Morrow County Hospital and Affiliate

63 Pages·2017·0.98 MB·English

____________________________________________

  Morrow County Hospital and Affiliates

  Financial Report and Compliance Report
with Supplementary Information

December 31, 2016 and 2015

Board of Trustees
Morrow County Hospital and Affiliates
651 West Marion Road
Mt. Gilead, Ohio 43338

We have reviewed the Independent Auditor’s Report of the Morrow County Hospital and
Affiliates, Morrow County, prepared by Arnett Carbis Toothman, LLP, for the audit period
January 1, 2016 through December 31, 2016. Based upon this review, we have accepted these
reports in lieu of the audit required by Section 117.11, Revised Code. The Auditor of State did
not audit the accompanying financial statements and, accordingly, we are unable to express, and
do not express an opinion on them.

Our review was made in reference to the applicable sections of legislative criteria, as reflected by
the Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditor
of State, regulations and grant requirements. The Morrow County Hospital and Affiliates is
responsible for compliance with these laws and regulations.

Dave Yost
Auditor of State

May 24, 2017

88 East Broad Street, Fifth Floor, Columbus, Ohio 43215‐3506
Phone: 614‐466‐4514 or 800‐282‐0370 Fax: 614‐466‐4490
www.ohioauditor.gov
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Morrow County Hospital and Affiliates____________________

Contents

Independent Auditor’s Report 1-2

Management's Discussion and Analysis 3-11

Basic Combined Financial Statements

Combined Balance Sheets 12

Combined Statements of Revenues, Expenses, and Changes in Net Position 13

Combined Statements of Cash Flow 14-15

Notes to Combined Financial Statements 16-48

Supplementary Information 49-51

Independent Auditor’s Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards. 52-53

Schedule of Audit Findings and Responses 54-55

Schedule of Prior Year Audit Findings and Responses 56
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actcpas.com

101 Washington Street, East
P.O. Box 2629
Charleston, WV 25329
304.346.0441 | 304.346.8333 fax
800.642.3601

INDEPENDENT AUDITOR'S REPORT

To the Board of Trustees
Morrow County Hospital and Affiliates
Mt. Gilead, Ohio

Report on the Financial Statements

We have audited the accompanying combined financial statements of Morrow County Hospital and
Affiliates, Morrow County, Ohio, a business-type activity of Morrow County, Ohio (the Hospital), which
comprise the combined balance sheet, as of December 31, 2016, and the related combined statement of
operations and changes in net position and cash flows for the year then ended, and the related notes to
the combined financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these combined financial
statements in accordance with accounting principles generally accepted in the United States of America;
this includes the design, implementation, and maintenance of internal controls relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the combined financial statements are free of
material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the combined financial statements. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement of the combined financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entities’ preparation and fair presentation of the combined financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entities’ internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
combined financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.

Bridgeport, WV • Buckhannon, WV • Charleston, WV • Columbus, OH • Meadville, PA • Morgantown, WV • New Castle, PA • Pittsburgh, PA
Opinion

In our opinion, the combined financial statements referred to above present fairly, in all material respects,
the financial position of Morrow County Hospital and Affiliates, Morrow County, Ohio, as of December 31,
2016, and the results of their operations and their cash flows for the year then ended, in accordance with
accounting principles generally accepted in the United States of America.

Other Matters

The combined financial statements of the Hospital, as of and for the year ended December 31, 2015,
were audited by other auditors whose report dated April 20, 2016, expressed an unmodified opinion on
those statements.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s
Discussion and Analysis on pages 3-11 be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We have applied
certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management’s responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated April 5, 2017,
on our consideration of Morrow County Hospital and Affiliates, Morrow County, Ohio, internal control over
financial reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters for the year ended December 31, 2016. A similar
report for the year ended December 31, 2015, dated April 20, 2016, which has not been included with the
2016 financial and compliance report was issued by other auditors. The purpose of those reports are to
describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing for each year, and not to provide an opinion on the internal control over financial
reporting or on compliance. Those reports are an integral part of an audit performed in accordance with
Government Auditing Standards in considering Hospital’s internal control over financial reporting and
compliance.

Charleston, West Virginia
April 5, 2017

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Morrow County Hospital and Affiliates_______________________
Management's Discussion and Analysis

Morrow County Hospital, located in Mount Gilead, Ohio, is a county-owned, tax-exempt entity
that operates an acute-care hospital facility providing quality, emergency, inpatient,
outpatient, swing bed, primary care and home health services to residents of Morrow County
and surrounding areas. The reporting entity (the “Hospital”) is comprised of Morrow County
Hospital, the Morrow County Hospital Foundation, and Morrow County Hospital Health
Services, which provides services exclusively for the benefit of Morrow County Hospital. The
Hospital is reported as an enterprise fund of Morrow County, Ohio. Morrow County Hospital is
operated under Section 339 of the Ohio Revised Code.

This section of the Hospital’s annual financial report presents management’s discussion and
analysis of the Hospital’s financial performance and provides an overall review of the
Hospital’s financial position and activities as of and for the years ended December 31, 2016,
and 2015. This discussion should be read in conjunction with the accompanying financial
statements and notes. The financial statements, notes, and this management’s discussion
and analysis are the responsibility of the Hospital’s management.

Financial and Operating Highlights for 2016

 Combined results ended the year with an operating loss of $1,339,651 compared to a
loss of $1,967,788 in 2015.

The Combined Net Position decreased by $3,615, compared to a Combined Net
Position decrease in 2015 of $649,178.

 The Combined Operating Revenues increased by $1,021,173, or 3.5%, compared
to 2015.

The Combined Operating Expenses increased $393,136 or 1.3% over 2015
Combined Operating Expenses.

The reasons for these outcomes are stated below:

A. The Hospital received additional funding through the Hospital Care Assurance
Program (HCAP). Net HCAP receipts increased $1,095,712 or 196% compared to
2015.

B. The Hospital leadership team, with assistance from its 3rd party Pharmacy
management continued to optimize its 340b program to include Rural Health Clinic
activity. Net 340b receipts increased $421,737 or 106% compared to 2015.

C. Morrow County’s Acute Care leadership partnered with our 3rd party Hospitalist team
to enhance observation and admission documentation and protocols.

D. Morrow County Hospital, through its affiliated employed physician’s practices,
successfully began billing for its third Rural Health Clinic.

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Morrow County Hospital and Affiliates_______________________
Management's Discussion and Analysis (Continued)

Overview of the Financial Statements

This annual report consists of financial statements prepared in accordance with the
provisions of GASB Statement No. 34, Basic Financial Statements - and Management’s
Discussion and Analysis - for State and Local Governments, as amended by GASB
Statement No. 37, Basic Financial Statements - and Management’s Discussion and Analysis
- for State and Local Governments: Omnibus, GASB Statement No. 38, Certain Financial
Statement Note Disclosures, as amended by GASB Statement No. 63, and GASB Statement
68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement
27. These standards establish comprehensive financial reporting standards for all state and
local governments and related entities.

The balance sheet, statement of revenues, expenses, and changes in net position, and
statement of cash flows provide an indication of the Hospital’s financial health. The balance
sheet includes the Hospital’s assets, deferred outflows of resources, liabilities and deferred
inflows of resources using the accrual basis of accounting as well as an indication about
which assets can be utilized for general purposes and which are restricted for other
purposes. The statement of revenues, expenses, and changes in net position reports the
revenues and expenses during the time periods indicated. The statement of cash flows
reports the cash provided and used by operating activities, as well as other cash sources,
such as investment income, and cash payments for repayment of debt and capital asset
acquisitions.

Financial Analysis of the Hospital at December 31, 2016

Total assets decreased 8.9% to $18.1 million, and total liabilities increased 7.8% to $18.0
million. The Hospital’s total net position decreased slightly from $3.1 million to $3.1 million, a
0.1% decrease from a year ago as shown in the following table:
2015 to 2016 Change
2015 2016 Amount Percentage
Assets
Current assets $ 9,693,018 $ 8,532,314 $ (1,160,704) -12.0%
Noncurrent assets 1 ,756,827 1 ,549,841 (206,986) -11.8%
Property and equipment 8 ,471,004 8 ,061,171 (409,833) -4.8%
Total assets 19,920,849 18,143,326 ( 1,777,523) -8.9%
Deferred Outflow of Resources
Pension 1 ,605,056 4 ,876,497 3,271,441 203.8%

Liabilities
Current liabilities 7 ,014,529 5 ,176,308 ( 1,838,221) -26.2%
Noncurrent liabilities 9 ,682,073 12,828,909 3,146,836 32.5%
Total liabilities 16,696,602 18,005,217 1,308,615 7.8%
Deferred Inflow of Resources 1 ,697,488 1 ,886,407 188,919 11.1%
Net Position
Net investment in
capital assets 7 ,593,292 7 ,460,368 (132,924) -1.8%
Unrestricted (4,461,477) (4,332,168) 129,309 -2.9%
Total net position $ 3,131,815 $ 3,128,200 $ (3,615) -0.1%

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