Hello,

I am looking to double check my calculation. Only 3 ratios - please show all the calculations. Need only 2010 -see attached for Financial statements:

Days in Accounts Receivable

Days Cash on Hand

Equity Ratio

MIDDLESEX HOSPITAL Financial Statements September 30, 2011 and 2010 (With Independent Auditors' Report Thereon) MIDDLESEX HOSPITAL Financial Statements September 30, 2011 and 2010 Table of Contents Page Independent Auditors' Report 1 Balance Sheets 2 Statements of Operations 3 Statements of Changes in Net Assets 4 Statements of Cash Flows 5 Notes to Financial Statements 6 KPMG LLP One Financial Plaza 755 Main Street Hartford, CT 06103 Independent Auditors' Report The Board of Directors Middlesex Hospital: We have audited the accompanying balance sheets of Middlesex Hospital (the Hospital) as of September 30, 2011 and 2010, and the related statements of operations, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Hospital's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hospital's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by 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 Middlesex Hospital as of September 30, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. January 23, 2012 KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (\"KPMG International\"), a Swiss entity. MIDDLESEX HOSPITAL Balance Sheets September 30, 2011 and 2010 (In thousands) Assets 2011 Current assets: Cash and cash equivalents Short-term investments (note 5) Patient accounts receivable, less reserve for uncollectible amounts of $11,945 and $9,808 in 2011 and 2010, respectively Estimated third-party payor settlements Prepaid and other Current portion of investments limited as to use (note 5) $ 2010 56,459 10,647 50,099 27,573 42,961 6,317 4,082 38,248 334 3,871 4,213 120,466 124,338 Investments limited as to use (note 5) 102,404 102,049 Other assets: Due from related parties (note 14) Other 110 4,904 908 6,295 5,014 7,203 174,742 158,718 $ 402,626 392,308 $ 3,123 18,782 29,606 207 2,166 7,168 65 2,827 12,669 27,456 2,946 6,360 3,889 61,117 56,147 66,531 5,632 117,232 14,042 69,102 5,540 103,987 12,722 203,437 191,351 Net assets: Unrestricted Temporarily restricted (notes 11 and 12) Permanently restricted (notes 11 and 12) 124,933 6,259 6,880 131,224 6,782 6,804 Total net assets 138,072 144,810 402,626 392,308 Total current assets Total other assets Property and equipment, net (note 6) Total assets Liabilities and Net Assets Current liabilities: Current portion of long-term debt (note 7) Accounts payable Accrued payroll and related liabilities Estimated third-party payor settlements Other accrued liabilities Current portion of estimated self-insurance liability (note 10) Current portion of accrued retirement liabilities (note 8) Total current liabilities Long-term liabilities: Long-term debt, net of current portion (note 7) Estimated self-insurance liability, net of current portion (note 10) Accrued retirement liabilities, net of current portion (note 8) Other Total long-term liabilities Commitments and contingencies (notes 2, 3, 6, 7, 8, 9 and 10) Total liabilities and net assets $ See accompanying notes to financial statements. 2 MIDDLESEX HOSPITAL Statements of Operations Years ended September 30, 2011 and 2010 (In thousands) 2011 2010 336,113 9,544 326,682 8,003 345,657 334,685 155,569 42,527 23,514 33,144 21,737 149,974 36,419 22,116 31,046 21,232 13,571 3,242 35,212 11,858 3,719 36,158 Total operating expenses 328,516 312,522 Income from operations 17,141 22,163 471 4,986 (874) 912 (1,117) 491 3,799 (861) (650) 4,378 2,779 21,519 24,942 Unrestricted revenues: Net patient service revenue (notes 2 and 3) Other revenue (note 4) $ Total unrestricted revenues Operating expenses: Salaries and wages Fringe benefits Purchased services Supplies Depreciation and amortization Provision for bad debts, net of recoveries of $3,423 and $3,665 in 2011 and 2010, respectively Interest Other operating expenses Other income (expense): Unrestricted gifts and bequests Net investment income Other nonoperating expenses Equity in joint venture income (loss) Loss from extinguishment of debt (note 7) Total other income, net Excess of revenues over expenses $ See accompanying notes to financial statements. 3 MIDDLESEX HOSPITAL Statements of Changes in Net Assets Years ended September 30, 2011 and 2010 (In thousands) 2011 Unrestricted net assets: Excess of revenues over expenses Change in net unrealized (losses) gains on other than trading securities Change in accumulated pension charges to unrestricted net assets (note 8) Transfer to parent Net assets released from restrictions for purchase of property and equipment $ Change in unrestricted net assets Temporarily restricted net assets: Contributions Net realized investment gains Change in net unrealized (losses) gains Net assets released from restrictions for purchase of property and equipment Expenditures for intended purposes Change in temporarily restricted net assets Permanently restricted net assets: Contributions Net realized investment (losses) gains Change in net unrealized gains Change in permanently restricted net assets Change in net assets Net assets, beginning of year Net assets, end of year $ See accompanying notes to financial statements. 4 2010 21,519 24,942 (5,780) 3,307 (19,038) (3,398) (20,229) (2,466) 406 754 (6,291) 6,308 1,037 267 (334) 929 206 362 (406) (1,087) (754) (567) (523) 176 85 (9) 208 1 7 76 216 (6,738) 6,700 144,810 138,110 138,072 144,810 MIDDLESEX HOSPITAL Statements of Cash Flows Years ended September 30, 2011 and 2010 (In thousands) 2011 Cash flows from operating activities: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization Provision for bad debts, net of recoveries Loss from extinguishment of debt Change in accumulated pension charges to unrestricted net assets Restricted contributions, net of expenditures Transfers to parent Change in net unrealized losses (gains) and net realized gains on investments and investment income Change in operating assets and liabilities: Patient accounts receivable Due from related parties Prepaid and other assets Accounts payable, accrued payroll and related liabilities, and other liabilities Accrued retirement liabilities Estimated self-insurance liability Estimated third-party payor settlements $ 2010 (6,738) 6,700 21,737 13,571 1,117 19,038 (35) 3,398 21,232 11,858 20,229 (570) 2,466 870 (7,682) (18,284) 798 (1,884) (11,025) (907) 505 8,803 (9,617) 900 541 2,195 (4,875) 643 (400) Net cash provided by operating activities 34,215 40,369 Cash flows from investing activities: Purchases of property and equipment, net Short-term investments, net Proceeds from sales of investments limited as to use Purchases of investments limited as to use Distributions from joint venture Investment income (37,791) 16,926 10,909 (18,141) 250 6,138 (22,763) (8,392) 11,336 (13,489) 4,060 (21,709) (29,248) (3,398) 33,803 (32,641) (3,407) (538) 35 (2,466) (6,907) 570 (6,146) (8,803) 6,360 2,318 50,099 47,781 Net cash used in investing activities Cash flows from financing activities: Transfers to parent Proceeds from issuance of long-term debt Payments for refinancing of long-term debt Repayment of long-term debt Deferred financing costs Restricted contributions, net of expenditures Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year $ 56,459 50,099 Supplemental disclosure of cash flow information: Cash paid for interest Cash paid for taxes $ 3,432 615 3,734 309 See accompanying notes to financial statements. 5 MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) (1) Organization and Significant Accounting Policies (a) Organization Middlesex Hospital (the Hospital) is a not-for-profit acute care hospital. The Hospital is a wholly owned subsidiary of Middlesex Health System, Inc. (System). The Hospital is also a 50% joint owner of the Middlesex Center for Advanced Orthopedic Surgery, LLC. In addition to the Hospital, System's subsidiaries include Middlesex Health Services, Inc. (Services), Middlesex Health Resources, Inc. (Resources) and MHS Primary Care, Inc. (MHSPC). Services operates an assisted living facility. Resources owns and manages certain real estate and also owns an interest in a collection agency. MHSPC owns and operates physician practices. (b) Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in conformity with U.S. generally accepted accounting principles. (c) Cash Equivalents and Short-Term Investments Cash equivalents represent highly liquid investments with maturities of less than three months. Short-term investments are primarily corporate bonds and commercial paper, with maturities of three to twelve months. Both exclude amounts limited as to use by board of directors (Board) designation or other restrictive arrangements. (d) Investments and Investment Income Investment income includes unrestricted realized gains and losses and unrestricted interest and dividends from board-designated funds and donor restricted funds included in investments limited as to use on the balance sheets. Income on short-term investment funds held by a trustee and assets deposited in the Hospital's self-insurance trust fund are reported as other revenue. If donor restricted, the realized investment income and losses from donor restricted investments are added to the appropriate restricted net assets. Unrealized gains and losses on all investments are excluded from the excess of revenues over expenses and recorded as a component of net assets, except when certain declines represent an other than temporary impairment in accordance with the Hospital's policy. Other-than-temporary impairments of $868 and $53 were recorded in net investment income in the statements of operations for the fiscal years ended September 30, 2011 and 2010, respectively. Investments are reported at fair value based on readily determinable fair market values or estimated fair value. Donated investments are reported at fair value at the date of receipt, which is then treated as cost. 6 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, establishes a formal hierarchy and framework for measuring fair value, and expanded disclosure about fair value measurements and the reliability of valuation inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Hospital has the ability to access. Level 2 - Inputs to the valuation methodology include: - Quoted prices for similar assets or liabilities in active markets; - Quoted prices for identical or similar assets or liabilities in inactive markets; - Inputs other than quoted prices that are observable for the asset or liability; - Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Investment securities, in general, are exposed to various risks. Recent market conditions have resulted in an unusually high degree of volatility and increased the risks and short term liquidity of certain investments held by the Hospital which could impact the value of investments after the date of these financial statements. (e) Investments Limited as to Use Investments limited as to use include assets set aside by the Board for future unspecified uses and to support education and other programs. The Board retains control over these funds and may at its discretion subsequently authorize the use of these funds for any purpose. Investments limited as to use also include donor restricted assets, assets held by trustees under revenue bond agreements, and a self-insurance trust arrangement. 7 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) (f) Property and Equipment, Net Property and equipment acquisitions are recorded at cost. Property and equipment donated to the Hospital are recorded at fair value at the date of receipt. Improvements and major renewals are capitalized, and maintenance and repairs are charged to expense as incurred. Depreciation is provided over the estimated useful life of each class of asset and is computed on the straight-line method. Estimated useful lives range from 3 to 10 years for equipment and 20 to 40 years for buildings and land improvements. (g) Long-Lived Assets The Hospital reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its fair value and may not be recoverable. At September 30, 2011 and 2010, no impairment was recorded. (h) Estimated Self-Insurance Liability The Hospital has adopted a policy of self-insuring the deductible portion of its medical malpractice and general liability insurance coverage. The deductible limits were $1,000 per claim and $3,000 in aggregate annually during fiscal 2011 and 2010. In addition, the Hospital self-insures its workers' compensation program and has purchased excess insurance for those losses exceeding $400 per occurrence (see note 10). (i) Net Asset Categories To ensure observance of limitations and restrictions placed on the use of resources available to the Hospital, the accounts of the Hospital are maintained in the following net asset categories: Unrestricted Unrestricted net assets represent available resources other than donor restricted contributions. Included in unrestricted net assets are assets set aside by the Board for future unspecified uses and to support education and other programs over which the Board retains control and may, at its discretion, subsequently use for other purposes. Temporarily Restricted Temporarily restricted net assets represent contributions that are restricted by the donor either as to purpose and/or as to time of expenditure. Permanently Restricted Permanently restricted net assets represent contributions received with the donor stipulation that the principal be invested in perpetuity and that only the income earned thereon be available for specific or general purposes. 8 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) (j) Net Patient Service Revenue Net patient service revenue is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. (k) Income Taxes The Hospital is a not-for-profit corporation as described in Section 501(c)(3) of the Internal Revenue Code and is generally exempt from Federal income taxes on related income pursuant to Section 501(a) of the Internal Revenue Code. Effective October 1, 2009, the Hospital adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, included in ASC Topic 740, Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements and prescribes a threshold of more-likely than-not for recognition of tax benefits of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 also provides related guidance on measurement, derecognition, classification, interest and penalties, and disclosure. The adoption of this standard did not have a material impact on the Hospital's financial statements. The Hospital's unrelated trade or business activities are generally limited to income from the laboratory and linen services provided to unrelated entities. (l) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Financial statement areas where management applies the use of assumptions and estimates consist primarily of investments, the allowance for uncollectible accounts, net patient service revenue, third-party reimbursement matters, accrued retirement liabilities, and estimated self-insurance liability. (2) Healthcare Regulatory Environment Federal Regulatory Environment The healthcare industry is subject to numerous laws and regulations of Federal, state, and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government healthcare program participation requirements, reimbursement for patient services, Medicare and Medicaid fraud and abuse and security and privacy of health information. Government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. 9 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Management believes that the Hospital is in compliance with fraud and abuse regulations as well as other applicable government laws and regulations. Compliance with such laws and regulations can be subject to future government review and interpretation as well as regulatory actions unknown or unasserted at this time. The State of Connecticut recently enacted Public Act No. 11-6, An Act Concerning the Budget for the Biennium Ending June 30, 2013 and Other Provisions Relating to Revenue, which included a tax on the net patient revenues of hospitals and changes to the Disproportionate Share Hospital (DSH) payments to hospitals effective for the State's fiscal year beginning July 1, 2011 that impacts all Connecticut hospitals. Other operating expenses includes approximately $800 for the initial quarter and the Hospital estimates a $3,200 annual reduction on its income from operations. (3) Net Patient Service Revenue The following table summarizes revenues from services to patients: Patient service revenue: Inpatient Outpatient $ Deductions: Allowances Charity care Net patient service revenue $ 2011 2010 466,210 567,462 406,629 531,514 1,033,672 938,143 (690,703) (6,856) (601,941) (9,520) (697,559) (611,461) 336,113 326,682 The Hospital has agreements with third-party payors that provide reimbursement to the Hospital at amounts different from the Hospital's established billing rates. These differences, including self-insured portion of health care benefits provided at its facilities for its employees and their dependents, are accounted for as allowances in determining net patient service revenue. Middlesex Hospital has a longstanding commitment to providing healthcare to all those in need, regardless of their ability to pay. The Hospital provides both free care and care at reduced rates. The charges written off for patients that qualified for free care under the Hospital's Charity Care Program totaled $6,856 and $9,520 in 2011 and 2010, respectively. The estimated costs for these services were $2,042 and $2,970 in 2011 and 2010, respectively. 10 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) During 2011 and 2010 approximately 34% of net patient service revenue was received under the Medicare program, 9% and 8%, respectively, under the state Medicaid and city welfare programs, 48% was received from contracts with private health payors and 9% and 10%, respectively, from patients and others. During the years ended September 30, 2011 and 2010, changes in estimates related to settlements with third-party payors for prior years increased net patient service revenue by $481 and $118, respectively. (4) Other Revenue Other revenue consists of revenue from grants, cafeteria sales, purchase discount rebates and rental income. In addition, included in other revenue is interest income on the following assets: funds held in trust under revenue bond agreements, funds held in the Hospital's self-insurance trust and notes receivable from related parties. (5) Investments Limited as to Use and Short-Term Investments Cost and market values for investments included in investments limited as to use as of September 30, 2011 and 2010 are summarized as follows: 2011 Total Market Mutual funds: Equity Fixed income Common/collective trust Common stock: U.S. equity Non-U.S. equity Corporate debt securities U.S. Government and Agency obligations Money market funds Cash Total $ $ 2010 Total Cost Market Cost 47,388 42,411 47,854 40,336 47,095 40,481 4,484 43,993 37,200 2,040 3,586 597 203 3,017 602 203 3,741 503 214 3,519 376 203 921 6,059 5,321 922 6,092 5,321 416 7,400 1,928 418 7,418 1,928 106,486 104,347 106,262 97,095 At September 30, 2011, investments with a market value below cost for less than 12 months included certain common stock and U.S. government and Agency obligations with a market value of $454 and $236, respectively, and an unrealized loss of $31 and $1, respectively. Investments with market value below cost for more than 12 months included certain mutual funds, common stock and U.S. government and Agency obligations with a market value of $15,708, $792, and $685, respectively, and an unrealized loss of $1,450, $81 and $1, respectively. 11 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) At September 30, 2010, there were no investments with a market value below cost for less than 12 months. Investments with market value below cost for more than 12 months included certain mutual funds, common stock and U.S. government and Agency obligations with a market value of $10,637, $971 and $416, respectively, and an unrealized loss of $216, $156 and $2, respectively. Investments limited as to use consisted of the following as of September 30, 2011 and 2010: 2011 Market Funds held in trust under revenue bond agreements $ Funds held in trust for estimated self-insurance liability Board-designated funds Donor-restricted funds Total $ 2010 Cost Market Cost 4,431 4,433 4,309 4,311 7,771 80,737 13,547 7,564 79,087 13,263 8,598 79,978 13,377 7,954 72,674 12,156 106,486 104,347 106,262 97,095 Included in net investment income for the years ended September 30, 2011 and 2010 were realized gains on sales of investments of $3,500 and $1,766, respectively. 12 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The following table sets forth by level, within the fair value hierarchy, the Hospital's short-term investments and assets whose use is limited at fair value as of September 30, 2011: Mutual funds: Equity Fixed income Common stock: U.S. equity Non-U.S. equity Corporate debt securities U.S. Government and Agency obligations Money market funds Cash $ $ Valuation techniques incorporating information other than observable market data (Level 3) Fair value as determined by quoted prices in active markets (Level 1) Valuation techniques based on observable market data (Level 2) 47,388 42,411 47,388 42,411 3,586 597 6,823 3,586 597 6,823 6,059 5,321 4,948 4,948 6,059 5,321 105,362 11,771 117,133 13 Total (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The following table sets forth by level, within the fair value hierarchy, the Hospital's short-term investments and assets whose use is limited at fair value as of September 30, 2010: Mutual funds: Equity Fixed income Common/collective trust Common stock: U.S. equity Non-U.S. equity Corporate debt securities U.S. Government and Agency obligations Money market funds Cash $ $ Valuation techniques incorporating information other than observable market data (Level 3) Fair value as determined by quoted prices in active markets (Level 1) Valuation techniques based on observable market data (Level 2) 47,095 40,481 4,484 47,095 40,481 4,484 3,741 503 13,551 3,741 503 13,551 7,400 1,928 14,652 14,652 7,400 1,928 101,148 32,687 133,835 Total Mutual funds and common stock are traded actively on exchanges and price quotes for these shares are readily available. As such, these are valued at closing values on active exchanges. For corporate debt securities and U.S. government and agency obligations multiple prices and price types are obtained from pricing vendors whenever possible, which enables cross-provider validations. A primary price source is identified based on asset type, class or issue for each security. The fair values of fixed-income securities are based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences. In accordance with Accounting Standards Update (ASU) 2009-12, net asset value (NAV) may be used as a practical expedient to estimate the fair value of certain investments, unless it is probable that all or a portion of the investment will be sold for an amount different from NAV. As of September 30, 2011 and 2010, the Hospital had no intentions to sell investments at amounts different than NAV. Common collective trusts invest in other public or private individual assets as determined and managed by the fund. The Hospital's interest in the common/collective trust fund is primarily based on the fair values of the underlying investments. Investments in collective trust funds are valued at their respective NAV per share/unit on the valuation date. The Hospital can redeem these investments at NAV on a daily basis. 14 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The redemption period for the Hospital's financial instruments ranges from daily to weekly and requires notification of one to thirty days. (6) Property and Equipment, Net Property and equipment and the related accumulated depreciation as of September 30, 2011 and 2010 consist of the following: Land and land improvements Buildings and fixed equipment Land and building under capital leases Other equipment Leasehold improvements $ Less accumulated depreciation Construction in progress (estimated cost to complete $6,984) Property and equipment, net $ 2011 2010 9,196 236,364 163,590 2,545 4,421 227,633 711 154,504 4,212 411,695 391,481 (258,275) (236,911) 153,420 154,570 21,322 4,148 174,742 158,718 Total rental expense under operating leases for the years ended September 30, 2011 and 2010 was $5,316 and $5,347, respectively. The following is a schedule of future minimum rentals under non-cancelable operating lease agreements: Fiscal year ending: 2012 2013 2014 2015 2016 Thereafter $ 3,998 3,417 2,806 1,626 954 5,846 $ 18,647 Property under capital lease had a net book value of $298 at September 30, 2010. During the year ended September 30, 2011, the Hospital acquired a building previously under a capital lease. 15 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) (7) Long-Term Debt As of September 30, 2011 and 2010, the Hospital's long-term debt consisted primarily of the following State of Connecticut Health and Educational Facilities Authority (CHEFA) Revenue Bonds and certain mortgage notes payable which are secured by certain real estate and other real property: 2011 Fixed Rate Revenue Bonds, Series N, due July 1, 2027 Fixed Rate Revenue Bonds, Series M, due July 1, 2027 Fixed Rate Revenue Bonds, Series L, due July 1, 2036 5.0% to 5.125% Revenue Bonds, Series H, due July 1, 2027 Mortgage notes and capital leases, net of interest $ Add bond premium Less bond discount Less current portion $ 2010 31,930 13,530 21,465 152 14,185 21,915 34,830 816 67,077 71,746 2,577 (3,123) 740 (557) (2,827) 66,531 69,102 CHEFA Series L Revenue Bonds (Series L bonds) and CHEFA Series M Auction Rate Bonds (Series M bonds) were issued on December 7, 2006 for $22,760 and $16,620, respectively. The Series L proceeds were used to finance the construction of a new emergency department facility and the Series M proceeds were used to refinance the Series K bonds. The Series L bonds mature from July 1, 2009 through July 1, 2036 at interest rates between 4.0% and 5.0%. On April 17, 2008, the Series M bonds were converted from their initial auction rate mode to a fixed rate mode. The Series M bonds mature from July 1, 2008 through July 1, 2027 at interest rates between 3.000% and 4.875%. CHEFA Series N Revenue Bonds (Series N bonds) were issued on July 26, 2011 for $31,930. The Series N proceeds were used to refinance the Series H bonds. The Series N bonds mature from July 1, 2012 through July 1, 2027 at interest rates between 3.0% and 5.0%. The Hospital has entered into a unsecured revolving line of credit agreement with a local bank. The maximum borrowing limit on this line of credit totaled $6,000 as of September 30, 2011 and 2010. Advances under this agreement have an annual interest rate based on the LIBOR rate plus 1.0% as determined for each interest period. The line of credit expires on April 30, 2012. As of September 30, 2011 and 2010 there were no advances. In fiscal 2011, CHEFA Series N Revenue Bonds (Series N bonds) were issued on behalf of Services to refinance the Series I bonds. The Series N bonds mature from July 1, 2012 through July 1, 2027 at interest rates between 3.0% and 5.0%. As a member of the obligated group, the Hospital is a guarantor of the Series N bonds. The outstanding balance of these bonds was $5,430 at September 30, 2011. 16 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The Hospital is required to maintain certain deposits with a trustee relating to its outstanding CHEFA bonds. Such deposits are included in investments limited as to use in the financial statements and consist of $4,431 in debt service funds. All of the outstanding CHEFA bonds and mortgage notes place limits on the incurrence of additional borrowings and require that the Hospital satisfy certain measures of financial performance as long as the bonds and mortgage notes are outstanding. All of the outstanding CHEFA bonds are secured by the gross receipts of the Hospital. The fair value of the Hospital's CHEFA bonds, based on market prices, was approximately $70,215 and $71,013 at September 30, 2011 and 2010, respectively. In 2004, the Hospital entered into a 25 year capital lease of $4,464 with an interest rate of 8.3% for a building. Under the terms of this capital lease, the Hospital exercised its option to purchase the building in 2010 for $4,820. Aggregate scheduled repayments on long-term debt and capital lease payments are as follows: Long-term debt 2012 2013 2014 2015 2016 Thereafter $ Add bond premium $ (8) Mortgage notes/ capital leases 3,060 3,045 3,135 3,255 3,410 51,020 63 42 21 21 5 66,925 152 2,577 69,502 152 Defined Benefit Retirement Plans The Hospital sponsors several retirement plans including a noncontributory, defined benefit pension plan (the Plan) covering substantially all of its employees. The Plan's benefits are based on years of credited service and average base pay during the employees' five highest-paid consecutive calendar years of credited service. The Plan is funded in accordance with the Employee Retirement Income Security Act (ERISA) minimum funding requirements. On July 31, 2009 the Hospital adopted a soft freeze of the Plan, effective January 1, 2010. All pension accruals have ceased under the terms of the Plan, with the limited exception that participants who were actively employed on December 31, 2009 will continue to have eligible compensation earned after December 31, 2009 recognized in the calculation of their accrued benefit beyond December 31, 2009. 17 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) As of December 31, 2010, the current Supplemental Executive Retirement Plan (SERP) was frozen and converted from a defined benefit to a defined contribution approach. In doing so, the lump sum value of the current SERP accrued benefit as of December 31, 2010 was established as the opening defined contribution account value as of January 1, 2011. These plan changes triggered curtailment and settlement accounting in fiscal 2011 following board approval of the plan changes. For accounting purposes, the defined benefit element of the current SERP is now terminated. Beginning January 1, 2011, the defined contribution element of the current SERP (including the opening value) will be accounted for as a defined contribution plan. The funded status at September 30, 2011 and 2010 for the plans are as follows: 2011 2010 216,037 202,423 248,047 42 12,319 12,393 (12,062) (1,191) 905 216,172 2,576 12,482 22,074 (5,257) Projected benefit obligation, end of year 260,453 248,047 Change in plan assets: Fair value of plan assets, beginning of year Actual return on plan assets Employer contributions Benefits paid 140,171 144 16,978 (12,062) 123,650 10,853 10,925 (5,257) 145,231 140,171 (115,222) (107,876) (65) (115,157) (3,889) (103,987) (115,222) (107,876) 107,292 87,260 994 107,292 88,254 Accumulated benefit obligation $ Change in projected benefit obligation: Projected benefit obligation, beginning of year Service cost Interest cost Actuarial loss Benefits paid Curtailments Settlements Fair value of plan assets, end of year Funded status $ Amounts recognized in balance sheets consist of: Current liability Noncurrent liability Net amount recognized $ Amounts recognized as accumulated charges to unrestricted net assets consist of: Net actuarial loss Prior service cost $ 18 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Following is a summary of net periodic benefit cost for the years ended September 30, 2011 and 2010: 2011 Components of net periodic benefit cost: Service cost Interest cost Expected return on plan assets Net amortization and deferral Curtailment loss Settlement loss Net periodic benefit cost 2010 $ 42 12,319 (10,917) 1,561 458 1,823 2,576 12,482 (10,276) 1,268 $ 5,286 6,050 The prior service cost that will be amortized from accumulated charges to unrestricted net assets into net periodic benefit cost over the next fiscal year is $2,099. 2011 Weighted average assumptions as of September 30: Discount rate (obligation) Discount rate (service cost - see below) Expected long-term return on plan assets Rate of compensation increase 4.65% 5.20 7.00 4.00 2010 5.20% 5.60 7.00 4.00 The discount rate is based on high-grade bond yield curve under which benefits were projected and discounted at spot rates along the curve. The discount rate was then determined as a single rate yielding the same present value. The expected long-term rate of return on plan assets is 7%. 19 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of September 30, 2011: Mutual funds: Equity Fixed income Common/collective trust Common stock: U.S. equity Non-U.S. equity Money market funds $ $ Valuation techniques incorporating information other than observable market data (Level 3) Fair value as determined by quoted prices in active markets (Level 1) Valuation techniques based on observable market data (Level 2) 72,412 50,568 9,504 72,412 50,568 9,504 4,543 1,004 7,200 4,543 1,004 7,200 135,727 9,504 145,231 Total The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of September 30, 2010: Mutual funds: Equity Fixed income Common/collective trust Common stock: U.S. equity Non-U.S. equity Money market funds $ $ Valuation techniques incorporating information other than observable market data (Level 3) Fair value as determined by quoted prices in active markets (Level 1) Valuation techniques based on observable market data (Level 2) 77,097 47,484 8,974 77,097 47,484 8,974 4,675 871 1,070 4,675 871 1,070 131,197 8,974 140,171 20 Total (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Mutual funds and common stock are traded actively on exchanges and price quotes for these shares are readily available. Common collective trusts invest in other public or private individual assets as determined and managed by the fund. The Plan's interest in the common/collective trust fund is based on the fair values of the underlying investments. Investments in collective trust funds are valued at their respective NAV per share/unit on the valuation date. The Plan can redeem these investments at NAV on a daily basis. The redemption period for the Plan's financial instruments ranges from daily to weekly and requires notification of one to thirty days. The Plan's weighted average asset allocations at September 30, 2011 and 2010 by asset category are as follows: Target Equity securities Debt securities Total 2011 2010 60% 40 60% 40 59% 41 100% 100% 100% The investment policy, as established by the Investment Committee, is to earn a total return in any 5-year period that will have exceeded the interest assumption in the actuarial plan valuation for that five-year period. For performance evaluation purposes, all rates of return will be examined on a net-of-fee basis. The pension assets are to be broadly diversified so as to limit the impact of large losses in individual investments on the total portfolio. The asset allocation is reviewed on a quarterly basis. Contributions of $10,800 are expected to be paid to the Plan in 2012. The following benefit payments, which reflect expected future service for the retirement plans, are expected to be paid: 2012 2013 2014 2015 2016 2017 - 2021 $ 6,830 7,503 8,223 8,926 9,746 61,790 $ 103,018 The Hospital does not provide post-retirement medical or health insurance benefits. 21 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) (9) Defined Contribution Plans Effective January 1, 2010 the Hospital implemented a new retirement program called the Middlesex Retirement Savings and Investment Plan which provides an automatic core contribution and a matching contribution when participants choose to make pre-tax contributions. The Hospital matches 50% of the first 4% that an employee contributes. In addition, employees become eligible for a core contribution upon completion of 12 months service provided they earn at least 1,000 hours of service in a calendar year and are actively employed on December 31, unless they retire or become disabled. The core contribution, which ranges from 2-6% of eligible pay, is based on the employee's age and years of services on December 31. The Hospital's contributions to the plan totaled $2,717 and $1,998 in 2011 and 2010, respectively. In addition, a core contribution of $3,870, which is scheduled to be paid in 2012, is included in accrued payroll and related liabilities. In addition, the Hospital sponsors other defined contribution plans for eligible employees. The Hospital's contributions to these plans totaled approximately $1,603 and $240 in 2011 and 2010, respectively. (10) Estimated Self-Insurance Liability and Other Contingencies There have been malpractice, general liability, and workers' compensation claims that fall within the Hospital's partially self-insured program (see note 1) which have been asserted against the Hospital. In addition, there are known incidents that have occurred through September 30, 2011 that may result in the assertion of claims. The Hospital has established an irrevocable trust, funded based upon actuarially determined funding levels, to provide for the payment of malpractice and general liability claims and related expenses. In addition, the Hospital is involved in litigation arising in the ordinary course of business. In the opinion of Hospital management, the ultimate resolution of these claims will not have a material impact on the Hospital's results of operations or financial position. (11) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use by the Hospital has been limited by the donors for a specific purpose. Temporarily restricted net assets are available for the following purposes as of September 30, 2011 and 2010: 2011 Education Health services Capital and other 22 2010 $ 1,750 1,397 3,112 1,760 1,429 3,593 $ 6,259 6,782 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Permanently restricted net assets have been restricted by donors to be maintained by the Hospital in perpetuity. Permanently restricted net assets as of September 30, 2011 and 2010 are as follows: 2011 Free beds Support of hospital operations Other 2010 $ 1,562 4,620 698 1,571 4,412 821 $ 6,880 6,804 (12) Endowments Effective October 1, 2008, the Hospital adopted FASB Staff Position No. 117-1, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds (FSP 117-1), now part of FASB ASC 958-205, Not-for-Profit Entities -Presentation of Financial Statements. On October 1, 2007 the Uniform Prudent Management of Institutional Funds Act (UPMIFA) was adopted by the State of Connecticut (Act). The new law updated existing fundamental investment principles providing standards to guide investing in a prudent manner and eliminating the restriction that endowment funds could not be spent below its historical dollar value. The Hospital considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the fund, (2) the purposes of the Hospital and the donor-restricted endowment fund, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Hospital and (7) the investment policies of the Hospital. The Hospital's endowments consist of approximately thirteen individual funds established for a variety of purposes including both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. Net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Hospital has interpreted UPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. The Hospital classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Hospital in a manner consistent with the standard of prudence prescribed by the Act. 23 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Endowment funds consist of the following at September 30, 2011: Unrestricted Donor-restricted endowment funds Board-designated endowment funds Total endowed net assets $ $ Temporarily restricted Permanently restricted Total 3,092 6,880 9,972 77,417 77,417 77,417 3,092 6,880 87,389 Endowment funds consist of the following at September 30, 2010: Unrestricted Donor-restricted endowment funds Board-designated endowment funds Total endowed net assets $ $ Temporarily restricted Permanently restricted Total 3,133 6,804 9,937 77,811 77,811 77,811 3,133 6,804 87,748 24 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) Changes in endowment funds for the year ended September 30, 2011 are as follows: Unrestricted Endowment net assets, October 1, 2010 $ Investment return: Investment income Net depreciation Total investment return Contributions, gifts and bequests Transfers Appropriation of endowment assets for expenditure Endowment net assets, September 30, 2011 $ Temporarily restricted Permanently restricted Total 77,811 3,133 6,804 87,748 4,986 (5,342) 111 (100) (9) 5,097 (5,451) (356) 11 (9) (354) (32) 85 85 (32) (38) (20) (58) 77,417 3,092 6,880 87,389 Changes in endowment funds for the year ended September 30, 2010 are as follows: Unrestricted Endowment net assets, October 1, 2009 $ Investment return: Investment income Net appreciation Total investment return Contributions, gifts and bequests Transfers Appropriation of endowment assets for expenditure Endowment net assets, September 30, 2010 $ Temporarily restricted Permanently restricted Total 71,222 3,018 6,588 80,828 3,799 2,899 86 64 1 7 3,886 2,970 6,698 150 8 6,856 (10) 208 208 (10) (109) (25) (134) 77,811 3,133 6,804 87,748 25 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The Hospital has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Hospital must hold in perpetuity or for a donor-specified period as well as board-designated funds. To satisfy its long term rate-of-return objectives, the Hospital relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Hospital targets a diversified asset allocation that places emphasis on investments in equities, fixed income and alternative investments to achieve its long-term return objectives with prudent risk constraints. The Hospital follows a policy of spending an amount that approximates the investment income earned, in addition to specific purchases of capital equipment. Accordingly, the Hospital expects its spending policy will allow its endowment funds to be maintained in perpetuity by growing at a rate at least equal to the planned payouts. Additional real endowment growth will be provided through new gifts and any excess investment return. (13) Functional Expenses. The Hospital provides health care services primarily to residents within its geographic location. Expenses to provide these services for the years ended September 30, 2011 and 2010 are as follows: Health care services Administrative and general 2011 2010 $ 282,285 46,231 264,564 47,958 $ 328,516 312,522 (14) Related Party Transactions As of September 30, 2011 and 2010, the Hospital had the following receivables from related parties: 2011 Middlesex Health Resources, Inc. Middlesex Health Services, Inc. MHS Primary Care, Inc. Total due from related parties 2010 $ 19 33 58 3 6 899 $ 110 908 Certain general and administrative supplies and services and other miscellaneous costs are paid by the Hospital on behalf of certain affiliates. Amounts due for these services are reflected as other receivables in the preceding table. 26 (Continued) MIDDLESEX HOSPITAL Notes to Financial Statements September 30, 2011 and 2010 (amounts in thousands) The Hospital paid Resources approximately $418 and $383, respectively, during 2011 and 2010 for rent. In addition, the Hospital had promissory notes due from MHS Primary Care, Inc. for lines of credit totaling $166 at a rate of 7% to be paid in 120 monthly installments. The balances due on these notes were $48 and $67 at September 30, 2011 and 2010, respectively. The Hospital made a cash transfer to the System of $3,398 and $2,466 for 2011 and 2010, respectively. The Hospital, in support of the System's mission, transfers funds annually to the System in conjunction with supporting activities within the integrated network. As of September 30, 2011, the Hospital has committed to transfer $2,998 to the System in fiscal 2012. (15) Subsequent Events The Hospital has evaluated events through January 23, 2012, which represents the date the financial statements were available to be issued and noted no subsequent events that would have impacted the Hospital's financial statements. (16) Community Benefit (Unaudited) (statistical information in whole numbers) As a medium-sized community hospital within a health system, providing extensive Community Benefit programs and services has always been the cornerstone of our organization. Continuous dedication to the communities we serve remains the hallmark of our vision, mission, and strategic planning. These objectives are inherent in the Health System and Hospital's vision and mission statements. The System's mission is to improve the health and well-being of our community by providing quality health care services with caring, compassion and skill with a vision designed to create a new standard for community health care by contributing materially to the health and well being of the communities it serves. The pledge to Community Benefit is strengthened by the Hospital's inclusion of the term Community Benefit in its mission statement: the Hospital recognizes community benefit, transparency and integrity as fundamental responsibilities and strives to meet community health needs to the fullest extent possible within its ability and resources. Middlesex Hospital's Community Benefit program was formalized in 2006 as a natural outgrowth for housing our long-standing community services under one roof. Since then, strengthening our Community Benefit program with targeted programs to meet community health and well-being needs and promoting community-wide health improvement services has been an annual priority initiative for our Hospital's leadership and remains a core institutional program. Our comprehensive Community Benefit model encompasses the following domains: executive involvement and commitment; a defined reporting structure; dedicated staffing resources; governance engagement; staff participation; annual goals; inclusion in annual organizational planning; internal and external communications; and inclusion of community members and agency partners. This footnote provides an overview of Middlesex Hospital's community benefit activities, organized by the categorical accounting standards as determined by the Catholic Health Association/VHA structure (Catholic Health Association, \"A Guide For Planning and Reporting Community Benefit\