hood memorial hospital basic financial statements …€¦ · cash and cash equivalents at end of...

HOOD MEMORIAL HOSPITAL

BASIC FINANCIAL STATEMENTS

AND INDEPENDENT AUDITOR'S REPORT

YEARS ENDED SEPTEMBER 30, 2007 AND 2006

Under provisions of state law, this report is a puoiicdocument Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

/Release Date

HOOD MEMORIAL HOSPITAL

TABLE OF CONTENTS

Page

Independent Auditor's Report 1

Management's Discussion and Analysis (required supplementary information) 2-4

Balance Sheets 5

Statements of Revenue, Expenses, and Changes in Net Assets 6

Statements of Cash Flows 7-8

Notes to Financial Statements 9-16

Other Report

Independent Auditor's Report on Internal Control Over Financial Reporting andOn Compliance and Other Matters Based on an Audit of Financial StatementsPerformed in Accordance With Government Auditing Standards 17

Schedule of Findings 19Schedule of Prior Year Findings 20

BEVERLY A. RYALLCertified Public Accountant

INDEPENDENT AUDITOR'S REPORT

Board of CommissionersHood Memorial Hospital

Hospital Service District No. 2 ofTangipahoa Parish, Louisiana

I have audited the accompanying financial statements of Hood Memorial Hospital (the Hospital - HospitalService District No. 2 of Tangipahoa Parish, a component unit of Tangipahoa Parish, Louisiana) as of and forthe years ended September 30, 2007 and 2006, as listed in the table of contents. These financial statementsare the responsibility of the Hospital's management. My responsibility is to express an opinion on thesefinancial statements based on my audit.

I conducted my audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issuedby the Comptroller General of the United States of America. Those standards require that I plan and performthe audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. I believethat my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of Hood Memorial Hospital as of September 30, 2007 and 2006, and the respective changesin financial position and cash flows for the years then ended in conformity with accounting principlesgenerally accepted in the United States of America.

The Management's Discussion and Analysis as listed in the table of contents is not a required part of thebasic financial statements but is supplementary information required by the Governmental AccountingStandards Board. I have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods of measurement and presentation of the required supplementaryinformation. However, I did not audit the information and express no opinion on it.

In accordance with Government Auditing Standards, I have also issued my report dated March 17, 2008 onmy consideration of the Hospital's internal control over financial reporting and on my tests of its compliancewith certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose ofthat report is to describe the scope of my testing of internal control over financial reporting and complianceand the results of that testing, and not to provide an opinion on the internal control over financial reporting oron compliance. That report is an integral part of an audit performed in accordance with Government AuditingStandards and should be considered in assessing the results of my audit.

Beverly A. Hycdl

Certified Public AccountantMarch 17, 2008

7426 President Drive, Baton Rouge, LA 70817 - (225) 752-51471

HOOD MEMORIAL HOSPITALAMITE, LOUISIANA

MANAGEMENT'S DISCUSSION AND ANALYSISSEPTEMBER 30, 2007

This section of the Hospital's annual financial report presents our discussion and analysis of theHospital's financial performance during the fiscal year that ended September 30, 2007. Please readthis document in conjunction with the Hospital's financial statements.

FINANCIAL HIGHLIGHTS

• The Hospital's total assets decreased by $233,705 over the course of this year's operations.• The Hospital's assets exceeded its liabilities at September 30, 2007 by $6,393,908 or a

decrease of $124,775 as a result of this year's operations.• The net patient service revenue decreased by $79,784 to $5,977,12 from the prior year's net

patient service revenue of $6,050,896.• The Hospital's cash and investments decreased by $205,908 from the prior year.

OVERVIEW OF THE FINANCIAL STATEMENTS

These financial statements consist of two sections-Management's Discussion and Analysis, requiredsupplementary information, and the basic financial statements (including the notes to the financialstatements).

BASIC FINANCIAL STATEMENTS

The basic financial statements include government-wide financial statements that provide both long-term and short-term information about the Hospital's overall financial status. The statements includethe Balance Sheet; the Statement of Revenues, Expenses, and Changes in Net Assets; and theStatement of Cash Flows.

The Balance Sheet and the Statement of Revenues, Expenses, and Changes in Net Assets include allrestricted and unrestricted assets and liabilities using the accrual basis of accounting. All of thecurrent year's revenues and expenses are taken into account regardless of when cash is received orpaid. These statements report the Hospital's net assets and the changes in them. The differencebetween total assets and total liabilities is net assets and may provide a useful indicator of whether thefinancial position of the Hospital is improving or deteriorating.

The Statement of Cash Flows reports cash receipts, cash payments, and net changes in cash resultingfrom operations, investing, and financing activities. The cash flow statement is prepared using thedirect method and includes the reconciliation of operating income (loss) to net cash provided (used) byoperating activities as required by GASB 34.



FINANCIAL ANALYSIS OF THE HOSPITAL

Balance SheetsSeptember 30

2007 2006Current assets $3,382,007 $2,752,698Capital assets, net 2,009,153 2,254,778Other assets, including assets

whose use is limited 2,016,278 2,103,367Total assets $6,877,138 $7,110,843

Current liabilities $ 448,705 $ 424,180Capital lease obligation, less current portion 34,525 167,980Total liabilities $ 483,230 $ 592,160

Net assetsInvested in capital assets, net of related debt $1,841,173 $1,960,471Unrestricted net assets 4,552,735 4,558,212

Total net assets $6,393,908 $6,518,683

Net assets of the Hospital decreased by $124,775 from the prior year or a 1.91% decrease.

Changes in Net AssetsYear ended September 30

2007 2006Revenues

Operating $6,132,714 $6,286,576Nonoperating 293,037 205,668

Total revenues 6,425,751 6,492,244

ExpensesOperating 6,550,526 6,368,928Total expenses 6,550,526 6,368,928

Increase (decrease) in net assets (124,775) 123,316

Net assets-beginning of year 6,518,683 6,395,367

Net assets-end of year $6,393,908 $6,518,683

Total revenues decreased by $66,493 from the previous year or a 1% decrease. Expenses increased by$181,598 from the prior year or a 3% increase.



Capital Assets

At September 30, 2007, the Hospital had invested $2,009,153 in a broad range of property andequipment.

Capital Assets at Year-endNet of Depreciation

2007 2006Land $ 87,893 $ 87,893Building and improvements 1,290,118 1,382,298Equipment 631,142 784,587Total $2,009,153 $2,254,778

The Hospital had equipment additions of $76,215 during the fiscal year.

Debt-Capital Lease Obligation

At September 30, 2007, the Hospital owed $167,980 for a capital lease obligation. At September 30,2006, the Hospital owed $294,307 for a capital lease obligation.

CONTACTING THE HOSPITAL'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, customers, investors and creditorswith a general overview of the Hospital's finances and to demonstrate the Hospital's accountability forthe money it receives. If you have questions about this report or need additional financial information,contact Mr. Claude Jones, Jr., Hospital Administrator, (985) 748-9485.

HOOD MEMORIAL HOSPITALBALANCE SHEETSSEPTEMBER 30, 2007 AND 2006

2007

ASSETS

CURRENT ASSETSCash and cash equivalentsPatient accounts receivable, net of estimated

uncollectibles of $175,000 in 2007and $175,000 in 2006

Amounts due from Medicare and Medicaid intermediariesInventoriesPrepaid expenses

Total current assets

ASSETS WHOSE USE IS LIMITEDBoard designated funds

InvestmentsAccrued interest receivable

Total noncurrent assets whose use is limited

PROPERTY AND EQUIPMENT, net

OTHER ASSETS

Total assets

$ 780,068

1,395,747928,683230,925

46,5843,382,007

1,434,15444,699

1,478,853

2,009,153

7,125

$ 6,877,138

2006

$ 323,261

1,520,040721,187161,20427,006

2,752,698

2,096,8694,374

2,101,243

2,254,778

2,124

$ 7,110,843

LIABILITIES AND NET ASSETS

CURRENT LIABILITIESAccounts payableAccrued salaries and related costsReserve for estimated claimsAmounts due to Medicare and Medicaid intermediariesCurrent portion of capital lease obligation

Total current liabilities

CAPITAL LEASE OBLIGATION, less current portionTotal liabilities

NET ASSETSInvested in capital assets, net of related debtUnrestricted net assets

Total net assets

Total liabilities and net assets

184,76535,39725,00070,088133,455448,705

34,525483,230

1,841,1734,552,7356,393,908

$ 6,877,138

175,88626,02225,00070,945126,327424,180

167,980592,160

1,960,4714,558,2126,518,683

$ 7,110,843

See accompanying notes to financial statements.

HOOD MEMORIAL HOSPITALSTATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSYEARS ENDED SEPTEMBER 30, 2007 AND 2006

2007 2006OPERATING REVENUES

Net patient service revenue (net of bad debtsof $1,068,020 in 2007 and $601,581 in 2006)

OtherTotal operating revenues

OPERATING EXPENSESSalariesEmployee benefitsSupplies, food, drugs, linenProfessional feesPurchased ancillaryDepreciationOtherMaintenanceTelephone and utilitiesInsurance

Total operating expenses

Operating loss

NONOPERATING REVENUES (EXPENSES)Investment incomeJoint venture incomeGrantsUnrealized (loss) gain on investmentsInterest expense-capital lease

Total nonoperating revenues (expenses)

Increase (decrease) in net assets

Net Assets beginning of the year

Net Assets end of the year

5,971,112161,602

6,132,714

2,858,403545,611955,762

1,078,450296,285321,840

30,976130,380181,430151,389

6,550,526

(417,812)

126,732152,40529,107(2,169)

(13,038)293,037

(124,775)

6,518,683

$ 6,393,908

6,050,896235,680

6,286,576

2,783,717507,207969,137

1,035,554271,150352,750

30,932116,396176,601125,484

6,368,928

(82,352)

107,23690,76335,125(7,670)

(19,786)205,668

123,316

6,395,367

$ 6,518,683


HOOD MEMORIAL HOSPITALSTATEMENTS OF CASH FLOWSYEARS ENDED SEPTEMBER 30, 2007 AND 2006

2007 2006Cash flows from operating activities

Cash received from patients and other third-party payers $ 5,887,052 $ 5,817,038Cash paid to employees and for employee-related costs (3,394,639) (3,282,471)Cash payments for supplies, services, other operating expenses (2,910,093) (2,673,009)Other receipts from operations 161,602 235,680

Net cash provided by operating activities (256,078) 97,238

Cash flows from noncapital financing activitiesNoncapital grants 29,107 35,125

Net cash provided by noncapital financing activities 29,107 35,125

Cash flows from capital and related financing activitiesPurchases of property and equipment (76,215) (115,362)Joint venture income 152,405 90,763Principal payments on capital lease obligation (126,327) (119,579)Interest payments on capital lease obligation (13,038) (19,786)

Net cash used by capital and related financing activities (63,175) (163,964)

Cash flows from investing activitiesInvestment income 86,407 108,318Purchases of assets whose use is limited (1,100,395) (144,396)Proceeds from maturities of assets whose use is limited 1,760,941 114,140

Net cash provided by investing activities 746,953 78,062

Net increase (decrease) in cash and cash equivalents 456,807 46,461

Cash and cash equivalents at beginning of year 323,261 276,800

Cash and cash equivalents at end of year $ 780,068 $ 323,261

See accompanying notes to financial statements.7

HOOD MEMORIAL HOSPITALSTATEMENTS OF CASH FLOWSYEARS ENDED SEPTEMBER 30, 2007 AND 2006

2007 2006Reconciliation of operating income (loss) to net cash

provided (used) by operating activities

Operating loss

Adjustments to reconcile operating income to net cashflows used in operating activities

DepreciationChanges in operating assets and liabilities

Patient accounts receivableEstimated third-party payor settlementsInventoryPrepaid expensesOther assetsAccounts payable, accrued salaries and related

costs and other accrued expenses

Net cash used in operating activities

$ (417,812)

321,840

124,293(208,353)(69,721)(19,578)

(5,001)

18,254

$ (256,078)

$ (82,352)

352,750

(109,189)(124,669)

17,001(335)

2,125

41,907

97,238

Noncash Investing, Capital and Financing Activities

Increase (decrease) in fair market value of investments (2,169) (7,670)


HOOD MEMORIAL HOSPITALNOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

Hood Memorial Hospital (the Hospital) is a nonprofit organization created by the Tangipahoa Parish Council (asHospital Service District No. 2 of Tangipahoa Parish, Louisiana), on November 17, 1964 (re-created on October19, 1965) under the provisions of Chapter 10 of Title 46 of the Louisiana Revised Statutes of 1950 and is exemptfrom federal and state income taxes. The governing authority of the District is the Tangipahoa Parish Counciland accordingly, appoints members to the Hospital Board. The Board exercises all administrative functions withrespect to the operation and management of the Hospital.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differ from these estimates.

Basis of Accounting

The Hospital reports in accordance with accounting principles generally accepted in the United States asspecified by the American Institute of Certified Public Accountants' Audits of Providers of Health Care Servicesand, as a governmental entity, also reports in accordance with accounting principles promulgated by theGovernmental Accounting Standards Board ("GASB").

The Hospital uses enterprise fund accounting. Revenues and expenses are recognized on the accrual basis usingthe economic resources measurement focus. Based on Governmental Accounting Standards Board (GASB)Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental EntitiesThat Use Proprietary Fund Accounting, the Hospital has elected to apply the provisions of all relevantpronouncements of the Financial Accounting Standards Board (FASB), including those issued after November30, 1989, that do not conflict with or contradict GASB pronouncements.

Cash and Cash Equivalents

Cash and cash equivalents include investments in highly liquid instruments with an original maturity of threemonths or less, excluding amounts whose use is limited by board designation.

Investments and Investment Income

All investments are stated at fair market value based on quoted market prices. Interest and gains and losses, bothrealized and unrealized, on investments are included in nonoperating revenue when earned.

Patient Accounts Receivable

Patient accounts receivable are reported at their outstanding unpaid balance adjusted for any write-offs and theallowance for doubtful accounts. Interest income is not accrued on any unpaid balances.

Accounts are considered past due at the time that the balance is 30 days delinquent. Accounts are written offwhen no payment has been received on the account for 120 days.


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Allowance for Doubtful Accounts

The allowance for doubtful accounts is established as losses are estimated to have occurred through a provisionfor doubtful accounts charged to earnings. Losses are charged against the allowance when management believesthe uncollectibility of an account is confirmed. Subsequent recoveries, if any, are credited to the allowance.

Inventories

Inventories are valued at the latest invoice price. This method approximates the lower of cost (first-in, first-outmethod) or market.

Assets Whose Use Is Limited

Assets whose use is limited include assets set aside by the Board of Commissioners for future capitalimprovements (over which the Board retains control and may at its discretion subsequently use for otherpurposes).

Property and Equipment

The Hospital records all property and equipment acquisitions at cost. Depreciation is provided over theestimated useful life of each class of depreciable asset and is computed on the straight-line method as follows:

Buildings and land improvements 10-40 yearsFixed equipment 20 yearsMajor movable equipment 5-20 years

Net Assets

The Hospital's net assets are classified into three components: invested in capital assets, net of related debt;restricted; and unrestricted. These components are defined as follows:

Invested in capital assets, net of related debt - This component reports capital assets, includingrestricted capital assets, net of accumulated depreciation, and reduced by the outstanding balances ofany borrowings that are attributable to the acquisition, construction, or improvement of those assets.

Restricted - This component reports those net assets with externally imposed constraints on their use bycreditors (such as through debt covenants), grantors, contributors, or laws or regulations of othergovernments or constraints imposed by law through constitutional provisions or enabling legislation.

Unrestricted - This component reports net assets that do not meet the definition of either of the othertwo components, "restricted" or "invested in capital assets.

Operating Revenues and Expenses

The Hospital's statement of revenues, expenses and changes in net assets distinguishes between operating andnonoperating revenues and expenses. Transactions deemed by management to be ongoing, major or central tothe provision of health care services are reported as operating revenues and expenses. All peripheral orincidental transactions are reported as a component of nonoperating revenues.

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED

Compensated Absences

The Hospital does not permit employees to accumulate vacation time. Generally, any days not used at year-endexpire.

Net Patient Service Revenues and Related Receivables

The Hospital has agreements with third-party payors that provide for payments to the Hospital at amountsdifferent from its established rates. Net patient service revenues are reported at the estimated net amountsrealizable from patients, third-party payors, and others for services rendered, including estimated retroactiveadjustments under reimbursement agreements. Retroactive adjustments are accrued on an estimated basis in theperiod the related services are rendered and adjusted in future periods as final settlements are determined.

Free Care

The Hospital did not provide free care during the years ended September 30, 2007 and 2006.

Self-Insured Medical Claims

The Hospital is self-insured for employee medical claims up to predetermined stop-loss amounts. Claims inexcess of the stop-loss amounts are insured through a commercial insurance carrier. Management accrues itsbest estimate of probable claim amounts incurred but not reported based on its previous loss experience.

Reclassifications

The prior-year financial statements have been reclassified to conform to their current-year presentation.

2. CASH AND INVESTMENTS

The composition of assets whose use is limited (board designated funds) at September 30, 2007 and 2006 is setforth below:

2007 2006Certificates of depositU. S. Government agency obligationsMoney market fundAccrued interest receivable

Total carrying value (at fair value)

$1,100,385270,482

63,27744,699

$1,478,853

$1,500,481428,412167,967

4,374

$2,101,243

Louisiana state statutes authorize the Hospital to invest in obligations of the U. S. Treasury and other Federalagencies, certificates of deposit of state banks and national banks having their principal office in the State ofLouisiana, guaranteed investment contracts issued by a financial institution having one of the two highest ratingcategories published by Standard & Poor's or Moody's, and mutual or trust funds registered with the Securitiesand Exchange Commission (provided the underlying investments of these funds meet certain restrictions).Statutes also require that all of the deposits of the Hospital be protected by insurance or collateral. The marketvalue of collateral pledged must equal or exceed 100% of the deposits not covered by insurance.

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2. CASH AND INVESTMENTS CONTINUED

As of September 30, 2007, the balances reported by financial institutions for cash, certificates of deposit andmoney market accounts totaled $2,136,846. Of the $2,136,846, $263,277 was covered by federal depositoryinsurance (GASB Category 1) and $1,873,569 was collateralized with securities held by the pledging bank in theHospital's name (GASB Category 2).

As of September 30, 2006, the balances reported by financial institutions for cash, certificates of deposit andmoney market accounts totaled $2,140,546. Of the $2,140,546, $467,967 was covered by federal depositoryinsurance (GASB Category 1) and $1,672,579 was collateralized with securities held by the pledging bank in theHospital's name (GASB Category 2).

The Hospital's investments are categorized to give an indication of the level of risk assumed at year end.Category (1) is intended to include investments that are insured or registered and for which the securities areheld by the Hospital or its agent in the Hospital's name. Category (2) includes uninsured or unregisteredinvestments for which the securities are held by the counterparty's trust department or agent in the Hospital'sname. Category (3) includes uninsured and unregistered investments for which the securities are held by thecounterparty or by its trust department or agent, but not in the Hospital's name.

Balances at September 30, 2007

Securities Type

U. S. Government agency obligationsCertificates of depositMoney market fundTotal Investments

1

100,00063,277

$ 163,277

Credit Risk Category2

$ 270,4821,000,395

$1,270,877

Balances at September 30, 2006

Securities Type

U. S. Government agency obligationsCertificates of depositMoney market fundTotal Investments

1

100,000167,967

$ 267,967

Credit Risk Category2

$ 428,4211,400,481

$1,828,902

3. NET PATIENT SERVICE REVENUE

Prior to April 1, 2003, service rendered to most Medicare program beneficiaries was paid at prospectivelydetermined rates based on fee schedules which varied according to a patient classification system based onclinical, diagnostic and other factors. Certain outpatient services and defined capital costs related to Medicarebeneficiaries were paid based on a cost reimbursement methodology under which the Hospital was paid at atentative rate with final settlement determined after submission of cost reports by the Hospital and audits thereofby the fiscal intermediary. Effective August 1, 2000, the Hospital is reimbursed for outpatient services under theambulatory payment classification (APC) based on prospectively determined rates.

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3. NET PATIENT SERVICE REVENUE CONTINUED

Effective April 1, 2003, for Medicare purposes, the Hospital was certified as a Critical Access Hospital whichchanged the reimbursement methodology. Inpatient acute care services rendered to Medicare programbeneficiaries are paid on a cost reimbursement methodology. Inpatient non-acute services, certain outpatientservices, and defined capital and medical education costs related to Medicare beneficiaries are paid based on acost reimbursement methodology. The Hospital is reimbursed for cost reimbursable items at a tentative rate withfinal settlement determined after submission of annual cost reports by the Hospital and audits thereof by the

Medicare fiscal intermediary. The Hospital's classification of patients under a Medicare program and theappropriateness of their admissions are subject to an independent review by a peer review organization undercontract with the Hospital. The Hospital's Medicare cost reports have been audited by the Medicare fiscalintermediary through September 30, 2006.

Inpatient service rendered to Medicaid program beneficiaries are reimbursed at a pre-determined daily rate(currently $527.04 per day). Outpatient services are reimbursed at cost less 17%. The Hospital's Medicaid costreports have been audited by the Medicaid fiscal intermediary through September 30, 2005.

The Hospital has also entered into payment agreements with certain commercial insurance carriers, healthmaintenance organizations, and preferred provider organizations. The basis for payments to the Hospital underthese agreements includes prospectively determined rates per discharge, discounts from established charges, andprospectively determined daily rates.

4. PATIENT ACCOUNTS RECEIVABLE

Patient accounts receivable at September 30, 2007 and 2006 consists of:

2007 2006Receivable from patients and their insurance carriers $1,066,167 $1,022,573Receivable from Medicare 399,585 561,047Receivable from Medicaid 104,995 111,420

Total patient accounts receivable 1,570,747 1,695,040Less allowance for uncollectible accounts 175,000 175,000Patient accounts receivable, net $1,395,747 $1,520,040

5. AMOUNTS DUE FROM (TO) MEDICARE AND MEDICAID

Amounts due from Medicare and Medicaid at September 30, 2007 and 2006 are as follows:

2007 2006Amounts due from Medicare $ 326,055 $ 125,408Amounts due from Medicaid 602,628 595,779

Total due from Medicare and Medicaid $ 928,683 $ 721,187

Amounts due to Medicare $ 35,328 $Amounts due to Medicaid 34,760 70,945

Total due to Medicare and Medicaid $ 70,088 $ 70,945

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6. PROPERTY AND EQUIPMENT

A summary of property and equipment at September 30, 2007 and 2006 follows:

LandLand improvementsBuildings and improvementsEquipment

Totals at historical costLess: accumulated depreciation for:Land improvementsBuildings and improvementsEquipment

Total accumulated depreciationProperty and equipment, net

LandLand improvementsBuildings and improvementsEquipment

Totals at historical costLess: accumulated depreciation for:Land improvementsBuildings and improvementsEquipment

Total accumulated depreciationProperty and equipment, net

BalanceSeptember 30,

2006$ 87,893 $

140,1163,215,7083,572,2377,015,954

131,3761,842,1502,787,6504,761,176

$ 2,254,778 $


2005$ 87,893 $

140,1163,206,7083,465,8756,900,592

128,9291,749,0112,530,4864,408,426

$ 2,492,166 $

Additions

76,21576,215

2,43489,746

229,660321,840

. (245,625)

Additions

9,000106,362115,362

2,44793,139

257,164352,750

(237,388) i


Disposals 2007$ - $ 87,893

140,1163,215,7083,648,4527,092,169

133,8101,931,8963,017,3105,083,016

$ - $ 2,009,153


Disposals 2006$ - $ 87,893

140,1163,215,7083,572,2377,015,954

131,3761,842,1502,787,6504,761,176

£ - $ 2,254,778

7. GROUP ANNUITY CONTRACT

Under the terms of a group annuity contract entered into between American United Life Insurance Company andthe Louisiana Hospital Association, eligible employees of the Hospital may enter into an agreement with theCompany to contribute 3% of their gross salary to a group annuity contract. The Hospital is then obligated tocontribute 5% to the contract (excluding overtime salary). Once the contributions are made, the Hospital has nofurther liability.

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8. CAPITAL LEASE OBLIGATION

In December 2004, the Hospital executed a capital lease obligation for the purchase of a CT scanner. Futureminimum lease payments, by year, under the capital lease obligation consisted of the following at September 30,2007:

2008 $ 139,3652009 34,841Total minimum lease payments 174,206Less amounts representing imputed interest 6,226Present value of net minimum lease payments (including

$133,455 classified as current) $ 167,980

For 2007 and 2006, the cost of leased assets included in capital assets totaled $654,812 and the relatedaccumulated amortization was $327,406 for 2007 and $196,444 for 2006. The related equipment collateralizesthe capital lease obligation.

Changes in Capital Lease Obligation

Balance - September 30, 2005 $ 413,886AdditionsPayments (119,579)

Balance - September 30, 2006 294,307AdditionsPayments (126,327)

Balance - September 30, 2007 $ 167,980

9. CONCENTRATIONS OF CREDIT RISK

The Hospital grants credit without collateral to its patients, most of whom are local residents and are insuredunder third-party payor agreements. Revenues from patients and third party payers were as follows:

2007 2006Medicare 37% 43%Medicaid 27% 23%All other 36% 34%

100% 100%

10. MALPRACTICE INSURANCE

During 1976, the State of Louisiana enacted legislation that created a statutory limit of $500,000 for eachmedical professional liability claim and established the Louisiana Patient Compensation Fund (State InsuranceFund) to provide professional liability insurance to participating health care providers. The Hospital participatesin the State Insurance Fund, which provides up to $400,000 coverage for settlement amounts in excess of$ 100,000 per claim. The Hospital is insured through the Louisiana Hospital Association Trust Fund with respectto the first $100,000 of each claim.

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11. ASSET PURCHASE AGREEMENT AND COOPERATIVE ENDEAVOR OPERATING ANDLEASE AGREEMENTS

On June 1, 2004, the Hospital sold the assets of the home health operations to Hood Home Health Service, LLCfor $50,000.

On June 1, 2004, the Hospital became a member of Hood Home Health Service, LLC. The members of the LLCare Louisiana Health Care Group, LLC with a 66.67% ownership and the Hospital with a 33.33% ownership.Under the terms of the agreement, the Hospital has no financial responsibility to the venture although theHospital may receive quarterly distributions from the venture.

On June 1, 2004, the Hospital entered into a lease agreement with the LLC for the property located at 409-A NWCentral Avenue, Amite, Louisiana (formerly the home health operations). The premises were leased for a termcommencing on June 1, 2004 and ending on May 31, 2005 and continuing thereafter on a month to month basisuntil terminated by either party by giving proper notice. The annual rental is $27,000 payable in equal monthlyinstallments of $2,250 due on the first day of each month.

Transactions for the years ended September 30, 2007 and 2006 are as follows:

2007 2006Rental income received $ 27,000 $ 27,000

Distributions from venture $152,405 $ 90,763

12. GOVERNMENTAL REGULATIONS

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, and Medicareand Medicaid fraud and abuse. Government activity has increased with respect to investigations and allegationsconcerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations ofthese laws and regulations could result in expulsion from government healthcare programs together with theimposition of significant fines and penalties, as well as significant repayments for patient services previouslybilled. Management believes that the Hospital is in compliance with fraud and abuse as well as other applicablegovernment laws and regulations. Compliance with such laws and regulations can be subject to futuregovernment review and interpretation as well as regulatory actions unknown or unasserted at this time.

Legislation and regulation at all levels of government have affected and are likely to continue to affect theoperation of the Hospital. Federal healthcare reform legislation proposals debated in Congress in recent yearshave included significant reductions in Medicare and Medicaid program reimbursement to hospitals and thepromotion of a restructured delivery and payment system focusing on competition among providers based onprice and quality, managed care, and steep discounting or capitated payment arrangements with many, if not all,of the Hospital's principal payers. It is not possible at this time to determine the impact on the Hospital ofgovernment plans to reduce Medicare and Medicaid spending, government implementation of national and statehealthcare reform or market-initiated delivery system and/or payment methodology changes. However, suchchanges could have an adverse impact on operating results, cash flows and estimated debt service coverage ofthe Hospital in future years.

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BEVERLY A. RYALLCertified Public Accountant

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIALREPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS

Board of CommissionersHood Memorial Hospital

Hospital Service District No. 2 ofTangipahoa Parish, Louisiana

I have audited the basic financial statements of Hood Memorial Hospital (the Hospital - Hospital ServiceDistrict No. 2 of Tangipahoa Parish, a component unit of Tangipahoa Parish, Louisiana) as of and for theyears ended September 30, 2007 and 2006, and have issued my report thereon dated March 17, 2008. Iconducted my audit in accordance with auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing my audit, I considered the Hospital's internal control over financial reporting as abasis for designing my auditing procedures for the purpose of expressing my opinion on the financialstatements, but not for the purpose of expressing an opinion on the effectiveness of the Hospital's internalcontrol over financial reporting. Accordingly, I do not express an opinion on the effectiveness of theHospital's internal control over financial reporting.

A control deficiency exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent or detect misstatements ona timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, thatadversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably inaccordance with generally accepted accounting principles such that there is more than a remote likelihoodthat a misstatement of the entity's financial statements that is more than inconsequential will not be preventedor detected by the entity's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results inmore than a remote likelihood that a material misstatement of the financial statements will not be preventedor detected by the entity's internal control.

My consideration of internal control over financial reporting was for the limited purpose described in the firstparagraph of this section and would not necessarily identify all deficiencies in internal control that might besignificant deficiencies or material weaknesses. I did not identify any deficiencies in internal control overfinancial reporting that I consider to be material weaknesses, as defined above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Hospital's financial statements are free ofmaterial misstatement, I performed tests of its compliance with certain provisions of laws, regulations,contracts, and grants agreements, noncompliance with which could have a direct and material effect on thedetermination of financial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of my audit, and accordingly, I do not express such an opinion. The resultsof my tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards.

7426 President Drive, Baton Rouge, LA 70817-(225) 752-514717

This report is intended solely for the information and use of the Board of Commissioners, management, andthe Louisiana Legislative Auditor and is not intended to be and should not be used by anyone other than thesespecified parties. Under Louisiana Revised Statute 24:513, this report is distributed by the LegislativeAuditor as a public document.

Beverly A. UyaU/

Certified Public AccountantMarch 17, 2008

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HOOD MEMORIAL HOSPITALSCHEDULE OF FINDINGSYEAR ENDED SEPTEMBER 30, 2007

A. SUMMARY OF AUDIT RESULTS

1. The auditor's report expresses an unqualified opinion on the basic financial statements of HoodMemorial Hospital.

2. No reportable conditions were disclosed during the audit of the basic financial statements.

3. No instances of noncompliance were disclosed during the audit of the financial statements.

B. FINDINGS-FINANCIAL STATEMENT AUDIT

None.

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HOOD MEMORIAL HOSPITALSCHEDULE OF PRIOR YEAR FINDINGSYEAR ENDED SEPTEMBER 30, 2007

No findings for the year ended September 30, 2006.

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hood memorial hospital basic financial statements …€¦ · cash and cash equivalents at end of...

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