board finance committee meeting

BOARD FINANCE COMMITTEE MEETING

* MONDAY, JULY 25, 2011 5:30 p.m. 456 E. Grand Avenue, Escondido, CA (Buffet Dinner available at 5:00 for Committee Members & Invited Guests Only) 1st Floor Conference Room

Time Page Target CALL TO ORDER 5:30

Public Comments .................................................................................................... ................ 5 ............ 5:35 5 minutes allowed per speaker with a cumulative total of 15 minutes per group

For further details & policy, see Request for Public Comment notices available in meeting room

Information Item(s) ................ 5 ................... 5:40

1. * Approval: Minutes – Monday, June 27, 2011 (Addendum A-Pp14-23) ................... ................ 2 .................. 2 5:42

2. Review: Fourth Quarterly Update – FY2011 Initiatives (Addendum B-Pp24-32)....... .............. 10 .................. 3 5:52

3. * Approval: General Obligation Bonds – Tax Levy 2011-2012 (Addendum C – Pp33-36) .................................................................................................................... .............. 15 .................. 4

6:07

4. * Approval: Establishment of Appropriations Limit for FY2012 (Addendum D – Pp37-41) .................................................................................................................... .............. 10 .................. 5

6:17

5. * Approval: Policy – Annual Adoption of Statement of Investment (Addendum E – Pp42-44) .................................................................................................................... ................ 3 .................. 6

6:20

6. * Approval: Physician Recruitment Agreements ........................................................ ................... 5 ........................ 6:25 Oliver Lee, MD & Arch Health Partners, Inc. – Family Medicine Ranjini Madhavan, MD & Arch Health Partners, Inc. – Internal Medicine Paul Kim, MD & Arch Health Partners, Inc. – Orthopedic Services

................... 7-8

................. 9-10

............... 11-12

7. * Approval: June 2011 & YTD FY2011 Financial Report ........................................... .............. 25 ................ 13 6:50

ADJOURNMENT TO CLOSED SESSION .................................................................................. .................... 6:50

~ pursuant to California Government Code §54954.5(h)

REPORT INVOLVING TRADE SECRET Discussion will concern proposed new service Estimated date of public disclosure: July 1, 2012 .............. 10 .................... 7:00

RESUMPTION OF OPEN SESSION ....................................................................... .................. .................... 7:00

Action Resulting From Closed Session Discussion – IF ANY ........................... ................ 5 .................... 7:05

ADJOURNMENT ............................................................................................................. .................... ...................... 7:05

NOTE: If you have a disability, please notify us 72 hours prior to the event so that we may provide reasonable accommodations.

Asterisks indicate anticipated action. Action is not limited to those designated items.

1

Minutes Finance Committee – Monday, June 27, 2011

Form A - Minutes.doc

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Tanya Howell, Secretary BY: Bob Hemker, CFO Background: The minutes of the Board Finance Committee meeting held on Monday, June 27, 2011, are respectfully submitted for approval (Addendum A).

Budget Impact: N/A

Staff Recommendation: Staff recommends approval of the Monday, June 27, 2011, Board Finance Committee minutes.

Committee Questions: COMMITTEE RECOMMENDATION: Motion: Individual Action: Information: Required Time:

2

Fourth and Final Quarterly Update – FY2011 Initiatives

Form A - Initiatives.doc

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Bob Hemker, CFO Background: Pursuant to direction of the Board upon adoption of the FY2011 Initiatives, we will be reviewing those associated with Finance Committee oversight. This will be the fourth and final quarterly review of the FY2011 Initiatives, which are appended as Addendum B.

Budget Impact: N/A

Staff Recommendation: Information only

Committee Questions:

COMMITTEE RECOMMENDATION: Motion: Individual Action: Information: Required Time:

3

General Obligation Bonds – Tax Levy 2011-2012

Form A - GO Bonds - Tax Levy.doc

TO: Board Finance Committee DATE: Monday, July 25, 2011 FROM: Bob Hemker, CFO Background: In July 2005, the first tranche of General Obligation (“GO”) Bonds was issued. The Series was priced in a negotiated sale on June 22, 2005, for $80 million PAR in Bonds. The Bond transaction closed on July 7, 2005.

In December 2007, the second tranche of GO Bonds was issued. The Series was priced in a negotiated sale on December 4, 2007, for $241.08 million PAR in Bonds. The Bond transaction closed on December 20, 2007.

In March 2009, the third tranche of GO Bonds was issued. The Series was priced in a negotiated sale on March 11, 2009, for $110 million PAR in Bonds. The Bond transaction closed on March 18, 2009.

In November 2010, the fourth and final tranche of GO Bonds was issued. The Series was priced in a negotiated sale on November 9, 2010, for $64,916,678.80 PAR in Bonds. The Bond transaction closed on November 18, 2010.

On an annual basis, PPH has requested that the County of San Diego levy and collect the taxes necessary to pay the debt service on the GO Bonds. PPH calculates the tax amount to levy based upon the debt service amortization and the assessed value of the District. The assessed value is provided by the County. The County then puts the required tax onto the tax roll, collects the taxes, and remits the collected amounts to the Paying Agent, Wells Fargo, on a monthly basis. The Paying Agent makes the required principal and interest payments on a semi-annual basis.

The resolution included in Addendum C will authorize the County of San Diego to levy and collect the required ad valorem taxes for the 2011-2012 tax roll.

Budget Impact: N/A

Staff Recommendation: Management will make a recommendation at the meeting.



4

Approval: Establishment of Appropriations Limit for Fiscal Year 2012

COMMITTEE RECOMMENDATION: Motion:

Individual Action:

Information:

Required Time:

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Robert A. Hemker, CFO BACKGROUND: The Board of Directors of Palomar Pomerado Health annually adopts the Appropriations Limit for the district, pursuant to Article XIIIB of the California Constitution. This action requests approval of the County’s Appropriations Limit for Fiscal Year 2012. This limit applies to only unrestricted appropriations and is not related to any appropriations that are restricted for the General Obligation Bonds. The Appropriations Limit is calculated to be $64,397,770 for fiscal year 2012 (See Addendum D). The District is substantially under that limit and is expected to receive approximately $13,000,000 in unrestricted property tax revenues in fiscal year 2012. BUDGET IMPACT: None STAFF RECOMMENDATION: Approval of Appropriations Limit for Palomar Pomerado Health. COMMITTEE QUESTIONS:

5

Board Policy Annual Adoption of Statement of Investment

Form A - Statement of Investment.doc

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Bob Hemker, CFO Background: In concert with the Legal Office, the Board Policy for Annual Adoption of Statement of Investment (attached as Addendum E) has been reviewed, and no changes are being recommended.

Budget Impact: N/A

Staff Recommendations: Staff recommends adoption of the Policy, with no changes, and with a recommendation for approval by the Board Governance Committee.


COMMITTEE RECOMMENDATION: Motion: Individual Action:

Information:

Required Time:

6

Physician Recruitment Agreement

ARCH-Lee Form A

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Lisa Hudson, Director, Physician & Business Development Background: The PPH community lacks an adequate number of primary care physicians as verified by Medical Development Specialists, a national consulting firm that specializes in physician manpower studies. PPH has an established physician recruitment program and had allocated resources to attract additional Family Medicine physicians to relocate to Inland North San Diego County. A PPH Physician Recruitment Agreement is being negotiated with Arch Health Partners, Inc., in order for Dr. Oliver Lee to join Arch and establish a practice in their San Marcos office. He intends to begin practicing in August of 2011.

Budget Impact: None

Staff Recommendation: Approval of the Physician Recruitment Agreement with Arch Health Partners and recommend approval by the full Board of Directors.


COMMITTEE RECOMMENDATION: Motion: Individual Action: X Information: Required Time:

7

PALOMAR POMERADO HEALTH - AGREEMENT ABSTRACT Section

Reference

Term/Condition

Term/Condition Criteria TITLE Physician Recruitment Agreement—Family Practice

AGREEMENT DATE Start date August 15, 2011

PARTIES 1) PPH

2) Arch Health Partners, Inc. 3) Oliver Lee, MD

Recitals PURPOSE Provide recruitment assistance to enable Dr. Oliver Lee to

establish a practice within Arch Health Partners

Article 4 SCOPE OF SERVICES Dr. Lee will establish a full-time family medicine practice in Arch’s San Marcos office and will participate in government-funded programs.

2.1; 2.2; 6.2; 6.4; 6.5

TERM 1 year of income assistance; two year repayment/forgiveness period

Recruitment procedure D.2

RENEWAL None available

Article 8; 9.17

TERMINATION Contract stipulates conditions for termination

Article 2 COMPENSATION

METHODOLOGY For monthly income guarantee group will submit monthly report of expenses and collections. For relocation and start-up cost assistance group will submit receipts.

BUDGETED X YES NO – IMPACT: None

5.1; 9.19 EXCLUSIVITY X NO YES – EXPLAIN: Government prohibits hospitals from requiring physician to exclusively have privileges or make referrals only to their hospital. The contract does include a non-compete clause.

PHYSICIAN

MANPOWER STUDY Medical Development Specialists, a national consulting firm who performed our Physician Manpower Study, completed an analysis which confirmed there is a justifiable community need for this recruitment

EXTERNAL FINANCIAL

VERIFICATION X YES NO Methodology: Medical Development Specialists (MDS) developed a pro forma for the practice to establish the contract value to cover income guarantee and cash flow needs. MDS also provided the market comparison to establish an appropriate income guarantee.

LEGAL COUNSEL

REVIEW X Yes NO Legal Counsel has approved this contract.

APPROVALS REQUIRED X CPO X General Counsel X CFO X CEO X BOD Finance Committee on July 25, 2011 X BOD

8


ARCH-Madhavan Form A

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Lisa Hudson, Director, Physician & Business Development Background: The PPH community lacks an adequate number of primary care physicians as verified by Medical Development Specialists, a national consulting firm that specializes in physician manpower studies. PPH has an established physician recruitment program and had allocated resources to attract additional Internal Medicine physicians to relocate to Inland North San Diego County. A PPH Physician Recruitment Agreement is being negotiated with Arch Health Partners, Inc., in order for Ranjini Madhavan, MD, to join Arch and establish a practice in their Poway office. She intends to begin practicing in September of 2011.

Budget Impact: None



COMMITTEE RECOMMENDATION: Motion: Individual Action: X Information: Required Time:

9


Reference

Term/Condition

Term/Condition Criteria TITLE Physician Recruitment Agreement—Internal Medicine

AGREEMENT DATE Start date September 1, 2011

PARTIES 1) PPH

2) Arch Health Partners, Inc. 3) Ranjini Madhavan, MD

Recitals PURPOSE Provide recruitment assistance to enable Dr. Ranjini Madhavan

to establish a practice within Arch Health Partners

Article 4 SCOPE OF SERVICES Dr. Madhavan will establish a full-time internal medicine practice in Arch’s Poway office and will participate in government-funded programs.

2.1; 2.2; 6.2; 6.4; 6.5




Article 8; 9.17






PHYSICIAN

MANPOWER STUDY Medical Development Specialists, a national consulting firm who performed our Physician Manpower Study, completed an analysis which confirmed there is a justifiable community need for this recruitment

EXTERNAL FINANCIAL


LEGAL COUNSEL



10


ARCH-Kim Form A

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2011 FROM: Lisa Hudson, Director, Physician & Business Development Background: The PPH community lacks an adequate number of orthopedic physicians as verified by Medical Development Specialists, a national consulting firm that specializes in physician manpower studies. PPH has an established physician recruitment program and had allocated resources to attract additional Orthopedic surgeons to relocate to Inland North San Diego County. A PPH Physician Recruitment Agreement is being negotiated with Arch Health Partners, Inc., in order for a qualified Orthopedic surgeon, Paul Kim, M.D., to contract with Arch to establish a practice in the service area in August of 2011.

Budget Impact: None




11


Reference

Term/Condition

Term/Condition Criteria TITLE Physician Recruitment Agreement—Orthopedic

AGREEMENT DATE Start date August 18, 2011

PARTIES 1) PPH

2) Arch Health Partners, Inc. 3) Paul Kim, MD

Recitals PURPOSE Provide recruitment assistance to enable APH to recruit a

qualified orthopedic surgeon, Dr. Paul Kim, to establishment a practice in the service area.

Article 4 SCOPE OF SERVICES APH will recruit a new physician to establish a full-time orthopedic practice and participate in government-funded programs.

2.1; 2.2; 6.2; 6.4; 6.5




Article 8; 9.17






PHYSICIAN

MANPOWER STUDY Medical Development Specialists, a national consulting firm who performed our Physician Manpower Study, completed an analysis which confirmed there is a justifiable community need for this recruitment.

EXTERNAL FINANCIAL


LEGAL COUNSEL



12

June 2011 & YTD FY2011 Financial Report

Form A - Financial Report.doc

TO: Board Finance Committee MEETING DATE: Monday, July 25, 2010 FROM: Bob Hemker, CFO Background: As the June 2011 financial close has been extended to assure all FY2011 business transactions are recorded in the pre-audit financial statements, and consistent with prior year year-end closings, financial statements may not be available. As available, financial information will be presented at the meeting.

Budget Impact: N/A

Staff Recommendation: Staff recommendation will be provided at the meeting.



13

ADDENDUM A

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2011-06-27 BoD Finance Minutes.doc 1

B O A R D F I N A N C E C O M M I T T E E M E E T I N G A T T E N D A N C E R O S T E R & M E E T I N G M I N U T E S C A L E N D A R Y E A R 2 0 1 1

MEETING DATES:

MEMBERS 1/31/11 2/28/11 3/28/11 5/2/11 5/23/11 6/27/11 7/25/11 8/29/11 9/26/11 10/31/11 11/28/11

LINDA GREER, R.N. – CHAIR P P P P P P DIRECTOR KAUFMAN P P P P P P DIRECTOR YERXA P P P P P P MICHAEL COVERT, FACHE P P E P P P ROGER ACHEATEL, M.D. P E P P E E JOHN LILLEY, M.D. P P P E P P MARCELO RIVERA, MD – ALTERNATE – 2ND ALTERNATE – 3RD ALTERNATE – 4TH ALTERNATE STAFF ATTENDEES BOB HEMKER P P P P P P GERALD BRACHT P P P P P P DAVID TAM P P P P P P TANYA HOWELL – SECRETARY P P P P P P INVITED GUESTS SEE TEXT OF MINUTES FOR NAMES OF GUEST PRESENTERS

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BOARD FINANCE COMMITTEE – MEETING MINUTES – MONDAY, JUNE 27, 2011

1. AGENDA ITEM

• DISCUSSION CONCLUSION/ACTION FOLLOW UP/RESPONSIBLE PARTY FINAL?

CALL TO ORDER • The meeting – held in the first floor conference room at 456 E. Grand Avenue, Escondido, CA – was called to order at 5:01 p.m. by Chair Linda Greer, RN

ESTABLISHMENT OF QUORUM • See roster

PUBLIC COMMENTS

• There were no public comments

INFORMATION ITEM(S)

• OUTCOME OF THE NCEMA AGREEMENT o New agreement calls for ED On-Call coverage for PMC and POM, as well as

Trauma coverage at PMC o Ortho & ENT call coverage have been excluded from the NCEMA contract as they

will be shifted to Arch Health Partners (AHP) − Original 5-year agreement—which expires June 30th—also included most sub-

specialties o Progressing well on discussions and have embedded into the FY2012 budget what

we thought would be likely amounts − Term of new agreement will likely be a 3-year initial term with two 1-year

extension options o Team working on agreements and financial arrangements includes Gerald Bracht,

Bob Hemker and members of the Legal Department o Will be moving forward, as the Board has already approved the financial parameters

and agreements to be negotiated o Team feels they have obtained a successful resolution in terms of scope of

coverage o Construct of Ortho panel is responsibility of AHP to negotiate

− If the Ortho acquisition by AHP goes through, that group would become part of the panel

Information only Y

1. MINUTES – MAY 23 2011

• No discussion MOTION: By Director Yerxa, seconded by Director Kaufman and carried to approve the minutes of the May 23 2011, Board Finance Committee. All in favor, none opposed.

Y

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1. AGENDA ITEM

• DISCUSSION CONCLUSION/ACTION FOLLOW UP/RESPONSIBLE PARTY FINAL? 2. PROGRAM REVIEW – COMPREHENSIVE STROKE PROGRAM

Based on an unavoidable scheduling conflict, this topic was discussed out of agenda order, but is realigned here for ease of reading • Utilizing the presentation included in the agenda packet, Paul Patchen, Director of Interventional Services, and Gerald Bracht, CAO of Palomar Medical Center, provided an update on the program, now beginning its second year

o They also introduced Dr. Michael Rafii, the Medical Director of the Stroke Program, and Barbara Buesch, Stroke Coordinator, who were available to answer any technical questions that might arise

o Mr. Patchen apologized for his tardiness, having been conflicted due to a final walkthrough in the surgical suites at PMC-West

o Basis for original program and pro forma was the projected volumes for Neuro Interventional (NI) cases—which carry a higher DRG − Based on a full year of cases

1) Manufacturer’s conversion rate was 13%, so pared that down, deriving the volumes just from Medicare patient population, which was considered a very conservative number of cases

o Have only had 3 NI cases YTD − Contribution margin on those cases was $29K

o Original capital outlay for equipment to perform NI − Transcranial Doppler is being used elsewhere − Philips CT upgrade is used sporadically for other studies − GE Anesthesia Equipment is used for multiple cases in IR, and will follow the

program to PMC-West o If we were to look at how the equipment is being used for other services, it could

possibly be shown to have paid for itself without the conversions − Have had some patients who would have had to be transferred out of district

who can now be treated in-district because of the equipment o Dr. Rafii stated that the conversion rate was so low due to a lack of comfort level on

the part of the physicians to convert the cases − Noted that there were 6 total cases that would have been viable for the

procedure 1) 3 were done, remainder were not due to delay in referral

a) Referral must be made within a 3-hour window 2) Delayed cases have been sent to ED Peer Review

− He also noted that the future of stroke programs are moving toward this direction and the NI should become more of an accepted norm

Information only Forwarded to the July 11, 2011, Board of Directors meeting as information • A follow-up program

review is to be scheduled for NLT 1 year from now and/or before the renewal of the contract o Follow-up is to occur

earlier if anything notable is seen at the 6-month mark

N

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1. AGENDA ITEM


o There are protocols that have been developed on the referral process − There have been several meetings with IR and ED physicians, as well as with

ER physicians and Anesthesiologists − Now need to ensure the protocol is executed

o Members of the Committee asked why we would continue to pay a stipend for NI procedures if the reality was a lack of growth for the program

o Mr. Patchen stated that he will perform an early review of the FY2013 budget, as the contract does not renew until next May, so there is still time to provide another Board review prior to the renewal date

3. PHYSICIAN PROFESSIONAL SERVICES AGREEMENT – EMPLOYEE & CORPORATE HEALTH SERVICES • Wendell H. Perry, DO

o Bob Hemker referred the Committee to Pp 4-5 of the agenda packet o Request from Corporate Health in San Marcos, as a key requirement per Medicare

is the immediate availability of on-staff physician coverage

MOTION: By Director Yerxa, seconded by Director Greer and carried to recommend approval of the one-year [9/1/11 to 8/31/12] Physician Professional Services Agreement for Employee and Corporate Health Services with Wendell H. Perry, DO. All in favor, none opposed.

Forwarded to the July 11, 2011, Board of Directors meeting with a recommendation for approval

Y

4. ARCH HEALTH PARTNERS’ (AHP) REQUEST FOR ADDITIONAL CAPITAL CONTRIBUTION TO ACQUIRE ORTHOPEDIC SURGERY ASSOCIATES OF NORTH COUNTY, INC. (OSANC)

• Bob Hemker provided background in terms of PPH’s roles and responsibilities in discussion compared to AHP, which is a separate legal entity

o AHP is contemplating entering into a relationship to acquire OSANC, which is comprised of Drs. Bried, Cohen & Owsley − Discussions are centered around the acquisition of the hard assets of the

professional practice and ancillary business associated therewith, including MRI and PT

− The surgery center and the income stream it generates was not evaluated as it is not part of the discussion and will remain a separate entity 1) Specific request by both parties that it not be addressed as there is no

desire to sell that business at this time 2) Separate discussions would be required in the future regarding a change

in that plan o FMV valuation was completed by a third party on both the hard assets and the

workload units of the physician practice − Valuation was done to ensure no intangibles were included in the acquisition

(e.g., chart value or anything along those lines; also, receivables or cash are not acquired)

− Hard assets include office furniture, the MRI unit, office equipment, etc., valued

MOTION: By Director Kaufman, seconded by Director Yerxa and carried to recommend approval for the following three actions with regard to AHP’s acquisition of OSANC and the manner in which the transaction should be handled: 1) An equity transfer of $605

thousand to facilitate the hard asset acquisition of the OSANC practice, including MRI and PT, inclusive of infrastructure hard assets (e.g., IT, etc.) needed by AHP

2) A $600 thousand increase to the AHP Line of Credit (LoC), bringing the total Line of Credit to approximately $4.1 million

3) Approval for the reassignment of approximately $745 thousand of previous draws on

Forwarded to the July 11, 2011, Board of Directors meeting with a recommendation for approval To be placed on the Finance Committee Discussion agenda • Updates on AHP’s

revenue production will continue to be refreshed just like we continue to update the 10-yr financial and capital plan

Y

18

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1. AGENDA ITEM


at slightly over $400K − In addition, AHP will require about $200K of additional funding for IT assets − Total acquisition costs of about $605K

o Position PPH has taken with AHP regarding requests to provide sources of funding for acquisitions is that hard assets are deemed to be an infusion of capital/equity transfer − In exchange, PPH acquires additional net asset position in AHP as its sole

member o Working capital for start-up costs, including delays of cash realization for A/R

normalization, falls under the provisions of the Line of Credit (LoC) o Overall strategy fits within the growth strategy of AHP

− As it relates to the Orthopedics relationship, it is also in the District’s best interests to have the conversations go forward, as the proposal meets the business needs both of the District and AHP, as well as those of OSANC

− They will be paid based upon worked RVUs and MGMA rate of pay for workload

o Vicky Lister, Executive Director of AHP, stated that the group are well-known in the community with high credibility − She feels it will be a “win-win” for all, as an opportunity to grow the Ortho

service line for PPH through referrals, to add spine and hand surgery, as well as to provide access to the other subspecialists

− There is value in the interconnected relationship for all 3 entities, and it will be able to help take AHP to the next level in creating a comprehensive network

− There is not a similar competing group in North County o Michael Covert made several points

− OSANC is a group that is influential in terms of what they wanted to do, which was to move into our market place

− They generate significant business − District could use good physician support, with a need to grow with young

physicians − Also has an interest in AHP being involved with the Sharp health plan − As the new NCEMA contract becomes a reality, the extraction of Ortho Call

from that agreement and provided by AHP makes sense − In terms of potential growth, Dr. Owsley has opportunities to grow his business

o AHP will likely be back at various points in time with strategic opportunities that make sense for both entities, and whether those will make sense for PPH to fund will be evaluated on a case by case basis

o Just did 1-year assessment last month comparing to its original pro forma • AHP has determined in concert with PPH to acquire OSANC

the LoC, to be reclassified as an equity transfer in accordance with the treatment of past acquisitions related to asset purchases by AHP

19

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1. AGENDA ITEM


o At this point in its financial position, AHP must still rely upon PPH for growth resources

o PPH treats hard assets as an equity transfer, fund balance to fund balance o The ability to bring the practice up to speed is treated via LoC transfers

• This is the method utilized in the acquisition of CHC, as well as the clarification of funding with regard to ENT as reviewed and restructured at April’s meeting • This transaction involves just over $400K in acquired asset, with an additional infusion of just over $200K for IT solutions, for a total of $605K in hard asset money needs through an equity transfer • To hold our criteria and policy true, AHP had been acquiring other hard assets by drawing from the LoC as opposed to via equity transfer requests, so it is also recommended that the LoC be increased by $600K, bringing it up to a total of roughly $4.1M • Assets have grown to $1.3M as investment in AHP, and the maximum LoC receivable would be $4.1M • Additional discussion focused on previously acquired assets by AHP, primarily for IT system expansion, which were made through a draw on the existing LoC

o For consistency, it was recommended that these acquisitions be made by equity transfer funds

o It was agreed that should be the methodology and funding solutions o Thus, the funds will be re-classed as an equity transfer with no reduction in the LoC

limit

5. MAY 2011 AND YTD FY2011 FINANCIAL REPORT

• Utilizing the presentation included as Addendum C of the agenda packet, Bob Hemker presented the financial statements for May 2011 and YTD FY2011. Only select slides were presented for discussion (listed below by report page number, with any additional comments): • BSC (PG3)

o MIXED PERFORMANCE WAS ACHIEVED IN MAY o There is a negative variance in volumes, as well as higher salary and transformation

costs o Also still seeing heavy expenditure on the Clarity go-live o May turned out to be challenging, but achieved close to budgeted bottom line

performance • EXECUTIVE SUMMARY OF KEY INDICATORS MTD (PG4)

o Relatively high volume with a 276 ADC o There was a $41K loss at the bottom bottom line o YTD Net Income was positive by $689K at the bottom bottom line o YTD OEBITDA Ratio was sitting right on the edge of budget at 9.82%

MOTION: By Director Yerxa, seconded by Director Dr. Lilley and carried to recommend approval of the May 2011 and YTD FY2011 Financial Report as presented. All in favor. None opposed.

Forwarded to the July 11, 2011, Board of Directors meeting with a recommendation for approval • Will put days cash on hand covenants for bonds on the spreadsheet for the next year

Y

20

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1. AGENDA ITEM


o Cash collections were $3.3M negative against budget for May − Still targeting June cash in the $40M range, which is somewhat short of picking

up the shortfall o Days Cash on Hand is budgeted at 80 based on bond requirements

− Cash is held well over that requirement • START BALANCE SHEET (PG12)

o Cash plus Board Designated is at $183M, up $11.6M compared to last year o Current Liabilities are down $6.4M compared to last year o Routine Property Plant & Equipment is $5.5M greater than last year o Have added $233M into the CIP this year

− On a $20M/$21M pace in increase/month, consistent with FMP forecasting o General Obligation (GO) Bonds have all been spent down o As we spend down on the Revenue Bonds, will then begin utilizing cash reserves as

per Financial and Capital Plan projections • MTD INCOME STATEMENT (PG13)

o May was a challenging month o One of the largest variances was in Salary & Wages, $744K unfavorable to budget,

with IT Clarity go-live preparations contributing almost three-quarters of that variance

o Net Income was negative to budget by $179K − Accrual for incentive compensation funding—which is self-funded—was

reversed in order to achieve the small negative variance − Effectively, if we were to open the book because we met economic

performance, there would now be nothing to pay out o Property Tax Revenues had another $200K negative variance

− As tax dollars are collected by the County, they are distributed directly to the District, there are uncollected taxes building up

− On the watch list to determine effect to reserves on the GO Bonds − Annual tax levy for GO Bonds is to be set in July

• YTD INCOME STATEMENT (PG14) o Admissions are down against budget less than three-quarters of a percent o LOS has a subtle variance of 3.92 vs. 3.86 o Patient Days are driven by activity o Salaries & Wages are still favorable vs. budget by $791K o Benefits are more stable, but still negative to budget by $1.3M

− Need to review getting that under control for the next calendar year o Property Tax has a YTD negative variance to budget of $600K

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1. AGENDA ITEM


o Bottom bottom line has a positive variance to budget of $689K o Actual and budget margin percentages are within .02% of each other

• INCOME STATEMENT YEAR-ON-YEAR (PG15) o Adjusted Discharges are extremely close, up against prior year by 27 o Net Revenues are about 6.47% higher than prior year o Salaries & Wages are about 6.37% higher than prior year o Benefits are up 16.6% over prior year o Supplies are up 3% over prior year o Total Expenses are up 6.79% year-on-year o Net Income from Operations is off just under $500K from prior year o Bottom bottom line is $85K positive over prior year

• INCOME STATEMENT – FY PROJECTION o Projected Net Income is $27.6M, will probably come closer to the $27.0M budgeted

− Performance is challenging, but should be able to meet that after true-ups • BOND COVENANT RATIOS (PG27) • PAYOR MIX (PG45)

o Seeing a payor mix change for the first time, with the Medicare bucket up a little − When you look at the aggregate, governmental payors comprise 56% of total

payor mix • CASE MIX INDEX (PG 47)

o Dotted lines are reflective of last year o The 1.48 consolidated case mix index is flat year-on-year

• CASE MIX INDEX BY REGION (PG 48) o Medicare based on revenue is up o Can see where the medical acuity is higher than last year, with a spike in business

and its intensity overall o YTD with a 1.59 consolidated is pretty flat-line

• Director Yerxa inquired about the extent the switch of the NICU to Rady’s had on patient days

o Mr. Hemker referred back to Pg32, which shows the breakdown of patient days by category − Peds Med-Oncology − Peds only affects July, then it falls off − The only NICU left for PPH is at POM, which is negligible − The last two bars fall off because of that change − 800 is Med-Oncology

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1. AGENDA ITEM


• Director Greer inquired about supply costs (Pg26), specifically as related to a $41K negative variance in food costs and an $11K negative variance in Employee Apparel

o Mr. Hemker stated that the food costs were expected to go up due to crop losses o He stated that the increase in apparel costs did not appear to be abnormally high,

as those costs were usually cyclical and based on timing as to when new replacement inventory comes in, not normally smoothed out, but he will put that item on a watch list

ADJOURNMENT The meeting was adjourned at 6:39 p.m.

SIGNATURES:

COMMITTEE CHAIR

Linda Greer, RN

COMMITTEE SECRETARY

Tanya Howell

23

ADDENDUM B

24

Initiative Budget: FY11 Budgeted, capital and strategic capital budget

Budget Status: On track to achieve Target level

Initiative Status:

• All Initiatives Complete

FY11 Initiative: 1.1 (a) Grow volume in agreed upon service lines

Outcome Measure: Additional contribution margin

Milestones: 1. Recruit new specialty physicians (Vascular Surgery,

Neurosurgery, Gyn/Onc)2. Existing program expansion and new program development

via business plan development and approval (Neuro-interventional Program/Stroke, Orthopedic Alignment, Spine Center)

3. Sales and outreach to primary service area (PSA) and secondary service area (SSA)

4. Conduct focused screening at expresscare5. Physician marketing and outreach activities (CME,

Networking events, communication/education)6. Focused service line marketing

• Targeted Customer Relationship Marketing (CRM) Campaigns for strategically identified inpatient and outpatient services

• Strategic print and radio advertising• Dine with the Docs Events – 3 times/year• The HealthSource/The BabySource magazine 3 times

per year• PPH Web Strategies

Report Date: July 11, 2011Reporting Committees: Finance; EMT Finance

EMT Sponsor: Gerald BrachtInitiative Manager: Lisa Hudson

Initiative Risks:

• Contribution margin erosion is a risk due to payor mix

1Jul 10

Jun11

Outcome Measure: Actual : $4.98 million CM thru March 2011, volume only thru May is 1.7% above target.

Q4 CM not available until September but should achieve Target based on eleven month performance.

Threshold – $2.9 millionTarget – $2.9 millionMaximum - $3.2 million

Sept 10 Nov 10 Jan 11 Mar 11 May 11

7. Expansion of service line relationship with Kaiser8. Establish new specialty physicians

82 3 54 6 7

25

FY11 Initiative: 1.1(b) Grow net primary care base

Outcome Measure: Number of new Primary Care Physicians (PCP)

Initiative Status:• Graybill- recruited 2 PCP, January started, #2 for June start• Arch-recruited 2 PCP to start this summer.• PCP inventory matrix has been developed to monitor “net”

growth on a quarterly basis- Now with a net +7 primarily due to new OB/GYN inflow.

• Completed the PCP Inventory Analysis. EMT Finance approval of the new metrics for which primary care physician will be included in the ongoing net totals (including those without hospital privileging). Approval to implement FY2012.

Milestones: 1. Complete PPH FY11 PCP inventory and analysis 2. Recruit new Primary Care Physicians for

1. Arch Health Partners2. Graybill Medical Group

3. Outreach to other unaligned Primary Care Groups in the primary and secondary service area to secure additional medical staff members and referral sources

4. Outreach to existing PPH Primary care base to assess needs and retirement plans

Report Date: July 11, 2011Reporting Committees: Finance; EMT Finance

EMT Sponsor: Gerald BrachtInitiative Manager: Lisa Hudson, Robert Trifunovic,

Vicky Lister

Initiative Risks:

• Retirement of existing Primary Care medical staff due to improving economic conditions and inability in securing new recruits secondary to competitive issues with other groups.

1Jul 10 Jun11

Initiative Budget: FY 11 BudgetedBudget Status: within FY11 Budget

Outcome Measure: (Actual: net +7 PCP’s thru March ‘11 YTD)

Threshold – 2 net PCPsTarget – 3 net PCPsMaximum – 4 net PCPs


2 3 4

26

FY11 Initiative: 1.2(a) Revenue Optimization Committee (ROC) initiative

Outcome Measure: Achieve cash collection goal Initiative Status:

• Will not meet cash collection goal ($480M) by fiscal year endMilestones:

1. Establish processes to fix edits one day after posting

2. Expand CDI to include managed care business

3. Implement RAC processes

4. Improve discharge time

5. Strategic pricing

6. Reduce denials for no authorization / no eligibility

Report Date: July 11, 2011Reporting Committees: Board Finance; EMT FinanceEMT Sponsor: Bob HemkerInitiative Manager: Tim Nguyen

Initiative Risks:

• Recoupments from RAC and/or MIC• Volume fluctuations / decline capitation membership • Shift in surgical volume from IP to OP and in payer mix

1Jul 10

Jun 11

Initiative Budget: FY11 Budgeted

Budget Status: Within Budget

Outcome Measure: AnnuallyThreshold - $480M; Target - $486M; Maximum - $492MActual - $466.8MSub-initiative Outcome Measure:

1. PFS – Maintain billing edits reconciliation <$5M/Act. $2.1M2. Case Mgmt – Achieve $2M CDI budget goal/Act. $341K3. RAC – Reduce stent 1-day stay by 50%, or 60 cases/Act. 594. Case Mgmt – Improve Hospitalist Disch. by Noon to 20%/Act. 12%5. Charge Services – Complete 3 departments by FYE/Act. 3 6. Patient Access – Reduce denials 10% or 370 accts/Act. 78 %


63 52 4

27

Report Date: July 11, 2011

Reporting Committees: PPH Board Finance; PPH Foundation Board; EMT Finance

EMT Sponsor: Terry GreenInitiative Manager: Anita Fraley; Robert Sheldon;

Michelle Ellison; Carolyn Zollars;

FY11 Initiative: 1.3(a) Realize year 3 capital campaign

Outcome Measure: Capital Campaign

Initiative Status:

• Fantasy Football and Drive to the Goal completed. • IT infrastructure completed for NetCommunity Grow and

Virtual Giving. Search engine optimization underway.• PPHF Board

– 19 members seated including new directors Fred Nasseri and Harvey Hershkowitz

– Three other community leaders being vetted

• Individual table sponsorships at approximately 35%• Employee campaign at 49% participation; $1,905,435

generated to date. Year end mailing sent 6/13/11.• Physician total to date is $2.4 million. Several requests

outstanding.

Milestones: 1. Launch SD Chargers Partnership program2. Implement enhanced PPHF board development program3. Operationalize NetCommunity Grow and Virtual Giving

programs4. Launch PPHF website and ePhilanthropy social networking

components5. Increase Honorary Campaign Cabinet members to 206. Increase the ratio of individual sponsorships to vendor-

related sponsors from 10/90 to 25/75

7. Increase PPHF board membership to 208. Reach $2 million employee campaign goal with 50%

participation9. Reach $3 million physician campaign goal

Initiative Risks:

• Status of the economy• Donor and dollar commitments to other charities

1Jul 10 Jun 11

Initiative Budget: FY 2011 PPHF budget

Budget Status: Within FY11 Budget

Outcome Measure: Actual = $4,763,778

Threshold – $8,000,000Target – $11,000,000 Maximum -$15,000,000


2 3 4 756 89

28

Outcomes Measures:

Approval of Financial Term Agreement

Initiative Status:1. Completed preliminary space programming and site analysis2. Interviewed potential developers on July 19, 20103. Progress update to Board Facilities & Grounds Committee on August

9, 20104. Completed Site Visit to Sutter Rehabilitation Facility on August 23,

20105. Presented the draft financial model to the Board Finance Committee

on November 30, 20106. Update to scheduled to Facilities & Grounds Sub-Committee on

February 14, 20117. Completed Development team visit PMCW Site in February , for a

review of the master plan and scope validation8. Updated Board Finance Committee in May, related to cancellation of

meeting in April. Final Agreement reviewed.Milestones:

1. Request for Qualifications – Developer Response 2. Recommend Developer3. Present Site Alternates to Board, Facilities and Grounds4. Present Draft Financial Model - Letter of Intent5. Develop Architectural Planning6. PPH Board Review, Facilities and Grounds7. PPH Board Finance Review8. Execute Financial Term Agreement

Outcome Measure: /Actual = ThresholdApproval of Financial Term Agreement• Threshold: June 30, 2011• Target: April 30, 2011• Maximum: January 30, 2011

Report Date: July 11, 2011Reporting Committees: Finance, Facilities & Grounds;

EMT FinanceEMT Sponsor: Sheila BrownInitiative Manager: Sheila Brown/Bob Hemker/

Michael Shanahan

Initiative Risks:

• CMS Ruling regarding the moratorium on the Long Term Acute Care Hospital (LTACH) until 2013

• Environmental-Soil Analysis• Project & Site Constraints-Costs Associated

1 3Jun 11Sept 10 Nov 10 Jan 11 Mar 11 May 11July 10

2 4 5 78 6

FY11 Initiative: 3.1 (a) Determine plan for affiliations: RehabCare FY11

Initiative Budget: FY11 budgetedBudget Status: Within FY11 budget

29

FY11 Initiative: 3.1(b) Develop Satellite Facilities

Outcome Measure: Completion of Joint Venture (JV) and ground lease for Rancho Penasquitos and Ramona satellites

Initiative Status:

• Formal structure and documents with venture partner on hold pending market interest

• Soft conditions and market demand and probability of tenancy commitments – currently minimum commitments to commence project(s) not achieved

• Evaluating alternative project scopes and structures for Ramona, developing project scope based on PPH and Arch needs

– Currently, an estimated 7,600 sq ft facility is planned• Updated entitlement to be obtained based upon revised scope

Milestones:

1. Complete demand analysis for both locations and finalize size and scope of projects

2. Commence establishment of Joint Venture entities for each project including ground leases

3. Complete project scope, design and economic packages for each project

4. Obtain requisite funding commitments for each project5. Finalize Joint Venture structures and agreements6. Obtain BOD Finance Committee approval7. Obtain Board of Director approval

Report Date: July 11, 2011Reporting Committees: Board Finance; Facilities and

Grounds; EMT FinanceEMT Sponsor: Bob HemkerInitiative Manager: Bob Hemker / Sheila Brown

Initiative Risks:

• Insufficient tenant demand resulting in inability to achieve minimum sized project to achieve financial viability – Rancho Peñasquitos

• Inability of venture partner to obtain construction and/or permanent financing – Rancho Peñasquitos

1Jul 10 Jun 11

Initiative Budget:

• No operating budget impact in FY2011• Capital funds through JV entities or unallocated PPH capital

fundsBudget Status: Within budget

Outcome Measure: / Actual = Not metThreshold – JV & ground lease for 1 site by 6/30/11Target – JV & ground lease for 2 sites by 6/30/11Maximum – JV & ground lease for 2 sites by 4/30/11


4 5 632 7

30

Outcome Measure: Completion of the Integrative Medicine Business Plan identifying key physician stakeholders.

Initiative Status:1. Milestones 1-4 completed. 2. Milestone 5 in progress.3. This initiative was redefined as of 3/23/11. The Integrative

Medicine Strategy Plan was changed and taken to the Strategic Planning Committee on 6/22/11 and approved.

Milestones:

1. Initiate physician/allied health panel to gather information to assure alignment with business plan

2. Perform market analysis3. Research appropriate business model4. Investigate competitive environment and perform

SWOT analyses5. Complete program pro forma 6. Complete marketing plan7. Review final business plan with physician/allied

health panel8. Present business plan to EMT Finance

Committee for approval9. Present business plan to Board Finance

Committee for approval

Outcome Measures: Actual = Threshold

• Threshold: Integrative Medicine Plan completed by 6/30/2011• Target: Integrative Medicine Plan completed by 3/31/2011• Maximum: Integrative Medicine Plan completed by 1/31/2011

Report Date: July 11, 2011Reporting Committees: Finance; EMT FinanceEMT Sponsor: Sheila BrownInitiative Manager: Ann Koeneke/Anna Ha

Initiative Risks:

• Consumers continue to utilize free-standing wellness centers

• Minimal physician/community understanding/utilization of Integrative Medicine Services

• Strategic Direction for Integrative Medicine will focus on PPH Employees as a priority effective 3/23/11

• Resignation of Program Manager effective 4/8/2011• PPH Center for Integrative Medicine & Wellness presentation on

6/22/11 to Board Strategic Planning Committee not EMT Finance Committee

FY11 Initiative: 3.2(a) Develop services that support physician affiliations (e.g., Integrative Medicine Services)

Jul 10 Sept 10 Nov 10 Jan 11 May 11 Jun 11

1 32 4 5 6 7 8 9Initiative Budget: FY11 budgeted

Budget Status: Within FY11 budget

Mar 11

31

FY11 Initiative: 3.3(b) Increase expresscare retail health centers

Outcome Measure: Increase the number of PPHexpresscare retail health centers

Milestones: 1. Finalize site/location selections2. Partner Design Approvals3. IT/Telecommunications Site Visit 4. Kick-Off Meeting5. Finalize Furniture, Fixtures & Equipment (FFE)6. Weekly Team Meetings 7. Agency Review 8. Finalize programmatic structure9. Recruitment 10. Bidding 11. Construction12. Deliver/Install FFE13. Credentialing 14. Licensing/Occupancy15. Grand Opening Celebrations/Tours

Report Date: July 11, 2011Report Committees: Finance; EMT FinanceEMT Sponsor: Sheila BrownInitiative Managers: Michael Shanahan, Stonish Pierce

Initiative Risks:• Legal and Agency issues relative to expansion areas• Initiation of construction schedule allowed by retail partner

1-9

Jul 10 Jun 11

Outcome Measure: Actual: 0 by 6/30/2011

Threshold – 1 new center by 6/30/2011Target – 2 new centers by 4/31/2011Maximum – 3 new centers by 3/31/2011


10 11 12 13 14 15

Initiative Budget: FY11 budgeted

Budget Status: Within FY11 budgetInitiative Status:• IT/Telecommunications site visits conducted to all locations• Kick-Off Meeting complete • FFE selected • Weekly design team meetings completed • City agency reviews (to resume following program structure approval)

• Programmatic structure/recommendation complete• Recruitment (suspended-Legal issues, resume upon Board approval)• Initiative is at-risk related as result of lawsuit that delayed progress • Programmatic structure/recommendations presented to Board • June 13, 2011 Board approved direction

32

ADDENDUM C

33

PALOMAR POMERADO HEALTH

RESOLUTION NO. 08.08.11 (01) – 01

RESOLUTION OF THE BOARD OF DIRECTORS OF PALOMAR POMERADO HEALTH CONCERNING THE LEVY AND COLLECTION OF TAXES BY THE BOARD OF SUPERVISORS OF THE COUNTY OF SAN DIEGO FOR FISCAL YEAR 2011-2012 TO PAY PRINCIPAL AND INTEREST ON GENERAL OBLIGATION BONDS AND AUTHORIZING THE TAKING OF ALL ACTIONS NECESSARY IN CONNECTION THEREWITH.

WHEREAS, as authorized by a ballot measure ("Measure BB"), approved by more than two-thirds of the votes cast on such ballot measure at an election held in Palomar Pomerado Health (the "District") on November 2, 2004, the Board of Directors of the District (the "Board of Directors") is authorized to issue $496,000,000 aggregate principal amount of general obligation bonds for the purpose of financing a portion of the hospital and health care facilities projects as referenced and described in Measure BB;

WHEREAS, in accordance with the provisions of The Local Health Care District Law of the State of California (constituting Division 23 of the California Health and Safety Code) (the "Local Health Care District Law"), the District issued $80,000,000 aggregate principal amount of such general obligation bonds, designated as "Palomar Pomerado Health General Obligation Bonds, Election of 2004, Series 2005A" (the "Series 2005A Bonds") on July 7, 2005;

WHEREAS, in accordance with the provisions of The Local Health Care District Law of the State of California (constituting Division 23 of the California Health and Safety Code) (the "Local Health Care District Law"), the District issued $241,083,318.80 aggregate principal amount of such general obligation bonds, designated as "Palomar Pomerado Health General Obligation Bonds, Election of 2004, Series 2007A" (the "Series 2007A Bonds") on December 20, 2007;

WHEREAS, in accordance with the provisions of The Local Health Care District Law of the State of California (constituting Division 23 of the California Health and Safety Code) (the "Local Health Care District Law"), the District issued $110,000,000 aggregate principal amount of such general obligation bonds, designated as "Palomar Pomerado Health General Obligation Bonds, Election of 2004, Series 2009A" (the "Series 2009A Bonds") on March 18, 2009;

WHEREAS, in accordance with the provisions of The Local Health Care District Law of the State of California (constituting Division 23 of the California Health and Safety Code) (the "Local Health Care District Law"), the District issued $64,916,678.80 aggregate principal amount of such general obligation bonds, designated as "Palomar Pomerado Health General Obligation Bonds, Election of 2004, Series 2010A" (the "Series 2010A Bonds") on November 18, 2010;

WHEREAS, as provided by the Local Health Care District Law, principal and interest on the Series 2005A, 2007A, 2009A and 2010A Bonds as the same becomes due are payable from the levy and collection of ad valorem taxes within the District;

WHEREAS, pursuant to Section 32312 of the Local Health Care District Law, the Board of Supervisors of the County of San Diego (the "Board of Supervisors of the County") is required to levy and collect annually each year until the Series 2005A, 2007A, 2009A and 2010A Bonds are paid a tax sufficient to pay the principal of and interest on such Series 2005A, 2007A, 2009A and 2010A Bonds as the same becomes due and payable;

WHEREAS, in order to facilitate the levy and collection of such ad valorem taxes by the Board of Supervisors of the County as provided in Section 32312 of the Local Health Care District Law,

34

the Board of Directors hereby notifies the Board of Supervisors of the County that principal and interest on the Bonds in the amount of $13,783,350 will become due and payable during the fiscal year commencing July 1, 2011, and ending June 30, 2012;

WHEREAS, the Board of Directors has been advised that the total net secured assessed valuation of the District is now estimated at $60,452,607,012 full value; and,

WHEREAS, also in order to facilitate the levy and collection of such ad valorem taxes by the Board of Supervisors of the County as provided in Section 32312 of the Local Health Care District Law, a rate of taxation of TBD

NOW, THEREFORE, BE IT RESOLVED THAT:

on each one hundred thousand dollars' valuation of taxable property (full value) within the District for fiscal year commencing July 1, 2011, and ending June 30, 2012, is hereby established;

Section 1. Recitals. The foregoing recitals are true and correct, and this Board of Directors so finds and determines.

Section 2. Further Authorization; Ratification of Actions. The Chair of the Board of Directors, any member of the Board of Directors, the President and Chief Executive Officer of the District or any designee of the President and Chief Executive Officer of the District or the Chief Financial Officer of the District or any designee of the Chief Financial Officer of the District (each, an "Authorized District Representative") is hereby authorized and directed, for and in the name of and on behalf of the District, to do any and all things and to execute and deliver any and all documents, instruments and certificates, and to enter into any and all agreements, which such Authorized District Representative may deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this Resolution. All such actions heretofore taken by any such Authorized District Representative are hereby ratified, confirmed and approved.

Section 3. Effective Date. This Resolution shall take effect from the date of adoption hereof.

PASSED AND ADOPTED by the Board of Directors of Palomar Pomerado Health on the 8th

AYES:

day of August, 2011, by the following vote:

NOES:

ABSENT:

ABSTAINING:

DATED: August 8, 2011

BY: ______________________________ T.E. Kleiter Chair, Board of Directors ATTESTED:

______________________________ Jerry Kaufman, PT MA Secretary, Board of Directors

35

STATE OF CALIFORNIA ) )ss COUNTY OF SAN DIEGO )

I, Jerry Kaufman, PT MA, the Secretary of Palomar Pomerado Health (the "District"), do hereby certify that the foregoing is a true copy of a resolution adopted by the District on August 8, 2011, at the time and by the vote stated above, which resolution is on file in the office of the District.

DATED: August 8, 2011

______________________________ Jerry Kaufman, PT MA Secretary, Board of Directors

36

ADDENDUM D

37

38

tlhd

Stamp

RESOLUTION NO. 08.08.11(02) – 02

RESOLUTION OF THE BOARD OF DIRECTORS OF PALOMAR POMERADO HEALTH

ESTABLISHING APPROPRIATIONS LIMIT OF THE DISTRICT FOR THE FISCAL YEAR JULY 1, 2011 - JUNE 30, 2012

PURSUANT TO ARTICLE XIII(B) OF THE CALIFORNIA CONSTITUTION _____________________________________________________________________

WHEREAS, Government Code Section 7910 requires that each year the Board of

Directors of this District shall, by resolution, establish the District’s appropriations limit for the following fiscal year pursuant to Article XIII (B) of the California Constitution; and

WHEREAS, for not less than fifteen days prior to this meeting the documentation attached hereto as Exhibit “A” used in the determination of the appropriations limit has been available to the public in accordance with Government Code 7910.

NOW THEREFORE, IT IS HEREBY RESOLVED by the Board of Directors as follows:

Section 1. The appropriations limit of Palomar Pomerado Health for fiscal year July 1, 2011 - June 30, 2012, pursuant to Article XIII(B) of the California Constitution is hereby established at $64,397,770.

Section 2. This resolution is effective immediately upon its adoption by the Board of Directors.

PASSED AND ADOPTED at the meeting of the Board of Directors of Palomar Pomerado Health, held August 8, 2011, by the following votes:

AYES:

NOES:

ABSENT:

ABSTAINING: ATTEST: ________________________________ T.E. Kleiter Chair ______________________________ Jerry Kaufman, PT MA Secretary

39

2010/2011 APPROPRIATIONS LIMIT $62,334,753

PRICE FACTOR 2.51% = 1.0251

-- OR --

CHANGE IN LOCAL ASSESSMENT ROLL DUE TO NON-RESIDENTIAL NEW CONSTRUCTION -22.87%

-- AND --

POPULATION FACTOR 0.78% = 1.0078

CALCULATION OF FACTOR FOR FY 2011/12 1.0251 x 1.0078 = 1.0331

$62,334,753 x 1.0331 = $64,397,770

2011/2012 APPROPRIATIONS LIMIT $64,397,770

EXHIBIT "A"

PALOMAR POMERADO HEALTHAPPROPRIATIONS LIMIT

2011/2012

40

NARRATIVE ON THE RECENT HISTORY OF TAXATION

Palomar Pomerado Health has two types of property taxes available as follows:

SPECIAL ASSESSMENT FOR GENERAL OBLIGATION BONDS

The taxes necessary to pay the interest and principal for Election of 2004, Series 2005A, 2007A,2009A and 2010A, Palomar Pomerado Health General Obligation Bonds that were approved by atwo thirds majority of the voters in November, 2004. These tax revenues are restricted for thespecific purpose of the election campaign of 2004.

OTHER PROPERTY TAXES

A tax equal to 1% of the full cash value of property is levied each fiscal year by the countyand distributed to governmental agencies within the county according to a formula mandatedby the state legislature. (California Constitution Article XIII(A); Revenue and Taxation CodeSection 97). The state legislature and the county place no restrictions on the tax moniesgranted to local government agencies, such as Palomar Pomerado Health. (Part 0.5,Division 1 of the Revenue and Taxation Code.) Since these tax revenues are unrestricted, it isnot necessary to inform the public regarding the intended use of the funds.

The following is a schedule reflecting our total tax revenues by fiscal year for the pastthirty-four years.

Total Restricted for Fiscal Received Bond Interest Increase (Decrease) Year Cash Basis & Principal Unrestricted $ %

1977/78 $2,460,384 $445,211 $2,015,173 ------- -------1978/79 1,513,554 518,736 994,818 (1,020,355) -50.63%1979/80 1,621,350 428,585 1,192,765 $197,947 19.90%1980/81 1,914,882 458,941 1,455,941 263,176 22.06%1981/82 2,157,298 425,948 1,731,350 275,409 18.92%1982/83 2,245,799 431,669 1,814,130 82,780 4.78%1983/84 2,453,236 454,544 1,998,692 184,562 10.17%1984/85 2,618,899 429,139 2,189,760 191,068 9.56%1985/86 2,922,025 400,336 2,521,689 331,929 15.16%1986/87 3,325,080 476,027 2,849,053 327,364 12.98%1987/88 3,590,335 415,348 3,174,987 325,934 11.44%1988/89 4,009,992 389,724 3,620,268 445,281 14.02%1989/90 4,644,106 451,969 4,192,137 571,869 15.80%1990/91 4,898,609 404,912 4,493,697 301,560 7.19%1991/92 5,305,810 435,226 4,870,584 376,887 8.39%1992/93 5,230,679 455,415 4,775,264 (95,320) -1.96%1993/94 5,405,901 429,917 4,975,984 200,720 4.20%1994/95 5,589,446 422,427 5,167,019 191,035 3.84%1995/96 5,604,306 452,813 5,151,493 (15,526) -0.30%1996/97 5,641,183 473,160 5,168,023 16,530 0.32%1997/98 5,862,721 358,706 5,504,015 335,992 6.50%1998/99 5,915,399 0 5,915,399 411,384 7.47%1999/00 6,432,482 0 6,432,482 517,083 8.74%2000/01 7,061,136 0 7,061,136 628,654 9.77%2001/02 7,693,200 0 7,693,200 632,064 8.95%2002/03 8,391,961 0 8,391,961 698,761 9.08%2003/04 9,077,863 0 9,077,863 685,902 8.17%2004/05 10,180,831 0 10,180,831 1,102,968 12.15%2005/06 20,853,221 9,303,843 11,549,378 1,368,547 13.44%2006/07 23,604,928 11,040,737 12,564,191 1,014,813 8.79%2007/08 25,130,428 11,730,239 13,400,189 835,998 6.65%2008/09 25,440,143 11,975,665 13,464,478 64,289 0.48%2009/10 24,580,410 11,621,467 12,958,943 (505,535) -3.75%2010/11 27,616,427 14,995,884 12,620,543 (338,400) -2.61%

From Prior Year (Unrestricted)

41

ADDENDUM E

42

I. PURPOSE:

A. This Statement of Investment Policy sets forth the investment guidelines for all Palomar Pomerado Health ("PPH ") investments purchased after March 1, 1996. The purpose of this policy is to ensure that PPH's funds are prudently invested according to the Board of Director's objectives to preserve capital, provide necessary liquidity and to achieve a market-average rate of return through economic cycles.

B. PPH may invest any portion of surplus funds of its Treasury that is not required for the immediate needs of PPH ("Investable Funds"), subject to the requirements of the California Government Code and this policy. If the provisions of the Government Code are or become more restrictive than those contained herein, such provisions shall govern, and are deemed incorporated into this policy upon taking effect.

C. Government Code Section 53600 et seq., authorizes local agencies to make investments in specified vehicles with money in a sinking fund of, or surplus money in, its treasury not required for the immediate needs of the agency.

D. Palomar Pomerado Health is a "local agency" subject to the provision of Government Code Section 53600 et seq., which recommends that Palomar Pomerado Health Board of Directors to annually adopt a statement of its investment policy, and to consider any delegation of authority to make investments on its behalf of the Chief Financial Officer.

E. The Board of Directors of Palomar Pomerado Health now desires to formally adopt this statement of investment policy, and to re-delegate to the Chief Financial Officer responsibility for all decisions regarding the sale or purchase of individual investments on behalf of PPH.

F. The Palomar Pomerado Health Chief Financial Officer is delegated responsibility for all decisions regarding the sale or purchase of individual investments on behalf of Palomar Pomerado Health.

II. DEFINITIONS:

A. Safety of Principal. Safety of principal is the foremost objective of PPH. The safety and risk associated with an investment refers to the potential loss of principal, interest or a combination of these amounts. Each investment transaction shall seek to ensure that capital losses are avoided, whether from institutional default, broker-dealer default, or erosion of market value of securities. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio.

B. Liquidity. Liquidity is the second most important objective of PPH. Liquidity refers to the ability to "cash in" at any moment in time with a minimal chance of losing some portion of principal or interest. Liquidity is an important investment quality especially when the need for unexpected funds occasionally occurs. The investment portfolio shall remain sufficiently liquid to enable PPH to meet all operating requirements that might be reasonably anticipated.

C. Yield. Yield is the potential dollar earnings an investment can provide; it is sometimes described as the rate of return. Within the limits of safety and liquidity, PPH shall strive toward portfolio growth that exceeds the rate of inflation in order to preserve capital.

III. TEXT / STANDARDS OF PRACTICE:

A. Delegation Of Authority To Chief Financial Officer; Procedures To Implement Investment Policy 1. Delegation of authority to Chief Financial Officer: The PPH Chief Financial Officer is delegated responsibility for all

decisions regarding the sale or purchase of individual investments on behalf of PPH. This delegation shall be reviewed annually by the Board through the Finance Committee. Any re-delegation shall be recorded in the minutes of these

Palomar Pomerado Health Policy

ANNUAL ADOPTION OF STATEMENT OF INVESTMENTBoard of Directors Policies FIN-11 (Rev: 3)Draft

Applicable to: Affected Departments:

Page 1 of 2ANNUAL ADOPTION OF STATEMENT OF INVESTMENT

7/13/2011https://www.lucidoc.com/cgi/doc-gw.pl?ref=pphealth:27092$3/frame/DOCBODY43

meeting. No person may engage in an investment transaction except as provided under the terms of this policy and any other procedures established by the Chief Financial Officer. The Chief Financial Officer shall be responsible for all actions undertaken and shall establish a system of controls to regulate the activities of subordinate officials.

B. This policy will be reviewed and updated as required or at least every year. C. Document History:

1. Original Document Date: 7/14/95; Revision Number: 1 Dated: 6/06 2. Prior to 2006, this Policy was Board Policy 10-513

IV. ADDENDUM:

V. DOCUMENT / PUBLICATION HISTORY: (template)

VI. CROSS-REFERENCE DOCUMENTS:(template)

Paper copies of this document may not be current and should not be relied on for official purposes. The current version is in Lucidoc at .

https://www.lucidoc.com/cgi/doc-gw.pl?ref=pphealth:27092$3

Revision Number

Effective Date Document Owner at Publication Description

(this version) 3

Bob Hemker, Chief Financial Officer Annual review for Board of Directors - no revision necessary; Signatory changed to current Board Chair T.E. Kleiter; Effective date of Board Governance Committee approval for previous revision was actually October 19, 2010 - final signature in Lucidoc makes it appear to have been approved in 2011

(Changes) 2 07/13/2011 Bob Hemker, Chief Financial Officer Clarification of language(Changes) 1 02/11/2008 Bob Hemker, Chief Financial Officer Effective date of Board approval of

this revision (2/11/08) was incorrectly entered as 11/14/07. [Reviewed on 9/1/2009 by Bob Hemker: Extended review to 9/1/2010]

(Changes) 0 11/14/2007 James Neal, Director of Corporate Integrity Updated by the board review

Authorized Promulgating Officers: ( unsigned ) Bob Hemker, Chief Financial Officer ( unsigned ) Janine Sarti, General Counsel ( unsigned ) Ted Kleiter, Chairman, Board of Directors

Reference Type Title Notes

Page 2 of 2ANNUAL ADOPTION OF STATEMENT OF INVESTMENT

7/13/2011https://www.lucidoc.com/cgi/doc-gw.pl?ref=pphealth:27092$3/frame/DOCBODY44

board finance committee meeting

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