisition related expenses 1.3 0.4 5.0 12.6 Debt extinguishment
costs - - - 38.9 Impairment and restructuring charges 0.9 - 0.9
(0.1 ) Pension credits - (1.6 ) - (2.6 ) Discontinued operations,
net of taxes 2.3 0.3 2.2 0.4 Adjusted
EBITDA (1) $ 86.4 $ 133.7 $ 164.1 $ 256.5
____________________
(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, stock
compensation, monitoring fees and expenses, 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
(In millions)
Recast
(Unaudited)
June 30, December 31, ASSETS 2011
2011 Current assets: Cash and cash equivalents $ 936.6 $
178.7 Restricted cash 2.3 8.8
Accounts receivable, net of allowance for
doubtful accounts of approximately $205.0 and
$306.0, respectively
484.4 576.9 Inventories 83.9 92.9 Deferred tax assets 92.9 79.1
Prepaid expenses and other current assets 157.9 252.4
Total current assets 1,758.0 1,188.8 Property, plant and equipment,
net of accumulated depreciation 1,830.5 2,050.0 Goodwill 757.1
768.4 Intangible assets, net of accumulated amortization 94.0 84.3
Deferred tax assets, noncurrent 27.5 50.0 Investments in securities
63.3 49.8 Other assets 65.8 84.3 Total assets $
4,596.2 $ 4,275.6
LIABILITIES AND
EQUITY Current liabilities: Accounts payable $ 314.3 $ 361.2
Accrued salaries and benefits 248.9 198.9 Accrued health plan
claims and settlements 114.9 119.0 Accrued interest 62.3 61.1 Other
accrued expenses and current liabilities 221.6 207.2 Current
maturities of long-term debt 461.8 12.4 Total current
liabilities 1,423.8 959.8 Professional and general liability and
workers compensation reserves 289.7 299.3 Pension benefit
obligation 188.0 171.3 Other liabilities 125.8 158.5 Long-term
debt, less current maturities 2,325.8 2,332.0 Commitments and
contingencies Redeemable non-controlling interests -
51.8
Equity: Vanguard Health Systems, Inc. stockholders’ equity: Common
stock 0.7 0.8 Additional paid-in capital 330.5
399.2
Accumulated other comprehensive income 20.6 19.7 Retained deficit
(116.8 ) (123.9 ) Total Vanguard Health Systems, Inc. stockholders’
equity 235.0
295.8
Non-controlling interests 8.1 7.1 Total equity 243.1
302.9
Total liabilities and equity $ 4,596.2 $ 4,275.6
VANGUARD
HEALTH SYSTEMS, INC. Condensed Consolidated Statements of
Cash Flows (Unaudited) (In millions)
Six months ended December 31,
Operating activities: 2010 2011 Net
loss $ (2.0 ) $ (8.6 ) Adjustments to reconcile net loss to net
cash provided by operating activities: Loss from discontinued
operations 2.2 0.4 Depreciation and amortization 75.8 128.4
Amortization of loan costs and accretion of principal on notes 3.9
8.4 Debt extinguishment costs - 38.9 Acquisition related expenses
5.0 12.6 Stock compensation 2.9 4.6 Deferred income taxes 5.7 (6.2
) Other 1.1 (1.1 ) Changes in operating assets and liabilities, net
of the impact of acquisitions 34.7 (170.8 ) Net cash
provided by operating activities – continuing operations 129.3 6.6
Net cash used in operating activities – discontinued operations
(2.2 ) (0.4 ) Net cash provided by operating activities 127.1 6.2
Investing activities:
Acquisitions and related expenses, net of
cash acquired
(457.9 ) (208.8 ) Capital expenditures (79.4 ) (137.2 ) Proceeds
from sales of investments in securities 7.0 42.3 Purchases of
investments in securities - (30.4 ) Other (1.0 ) (0.7 ) Net cash
used in investing activities (531.3 ) (334.8 )
Financing
activities: Payments of long-term debt and capital leases (4.1
) (460.7 ) Proceeds from debt borrowings 216.6 - Payments of
refinancing costs and fees (5.6 ) - Proceeds from the issuance of
common stock - 67.5 Payments of IPO costs - (6.9 ) Payments of
tender premiums on note redemptions - (27.6 ) Distributions paid to
non-controlling interests and other (2.0 ) (1.6 ) Net cash provided
by (used in) financing activities 204.9 (429.3 ) Net
decrease in cash and cash equivalents (199.3 ) (757.9 )
Cash and cash equivalents, beginning of
period
257.6 936.6
Cash and cash equivalents, end of
period
$ 58.3 $ 178.7 Net cash paid for interest $
69.6 $ 81.0 Net cash paid (received) for income taxes
$ (0.3 ) $ 0.6
VANGUARD HEALTH SYSTEMS, INC. Segment Information
(Unaudited) (In millions)
Quarter ended December 31, 2010 Acute
Care % of Health % of Services
Revenues Plans Revenues Eliminations
Consolidated Patient service revenues, net(1) $ 708.6 100.0
% $ - - % $ (11.0 ) $ 697.6 Premium revenues - -
211.8 100.0 - 211.8 Total revenues
708.6 100.0 211.8 100.0 (11.0 ) 909.4
Salaries and benefits (excludes
stock compensation)
365.5 51.6 8.3 3.9 - 373.8 Health plan claims expense(1) - - 175.8
83.0 (11.0 ) 164.8 Supplies 133.4 18.8 0.1 0.1 - 133.5 Other
operating expenses 140.7 19.9 10.2 4.8
- 150.9 Segment EBITDA(2) 69.0 9.7 17.4 8.2 - 86.4
Less: Interest, net 36.0 5.3 (0.9 ) (0.4 ) - 35.1
Depreciation and amortization
37.5 5.3 1.1 0.5 - 38.6 Equity method income (0.3 ) - - - - (0.3 )
Stock compensation 1.7 0.1 - - - 1.7 Loss on disposal of assets 0.1
- - - - 0.1 Realized loss on investments 0.1 - - - - 0.1 Monitoring
fees and expenses 1.1 0.1 - - - 1.1 Acquisition related expenses
1.3 0.1 - - - 1.3
Impairment and
restructuring charges
0.9 0.1 - - - 0.9
Income (loss) from
continuing operations before income taxes
$ (9.4 ) (1.3 )% $ 17.2 8.1 % $ - $ 7.8
____________________
(1) We eliminate in consolidation those
patient service revenues earned by our healthcare 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, stock compensation, gain or loss on disposal
of assets, realized gains or losses on investments, monitoring fees
and expenses, acquisition related expenses, debt extinguishment
costs, impairment and restructuring charges and pension expense
(credits). Management uses Segment EBITDA to measure 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 about the financial
performance of our segments to investors, lenders, financial
analysts and rating agencies. 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, 2011
Acute Care % of Health % of
Services Revenues Plans Revenues
Eliminations Consolidated Patient service revenues,
net(1) $ 1,289.9 100.0 % $ - - % $ (10.5 ) $ 1,279.4 Premium
revenues - - 188.8 100.0 - 188.8
Total revenues 1,289.9 100.0 188.8 100.0 (10.5 ) 1,468.2
Salaries and benefits (excludes
stock compensation)
689.2 53.4 9.3 4.9 - 698.5 Health plan claims expense(1) - - 157.8
83.6 (10.5 ) 147.3 Supplies 227.9 17.7 - - - 227.9 Other operating
expenses 271.2 21.0 12.2 6.4 - 283.4 Medicare and Medicaid EHR
incentive payments (22.6 ) (1.7 ) - - - (22.6
) Segment EBITDA(2) 124.2 9.6 9.5 5.1 - 133.7 Less: Interest, net
43.8 3.4 (0.6 ) (0.3 ) - 43.2 Depreciation and amortization 64.6
5.0 1.2 0.7 - 65.8 Equity method income (0.6 ) - - - - (0.6 ) Stock
compensation 3.9 0.3 - - - 3.9 Loss on disposal of assets 0.4 - - -
- 0.4 Acquisition related expenses 0.4 - - - - 0.4 Pension credits
(1.6 ) (0.1 ) - - - (1.6 )
Income from continuing operations
before income taxes
$ 13.3 1.0 % $ 8.9 4.7 % $ - $ 22.2
____________________
(1) We eliminate in consolidation those
patient service revenues earned by our healthcare 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, stock compensation, gain or loss on disposal
of assets, realized gains or losses on investments, monitoring fees
and expenses, acquisition related expenses, debt extinguishment
costs, impairment and restructuring charges and pension expense
(credits). Management uses Segment EBITDA to measure 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 about the financial
performance of our segments to investors, lenders, financial
analysts and rating agencies. 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, 2010 Acute Care
% of Health % of Services
Revenues Plans Revenues Eliminations
Consolidated Patient service revenues, net(1) $ 1,360.9
100.0 % $ - - % $ (21.8 ) $ 1,339.1 Premium revenues - -
432.4 100.0 - 432.4 Total
revenues 1,360.9 100.0 432.4 100.0 (21.8 ) 1,771.5
Salaries and benefits (excludes
stock compensation)
710.9 52.3 16.5 3.8 - 727.4 Health plan claims expense(1) - - 360.7
83.4 (21.8 ) 338.9 Supplies 254.4 18.7 0.1 - - 254.5 Other
operating expenses 265.9 19.5 20.7 4.8
- 286.6 Segment EBITDA(2) 129.7 9.5 34.4 8.0 - 164.1
Less: Interest, net 71.1 5.2 (1.2 ) (0.2 ) - 69.9 Depreciation and
amortization 73.6 5.4 2.2 0.5 - 75.8 Equity method income (0.6 )
(0.1 ) - - - (0.6 ) Stock compensation 2.9 0.2 - - - 2.9 Loss on
disposal of assets 0.1 - - - - 0.1 Realized loss on investments 0.1
- - - - 0.1 Monitoring fees and expenses 2.5 0.2 - - - 2.5
Acquisition related expenses 5.0 0.4 - - - 5.0
Impairment and
restructuring charges
0.9 0.1 - - - 0.9
Income (loss) from
continuing operations before income taxes
$ (25.9 ) (1.9 )% $ 33.4 7.7 % $ - $ 7.5
____________________
(1) We eliminate in consolidation those
patient service revenues earned by our healthcare 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, stock compensation, gain or loss on disposal
of assets, realized gains or losses on investments, monitoring fees
and expenses, acquisition related expenses, debt extinguishment
costs, impairment and restructuring charges and pension expense
(credits). Management uses Segment EBITDA to measure 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 about the financial
performance of our segments to investors, lenders, financial
analysts and rating agencies. 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 revenues(1) $ 2,531.0 100.0 % $
- - % $ (19.1 ) $ 2,511.9 Premium revenues - - 399.8
100.0 - 399.8 Total revenues 2,531.0
100.0 399.8 100.0 (19.1 ) 2,911.7
Salaries and benefits (excludes
stock compensation)
1,344.5 53.1 18.3 4.6 - 1,362.8 Health plan claims expense(1) - -
331.1 82.8 (19.1 ) 312.0 Supplies 441.4 17.4 0.1 - - 441.5 Other
operating expenses 538.6 21.3 22.9 5.7 - 561.5
Medicare and Medicaid EHR
incentive payments
(22.6 ) (0.9 ) - - - (22.6 ) Segment EBITDA(2)
229.1 9.1 27.4 6.9 - 256.5 Less: Interest, net 89.9 3.6 (0.9 ) (0.2
) - 89.0 Depreciation and amortization 126.1 5.0 2.3 0.6 - 128.4
Equity method income (0.7 ) - - - - (0.7 ) Stock compensation 4.6
0.2 - - - 4.6 Gain on disposal of assets (0.8 ) (0.1 ) - - - (0.8 )
Acquisition related expenses 12.6 0.5 - - - 12.6 Debt
extinguishment costs 38.9 1.5 - - - 38.9
Impairment and
restructuring charges
(0.1 ) - - - - (0.1 ) Pension credits (2.6 ) (0.1 ) - -
- (2.6 )
Income (loss) from
continuing operations before income taxes
$ (38.8 ) (1.5 )% $ 26.0 6.5 % $ - $ (12.8 )
____________________
(1) We eliminate in consolidation those
patient service revenues earned by our healthcare 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, stock compensation, gain or loss on disposal
of assets, realized gains or losses on investments, monitoring fees
and expenses, acquisition related expenses, debt extinguishment
costs, impairment and restructuring charges and pension expense
(credits). Management uses Segment EBITDA to measure 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 about the financial
performance of our segments to investors, lenders, financial
analysts and rating agencies. 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:
December 31, 2010 2011 % Change Number
of hospitals at end of period 18 28 Licensed beds at end of period
4,534 7,064 Discharges 46,803 71,961 53.8 % Adjusted discharges
83,330 129,089 54.9 Average length of stay 4.19 4.39 4.8 Patient
days 195,929 316,075 61.3 Adjusted patient days 348,841 566,997
62.5 Patient revenue per adjusted discharge $
8,151
$
9,451 15.9 Inpatient surgeries 9,826 16,910 72.1 Outpatient
surgeries 19,488 31,876 63.6 Emergency room visits 178,198 299,075
67.8 Health plan member lives 242,700 249,500 2.8 Health plan
claims expense percentage 77.8 % 78.0 %
Uncompensated care as a percent of net
patient revenues (prior to these uncompensated care
adjustments)
15.9 % 18.8
%
Net patient revenue payer mix: Medicare 27.6 % 28.2
%
Medicaid 8.9 13.8 Managed Medicare 15.3 11.1
Managed Medicaid 9.0 8.7 Managed care 37.0 34.5 Commercial 1.2 2.3
Self-pay 1.0 1.4 Total 100.0 % 100.0
%
Discharges by payer: Medicare 28.2 % 29.5
%
Medicaid 10.6 11.8 Managed Medicare 16.2 12.1 Managed Medicaid 14.4
16.4 Managed care 24.8 22.8 Commercial 0.5 0.5 Self-pay 5.3
6.9 Total 100.0 % 100.0
%
VANGUARD HEALTH
SYSTEMS, INC. Selected Operating Statistics
(Unaudited) (continued) Quarter
ended
SAME
HOSPITAL:
December 31, 2010 2011 % Change Number
of hospitals at end of period 18 18 Licensed beds at end of period
4,534 4,464 Total revenues, including health plan revenues (in
millions) $
909.3
$
892.3 (1.9 )% Net patient service revenues (in millions) $
697.5
$
714.6 2.5 Discharges
46,803
45,853 (2.0 ) Adjusted discharges 83,330 84,083 0.9 Average length
of stay 4.19 4.05 (3.3 ) Patient days 195,929 185,783 (5.2 )
Adjusted patient days 348,841 340,680 (2.3 ) Patient revenue per
adjusted discharge $
8,151
$
8,297 1.8 Inpatient surgeries
9,826
9,841 0.2 Outpatient surgeries 19,488 19,176 (1.6 ) Emergency room
visits 178,198 185,634 4.2 Health plan member lives 242,700 237,100
(2.3 )
Uncompensated care as a percentage of net
patient revenues (prior to these uncompensated care
deductions)
15.9 % 20.0 % Net patient revenue payer mix (1): Medicare
27.6 % 27.4 % Medicaid 8.9 10.4 Managed Medicare 15.3 15.9 Managed
Medicaid 9.0 8.4 Managed care 37.0 36.1 Commercial 1.2 1.6 Self-pay
1.0 0.2 Total 100.0 % 100.0 %
____________________
(1) Net patient revenue payer mix as
presented includes the impact of the reclassification of the
provision for doubtful accounts to a revenue deduction instead of
an operating expense.
Discharges by payer: Medicare 28.2 % 28.3 % Medicaid 10.6
9.7 Managed Medicare 16.2 16.1 Managed Medicaid 14.4 14.2 Managed
care 24.8 25.1 Commercial 0.5 0.5 Self-pay 5.3 6.1
Total 100.0 % 100.0 % Note: Same hospital results include
those facilities that we owned for the entirety of both quarters of
the respective years.
VANGUARD HEALTH SYSTEMS, INC. Selected Operating
Statistics (Unaudited) (continued)
Six Months Ended
CONSOLIDATED:
December 31, 2010 2011 % Change Number
of hospitals at end of period 18 28 Licensed beds at end of period
4,534 7,064 Discharges 91,780 140,122 52.7 % Adjusted discharges
164,176 254,345 54.9 Average length of stay 4.17 4.37 4.9 Patient
days 382,377 612,154 60.1 Adjusted patient days 683,996 1,111,161
62.5 Patient revenue per adjusted discharge $ 7,952
$
9,397 18.2 Inpatient surgeries 19,583 32,897 68.4 Outpatient
surgeries 38,891 61,852 59.0 Emergency room visits 351,363 591,914
68.5 Health plan claims expense percentage 78.4 % 78.0 %
Uncompensated care as a percent of net
patient revenues (prior to these uncompensated care
adjustments)
16.2 % 18.4 % Net patient revenue payer mix: Medicare 27.4 %
27.4 % Medicaid 8.5 14.3 Managed Medicare 15.6 10.7 Managed
Medicaid 9.7 9.6 Managed care 37.0 34.8 Commercial 1.1 1.9 Self-pay
0.7 1.3 Total 100.0 % 100.0 % Discharges by
payer: Medicare 27.9 % 28.9 % Medicaid 10.4 11.2 Managed Medicare
15.7 12.2 Managed Medicaid 14.7 17.1 Managed care 25.3 23.0
Commercial 0.5 0.5 Self-pay 5.5 7.1 Total 100.0 %
100.0 %
VANGUARD HEALTH SYSTEMS, INC. Selected Operating
Statistics (Unaudited) (continued)
Six Months Ended
SAME
HOSPITAL:
December 31, 2010 2011 % Change Number
of hospitals at end of period 15 15 Licensed beds at end of period
4,017 3,947 Total revenues, including health plan revenues (in
millions) $
1,639.3
$
1,630.4 (0.5 )% Net patient service revenues (in millions) $
1,206.9
$
1,241.7 2.9 Discharges 83,869 82,409 (1.7 ) Adjusted discharges
150,342 153,098 1.8 Average length of stay 4.13 4.01 (2.9 ) Patient
days 346,473 330,090 (4.7 ) Adjusted patient days 621,081 613,235
(1.3 ) Patient revenue per adjusted discharge $
7,849
$
7,934 1.1 Inpatient surgeries 17,746 17,560 (1.0 ) Outpatient
surgeries 36,253 35,273 (2.7 ) Emergency room visits 320,935
336,728 4.9
Uncompensated care as a percentage of net
patient revenues (prior to these uncompensated care
deductions)
16.3 % 20.4 % Net patient revenue payer mix (1): Medicare
26.7 % 25.7 % Medicaid 7.7 8.5 Managed Medicare 16.2 16.7 Managed
Medicaid 10.1 9.2 Managed care 38.1 38.4 Commercial 1.1 1.4
Self-pay 0.1 0.1 Total 100.0 % 100.0 %
____________________
(1) Net patient revenue payer mix as
presented includes the impact of the reclassification of the
provision for doubtful accounts to a revenue deduction instead of
an operating expense.
Discharges by payer: Medicare 27.5 % 26.8 % Medicaid 8.8 8.1
Managed Medicare 16.3 17.3 Managed Medicaid 15.3 15.2 Managed care
26.8 25.9 Commercial 0.4 0.5 Self-pay 4.9 6.2 Total
100.0 % 100.0 % Note: Same hospital results include those
facilities that we owned for the entirety of both year-to-date
periods.
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