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entitled 'Hurricane Katrina: Trends in the Operating Results of Five 
Hospitals in New Orleans before and after Hurricane Katrina' which was 
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July 17, 2008: 

The Honorable John D. Dingell:
Chairman:
The Honorable Joe Barton:
Ranking Member:
Committee on Energy and Commerce: House of Representatives: 

The Honorable Bart Stupak:
Chairman:
The Honorable John Shimkus:
Ranking Member:
Subcommittee on Oversight and Investigations: Committee on Energy and 
Commerce: 

House of Representatives: 

Subject: Hurricane Katrina: Trends in the Operating Results of Five 
Hospitals in New Orleans before and after Hurricane Katrina: 

New Orleans faces many challenges in the aftermath of Hurricane Katrina 
including the challenge of reestablishing the health care system and 
hospitals within the system. Hurricane Katrina, which made landfall on 
August 29, 2005, and the subsequent flooding caused by the failure of 
the New Orleans levee systems, resulted in the sudden closure, damage, 
or disruption in services at many of the New Orleans hospitals. On 
August 1, 2007, officials representing five New Orleans hospitals that 
have been the main health care providers in the region since the 
hurricane,[Footnote 1] testified before the House Committee on Energy 
and Commerce's Subcommittee on Oversight and Investigations. The 
officials stated that since the hurricane they have experienced 
significant operating losses and that they expect the losses to 
continue. 

The official from one of the hospitals that was designated to present 
an overview of the specific problems facing the five hospitals stated 
in his testimony that the hospitals expected to experience a combined 
operating loss of $135 million in calendar year 2007. This operating 
loss estimate was calculated using operating revenue and expense 
amounts for all five hospitals for January through May 2007 and then 
annualized for the year. The official also testified that the combined 
operating loss for the five hospitals would equal $405 million by 2009. 
The hospital official cited several reasons for operating losses, 
including increased labor costs and Medicare reimbursements that do not 
take into account the increased labor costs since the hurricane. The 
hospital official appealed to Congress for additional federal financial 
assistance. 

The subcommittee asked us to review the extent to which Hurricane 
Katrina adversely affected the hospitals' operating results. To that 
end, Congress asked us to analyze: 

1) the operating results of the five hospitals before and after 
Hurricane Katrina and: 

2) the factors contributing to changes in hospital operating results 
and whether those factors would have a continuing impact. 

For information on hospital operating results before and after 
Hurricane Katrina, we requested the hospitals' audited consolidated 
financial statements for the 8-year period 2000 through 2007. All of 
the audited financial statements for 2000 to 2007 received unqualified 
or "clean" opinions from independent public accounting firms.[Footnote 
2] For Touro Infirmary, we used the 2007 unaudited consolidated 
financial statements because audited statements were not completed by 
the end of our review.We also used hospital budgeted financial 
statements for 2008.[Footnote 3] 

The hospitals' financial statements include a Statement of Operations 
which shows revenues, expenses, gains, and losses.The Statement of 
Operations includes the operating income or loss[Footnote 4] and net 
income or loss[Footnote 5] for the year. We relied on amounts in the 
Statement of Operations for our analysis. Our analysis includes the 
calculation of three profitability measures that are derived from the 
Statement of Operations--operating income or loss, net income or loss, 
and earnings before interest, depreciation, and amortization (EBIDA). 
We used these three measures to evaluate changes in hospital operating 
results. 

We conducted site visits at the five hospitals and met with their chief 
financial officers and other financial staff to discuss hospital 
operating results, including operating income or loss, net income or 
loss, EBIDA, and other information presented in the financial 
statements. We obtained data from the hospitals on occupancy rates, the 
percentage of gross patient revenue from different payer sources (payer 
mix), and data on the amount of state and federal assistance provided 
as uncompensated care funds and wage index grant payments. 

To obtain information on factors contributing to hospital operating 
results, we reviewed hospital audited financial statements for changes 
in revenue and expense amounts that contributed to changes in hospital 
operating results. We also reviewed any available management discussion 
and analysis sections in the hospital financial statements. We 
discussed factors contributing to the hospital operating results with 
the hospital officials during our site visits. We held discussions with 
state officials in the Louisiana Department of Health and Hospitals 
(LDHH) to obtain their assessment of factors contributing to the 
hospital operating results. We also held discussions with credit 
analysts to obtain their views on the hospitals' operating results and 
their assessment of the continuing impact of certain factors on the 
hospitals' operations. See enclosure I for more information on our 
scope and methodology. 

We incorporated as appropriate, comments received from the five 
hospitals and the Secretary of LDHH. See our "Agency Comments and 
Evaluation". 

We conducted our work from November 2007 through June 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Results in Brief: 

Operating results of all five hospitals significantly declined in 2005, 
the year of Hurricane Katrina, based on the three measures of 
profitability we used to illustrate differences in the hospitals' 
operating results before and after the hurricane--operating income or 
loss, net income or loss, and earnings before interest, depreciation 
and amortization. However, four out of the five hospitals showed some 
improvement in their operating results for 2006, 2007, and projected 
for 2008. For the fifth hospital, the amounts for the three 
profitability measures for 2007 and projected for 2008 declined from 
2005 amounts. In viewing these trends, it is important to consider the 
amount and timing of special payments that the hospitals received to 
cover Hurricane Katrina-related losses for 2005 through 2008. These 
special payments included insurance payments from private insurers for 
business interruption and property and casualty claims, wage index 
grants from the Department of Health and Human Services (HHS) to cover 
some of the increases in labor costs experienced by the hospitals and 
funds from the state of Louisiana for uncompensated care to cover the 
increased costs for providing health care to the uninsured. They also 
included Federal Emergency Management Agency (FEMA) and National Flood 
Insurance Program (NFIP) reimbursements to cover losses due to flooding 
and federally declared disasters. Despite the improvements in operating 
results for four of the five hospitals we examined, the financial 
position for these four hospitals has weakened, as evidenced by 
declines in net asset balances since 2004. Such declines indicate that 
the hospitals have been either using their assets, incurring additional 
debt to support operations or both. 

Increased expenses have contributed to changes in hospital operating 
results since Hurricane Katrina. Increases in operating expenses have 
generally been greater than increases in operating revenues, thereby 
negatively affecting operating results. Hospitals have experienced 
higher labor costs since the hurricane. A nursing shortage and 
reduction in the physician base and workforce, exacerbated by the 
hurricane, forced hospitals to hire staff at salaries and wages that 
were higher than before the hurricane. Generally, revenue from patient 
services has not kept pace with increased expenses. Hospital officials 
believe that revenues will continue to lag behind expenses until some 
of the increased labor costs are covered in Medicare reimbursement 
rates through changes to the wage index. However, this relief is not 
fully expected until 2010. Like hospital officials, officials in LDHH 
believe that increased operating expenses contributed to the decline in 
hospital operating results and that labor costs were a major driver of 
decreased operating results. The state health officials developed an 
estimate and requested $50 million in funding that the five hospitals 
need to cover operating losses in 2007. Credit analysts with whom we 
spoke also cited the increase in labor costs as a factor. The analysts 
said that the decline in hospital operating results since Hurricane 
Katrina could be a factor in increasing the hospitals' costs of raising 
funds in the bond market. 

We provided a draft of this report to the Secretary of the Department 
of Health and Human Services and the Secretary of LDHH. Health and 
Human Services did not provide comments on the report. The Secretary of 
LDHH commented that the sections of the report related to LDHH were 
accurate. We also included the comments received from the five 
hospitals in enclosures III through VII, as appropriate. 

Background: 

Hurricane Katrina and the resulting flooding of nearly 80 percent of 
New Orleans significantly affected the city's economy, labor market 
dynamics, and individual businesses. All the major industry sectors 
lost jobs in Louisiana, with the largest losses occurring in health 
services, education, and leisure and hospitality, among others. Job 
losses were due primarily to the destruction of the city's 
infrastructure and businesses, thereby eliminating places of 
employment. The destruction of homes and the subsequent public health 
crisis forced large segments of the employed population to leave the 
city. 

Among the challenges facing the greater New Orleans area in the 
aftermath of the hurricane is the significant damage to hospital 
facilities, the loss of hospital staff who relocated to other areas, 
and the associated disruption of hospital inpatient care and emergency 
services. Other challenges include changes in the population and 
overall economic pressures on nonprofit hospitals. We previously 
reported that before Hurricane Katrina, 16 hospitals operated in the 
greater New Orleans area.[Footnote 6] These included the Charity and 
University Hospitals together known as the Medical Center of Louisiana 
at New Orleans (MCLNO). MCLNO is part of a statewide system of 10 
public hospitals that served as the primary safety net hospital for 
many local residents. About half of its patients were uninsured, and 
about one-third were covered by Medicaid. Charity has remained closed. 
The state of Louisiana is currently discussing options for replacing 
Charity, as well as developing plans for changes to the health care 
system in New Orleans and the entire state. University Hospital closed 
after the hurricane but has reopened at reduced capacity. 

Three of the five hospitals in our review, West Jefferson Medical 
Center, East Jefferson General Hospital, and Ochsner Health System, 
remained open during Hurricane Katrina. All three hospitals incurred 
facility and equipment damage even though they were able to stay open. 
The other two hospitals closed after the hurricane for varying periods. 
Touro Infirmary closed temporarily on September 1, 2005, and reopened 
on September 28, 2005. Tulane University Hospital and Clinic received 
major storm damage at its main campus and closed after the hurricane. 
Tulane's main campus hospital reopened at partial capacity in February 
2006. Tulane's Lakeside hospital received minor damage and reopened in 
late 2005. 

All five hospitals offer a variety of health care services to the 
populations they serve. The following briefly describes each hospital 
and its services. 

West Jefferson Medical Center (West Jefferson): 

West Jefferson is a not-for-profit hospital located in Marrero, 
Louisiana, and operates under the jurisdiction of the Parish Council of 
Jefferson Parish, Louisiana, as Jefferson Parish Hospital Service 
District No. 1. The hospital is exempt from federal and state income 
taxes. West Jefferson operates an acute care hospital, physician 
clinics, medical office buildings, and a health and fitness center. The 
medical center is a full-service community hospital that offers 
emergency services; an aero medical helicopter flight program; 
neuroscience services, including a dedicated stroke unit; orthopedic 
services; diagnostic imaging; a cancer program; open heart and cardiac 
services; and women's services. West Jefferson also has pediatric and 
neonatal intensive care units as well as a pediatric emergency room. It 
also provides programs in occupational health, stroke, and spinal cord 
injury rehabilitation. 

East Jefferson General Hospital (East Jefferson): 

East Jefferson is a not-for-profit hospital located in Metairie, 
Louisiana, and operates under the jurisdiction of the Parish Council of 
Jefferson Parish, Louisiana, as Jefferson Parish Hospital Service 
District No. 2. The hospital is exempt from federal and state income 
taxes. East Jefferson includes a PET Scan Center, a physician network, 
an ambulatory surgery center, a radiation oncology center, and a 
cardiovascular practice. It is a community hospital that offers 
cardiovascular services; emergency services; neuroscience services, 
including sleep studies; orthopedic services, including joint 
replacement; diagnostic imaging; a cancer program; and special care 
including coronary and neonatal intensive care units. It also provides 
programs in occupational health, physical therapy, and speech and 
language pathology. 

Touro Infirmary (Touro): 

Touro is a not-for-profit, faith-based community teaching hospital 
located in the Garden District in Uptown New Orleans. The hospital 
provides cardiovascular services, emergency services, neurosciences, 
oncology services, orthopedic services, nuclear medicine services, 
rehabilitation services, wound care, and special services such as 
neonatal intensive care and intensive care. Touro subsidiaries include 
Touro Infirmary Foundation; Woldenberg Village, Inc; the hospital's 
wholly owned for-profit subsidiaries, Metrolab, Inc., and Crescent City 
Physicians, Inc; and its 50 percent interest in Choice Healthcare, Inc. 
Woldenberg operates a 120-bed nursing home, a 60-unit assisted living 
facility, and a 60-unit independent living facility. 

Tulane University Hospital and Clinic (Tulane): 

Tulane is a partnership between Tulane University and the Hospital 
Corporation of America (HCA, Inc.) Tulane is a for-profit, limited 
liability company. Tulane has two facilities in the New Orleans 
metropolitan area, including its main campus and a secondary campus at 
Tulane-Lakeside Hospital in Metairie, Louisiana, which was purchased 
just before Hurricane Katrina, on July 1, 2005. Between these two 
campuses, Tulane provides a full range of medical services, including 
cardiovascular services, emergency services, neurosciences, oncology 
services, orthopedic services, nuclear medicine services, 
rehabilitation, and special services, such as neonatal intensive care 
and intensive care. 

Ochsner Health System (Ochsner): 

On August 31, 2001, Alton Ochsner Medical Foundation merged with 
Ochsner Clinic, L.L.C., to become Ochsner Clinic Foundation (OCF), 
which included Ochsner Health Plan, Inc. (OHP), a managed care 
organization that provided comprehensive medical services to members. 
Then in April 2004, OCF sold OHP. Ochsner Community Hospitals (OCH) and 
Ochsner Health System were created in 2006. Ochsner Health System is 
the not-for-profit, parent company of OCF and OCH. In October 2006, OCH 
acquired three former Tenet Healthcare Corporation hospitals in the 
greater New Orleans area: Ochsner Medical Center Kenner, L.L.C., 
formerly Kenner Regional Medical Center; Ochsner Medical Center 
Westbank, L.L.C., formerly Meadowcrest Hospital; and Ochsner Baptist 
Medical Center, L.L.C., formerly Memorial Medical Center. 

Ochsner consists of six hospitals located on seven campuses and 
operates more than 30 clinics in the New Orleans and Baton Rouge areas. 
OCF also includes the Elmwood Fitness Center and its wholly-owned not- 
for-profit subsidiaries, the Brent House Corporation, Ochsner Home 
Health Corporation, and Ochsner Bayou, L.L.C. Ochsner Clinic Foundation 
Hospital owns and operates a 510-bed acute care hospital known as 
Ochsner Medical Center/Ochsner Foundation Hospital. The services 
offered by the Ochsner hospitals and clinics include cardiovascular, 
emergency, neurosciences, oncology, orthopedic, organ transplant, 
nuclear medicine, rehabilitation, wound care, intensive care, coronary 
intensive care, neonatal intensive care, and pediatric intensive care. 

Operating Results Declined with Hurricane Katrina, but Some Improvement 
Noted for Most of the Hospitals: 

In analyzing the operating results of the five New Orleans hospitals 
for the period from 2000 to 2007 and projected for 2008, we used three 
measures of profitability to illustrate how the hospitals' operating 
results changed from the period before Hurricane Katrina: (1) operating 
income or loss, (2) net income or loss, and (3) EBIDA. 

* Operating income or loss is the hospitals' profit or loss from 
operations excluding such nonoperating items as investment earnings and 
gains and losses on sale of assets used in business. It is the result 
of hospital operating revenues, such as net patient-service revenue, 
minus operating expenses, such as salaries and wages. The measure thus 
focuses strictly on a hospital's core business. 

* Net income or loss is the bottom-line profit or loss: the result of 
all revenues from operating and nonoperating sources and gains minus 
all expenses and losses. The hospitals need to generate bottom-line 
profits to remain viable. 

* EBIDA is another measure of hospital profitability that adds the 
interest, depreciation, and amortization expense back to the net 
income. This measure helps to provide a baseline or comparison of 
profit or loss across hospitals by excluding the effects of different 
rates used for interest expense and different accounting methods used 
to calculate depreciation and amortization. 

Operating results for all five hospitals significantly declined in 
2005, the year of Hurricane Katrina, based on all three profitability 
measures. Since then, the operating results for four out of the five 
hospitals have improved. For these four hospitals, the operating income 
or loss, net income or loss, and EBIDA amounts for 2006, 2007, and 
projected for 2008 were better than the amounts in 2005. Tulane is the 
only hospital for which the amounts for the three profitability 
measures for 2007 and 2008 were worse than the 2005 amounts. 

Contributing to the improved hospital operating results since 2005 are 
the amounts and timing of special payments or revenue received by the 
hospitals to cover hurricane-related losses. For example, in varying 
amounts and in different years, the hospitals received insurance 
proceeds from private insurers for business interruption, property and 
casualty claims, or both. The hospitals also received wage index grant 
payments from HHS to cover some of the increases in labor costs 
experienced by the hospitals that would not otherwise be reimbursed 
through the Medicare wage index until 2010.[Footnote 7] In addition, 
the hospitals received funds from the state of Louisiana for 
uncompensated care to cover increased costs for providing health care 
to the uninsured. Also, the hospitals received FEMA and NFIP 
reimbursements to cover losses due to flooding and federally declared 
disasters. 

Despite the improvements in operating results, four of the five 
hospitals have weakened financial positions, as evidenced by declines 
in their net asset balances since 2004. Such declines indicate that the 
hospitals have been using their assets, incurring additional debt, or 
both to support operations. 

Hospital Operating Income or Loss: 

All five hospitals had operating losses during most of the 5 years 
before Hurricane Katrina with four of the five hospitals having 1 to 2 
years of operating income. The operating losses increased significantly 
in 2005, the year of Hurricane Katrina (see table 1). 

Table 1: Operating Income (Loss), Calendar Years 2000-2008: 

Dollars in millions: 

Hospital: West Jefferson; 
2000: ($3.8); 
2001: ($5.0); 
2002: ($10.1); 
2003: ($1.1); 
2004: $1.9; 
2005[A]: ($39.1); 
2006: ($17.6); 
2007: ($5.8); 
2008[B]: ($3.5). 

Hospital: East Jefferson; 
2000: (19.8); 
2001: (8.4); 
2002: (28.3); 
2003: (10.9); 
2004: (10.5); 
2005[A]: (40.4); 
2006: (10.2); 
2007: (29.6); 
2008[B]: (23.9). 

Hospital: Touro[C]; 
2000: (3.2); 
2001: (6.5); 
2002: (1.8); 
2003: (2.5); 
2004: 0.8; 
2005[A]: (40.7); 
2006: 4.9; 
2007: (36.4); 
2008[B]: (15.0). 

Hospital: Tulane; 
2000: (8.5); 
2001: (2.1); 
2002: 3.6; 
2003: 0.1; 
2004: (4.4); 
2005[A]: (18.9); 
2006: 3.1; 
2007: (42.2); 
2008[B]: (37.6). 

Hospital: Ochsner; 
2000: 18.7; 
2001: (1.1); 
2002: (11.2); 
2003: (13.3); 
2004: (10.8); 
2005[A]: (73.4); 
2006: (8.9); 
2007: (31.6); 
2008[B]: (23.0). 

Total; 
2000: ($16.6); 
2001: ($23.1); 
2002: ($47.8); 
2003: ($27.7); 
2004: ($23.0); 
2005[A]: ($212.5); 
2006: ($28.7); 
2007: ($145.6); 
2008[B]: ($103.0). 

Source: GAO analysis based on audited, unaudited, and budgeted 
financial statements. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on hospital budgeted financial 
statements. 

[C] Touro amounts for 2007 are from unaudited financial statements. 

[End of table] 

During the year of the hurricane, the hospitals collectively had 
operating losses of about $212.5 million. Combined operating losses 
continued in 2006 and 2007 totaling $28.7 million and $145.6 million, 
respectively. Except for Tulane, the operating income or loss amounts 
for 2006, 2007, and projected for 2008 are an improvement over those 
for 2005. Our calculation of operating income or loss amounts for 2005 
through 2008 includes special payments received by the hospitals to 
cover hurricane-related losses, including insurance proceeds for 
business interruption and property and casualty claims, federal wage 
index grant payments, and uncompensated care funds.[Footnote 8] The 
amount of these special payments received by each hospital varied, with 
special payments included in operating income or loss ranging from 
about $36 million to about $168 million. Collectively, the five 
hospitals reported about $389.2 million in special payments from 2005 
through 2008 that were included in calculating operating income or 
loss; $73.5 million in 2005, $183.2 million in 2006, $118.8 million in 
2007, and a projected $13.7 million in 2008. See enclosure II for a 
schedule of all special payments received by the hospitals in 2005 
through 2008 to cover hurricane-related losses. 

The amount of special payments received by the hospitals may increase 
depending on the ultimate treatment of the community disaster loans 
(CDL) that West Jefferson and East Jefferson received in 2006. West 
Jefferson and East Jefferson received loans of $30.7 million and $61 
million, respectively. West Jefferson officials said that they used the 
loans to cover operating losses and East Jefferson officials reported 
that they used the loans to pay for operating expenses such as 
salaries. Our calculation of operating income or loss does not include 
these amounts as they were properly recorded as liabilities instead of 
operating revenues. Officials at both hospitals told us that their 
obligation to repay the loans might be forgiven if they meet certain 
requirements under the CDL program. If the CDLs are canceled or 
forgiven, the loan balances and any accrued interest payable would be 
treated as revenue in the year in which the loans are forgiven. See 
enclosure II for more information on the CDL program and these loans 
amounts. 

The amounts we present as each hospital's operating income or loss from 
2005 through 2008 projections are affected by the amounts and timing of 
the special payments received by each hospital to cover hurricane- 
related losses. For example, Tulane, which received about $168 million 
in special payments, received more than 80 percent of those payments in 
2005 and 2006, which contributed to the hospital having comparatively 
more favorable operating income or loss amounts for these years than if 
the payments had been deferred. The other four hospitals received the 
bulk of their special payments in 2006 and 2007, contributing to their 
improved operating results in those years. The bottom line is that the 
trends in hospital operating income or loss amounts could have been 
different had the special payments been received in other periods, 
earlier or later. (See detail on the payments received by each hospital 
in enclosures III through VII). 

The hospitals' projected operating losses for 2008 show improvement 
over 2005 operating losses despite including the smallest total amount 
of projected revenue from special payments of any year since the 
hurricane. Hospitals therefore expect to improve their operating income 
or loss with less support from special payments. 

Hospital Net Income or Loss: 

All five hospitals reported positive net income in multiple years 
during the period before Hurricane Katrina. Then in 2005, all five 
hospitals reported net losses. The collective net loss for all five 
hospitals was $165 million in 2005 (see table 2). 

Table 2: Net Income (Loss), Calendar Years 2000-2008: 

Dollars in millions: 

Hospital: West Jefferson; 
2000: $7.3; 
2001: $2.8; 
2002: ($3.3); 
2003: $4.5; 
2004: $2.4; 
2005[A]: ($37.6); 
2006: ($12.6); 
2007: $6.3; 
2008[B]: $3.1. 

Hospital: East Jefferson; 
2000: 4.4; 
2001: 16.1; 
2002: (14.1); 
2003: (2.7); 
2004: (4.6); 
2005[A]: (30.8); 
2006: 4.6; 
2007: (12.2); 
2008[B]: (14.0). 

Hospital: Touro[C]; 
2000: 4.5; 
2001: (9.7); 
2002: (8.5); 
2003: 11.1; 
2004: 11.4; 
2005[A]: (33.5); 
2006: 22.8; 
2007: (20.3); 
2008[B]: (8.9). 

Hospital: Tulane; 
2000: (8.5); 
2001: (2.1); 
2002: 3.6; 
2003: 0.1; 
2004: (4.4); 
2005[A]: (18.9); 
2006: 3.1; 
2007: (42.2); 
2008[B]: (37.6). 

Hospital: Ochsner; 
2000: 16.3; 
2001: (7.8); 
2002: (71.2); 
2003: 41.3; 
2004: 102.6; 
2005[A]: (44.2); 
2006: 34.7; 
2007: 5.6; 
2008[B]: (18.1). 

Total; 
2000: $24.0; 
2001: ($0.7); 
2002: ($93.5); 
2003: $54.3; 
2004: $107.4; 
2005[A]: ($165.0); 
2006: $52.6; 
2007: ($62.8); 
2008[B]: ($75.5). 

Source: GAO analysis of the hospitals' audited, unaudited, and budgeted 
financial statements. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on hospital budgeted financial 
statements. 

[C] Touro amounts for 2007 are from unaudited financial statements. 

[End of table] 

The net income or loss amounts include revenues and expenses from 
nonoperating sources, such as investment earnings and gains and losses 
on assets. Four of the five hospitals had positive nonoperating amounts 
from 2006, 2007, and projected for 2008, and thus the net income or 
loss for those hospitals shows a more positive result than operating 
income or loss for that same period. Since 2005, the net income or loss 
amounts for four of the five hospitals have improved.[Footnote 9] In 
fact, West Jefferson reported net income for 2007 that is greater than 
the net income reported for 2004 the year before the hurricane, and 
that is within the range of the net income or loss amounts for the 5 
years before Hurricane Katrina. Ochsner and East Jefferson also 
reported net income or loss amounts for 2007 that are in the range of 
the net income or loss amounts for the 5 years before the hurricane 
(see table 2). 

Hospital Earnings before Interest, Depreciation, and Amortization: 

All five hospitals consistently reported positive EBIDA during the 5 
years before Hurricane Katrina, except for Ochsner in 2002. In the year 
of the hurricane, two of the five hospitals reported negative EBIDA, 
and the others reported positive EBIDA that was generally lower than 
for the 5 years before the hurricane (see table 3). 

Table 3: EBIDA, Calendar Years 2000-2008: 

Dollars in millions: 

Hospital: West Jefferson; 
2000: $18.1; 
2001: $16.8; 
2002: $13.2; 
2003: $21.6; 
2004: $20.8; 
2005[A]: ($15.2); 
2006: $10.0; 
2007: $30.4; 
2008[B]: $27.2. 

Hospital: East Jefferson; 
2000: 30.7; 
2001: 47.6; 
2002: 18.1; 
2003: 30.1; 
2004: 27.1; 
2005[A]: 6.6; 
2006: 34.3; 
2007: 21.7; 
2008[B]: 17.9. 

Hospital: Touro[C]; 
2000: 20.2; 
2001: 6.3; 
2002: 11.6; 
2003: 31.6; 
2004: 32.7; 
2005[A]: (13.2); 
2006: 43.5; 
2007: 0.7; 
2008[B]: 12.7. 

Hospital: Tulane; 
2000: 7.3; 
2001: 15.7; 
2002: 20.1; 
2003: 18.5; 
2004: 14.5; 
2005[A]: 1.8; 
2006: 22.7; 
2007: (16.1); 
2008[B]: (11.9). 

Hospital: Ochsner; 
2000: 51.8; 
2001: 37.8; 
2002: (10.0); 
2003: 99.1; 
2004: 162.4; 
2005[A]: 18.3; 
2006: 104.0; 
2007: 82.2; 
2008[B]: 64.8. 

Total; 
2000: $128.1; 
2001: $124.2; 
2002: $53.0; 
2003: $200.9; 
2004: $257.5; 
2005[A]: ($1.7); 
2006: $214.5; 
2007: $118.9; 
2008[B]: $110.7. 

Source: GAO analysis of the hospitals' audited, unaudited, and budgeted 
financial statements. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on hospital budgeted financial 
statements. 

[C] Touro amounts for 2007 are from unaudited financial statements. 

[End of table] 

Since 2005, the EBIDA amounts for four of the five hospitals have 
improved. The 2006, 2007, and projected 2008 EBIDA amounts for East 
Jefferson and Ochsner are within the range of the EBIDA amounts for the 
5 years before Hurricane Katrina (see table 3). 

Despite the improvements that we noted in the operating income or loss 
and the other profitability measures that we present, four of the five 
hospitals have weakened financial positions, as evidenced by declines 
in their net asset balances since 2004. Such declines indicate that the 
hospitals have been using their assets, taking on additional debt, or 
both to support operations. One of the hospitals, Touro, told us that 
although its operating losses are lower in the years since the 
hurricane, its financial position is weaker because cash and investment 
balances have declined from levels before Hurricane Katrina as shown in 
its financial statements for 2004 and 2007. According to Touro hospital 
officials, they have had to use their cash and investments to cover 
operating expenses in years that they had operating losses. Touro's 
cash and investment amounts declined by approximately $23 million from 
2004 to 2007 or about 22 percent. Touro officials reported that using 
hospital cash for operating expenses will affect their ability to make 
future expenditures for capital improvements, such as new technology 
and equipment. 

Increased Expenses Continue to Affect Hospital Operating Results: 

Increased operating expenses have contributed to changes in hospital 
operating results, particularly labor costs. Hospital officials 
attribute the increase in labor costs to the added costs to hire and 
retain staff. Also, revenue from patient services generally has not 
kept pace with increased expenses. Hospital officials cited 
insufficient Medicare reimbursement and shifts in revenues from 
commercial insurance and government payees and in some cases more 
uninsured patients. 

State health officials within LDHH also told us that labor costs have 
affected hospital operating results. The Secretary of LDHH and his 
staff developed an estimate of funding that the hospitals would need to 
cover operating losses for 2007 resulting from increased labor costs 
and requested funding from Congress.[Footnote 10] Credit analysts that 
we spoke with also cited increased labor costs as a factor that will 
continue to affect hospital operating results. They also cited other 
factors, including the increased costs that hospitals will incur to 
raise funds in the bond market because of declining operating results 
since the hurricane. 

Contributing Factors Based on Hospital Officials and Hospital 
Information: 

Hospital officials told us that they are experiencing higher labor 
costs because of higher employee salaries and wages and the contract 
labor costs to overcome a nursing shortage along with the reduction in 
the workforce and physician base that were exacerbated by the 
hurricane. The hospitals' labor costs included the added costs to hire 
and retain staff. The hospital financial statements also showed 
increases in nonlabor expenses, including bad-debt expenses. For 
example, one hospital reported that the displacement of residents after 
the storm made it difficult to collect outstanding debts, requiring 
increases in the provision for bad debts. This hospital's provision for 
bad debt increased 135 percent from 2004 to 2005.[Footnote 11] 

Generally, revenue from patient services has not kept pace with 
increased expenses. Hospital officials reported that current Medicare 
reimbursement rates do not cover the increased labor costs, which is a 
primary factor contributing to the lag in operating revenues. They 
expect that changes in the Medicare wage index will ease some of the 
strain on revenues. Several hospitals stated that changes might also be 
needed in the rates from commercial insurance payees. The hospitals 
provided trend data which in some cases show shifts in revenues between 
commercial and managed care payees, government payees, and the 
uninsured. See hospital payer mix data in enclosures III to VII. 

The hospital officials discussed the impact that their declining 
operating results have had on their ability to meet bond agreement 
requirements. With the exception of Tulane, each of the hospitals has 
bonds outstanding. Operating losses in 2005 and 2006 resulted in three 
of the four hospitals with bond issuances failing to meet conditions of 
their bond agreements. These agreements generally require that the 
hospitals maintain a certain debt-service coverage ratio (DSC). This is 
the ratio of adjusted net income to debt payments or the amount of cash 
flow available to meet annual interest and principal payments on the 
debt. The three hospitals did not maintain the required DSC although 
they were current in their bond payments. As a result, the hospitals 
had to obtain waivers of the bond covenants and this resulted in a 
variety of actions. For example, bond agreements required the hospitals 
to hire consultants to make recommendations to improve hospital 
operations. One hospital had a mortgage placed on its assets as a 
condition of the waiver. 

State Health Officials' Views on Factors Affecting Operating Results 
and Their Estimate of Funding Needed to Cover Hospital Losses: 

We discussed the operating results of the five hospitals with officials 
within LDHH, including the Secretary. LDHH officials cited increased 
labor costs as a factor affecting hospital operating results that could 
be directly tied to changes caused by Hurricane Katrina in the labor 
market. The Secretary explained that his staff reviewed the information 
the hospitals provided to Congress and did some limited analysis of 
changes in the expenses and revenues of the hospitals, particularly 
focusing on changes in labor costs. 

The objective of the LDHH analysis was to isolate problems caused by 
the hurricane from those related to regional economic trends to 
determine the level of assistance the hospitals need from Congress to 
cover 2007 losses. LDHH officials explained that they used the 
financial information that the hospitals provided to Congress at an 
August 1, 2007, hearing as the basis for their analysis. Their analysis 
included revenue and expense amounts for all five hospitals for the 
first 5 months of 2005 and the first 5 months of 2007. They told us 
that their analysis focused on increases in salary and wages and 
contract-labor expenses. The LDHH staff calculated these increases as a 
percentage of patient-service revenues before and after the hurricane. 
LDHH officials said that their analysis showed increases in the amount 
of patient-service revenues that all five hospitals had to use to cover 
labor costs since the hurricane. In an April 8, 2008, letter to 
Congress, LDHH asked for $50 million in grants for the New Orleans 
hospitals to provide cash flow stabilization for 2007. The Medicare 
Wage Index will not begin to cover the increases in wage and labor 
rates after Hurricane Katrina until it is adjusted in 2010. 

Views of Credit Analysts: 

Credit analysts told us that the costs the New Orleans hospitals are 
experiencing for utilities, insurance, and labor are atypical in any 
market and this has created challenges for the hospitals. They also 
told us that the hospitals have lost staff who are hard to replace. 
Given the elevated costs of housing and the loss of core services and 
businesses in the area, recruitment and retention of both 
administrative and medical staff have become difficult. 

Credit analysts also noted that health care is a high-fixed-cost 
business. Plant and labor costs are high, and health care providers are 
very sensitive to changes in patient volume. Although the population is 
down in New Orleans from pre-Katrina levels, the analysts noted that 
the five hospitals likely have regained much of their patient volume 
because of hospital closures. 

The analysts provided insights about the impact that operating losses 
will have on future operations of the hospitals including the increased 
costs that the hospitals' may face in raising funds through bond 
issuances. They noted that with the magnitude of the hospitals' losses 
in consecutive years, and the requirement to make bond payments, the 
hospitals may try to preserve cash by not investing in new facilities 
and equipment and making fewer repairs. As the average age of hospital 
facilities rises over a period of years, capital needs can become 
larger and more difficult to address. 

Concluding Observations: 

Approximately 3 years after Hurricane Katrina, five New Orleans 
hospitals that have been the main health care providers in the region 
since the hurricane are trying to recover from a decline in their 
operating results that has included multiple years of financial losses 
greater than losses experienced before the hurricane. Some of the 
hospitals are showing more improvement than others, but all suffer from 
increased costs associated with a shortage of health professionals in 
the region and four of the five have weakened financial positions. 
Continuing financial losses can impair the ability of these hospitals 
to remain viable entities that can provide health care to the residents 
of New Orleans. State health officials are developing plans for how the 
future health care system in New Orleans and the state of Louisiana 
should be configured. Further because future population growth in New 
Orleans is uncertain, it is unclear how competition among the five 
hospitals to maintain adequate patient volumes and operating revenues 
to cover operating expenses will affect their ongoing financial 
viability. While the five hospitals have generally shown some 
improvement in their operating results with the assistance of federal 
funding, insurance, and other special payments, it is also unclear 
whether these five hospitals will be able to make continued 
improvements while the New Orleans region is still going through the 
recovery process. Also, the economic pressures affecting nonprofit 
hospitals nationally are adversely affecting these New Orleans 
hospitals. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the Secretary of the Department 
of Health and Human Services and the Secretary of LDHH. Health and 
Human Services did not provide comments on the report. The Secretary of 
LDHH provided comments and indicated that the sections of the report 
related to LDHH were accurate. We also provided each hospital with a 
draft of the enclosure related to it for review. We included the 
comments received from the hospitals in the enclosures, as appropriate. 

We are sending copies of this report to the Secretary of Health and 
Human Services, the Secretary of the Louisiana Department of Health and 
Hospitals, and other interested parties. We will also make copies 
available to others on request. In addition, the report will be 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any question about this report, please 
contact me at 202-512-9471 or franzelj@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. Major contributors to this report were 
Kimberly Brooks, Assistant Director; Lisa Crye; Lisa Galvan; and 
Jeffrey Isaacs. Maxine Hattery provided assistance and Barbara Hills 
developed the report's graphics. 

Signed by: 

Jeanette M. Franzel: 

Director, Financial Management and Assurance: 

Enclosures - 7: 

[End of section] 

Enclosure I: Scope and Methodology: 

For information on hospital operating results before and after 
Hurricane Katrina, we obtained the hospitals' audited consolidated 
financial statements for the 8-year period 2000 through 2007. All of 
the audited financial statements for 2000 to 2007 received unqualified 
or "clean" opinions from independent public accounting firms.[Footnote 
12] For Touro Infirmary, we used the 2007 unaudited consolidated 
financial statements because audited statements were not completed by 
the end of our review.We also used hospital budgeted financial 
statements for 2008.[Footnote 13] 

The hospitals' financial statements include a Statement of Operations 
which shows revenues, expenses, gains, and losses.[Footnote 14] The 
Statement of Operations includes the operating income or loss[Footnote 
15] and net income or loss[Footnote 16] for the year. We relied on 
amounts in the Statement of Operations for our analysis. Our analysis 
includes the calculation of three profitability measures that are 
derived from amounts included in the Statement of Operations--operating 
income or loss, net income or loss, and earnings before interest, 
depreciation, and amortization (EBIDA). We used these three measures to 
evaluate changes in hospital operating results. 

The Statement of Operations for the five hospitals included different 
categories of revenue and expense in the calculation of operating 
income or loss. We reclassified categories of revenue and expense so 
that we could consistently report operating income or loss across 
hospitals for comparison. For example, we reclassified insurance 
payments as operating revenue to calculate operating income or loss for 
all five hospitals, although two of the five hospitals had included 
insurance payments as nonoperating revenue. We also reclassified 
hospital investment income, Federal Emergency Management Agency (FEMA) 
reimbursements, and interest expense. Accordingly, certain revenue and 
expense amounts included in operating income or loss that we report are 
different from the amounts as reported in the hospital financial 
statements. 

The net income or loss amounts we include in our analysis are as 
reported on the hospitals' Statement of Operations. The EBIDA amounts 
that we include in our analysis are calculated using the net income, 
interest, depreciation, and amortization amounts as reported on the 
hospitals' Statement of Operations. 

We conducted site visits at the five hospitals and met with their chief 
financial officers and other financial staff to discuss hospital 
operating results, including operating income or loss, net income or 
loss, EBIDA, and other information presented in the financial 
statements. We obtained data from the hospitals on occupancy rates, the 
percentage of gross patient revenue from different payer sources (payer 
mix), and data on the amount of state and federal assistance provided 
as uncompensated care funds and wage index grant payments. We did not 
independently verify data on hospital occupancy, payer mix, and 
uncompensated care. We compared the hospital-reported wage index grant 
payments with information obtained from the Louisiana Department of 
Health and Hospitals (LDHH) and the Department of Health and Human 
Services (HHS)for reasonableness. 

To obtain information on factors contributing to hospital operating 
results, we reviewed each hospital's audited financial statements for 
changes in revenue and expense amounts that could contribute to changes 
in hospital operating results. We also reviewed any available 
management discussion and analysis sections. We discussed factors 
contributing to the hospital operating results with the hospital 
officials during our site visits. We held discussions with state 
officials in LDHH to obtain their assessment of factors contributing to 
the hospital operating results and to discuss the extent to which they 
have analyzed the operating results of the five hospitals. We also held 
discussions with credit analysts to obtain their views on the 
hospitals' operating results and their assessment of the continuing 
impact of certain factors on the hospitals' operations. 

We provided a draft of this report to the Secretary of the Department 
of Health and Human Services and the Secretary of LDHH. Health and 
Human Services did not provide comments on the report. The Secretary of 
LDHH provided comments and indicated that the sections of the report 
related to LDHH were accurate. We also provided each hospital with a 
draft of the enclosure related to it for review. We included the 
comments received from the hospitals in the enclosures, as appropriate. 

We conducted our work from November 2007 through June 2008 in 
accordance with generally accepted government auditing standards. Those 
standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

[End of section] 

Enclosure II: Special Payments Received by the Five New Orleans 
Hospitals: 

Table 4: Special Payments Received by the Five New Orleans Hospitals 
from 2005 to 2008 to Cover Hurricane Katrina Losses: 

Type of special payment: Private insurance; 
2005: $73.5; 
2006: $134.7; 
2007: $21.0; 
2008: $1.4; 
Total All Years: $230.6. 

Type of special payment: Wage index grant payments; 
2005: 0; 
2006: 0; 
2007: 29.1; 
2008: 0; 
Total All Years: $29.1. 

Type of special payment: Uncompensated care funds; 
2005: 0; 
2006: 48.5; 
2007: 68.7; 
2008: 12.3; 
Total All Years: $129.5. 

Total included in operating income (loss); 
2005: $73.5; 
2006: $183.2; 
2007: $118.8; 
2008: $13.7; 
Total All Years: $389.2. 

FEMA/NFIP reimbursements included in nonoperating revenue; 
2005: $3.4; 
2006: $11.1; 
2007: $15.7; 
2008: $0.5; 
Total All Years: $30.6. 

Community disaster loans: West Jefferson Medical Center; 
2005: [Empty]; 
2006: $30.7; 
2007: [Empty]; 
2008: [Empty]; 
Total All Years: $30.7. 

Community disaster loans: East Jefferson General Hospital; 
2005: [Empty]; 
2006: 61.0; 
2007: [Empty]; 
2008: [Empty]; 
Total All Years: $61.0. 

Total community disaster loans; 
2005: [Empty]; 
2006: $91.7; 
2007: [Empty]; 
2008: [Empty]; 
Total All Years: $91.7. 

Source: Hospitals' audited and budgeted financial statements and other 
hospital information. Touro 2007 amounts are from unaudited financial 
statements. 

[End of table] 

The largest component of special payments received by the hospitals was 
from private insurance companies for business interruption and property 
and casualty claims. The hospitals reported that they received $230.6 
million in these payments. In terms of federal and state assistance 
received by the hospitals, wage index grant payments and uncompensated 
care funds totaled $158.6 million, and the hospitals also received 
$30.6 million in FEMA and the National Flood Insurance Program (NFIP) 
reimbursement. 

The special payments also include the Community Disaster Loans (CDL) 
that West Jefferson Medical Center (West Jefferson) and East Jefferson 
General Hospital (East Jefferson) received during 2006. However, these 
amounts are not included in operating or nonoperating revenues of the 
two hospitals because the amounts were recorded as liabilities. The 
total amounts of special payments from the federal government may 
increase depending on the ultimate treatment of these loans. The CDL 
program is a program of federal aid available to local government 
entities specifically to replace revenue lost as the result of a 
natural or man-made disaster. The CDL program is unique in permitting 
local governments struck by a disaster to borrow directly from the 
federal government. It has also been unique in giving the federal 
administrators of the loan program the authority to cancel the 
borrower's obligation to repay the loan under specified local budget 
conditions. The obligation to repay the loan shall be canceled if the 
locality's revenue in the 3 fiscal years following the disaster is 
deemed insufficient by FEMA; however, the current regulations provide 
that FEMA cannot cancel the obligation to repay a loan until at least 
three years following a disaster. 

West Jefferson officials stated that they used the loan to pay for 
operational expense, mainly payroll costs. The terms of the loan call 
for interest to be accrued at 2.74 percent annually to be repaid with 
the principal when the loan becomes due in 2011. Hospital officials 
told us they plan to request cancellation of this obligation. 

East Jefferson officials stated that they used the loan to pay for 
operational expenses, mainly payroll costs. The terms of the loan call 
for interest to be accrued at 2.68 percent for approximately $45.5 
million and 3.0 percent for the remaining balance. Approximately $45.5 
million of the loan plus accrued interest is due in January 2011, with 
the remainder due in August and September 2011. Hospital officials told 
us they plan to request cancellation of this obligation. 

If the CDL loans are canceled or forgiven, the loan balances and any 
accrued interest payable would be treated as revenue in the year in 
which the loans are forgiven. 

[End of section] 

Enclosure III: West Jefferson Medical Center (West Jefferson): 

Hospital Description: 

West Jefferson is a not-for-profit hospital and health system located 
in Marrero, Louisiana. West Jefferson operates under the jurisdiction 
of the Parish Council of Jefferson Parish, Louisiana, as Jefferson 
Parish Hospital District No.1 and is exempt from federal and state 
income taxes. West Jefferson has 451 licensed beds and 341 total 
staffed beds. West Jefferson is a full-service community hospital that 
offers emergency services; an aero medical helicopter flight program; 
neuroscience services, including a dedicated stroke unit; orthopedic 
services, diagnostic imaging; a cancer program; open heart and cardiac 
services; and women's services. West Jefferson also has pediatric and 
neonatal intensive care units as well as a pediatric emergency room. It 
also provides programs in occupational health, stroke, and spinal cord 
injury rehabilitation. 

West Jefferson was one of three hospitals that remained open in the New 
Orleans metropolitan area during Hurricane Katrina and the only 
hospital open in the west bank at the time of Hurricane Katrina. 

Results of Review: 

Table 5: West Jefferson Operating Income (Loss), Net Income (Loss), and 
EBIDA, 2000-2008: 

Dollars in millions: 

Operating income (loss); 
2000: ($3.8); 
2001: ($5.0); 
2002: ($10.1); 
2003: ($1.1); 
2004: $1.9; 
2005[A]: ($39.1); 
2006: ($17.6); 
2007: ($5.8); 
2008[B]: ($3.5). 

Net income (loss); 
2000: 7.3; 
2001: 2.8; 
2002: (3.3); 
2003: 4.5; 
2004: 2.4; 
2005[A]: (37.6); 
2006: (12.6); 
2007: 6.3; 
2008[B]: 3.1. 

EBIDA; 
2000: 18.1; 
2001: 16.8; 
2002: 13.2; 
2003: 21.6; 
2004: 20.8; 
2005[A]: (15.2); 
2006: 10.0; 
2007: 30.4; 
2008[B]: 27.2. 

Source: GAO analysis, based on audited and budgeted financial 
statements of West Jefferson Medical Center: 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

West Jefferson Operating Income (Loss): 

West Jefferson had operating losses in 4 of the 5 years before 
Hurricane Katrina and operating losses in 2005 through 2007. West 
Jefferson estimates that it will also have an operating loss in 2008. 
Our calculation of operating income or loss is the result of operating 
revenues minus operating expenses. West Jefferson operating loss 
amounts for 2006 and 2007 include special payments that the hospital 
received. In 2007, West Jefferson received insurance payments to cover 
losses from the hurricane and wage index grant payments to cover some 
of the increase in labor costs. West Jefferson received uncompensated 
care funds to cover some of the costs associated with the volume of 
uninsured patients in 2006 and 2007. (See figs. 1 and 2 and table 6.) 

Figure 1: West Jefferson Operating Revenues and Expenses 2000-2008: 

This figure is a combination bar graph showing West Jefferson operating 
revenues and expenses 2002-2008. The X axis represents the year, and 
the Y axis represents the dollars. One bar represents operating 
revenues, and the other represents operating expenses. 

Fiscal year: 2000; 
Operating revenues: $149.3; 
Operating expenses: $153.1. 

Fiscal year: 2001; 
Operating revenues: $149.3; 
Operating expenses: $154.3. 

Fiscal year: 2002; 
Operating revenues: $165.0; 
Operating expenses: $175.2. 

Fiscal year: 2003; 
Operating revenues: $178.5; 
Operating expenses: $179.6. 

Fiscal year: 2004; 
Operating revenues: $191.5; 
Operating expenses: $189.6. 

Fiscal year: 2005 [A]; 
Operating revenues: $163.0; 
Operating expenses: $202.5. 

Fiscal year: 2006; 
Operating revenues: $232.6; 
Operating expenses: $250.2. 

Fiscal year: 2007; 
Operating revenues: $241.9; 
Operating expenses: $247.7. 

Fiscal year: 2008 [B]; 
Operating revenues: $250.3; 
Operating expenses: $253.8. 

[See PDF for image] 

Source: GAO analysis based on audit and budgeted financial statements 
of West Jefferson Medical Center. 

Note: Amounts in figure may not reconcile to reported operating income 
(loss) amounts due to immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] Year 2008 amounts are based on hospital budgeted financial 
statements. 

Notes: Operating revenues include net patient service revenues, other 
operating revenues, and the provision for bad debt, which is included 
in net patient service revenues for years 2001 through 2008. Operating 
revenues for 2006 and 2007 also include special payments that West 
Jefferson received, including payments from private insurance, wage 
index grants, and uncompensated care funds. 

Operating expenses include direct operating costs, such as salaries, 
purchased services, depreciation, interest expense, and bad debt 
expense for 2000 only. West Jefferson financial statements for 2005 
through 2008 included interest expenses as a nonoperating expense, but 
for consistency with the other hospitals in our study, we included 
interest expenses as an operating expense. 

[End of figure] 

Figure 2: West Jefferson Operating Income (Loss), 2000-2008[A]: 

This figure is a line graph showing West Jefferson operating income 
(loss), 2000-2008. The X axis represents the year, and the Y axis 
represents the dollars (in millions). 

Year: 2000; 
Dollars in millions: -$3.8. 

Year: 2001; 
Dollars in millions: -$5.0. 

Year: 2002; 
Dollars in millions: -$10.1. 

Year: 2003; 
Dollars in millions: -$1.1. 

Year: 2004; 
Dollars in millions: -$1.9. 

Year: 2005 [A]; 
Dollars in millions: -$39.1. 

Year: 2006; 
Dollars in millions: -$17.6. 

Year: 2007; 
Dollars in millions: -$5.8. 

Year: 2008 [B]; 
Dollars in millions: -$3.5. 

[See PDF for image] 

Source: GAO analysis based on audit and budgeted financial statements 
of West Jefferson Medical Center. 

[A] The financial statements report different operating income (loss) 
amounts for years 2005-2007 than our amounts in the figure above due to 
our reclassification of certain operating and nonoperating amounts to 
calculate operating income (loss) for consistency with other hospitals 
in our study. 

[B] Year of Hurricane Katrina. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 6: West Jefferson Special Payments Received from 2005 to 2008 to 
Cover Hurricane Katrina Losses: 

Dollars in millions: 

Type of payment: Private insurance; 
2005[A]: [Empty]; 
2006: [Empty]; 
2007: $4.8; 
2008: [Empty]; 
Total years: $4.8. 

Type of payment: Wage index grant payments; 
2005[A]: [Empty]; 
2006: [Empty]; 
2007: 3.7; 
2008: [Empty]; 
Total years: $3.7. 

Type of payment: Uncompensated care funds; 
2005[A]: [Empty]; 
2006: $19.0; 
2007: 8.2; 
2008: [Empty]; 
Total years: $27.2. 

Total included in operating income (loss); 
2005[A]: [Empty]; 
2006: $19.0; 
2007: $16.7; 
2008: [Empty]; 
Total years: $35.7. 

FEMA reimbursements included in nonoperating revenue; 
2005[A]: [Empty]; 
2006: 1.5; 
2007: 1.5; 
2008: [Empty]; 
Total years: $3.0. 

Total; 
2005[A]: [Empty]; 
2006: $20.5; 
2007: $18.2; 
2008: [Empty]; 
Total years: $38.7. 

Source: West Jefferson Medical Center. 

[A] Year of Hurricane Katrina. 

[End of table] 

West Jefferson Net Income (Loss): 

West Jefferson had net income in 4 of the 5 years before Hurricane 
Katrina but had net losses in 2 of the 3 years from 2005 to 2007. West 
Jefferson estimates that it will also have net income for 2008. Net 
income or loss includes nonoperating revenues including investments and 
reimbursements that West Jefferson received from FEMA. (See fig. 3 and 
table 7.) 

Figure 3: West Jefferson Net Income (Loss), 2000-2008: 

This figure is a line graph showing West Jefferson Net Income (loss), 
2000-2008. The X axis represents the year, and the Y axis represents 
the dollars (in millions). 

Year: 2000; 
Dollars in millions: $7.3. 

Year: 2001; 
Dollars in millions: $2.8. 

Year: 2002; 
Dollars in millions: -$3.3. 

Year: 2003; 
Dollars in millions: $4.5. 

Year: 2004; 
Dollars in millions: $2.4. 

Year: 2005[A]; 
Dollars in millions: -$37.6. 

Year: 2006; 
Dollars in millions: -$12.6. 

Year: 2007; 
Dollars in millions: $6.3. 

Year: 2008[B]; 
Dollars in millions: $3.1. 

[See PDF for image] 

Source: GAO analysis based on audit and budgeted financial statements 
of West Jefferson Medical Center. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 7: West Jefferson Calculation of Net Income (Loss), 2000-2008: 

Dollars in millions: 

Operating income (loss); 
2000: ($3.8); 
2001: ($5.0); 
2002: ($10.1); 
2003: ($1.1); 
2004: $1.9; 
2005[A]: ($39.1); 
2006: ($17.6); 
2007: ($5.8); 
2008[B]: ($3.5). 

Investment income; 
2000: $8.8; 
2001: $9.7; 
2002: $5.5; 
2003: $3.4; 
2004: $2.9; 
2005[A]: $2.1; 
2006: $5.9; 
2007: $8.6; 
2008[B]: $6.6. 

FEMA reimbursements; 
2000: [Empty]; 
2001: [Empty]; 
2002: [Empty]; 
2003: [Empty]; 
2004: [Empty]; 
2005[A]: [Empty]; 
2006: 1.5; 
2007: 1.5; 
2008[B]: [Empty]. 

Other nonoperating revenue and gains (losses)[C]; 
2000: 2.3; 
2001: (1.9); 
2002: 1.3; 
2003: 2.2; 
2004: (2.5); 
2005[A]: (0.6); 
2006: (2.3); 
2007: 2.0; 
2008[B]: 0.0. 

Total nonoperating revenues and gains (losses); 
2000: $11.1; 
2001: $7.8; 
2002: $6.8; 
2003: $5.6; 
2004: $0.4; 
2005[A]: $1.5; 
2006: $5.1; 
2007: $12.1; 
2008[B]: $6.6. 

Net income (loss); 
2000: $7.3; 
2001: $2.8; 
2002: ($3.3); 
2003: $4.5; 
2004: $2.4; 
2005[A]: ($37.6); 
2006: ($12.6); 
2007: $6.3; 
2008[B]: $3.1. 

Source: GAO analysis, based on audited and budgeted financial 
statements of West Jefferson Medical Center. 

Note: Amounts in table may not add to net income (loss) amounts due to 
immaterial rounding differences: 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[C] Includes the assessment by Jefferson Parish except for 2008. 

[End of table] 

West Jefferson EBIDA: 

West Jefferson had positive EBIDA in the 5 years before the hurricane 
but had negative EBIDA in 2005, the year of the hurricane. West 
Jefferson had positive EBIDA in 2006 and 2007 and estimates that it 
will also have positive EBIDA for 2008. In calculating EBIDA, the 
interest, depreciation, and amortization amounts are added back to net 
income. 

Table 8: West Jefferson Calculation of EBIDA, 2000-2008: 

Dollars in millions: 

Net income (loss); 
2000: $7.3; 
2001: $2.8; 
2002: ($3.3); 
2003: $4.5; 
2004: $2.4; 
2005[A]: ($37.6); 
2006: ($12.6); 
2007: $6.3; 
2008[B]: $3.1. 

Interest, depreciation, and amortization; 
2000: 10.8; 
2001: 14.0; 
2002: 16.5; 
2003: 17.1; 
2004: 18.4; 
2005[A]: 22.4; 
2006: 22.6; 
2007: 24.1; 
2008[B]: 24.1. 

EBIDA; 
2000: 18.1; 
2001: 16.8; 
2002: 13.2; 
2003: 21.6; 
2004: 20.8; 
2005[A]: (15.2); 
2006: 10.0; 
2007: 30.4; 
2008[B]: 27.2. 

Source: GAO analysis, based on audited and budgeted financial 
statements of West Jefferson Medical Center. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Summary of Operating Results before Hurricane Katrina: 

* 2000-2004. West Jefferson reported operating losses for 4 out of the 
5 years before Hurricane Katrina but had net income for 4 out of the 5 
years before Katrina as a result of investments and other nonoperating 
revenues and gains. West Jefferson had positive EBIDA in all 5 years 
before Hurricane Katrina. West Jefferson had a large operating loss in 
2002 due mostly to the insolvency of a health maintenance organization 
which resulted in a one-time charge to operations for losses incurred. 

Summary of Operating Results after Hurricane Katrina: 

* 2005. West Jefferson was one of three hospitals that remained open in 
the New Orleans metropolitan area during Hurricane Katrina and the only 
hospital open in the west bank at the time of the hurricane. West 
Jefferson had a $39.1 million operating loss for 2005 due to a 15 
percent decline in operating revenues and a 7 percent increase in 
operating expenses. Revenues declined primarily because of the 
evacuation of the surrounding population. Operating expenses increased 
for several reasons, including an across-the-board market increase in 
salaries to the majority of West Jefferson employees as a result of the 
hurricane, professional fees paid to emergency physicians' groups that 
provided services to the medical center's emergency room, and financial 
assistance provided to physicians who practice at the medical center 
and experienced business interruption because of the hurricane. West 
Jefferson had to obtain a waiver under Medicare policy to be able to 
provide the financial assistance to the physicians. West Jefferson also 
had a net loss of $37.6 million and negative EBIDA of $15.2 million. 

* 2006. West Jefferson operating results improved over 2005 in all 
three profitability measures. West Jefferson reduced its operating loss 
to $17.6 million from the $39.1 million operating loss in 2005. West 
Jefferson's net loss was $12.6 million down from $37.6 million in 2005 
and EBIDA was a positive $10 million as compared to a negative $15.2 
million for 2005. Contributing to the positive change in 2006 operating 
results was the amount of special payments that West Jefferson 
received, including $19 million in uncompensated care funds that were a 
part of operating revenues and $1.5 million in FEMA reimbursements 
included in nonoperating revenues. West Jefferson experienced an 
increase in patient volumes because of the reduced availability of 
health care in the region during the year. Increases in contract labor 
expenses contributed to increased operating expenses. According to West 
Jefferson hospital officials, contract labor expense increased 695 
percent in 2006 compared to 2005 as the region experienced an acute 
nursing shortage resulting from Hurricane Katrina. 

West Jefferson also received a CDL for $31 million in 2006 that has not 
been reflected in revenues because it is recorded as a liability. This 
amount was used to cover operating losses and is currently due in 2011. 
Under FEMA regulations, the obligation to repay the loan could be 
forgiven if certain conditions are met. West Jefferson officials told 
us that they will apply for forgiveness of this loan. If the loan is 
cancelled or forgiven, the loan balance and any accrued interest 
payable would be treated as revenue in the year in which the loan is 
forgiven. See Enclosure II for additional information. 

* 2007. This was a year of continuing progress for West Jefferson as it 
moved forward in its recovery from the effects of Hurricane Katrina. 
Operating losses in 2007 were less than 2006. West Jefferson had an 
operating loss of $5.8 million in 2007 versus an operating loss of 
$17.6 million for 2006. Contributing to the decline in operating losses 
was about $17 million in special payments that West Jefferson received. 
For example, net patient service revenue included $8.2 million in 
uncompensated care funds and the $3.7 million wage index grant that 
West Jefferson received to partially offset the increased labor costs 
since the hurricane. In addition, other operating revenue included $4.8 
million in business interruption and property damage payments from 
private insurance. Operating expenses were greater than operating 
revenues, but the expenses decreased by $2.5 million from the prior 
year due in part to a decrease in purchased services expenses, which 
includes contract labor costs. West Jefferson reported that it reduced 
contract nursing expenses by 52 percent in 2007 as compared to those in 
2006. West Jefferson intensified its recruitment and retention efforts 
to reduce its reliance on contract labor resulting in a reduction from 
about 100 contract full-time equivalents (FTE) in 2006 to just over 10 
contract FTEs at year-end 2007. 

West Jefferson also improved its bottom-line net income or loss. West 
Jefferson reported net income of $6.3 million in 2007, which was 
greater than the net income reported for 2004, the year before the 
hurricane, and that is within the range of the net income or loss 
amounts for the five years before Hurricane Katrina. Nonoperating 
revenues, including $8.6 million in investment income and $1.5 million 
in FEMA reimbursements, contributed to the net income amount. 

* 2008. West Jefferson projected continued improvement in its operating 
results. West Jefferson projected an operating loss of $3.5 million 
dollars with operating revenues coming closer to covering operating 
expenses. West Jefferson did not budget for any special payments in 
2008, thus indicating that it expects to make improvements with less 
support from special payments. West Jefferson also projected $3.1 
million in net income and has a projected positive EBIDA of $27.2 
million. 

Impact on Hospital Bonds: 

As a result of changes in its operating results since the hurricane, in 
2005 and 2006 West Jefferson did not meet requirements of its bond 
agreements to maintain a debt service coverage ratio of greater than 
1.2 times its maximum annual debt service. The debt service coverage 
ratio is the ratio of adjusted net income to debt payments or the 
amount of cash flow available to meet annual interest and principal 
payments on debt. This ratio should ideally be over 1.0, meaning the 
entity is generating enough net income to pay its debt obligations. A 
ratio below 1.0 indicates that there is not enough cash flow to cover 
debt payments. 

West Jefferson bond insurers granted the hospital a waiver for not 
maintaining the debt service coverage ratio for 2005, but West 
Jefferson had to agree to an increase in the debt service coverage 
ratio requirement from 1.2 times maximum annual debt service to 1.5 
times for 2006. For 2006, West Jefferson's bond insurers granted the 
hospital a waiver for not attaining the increased debt service coverage 
ratio but required West Jefferson to engage consultants and provide a 
detailed plan to improve operating performance. The hospital is working 
with consultants as required by its bond agreements and is implementing 
actions to cut certain services. 

In May 2007, one of West Jefferson's bond insurers directed, under the 
terms of the trust indenture, that a mortgage be recorded for 
substantially all of the medical center's property and equipment. 

Impact on Hospital Financial Position: 

West Jefferson has a weakened financial position as shown by declines 
in its net asset balances. This indicates that the hospital has been 
using its assets or taking on additional debt to support operations, or 
both. For example, West Jefferson had net assets of $186 million in 
2004 before the hurricane and net assets of $142 million in 2007. 

West Jefferson Trends in Other Financial Information: 

Table 9: West Jefferson Staffed Beds, 2000-2007: 

Year: 2000; 
Beds: Unavailable. 

Year: 2001; 
Beds: Unavailable. 

Year: 2002; 
Beds: 323. 

Year: 2003; 
Beds: 317. 

Year: 2004; 
Beds: 323. 

Year: 2005[A]
Beds: 323. 

Year: 2006; 
Beds: 323. 

Year: 2007; 
Beds: 341. 

Source: West Jefferson Medical Center. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 10: West Jefferson Occupancy Rates, 2000-2007: 

Year: 2000; 
Rates: Unavailable. 

Year: 2001; 
Rates: Unavailable. 

Year: 2002; 
Rates: 66.9. 

Year: 2003; 
Rates: 68.5. 

Year: 2004; 
Rates: 68.9. 

Year: 2005[A]; 
Rates: 71.6. 

Year: 2006; 
Rates: 79.7. 

Year: 2007; 
Rates: 69.7. 

Source: West Jefferson Medical Center. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 11: West Jefferson Payer Mix, 2000-2007: 

Percentages: 

Payer[A]: Managed care/commercial; 
2000[B]: N/A; 
2001: 34.9; 
2002: 34; 
2003: 33; 
2004: 33; 
2005[C]: 32; 
2006: 31; 
2007: 31. 

Payer[A]: Medicare; 
2000[B]: N/A; 
2001: 25.7; 
2002: 27; 
2003: 30; 
2004: 30; 
2005[C]: 29; 
2006: 27; 
2007: 26. 

Payer[A]: Medicare HMO; 
2000[B]: N/A; 
2001: 12.9; 
2002: 11; 
2003: 9; 
2004: 9; 
2005[C]: 11; 
2006: 13; 
2007: 15. 

Payer[A]: Medicaid; 
2000[B]: N/A; 
2001: 11.4; 
2002: 13; 
2003: 13; 
2004: 14; 
2005[C]: 18; 
2006: 17; 
2007: 18. 

Payer[A]: Self-pay/other; 
2000[B]: N/A; 
2001: 15.1; 
2002: 15; 
2003: 15; 
2004: 14; 
2005[C]: 10; 
2006: 12; 
2007: 10. 

Source: West Jefferson Medical Center. 

[A] Payer mix data for 2000 through 2004 represent information at the 
time of patient registration or point of service. 

[B] N/A--Data were not available. 

[C] Year of Hurricane Katrina. For 2005 forward, the data represent 
information on the patient account at year-end. 

[End of table] 

[End of section] 

Enclosure IV: East Jefferson General Hospital (East Jefferson): 

Hospital Description: 

East Jefferson is a not-for-profit hospital located in Metairie, 
Louisiana, approximately 7 miles from downtown New Orleans. East 
Jefferson operates under the jurisdiction of the Parish Council of 
Jefferson Parish, Louisiana, as Jefferson Parish Hospital Service 
District No. 2 and is exempt from federal and state income taxes. In 
2007, East Jefferson had over 450 licensed beds, with a total of 413 
staffed beds. East Jefferson includes a PET Scan Center of East 
Jefferson, LLC; East Jefferson Physician Network, LLC; East Jefferson 
Ambulatory Surgery Center, LLC; East Jefferson Radiation Oncology, LLC; 
and East Jefferson Cardiovascular Venture, LLC. East Jefferson is a 
community hospital that offers cardiovascular services; emergency 
services; neuroscience services, including sleep studies; orthopedic 
services, including joint replacement; diagnostic imaging; a cancer 
program; and special care, including coronary and neonatal intensive 
care units. It also provides programs in occupational health, physical 
therapy, and speech and language pathology. 

East Jefferson was one of three hospitals that remained open in the New 
Orleans metropolitan area during Hurricane Katrina. 

Results of Review: 

Table 12: East Jefferson Operating Income (Loss), Net Income (Loss) and 
EBIDA, 2000-2008: 

Dollars in millions: 

Operating income (loss); 
Year 2000: ($19.8); 
Year 2001: ($8.4); 
Year 2002: ($28.3); 
Year 2003: ($10.9); 
Year 2004: ($10.5); 
Year 2005[A]: ($40.4); 
Year 2006: ($10.2); 
Year 2007: ($29.6); 
Year 2008[B]: ($23.9). 

Net Income (Loss); 
Year 2000: 4.4; 
Year 2001: 16.1; 
Year 2002: (14.1); 
Year 2003: (2.7); 
Year 2004: (4.6); 
Year 2005[A]: (30.8); 
Year 2006: 4.6; 
Year 2007: (12.2); 
Year 2008[B]: (14.0). 

EBIDA; 
Year 2000: 30.7; 
Year 2001: 47.6; 
Year 2002: 18.1; 
Year 2003: 30.1; 
Year 2004: 27.1; 
Year 2005[A]: 6.6; 
Year 2006: 34.3; 
Year 2007: 21.7; 
Year 2008[B]: 17.9. 

Source: GAO analysis, based on audited and budgeted financial 
statements of East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

East Jefferson Operating Income (Loss): 

East Jefferson had operating losses in all of the 5 years before 
Hurricane Katrina and operating losses in 2005 to 2007. East Jefferson 
estimates that it will also have an operating loss in 2008. Our 
calculation of operating income or loss is the result of operating 
revenues minus operating expenses. East Jefferson operating revenues 
for 2005 through 2008 include special payments that the hospital 
received or expects to receive from private insurance to cover losses 
from the hurricane, wage index grant payments to cover some of the 
increase in labor costs, and uncompensated care funds to cover some of 
the costs associated with uninsured patients. (See figs. 4 and 5 and 
table 13.) 

Figure 4: East Jefferson Operating Revenues and Expenses, 2000-2008: 

This figure is a combination bar graph showing East Jefferson operating 
revenues and expenses, 2000-2008. The X axis represents the year, and 
the Y axis represents the dollars in millions. One bar represents 
operating revenues, and the other represents operating expenses. 

Year: 2000; 
Operating expenses: 243.5; 
Operating revenues: 263.4. 

Year: 2001; 
Operating expenses: 273.3; 
Operating revenues: 281.7. 

Year: 2002; 
Operating expenses: 261.2; 
Operating revenues: 289.6. 

Year: 2003; 
Operating expenses: 251.9; 
Operating revenues: 262.8. 

Year: 2004; 
Operating expenses: 270.4; 
Operating revenues: 280.9. 

Year: 2005[A]; 
Operating expenses: 257.9; 
Operating revenues: 298.3. 

Year: 2006; 
Operating expenses: 311.8; 
Operating revenues: 322.0. 

Year: 2007; 
Operating expenses: 318.7; 
Operating revenues: 348.4. 

Year: 2008[B]; 
Operating expenses: 311.0; 
Operating revenues: 334.9. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted financial 
statements of East Jefferson General Hospital. 

Note: Amounts in figure may not reconcile to reported operating income 
(loss) amounts due to immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] Year 2008 amounts are based on hospital budgeted financial 
statements. 

Notes: Operating revenues include net patient service revenues, other 
operating revenues, and the provision for bad debt which is only 
included in net patient service revenues for years 2003 through 2008. 
Operating revenues for 2005 through 2008 also include special payments 
that East Jefferson received, including payments from private 
insurance, wage index grants, and uncompensated care funds. East 
Jefferson financial statements for 2005 and 2006 included payments from 
private insurance in nonoperating revenue, but for consistency with the 
other hospitals in our study; we included insurance payments in 
operating revenue. Also, 2008 operating revenues exclude rental income 
from leases that we reclassified as nonoperating revenues to be 
consistent with how these amounts were reported in other years. 

Operating expenses include direct operating costs, such as salaries, 
purchased services, depreciation, supplies, interest expense, and 
provision for bad debt, which is only included for years 2000 through 
2002. 

[End of figure] 

Figure 5: East Jefferson Operating Income (Loss), 2000-2008A: 

This figure is a line graph showing East Jefferson operating income 
(loss), 2000-2008[A]. The X axis is the year, and the Y axis represents 
the dollars in millions. 

Year: 2000; 
Dollars in millions: -$19.8. 

Year: 2001; 
Dollars in millions: -$8.4. 

Year: 2002; 
Dollars in millions: -$28.3. 

Year: 2003; 
Dollars in millions: -$10.9. 

Year: 2004; 
Dollars in millions: -$10.5. 

Year: 2005[B]; 
Dollars in millions: -$40.4. 

Year: 2006; 
Dollars in millions: -$10.2. 

Year: 2007; 
Dollars in millions: -$29.6. 

Year: 2008[C]; 
Dollars in millions: -$23.9. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted statements of East 
Jefferson General Hospital. 

[A] The financial statements report different operating income (loss) 
amounts for years 2005, 2006, and 2008 than our amounts in figure above 
due to our reclassification of certain operating and non-operating 
amounts to calculate operating income (loss) for consistency with other 
hospitals in our study. 

[B] Year of Hurricane Katrina. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 13: East Jefferson Special Payments Received from 2005 to 2008 to 
Cover Hurricane Katrina Losses: 

Dollars in millions: 

Type of payment: Private insurance; 
2005[A]: $1.1; 
2006: $22.8; 
2007: [Empty]; 
2008[B]: [Empty]; 
Total All Years: $23.9. 

Type of payment: Wage index grant payments; 
2005[A]: [Empty]; 
2006: [Empty]; 
2007: 5.5; 
2008[B]: [Empty]; 
Total All Years: $ 5.5. 

Type of payment: Uncompensated care funds; 
2005[A]: [Empty]; 
2006: 9.3; 
2007: 8.8; 
2008[B]: 6.0; 
Total All Years: $24.1. 

Total included in operating revenue; 
2005[A]: $1.1; 
2006: $32.1; 
2007: $14.3; 
2008[B]: $6.0; 
Total All Years: $53.5. 

Type of payment: FEMA reimbursements included in nonoperating revenue; 
2005[A]: [Empty]; 
2006: 2.3; 
2007: 3.2; 
2008[B]: .5; 
Total All Years: $6.0. 

Total; 
2005[A]: $1.1; 
2006: $34.4; 
2007: $17.5; 
2008[B]: $6.5; 
Total All Years: $59.5. 

Source: East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[B] Year 2008 amounts are based on hospital budgeted financial 
statements. 

[End of table] 

East Jefferson Net Income (Loss): 

East Jefferson had net losses in 3 of the 5 years before Hurricane 
Katrina and net losses in 2 of the 3 years from 2005 to 2007. Also, 
East Jefferson estimates that it will have a net loss for 2008. Net 
income or loss includes nonoperating revenues net of nonoperating 
expenses, including investments and reimbursements that East Jefferson 
received from FEMA. (See fig. 6 and table 14.) 

Figure 6: East Jefferson Net Income (Loss), 2000-2008: 

This figure is a line graph showing East Jefferson net income (loss), 
2000-2008. The X axis represents the year, and the Y axis represents 
the dollars (in millions). 

Year: 2000; 
Dollars in millions: $4.4. 

Year: 2001; 
Dollars in millions: $16.1. 

Year: 2002; 
Dollars in millions: -$14.1. 

Year: 2003; 
Dollars in millions: -$2.7. 

Year: 2004; 
Dollars in millions: -$4.6. 

Year: 2005[A]; 
Dollars in millions: -$30.8. 

Year: 2006; 
Dollars in millions: $4.6. 

Year: 2007; 
Dollars in millions: -$12.2. 

Year: 2008[B]; 
Dollars in millions: -$14.0. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted financial 
statements of East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 14: East Jefferson Calculation of Net Income (Loss), 2000-2008: 

Dollars in millions: 

Operating income (loss); 
2000: ($19.8); 
2001: ($8.4); 
2002: ($28.3); 
2003: ($10.9); 
2004: ($10.5); 
2005[A]: ($40.4); 
2006: ($10.2); 
2007: ($29.6); 
2008[B]: ($23.9). 

Non-operating revenues and gains (losses): Investment income; 
2000: $24.5; 
2001: $23.5; 
2002: $19.0; 
2003: $7.3; 
2004: $4.3; 
2005[A]: $8.7; 
2006: $10.9; 
2007: $15.0; 
2008[B]: $6.0. 

Non-operating revenues and gains (losses): FEMA reimbursements; 
2000: [Empty]; 
2001: [Empty]; 
2002: [Empty]; 
2003: [Empty]; 
2004: [Empty]; 
2005[A]: [Empty]; 
2006: 2.3; 
2007: 3.2; 
2008[B]: 0.5. 

Non-operating revenues and gains (losses): Other nonoperating revenue 
and gains (losses)[ C]; 
2000: (0.2); 
2001: 1.0; 
2002: (4.8); 
2003: 0.8; 
2004: 1.6; 
2005[A]: 0.9; 
2006: 1.6; 
2007: (0.7); 
2008[B]: 3.4. 

Total nonoperating revenues and gains (losses); 
2000: $24.3; 
2001: $24.5; 
2002: $14.2; 
2003: $8.2; 
2004: $6.0; 
2005[A]: $9.6; 
2006: $14.8; 
2007: $17.5; 
2008[B]: $9.9. 

Net income (loss); 
2000: $4.4; 
2001: $16.1; 
2002: ($14.1); 
2003: ($2.7); 
2004: ($4.6); 
2005[A]: ($30.8); 
2006: $4.6; 
2007: ($12.2); 
2008: ($14.0). 

Source: GAO analysis, based on audited and budgeted financial 
statements of East Jefferson General Hospital: 

Note: Amounts in table may not add to net income (loss) amounts due to 
immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[C] Includes the transfer to Jefferson Parish except for 2008. 

[End of table] 

East Jefferson EBIDA: 

East Jefferson had positive EBIDA in the 5 years before the hurricane 
and also had positive EBIDA in 2005, the year of the hurricane. East 
Jefferson had positive EBIDA in 2006 and 2007 and estimates that it 
will also have positive EBIDA for 2008. In calculating EBIDA, interest, 
depreciation, and amortization amounts are added back to net income. 

Table 15: East Jefferson EBIDA, 2000-2008: 

Dollars in millions: 

Net income (loss); 
2000: $4.4; 
2001: $16.1; 
2002: ($14.1); 
2003: ($2.7); 
2004: ($4.6); 
2005[A]: ($30.8); 
2006: $4.6; 
2007: ($12.2); 
2008[B]: ($14.0). 

Interest, depreciation, and amortization; 
2000: 26.3; 
2001: 31.5; 
2002: 32.2; 
2003: 32.8; 
2004: 31.7; 
2005[A]: 37.4; 
2006: 29.7; 
2007: 33.9; 
2008[B]: 31.9. 

EBIDA; 
2000: 30.7; 
2001: 47.6; 
2002: 18.1; 
2003: 30.1; 
2004: 27.1; 
2005[A]: 6.6; 
2006: 34.3; 
2007: 21.7; 
2008[B]: 17.9. 

Source: GAO analysis, based on audited and budgeted financial 
statements of East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Summary of Operating Results before Hurricane Katrina: 

* 2000-2004. East Jefferson had operating losses in all 5 years before 
Hurricane Katrina. In 2002, operating losses increased by $20 million 
from 2001 because of several issues. Operating revenue was down about 
$12 million because of a reduction in admissions while operating 
expenses increased $7.9 million. The increase in expenses was due to 
increased salaries, wages, and benefits in addition to an increase in 
bad debt expense from the bankruptcy of several managed care 
organizations. East Jefferson had net income in 2 years before the 
hurricane because of investment income and other nonoperating revenues 
and gains. East Jefferson also had positive EBIDA in all 5 years before 
Hurricane Katrina. 

Summary of Operating Results after Hurricane Katrina: 

* 2005. East Jefferson operating results declined from pre-Katrina 
levels. East Jefferson suffered disruption of business and damage to 
its structures from the effects of Hurricane Katrina, although it was 
one of three hospitals that remained open in the New Orleans 
metropolitan area during the hurricane. East Jefferson had a decline in 
net patient revenues and this decline along with an increase in 
operating expenses contributed to the $40.4 million operating loss. 
East Jefferson officials said that some patients were staying in the 
hospital longer because of the lack of suitable homes or subacute 
services post discharge, such as home health or skilled nursing care 
and nursing homes. East Jefferson officials said that they lose money 
for certain Medicare patients where reimbursement becomes limited after 
a certain length of stay. East Jefferson reported a $30.8 million net 
loss for the year and had positive EBIDA of $6.6 million. 

* 2006. East Jefferson's operating results improved mainly because of 
special payments from private insurance and uncompensated care funds. 
East Jefferson had a $10.2 million operating loss, which was about $30 
million less than the operating loss from 2005. The $10.2 million 
operating loss included $22.8 million in insurance payments and $9.3 
million in uncompensated care funds. East Jefferson reported that its 
operations faced challenges because of the higher cost of living 
resulting in an increase in salaries, wages, benefits, and contract 
labor; difficulty recruiting and maintaining the professional staff of 
physicians, nurses, and other allied health professional and support 
staff; and the shortage of health care resources that put a strain on 
the delivery of available beds and emergency room services. 

East Jefferson generated net income of $4.6 million because of $10.9 
million in investment income, FEMA reimbursements of approximately $2.3 
million, and other nonoperating revenues and gains. East Jefferson also 
had positive EBIDA of $ 34.3 million. 

East Jefferson received a CDL for $61 million in 2006 that has not been 
reflected in revenues because it is recorded as a liability. This 
amount was used to cover operating expenses and is currently due in 
2011. Under FEMA regulations, the obligation to repay the loan could be 
forgiven if certain conditions are met. East Jefferson officials told 
us that they will apply for forgiveness of this loan. If the loan is 
cancelled or forgiven, the loan balance and any accrued interest 
payable would be treated as revenue in the year in which the loan is 
forgiven. See enclosure II for additional information. 

* 2007. East Jefferson operating results were an improvement over 2005 
levels. East Jefferson had an operating loss of $29.6 million. While 
2007 operating revenues increased over 2006 revenues, they included a 
smaller amount of special payments. Special payments included $5.5 
million in wage index grant payments and $8.8 million in uncompensated 
care funds. Increased operating revenues also resulted from increased 
volumes in the hospital clinics and emergency rooms and new lines of 
service, such as the Da Vinci Robot. Operating expenses also increased 
primarily because of increasing labor costs in the market. 

East Jefferson's reported a net loss of $12.2 million in 2007 that 
included nonoperating revenues, such as $15 million in investment 
income and $3.2 million in FEMA reimbursements. This net loss amount is 
generally in the range of net income or loss amounts for all years 
before the hurricane. East Jefferson also had positive EBIDA of $21.7 
million. 

* 2008. East Jefferson projected continued improvement in its operating 
results over 2005 levels. East Jefferson projected an operating loss of 
$23.9 million, which includes $6 million in uncompensated care funds. 
East Jefferson received a smaller amount of special payments in 2008 
than in the 2 prior years, indicating that it expects to make 
improvements with less support from special payments. East Jefferson 
also projected a $14 million net loss and has a projected positive 
EBIDA of $17.9 million. 

Impact on Hospital Bonds: 

Although East Jefferson remained current in its bond payments in 2005, 
it was not in compliance with its bond covenants. The covenants require 
that East Jefferson maintain a certain debt service coverage ratio each 
year. The debt service coverage ratio is the ratio of net income to 
debt payments or the amount of cash flow available to meet annual 
interest and principal payments on debt. This ratio should ideally be 
over 1.0, meaning the entity is generating enough net income to pay its 
debt obligations. A ratio below 1.0 indicates that there is not enough 
cash flow to cover debt payments. The hospital received waivers from 
its bond insurers for the covenant noncompliance after meeting 
conditions that included depositing approximately $8.5 million of short-
term investments in a reserve account fund and hiring a management 
consultant to assist with improving the hospital's financial results. 

Impact on Hospital Financial Position: 

East Jefferson has a weakened financial position as shown by declines 
in its net asset balances. This indicates that the hospital has been 
using its assets, taking on additional debt, or both to support 
operations. For example, East Jefferson had net assets of about $288 
million in 2004 before the hurricane and $249 million in 2007. 

East Jefferson Trends in Other Financial Information: 

Table 16: East Jefferson Staffed Beds, 2000-2007: 

Year: 2000; 
Beds: 482. 

Year: 2001; 
Beds: 471. 

Year: 2002; 
Beds: 436. 

Year: 2003; 
Beds: 436. 

Year: 2004; 
Beds: 430. 

Year: 2005[A]; 
Beds: 443. 

Year: 2006; 
Beds: 429. 

Year: 2007; 
Beds: 413. 

Source: East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 17: East Jefferson Occupancy Rates, 2000-2007: 

Percentages: 

Year: 2000; 
Rates: 67.9. 

Year: 2001; 
Rates: 70.8. 

Year: 2002; 
Rates: 76.5. 

Year: 2003; 
Rates: 68.5. 

Year: 2004; 
Rates: 68.6. 

Year: 2005[A]; 
Rates: 71.9. 

Year: 2006; 
Rates: 75.2. 

Year: 2007; 
Rates: 78.3. 

Source: East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 18: East Jefferson Payer Mix, 2000-2008: 

Percentages: 

Payer: Managed care/commercial; 
2000: 43; 
2001: 42; 
2002: 43; 
2003: 43; 
2004: 40; 
2005[A]: 38; 
2006: 35; 
2007: 35; 
2008[B]: 33. 

Payer: Medicare (Medicare HMO, combined); 
2000: 45; 
2001: 44; 
2002: 41; 
2003: 40; 
2004: 41; 
2005[A]: 44; 
2006: 44; 
2007: 47; 
2008[B]: 50. 

Payer: Medicaid; 
2000: 8; 
2001: 9; 
2002: 11; 
2003: 12; 
2004: 13; 
2005[A]: 12; 
2006: 14; 
2007: 15; 
2008[B]: 14. 

Payer: Self-pay/other; 
2000: 5; 
2001: 5; 
2002: 5; 
2003: 5; 
2004: 6; 
2005[A]: 5; 
2006: 7; 
2007: 3; 
2008[B]: 4. 

Source: East Jefferson General Hospital. 

[A] Year of Hurricane Katrina. 

[B] The 2008 year to date only includes discharges coded as of May 1, 
2008. 

[End of table] 

[End of section] 

Enclosure V: Touro Infirmary and Subsidiaries (Touro): 

Hospital Description: 

Touro is not-for-profit, faith-based community teaching hospital 
located in the Garden District in Uptown New Orleans. Touro includes 
Touro Infirmary (Hospital); Touro Infirmary Foundation; Woldenberg 
Village, Inc; the hospital's wholly owned for-profit subsidiaries, 
Metrolab, Inc., and Crescent City Physicians, Inc; and its 50 percent 
interest in Choice Healthcare, Inc. Woldenberg operates a 120-bed 
nursing home, a 60-unit assisted living facility, and a 60-unit 
independent living facility. The hospital's services include 
cardiovascular, emergency, neurosciences, oncology, orthopedic, nuclear 
medicine, rehabilitation, wound care, and special services such as 
neonatal intensive care and intensive care. 

Touro temporarily closed on September 1, 2005 and, reopened on 
September 28, 2005. It was the first hospital to reopen after Hurricane 
Katrina in Orleans Parish. 

Results of Review: 

Table 19: Touro Operating Income (Loss), Net Income (Loss), and EBIDA, 
2000-2008: 

Dollars in millions: 

Year: 2000; 
Operating income (loss): ($3.2); 
Net income (loss): 4.5; 
EBIDA: 20.2. 

Year: 2001; 
Operating income (loss): ($6.5); 
Net income (loss): (9.7); 
EBIDA: 6.3. 

Year: 2002; 
Operating income (loss): ($1.8); 
Net income (loss): (8.5); 
EBIDA: 11.6. 

Year: 2003; 
Operating income (loss): ($2.5); 
Net income (loss): 11.1; 
EBIDA: 31.6. 

Year: 2004; 
Operating income (loss): $0.8; 
Net income (loss): 11.4; 
EBIDA: 32.7. 

Year: 2005[A]; 
Operating income (loss): ($40.7); 
Net income (loss): (33.5); 
EBIDA: (13.2). 

Year: 2006; 
Operating income (loss): $4.9; 
Net income (loss): 22.8; 
EBIDA: 43.5. 

Year: 2007[B]; 
Operating income (loss): ($36.4); 
Net income (loss): (20.3); 
EBIDA: 0.7. 

Year: 2008[C]; 
Operating income (loss): ($15.0); 
Net income (loss): (8.9); 
EBIDA: 12.7. 

Source: GAO analysis, based on audited, unaudited, and budgeted 
financial statements of Touro Infirmary and subsidiaries. 

[A] Year of Hurricane Katrina. 

[B] The 2007 data are based on unaudited financial statements. 

[C] Year 2008 amounts are based on hospital budgeted financial 
statements. 

[End of table] 

Touro Operating Income (Loss): 

Touro had operating losses in 4 of the 5 years before Hurricane Katrina 
and operating losses in 2 of the 3 years from 2005 to 2007. Touro 
estimates that it will also have an operating loss in 2008. Our 
calculation of operating income or loss is the result of operating 
revenues minus operating expenses. Touro's operating income for 2005 
through 2008 include special payments that the hospital received from 
private insurance to cover losses from the hurricane, wage index grant 
payments to cover some of the increase in labor costs, and 
uncompensated care funds to cover some of the costs associated with the 
increased volume of uninsured patients. (See figs. 7 and 8 and table 
20.) 

Figure 7: Touro Operating Revenues and Expenses, 2000-2008: 

This figure is a combination bar graph showing Touro operating revenues 
and expenses, 2000-2008. The X axis represents the year, and the Y axis 
represents operating revenues and expenses. The bars represent 
operating revenues and operating expenses. 

Year: 2000; 
Operating revenues: 129.6; 
Operating expenses: 132.8. 

Year: 2001; 
Operating revenues: 144.5; 
Operating expenses: 151.0. 

Year: 2002; 
Operating revenues: 163.8; 
Operating expenses: 165.6. 

Year: 2003; 
Operating revenues: 179.0; 
Operating expenses: 181.5. 

Year: 2004; 
Operating revenues: 194.3; 
Operating expenses: 193.4. 

Year: 2005[A]; 
Operating revenues: 170.6; 
Operating expenses: 211.2. 

Year: 2006; 
Operating revenues: 248.5; 
Operating expenses: 243.6. 

Year: 2007[B]; 
Operating revenues: 214.7; 
Operating expenses: 251.1. 

Year: 2008[C]; 
Operating revenues: 233.0; 
Operating expenses: 247.9. 

[See PDF for image] 

Source: GAO analysis based on audited, unaudited, and budget financial 
statements of Touro infirmary and subsidiaries. 

Note: Amounts in figure may not reconcile to reported operating income 
(loss) amounts due to immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] The 2007 data are based on unaudited financial statements. 

[C] Year 2008 amounts are based on hospital budgeted financial 
statements. 

Notes: Operating revenues include net patient service revenues, other 
operating revenues and net assets released from restrictions for 
operations. Operating revenues for 2005 through 2008 also include 
special payments that Touro received, including payments from private 
insurance, and wage index grants. Touro financial statements for 2005 
through 2008 included payments from private insurance in non-operating 
revenue, but for consistency with the other hospitals in our study, we 
included insurance payments in operating revenue. Further, the 
financial statements included investment income in operating revenue, 
but for consistency with the other hospitals in our study, we 
reclassified investment income as nonoperating revenue. 

Operating expenses include direct operating costs such as salaries, 
purchased services, impairments of assets, depreciation, provision for 
doubtful accounts which includes an offset of uncompensated care funds, 
and interest expense. Touro's 2005 financial statements included some 
insurance payments as an offset against operating expenses, but for 
consistency with the other hospitals in our study, we included all 
insurance payments in operating revenue. 

[End of figure] 

Figure 8: Touro Operating Income (Loss), 2000-2008[A]: 

This figure is a line graph showing Touro operating income (loss), 2000-
2008[A]. The X axis represents the year, and the Y axis is the dollars. 

Year: 2000; 
Dollars (in million): -3.2. 

Year: 2001; 
Dollars (in million): -6.5. 

Year: 2002; 
Dollars (in million): -1.8. 

Year: 2003; 
Dollars (in million): -2.5. 

Year: 2004; 
Dollars (in million): 0.8. 

Year: 2005; 
Dollars (in million): -40.7. 

Year: 2006; 
Dollars (in million): 4.9. 

Year: 2007; 
Dollars (in million): -36.4. 

Year: 2008; 
Dollars (in million): -15.0. 

[See PDF for image] 

Source: GAO analysis based on audited, unaudited, and budget financial 
statements of Touro infirmary and subsidiaries. 

[A] The financial statements report different operating income (loss) 
amounts for years 2000-2008 than our amounts in figure above due to our 
reclassification of certain operating and nonoperating amounts to 
calculate operating income (loss) for consistency with other hospitals 
in our study. 

[B] The year of Hurricane Katrina. 

[C] The 2007 data are based on unaudited financial statements. 

[D] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 20: Touro Special Payments Received from 2005 to 2008 to Cover 
Hurricane Katrina Losses: 

Dollars in millions: 

Type of payment: Private insurance; 
2005[A]: $16.0; 
2006: $33.7; 
2007: $1.5; 
2008[B]: $1.4; 
Total all years: $52.6. 

Type of payment: Wage index grant payments; 
2005[A]: [Empty]; 
2006: [Empty]; 
2007: 3.6; 
2008[B]: [Empty]; 
Total all years: $3.6. 

Uncompensated care funds; 
2005[A]: [Empty]; 
2006: 1.5; 
2007: 9.1; 
2008[B]: 3.3; 
Total all years: $13.9. 

Total included in operating revenue; 
2005[A]: $16.0; 
2006: $35.2; 
2007: $14.2; 
2008[B]: $4.7; 
Total all years: $70.1. 

FEMA reimbursements included in nonoperating revenue; 
2005[A]: [Empty]; 
2006: 3.8; 
2007: 4.8; 
2008[B]: [Empty]; 
Total all years: $8.6. 

Total; 
2005[A]: $16.0; 
2006: $39.0; 
2007: $19.0; 
2008[B]: $4.7; 
Total all years: $78.7. 

Source: Touro Infirmary and subsidiaries. 

[A] Year of Hurricane Katrina. 

[B] Year 2008 amounts are based on hospital budgeted financial 
statements. 

[End of table] 

Touro Net Income (Loss): 

Touro had net income in 3 of the 5 years before Hurricane Katrina but 
had net losses in 2 of the 3 years from 2005 to 2007. Touro estimates 
that it will have a net loss for 2008. Net income or loss includes 
nonoperating revenues net of nonoperating expenses including 
investments and reimbursements that Touro received from FEMA. (See fig. 
9 and tables 19 and 20.) 

Figure 9: Touro Net Income (Loss), 2000-2008: 

This figure is a line graph showing Touro net income (loss), 2000-2008. 
The X axis represents the year, and the Y axis represents the net 
income (loss). 

Year: 2000; 
Dollars (in millions): 4.5. 

Year: 2001; 
Dollars (in millions): -9.7. 

Year: 2002; 
Dollars (in millions): -8.5. 

Year: 2003; 
Dollars (in millions): 11.1. 

Year: 2004; 
Dollars (in millions): 11.4. 

Year: 2005[A]; 
Dollars (in millions): -33.5. 

Year: 2006; 
Dollars (in millions): 22.8. 

Year: 2007[B]; 
Dollars (in millions): -20.3. 

Year: 2007[B]; 
Dollars (in millions): -8.9. 

[See PDF for image] 

Source: GAO analysis based on audited, unaudited, and budget financial 
statements of Touro infirmary and subsidiaries. 

[A] Year of Hurricane Katrina. 

[B] The 2007 data are based on unaudited financial statements. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 21: Touro Calculation of Net Income (Loss), 2000-2008: 

Dollars in millions: 

Year: 2000; 
Operating income (loss): ($3.2); 
Nonoperating revenues and gains (losses): Investment income: $5.9; 
Operating income (loss): Nonoperating revenues and gains (losses): FEMA 
reimbursements: [Empty]; 
Operating income (loss): Nonoperating revenues and gains (losses): 
Other nonoperating revenue and gains (losses): 1.9; 
Operating income (loss): Nonoperating revenues and gains (losses): 
Total nonoperating revenues and gains (losses): $7.8; 
Net income (loss): $4.5. 

Year: 2001; 
Operating income (loss): ($6.5); 
Nonoperating revenues and gains (losses): Investment income: (6.8); 
Nonoperating revenues and gains (losses): FEMA reimbursements: [Empty]; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 3.6; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): ($3.2); 
Net income (loss): ($9.7). 

Year: 2002; 
Operating income (loss): ($1.8); 
Nonoperating revenues and gains (losses): Investment income: ($7.5); 
Nonoperating revenues and gains (losses): FEMA reimbursements: [Empty]; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 0.8; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): ($6.7); 
Net income (loss): ($8.5). 

Year: 2003; 
Operating income (loss): ($2.5); 
Nonoperating revenues and gains (losses): Investment income: $13.0; 
Nonoperating revenues and gains (losses): FEMA reimbursements: [Empty]; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 0.6; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): $13.6; 
Net income (loss): $11.1. 

Year: 2004; 
Operating income (loss): $0.8; 
Nonoperating revenues and gains (losses): Investment income: $8.3; 
Nonoperating revenues and gains (losses): FEMA reimbursements: [Empty]; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 2.2; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): $10.5; 
Net income (loss): $11.4. 

Year: 2005[A]; 
Operating income (loss): ($40.7); 
Nonoperating revenues and gains (losses): Investment income: $8.5; 
Nonoperating revenues and gains (losses): FEMA reimbursements: 0.0; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): ($1.3); 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): $7.2; 
Net income (loss): $33.5. 

Year: 2006; 
Operating income (loss): ($4.9); 
Nonoperating revenues and gains (losses): Investment income: $12.9; 
Nonoperating revenues and gains (losses): FEMA reimbursements: 3.8; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 1.2; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): $17.9; 
Net income (loss): $22.8. 

Year: 2007[B]; 
Operating income (loss): ($36.4); 
Nonoperating revenues and gains (losses): Investment income: $8.8; 
Nonoperating revenues and gains (losses): FEMA reimbursements: 4.8; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 2.6; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): $16.2; 
Net income (loss): ($20.3). 

Year: 2008[C]; 
Operating income (loss): ($15.0); 
Nonoperating revenues and gains (losses): Investment income: $5.6; 
Nonoperating revenues and gains (losses): FEMA reimbursements: 0.0; 
Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (losses): 0.5; 
Nonoperating revenues and gains (losses): Total nonoperating revenues 
and gains (losses): $6.1; 
Net income (loss): ($8.9). 

Source: GAO analysis, based on audited, unaudited, and budgeted 
financial statements of Touro Infirmary and subsidiaries. 

Note: Amounts in table may not add to net income (loss) amounts due to 
immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2007 are based on unaudited financial statements. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Touro EBIDA: 

Touro had positive EBIDA in the 5 years before Hurricane Katrina but 
had negative EBIDA in 2005, the year of the hurricane. In 2006 and 
2007, Touro had positive EBIDA, and estimates that it will also have 
positive EBIDA for 2008. In calculating EBIDA, the interest, 
depreciation, and amortization amounts are added back to net income. 
(See table 22.) 

Table 22: Touro Calculation of EBIDA, 2000-2008: 

Year: 2001; 
Net income (loss): $4.5; 
Interest, depreciation, and amoritization: 15.7; 
EBIDA: 20.2. 

Year: 2002; 
Net income (loss): ($9.7); 
Interest, depreciation, and amoritization: 16.0; 
EBIDA: 6.3. 

Year: 2003; 
Net income (loss): $11.1; 
Interest, depreciation, and amoritization: 20.5; 
EBIDA: 31.6. 

Year: 2004; 
Net income (loss): $11.4; 
Interest, depreciation, and amoritization: 21.3; 
EBIDA: 32.7. 

Year: 2005[A]; 
Net income (loss): ($33.5); 
Interest, depreciation, and amoritization: 20.3; 
EBIDA: (13.2). 

Year: 2006; 
Net income (loss): $22.8; 
Interest, depreciation, and amoritization: 20.7; 
EBIDA: 43.5. 

Year: 2007[B]; 
Net income (loss): ($20.3); 
Interest, depreciation, and amoritization: 21.0; 
EBIDA: 0.7. 

Year: 2008[C]; 
Net income (loss): ($8.9); 
Interest, depreciation, and amoritization: 21.6; 
EBIDA: 12.7. 

Source: GAO analysis, based on audited, unaudited, and budgeted 
financial statements of Touro Infirmary and subsidiaries. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2007 are based on unaudited financial statements. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Summary of Operating Results before Hurricane Katrina: 

* 2000-2004. Touro had operating losses 4 out of 5 years before 
Hurricane Katrina, but reported net income in 3 of those years because 
of investment income and other nonoperating revenues and gains. Touro 
also had positive EBIDA in all 5 years before Hurricane Katrina. 

Summary of Operating Results after Hurricane Katrina: 

* 2005. Touro operating results declined from pre-Katrina levels. Touro 
had a $40.7 million operating loss. Touro received $16 million in 
payments from private insurance but had a significant decline in net 
patient revenues because the hospital was closed for 1 month after the 
hurricane and reopened at a significantly reduced capacity. Touro also 
reported a $33.5 million net loss for the year and had negative EBIDA 
of $13.2 million. 

* 2006. Touro operating results improved over 2005 levels. Touro had 
operating income of $4.9 million with $33.7 million in insurance 
payments and $1.5 million in uncompensated care funds included in 
operating revenues. Touro also had net income of $22.8 million due to 
$12.9 million in investment income, FEMA reimbursements of 
approximately $3.8 million, and other nonoperating revenues and gains. 
Touro also had positive EBIDA of $43.5 million. 

* 2007. Touro operating results were an improvement over 2005 levels. 
Touro had an operating loss of $36.4 million. While operating revenues 
increased, they included a smaller amount of special payments than in 
2006. Special payments included $1.5 million in insurance payments, 
$3.6 million in wage index grant payments, and $9 million in 
uncompensated care funds. Touro's unaudited financial statements show a 
net loss of $20.3 million after including $8.8 million in investment 
income and other nonoperating revenues. Additionally, according to 
Touro officials the hospital also received $4.8 million in FEMA 
reimbursements. Touro also has positive EBIDA of $0.7 million. 

* 2008. Touro projected improvement in its operating results over 2005 
levels. Touro projected an operating loss of $15 million, which 
includes about $3 million in uncompensated care funds and $1.4 million 
in insurance payments. Touro received a smaller amount of special 
payments in 2008 than in the 3 prior years. The projected improvement 
in operating results indicates that Touro expects to continue to make 
improvements over 2005 levels with less support from special payments. 
Touro also projected an $8.9 million net loss and has a projected 
positive EBIDA of $12.7 million. 

Impact on Hospital Bonds: 

As result of operating losses, in 2005 Touro did not meet its bond 
covenants, which require that the hospital maintain a debt service 
coverage ratio of greater than 1.1. The debt service coverage ratio is 
the ratio of net income to debt payments or the amount of cash flow 
available to meet annual interest and principal payments on debt. This 
ratio should ideally be over 1.0, meaning the entity is generating 
enough net income to pay its debt obligations. A ratio below 1.0 
indicates that there is not enough cash flow to cover debt payments. 
Touro management retained a consultant to make recommendations to 
improve the operating results of the hospital. According to hospital 
officials, Touro was not in compliance with these requirements in 2007 
and is in discussions with its bond trustee about this matter. 

Impact on Hospital Financial Position: 

Touro has a weakened financial position as shown by declines in its net 
asset balances. This indicates that the hospital has been using its 
assets to support operations. Touro had net assets of about $144 
million in 2004 before the hurricane and net assets of $118 million in 
2007. 

Touro officials told us that although their operating losses are lower 
in 2006 through 2008 than losses in 2005, their financial position is 
weaker because their cash and investment balances have declined from 
levels before Hurricane Katrina. Touro cash and investment balances 
were about $105 million in 2004 and about $82 million in 2007, a 
decline of about $23 million or about 22 percent. Touro officials said 
that they have had to use their cash and investments to cover operating 
expenses in years that they had operating losses. They also said that 
using their cash for operating expenses will affect their ability to 
make future expenditures for capital improvements, such as new 
technology and equipment. 

Touro Trends in Other Financial Information: 

Table 23: Touro Staffed Beds, 2000-2007: 

Year: 2000; 
Beds: 352. 

Year: 2001; 
Beds: 369. 

Year: 2002; 
Beds: 375. 

Year: 2003; 
Beds: 355. 

Year: 2004; 
Beds: 359. 

Year: 2005[A]; 
Beds: 302. 

Year: 2006; 
Beds: 337. 

Year: 2007; 
Beds: 345. 

Source: Touro Infirmary and subsidiaries. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 24: Touro Occupancy Rates, 2000-2007: 

Percentages: 

Year: 2000; 
Rates[B]. 

Year: 2001; 
Rates[B]: 56.2. 

Year: 2002; 
Rates[B]: 60.7. 

Year: 2003; 
Rates[B]: 59.0. 

Year: 2004; 
Rates[B]: 67.5. 

Year: 2005[A]; 
Rates[B]: 71.0. 

Year: 2006; 
Rates[B]: 66.7. 

Year: 2007; 
Rates[B]: 66.8. 

Year: 2008; 
Rates[B]: 61.4. 

Source: Touro Infirmary and subsidiaries. 

[A] Year of Hurricane Katrina. 

[B] Rates are based on acute care. 

[End of table] 

Table 25: Touro Payer Mix, 2000-2008: 

Percentages: 

Managed care/commercial; 
2000[A]: N/A; 
2001: 32.5; 
2002: 29.6; 
2003: 33.7; 
2004: 33.5; 
2005[B]: 33.9; 
2006: 29.4; 
2007: 28.1; 
2008[C]: 27.2. 

Medicare; 
2000[A]: N/A; 
2001: 41.5; 
2002: 43.3; 
2003: 40.3; 
2004: 38.6; 
2005[B]: 38.1; 
2006: 30.5; 
2007: 30.1; 
2008[C]: 31.4. 

Medicare HMO; 
2000[A]: N/A; 
2001: 6.5; 
2002: 5.1; 
2003: 4.8; 
2004: 4.5; 
2005[B]: 5.8; 
2006: 16.4; 
2007: 20.2; 
2008[C]: 21.7. 

Medicaid; 
2000[A]: N/A; 
2001: 16.8; 
2002: 17.8; 
2003: 16.2; 
2004: 18.9; 
2005[B]: 16.6; 
2006: 15.2; 
2007: 16.8; 
2008[C]: 15.2. 

Self-pay/other; 
2000[A]: N/A; 
2001: 2.7; 
2002: 4.3; 
2003: 5.0; 
2004: 4.5; 
2005[B]: 5.6; 
2006: 8.6; 
2007: 4.9; 
2008[C]: 4.6. 

Source: Touro Infirmary and subsidiaries. 

[A] N/A-Data were not available. 

[B] Year of Hurricane Katrina. 

[C] Data are through February 2008. 

[End of table] 

[End of section] 

Enclosure VI: Tulane University Hospital and Clinic (Tulane): 

Hospital Description: 

Tulane is a partnership between Tulane University and Hospital 
Corporation of America (HCA) and is a for-profit, limited liability 
company. Tulane has two facilities in the New Orleans metropolitan 
area: its main campus and a secondary campus at Tulane-Lakeside 
Hospital in Metairie, Louisiana, which was acquired just before 
Hurricane Katrina, on July 1, 2005. Between these two campuses, Tulane 
provides a full range of medical services, including cardiovascular, 
emergency, neurosciences, oncology, orthopedic, nuclear medicine, 
rehabilitation, and special services, such as neonatal intensive care 
and intensive care. Following the hurricane, the Lakeside campus, which 
received minor storm damage, reopened in 2005. In February 2006, after 
being closed for almost 6 months, the Tulane main campus reopened its 
emergency room, several operating rooms, 63 beds, an adult and 
pediatric intensive care unit, a pharmacy, and several cardiology labs. 
At its reopening, the main campus was about one-fourth of its pre- 
Katrina size and had about half of its pre-Katrina staffing. In 2007, 
Tulane had 288 staffed beds. 

Results of Review: 

Table 26: Tulane Operating Income (Loss), Net Income (Loss), and EBIDA, 
2000-2008: 

Dollars in millions: 

Operating income (loss); 
2000: ($8.5); 
2001: ($2.1); 
2002: $3.6; 
2003: $0.1; 
2004: ($4.4); 
2005[A]: ($18.9); 
2006: $3.1; 
2007: ($42.2); 
2008: ($37.6). 

Net income (loss)[C]; 
2000: (8.5); 
2001: (2.1); 
2002: 3.6; 
2003: 0.1; 
2004: (4.4); 
2005[A]: (18.9); 
2006: 3.1; 
2007: (42.2); 
2008: (37.6). 

EBIDA; 
2000: 7.3; 
2001: 15.7; 
2002: 20.1; 
2003: 18.5; 
2004: 14.5; 
2005[A]: 1.8; 
2006: 22.7; 
2007: (16.1); 
2008: (11.9). 

Source: GAO analysis, based on audited and budgeted financial 
statements of Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[C] Net income (loss) is the same as operating income (loss) because 
Tulane does not have nonoperating revenue and expenses. 

[End of table] 

Tulane Operating Income (Loss): 

Tulane had operating losses in 3 of the 5 years before Hurricane 
Katrina and operating losses in 2 of the 3 years from 2005 to 2007. 
Tulane estimates that it will also have an operating loss in 2008. Our 
calculation of operating income or loss is the result of operating 
revenues minus operating expenses. Tulane operating revenues for 2005 
through 2008 include special payments that the hospital received from 
private insurance to cover losses from the hurricane, wage index grant 
payments to cover some of the increase in labor costs, and 
uncompensated care funds to cover some of the costs associated with the 
volume of uninsured patients. (See figs. 10 and 11 and table 27.) 

Figure 10: Tulane Operating Revenues and Expenses, 2000-2008: 

This figure is a combination bar graph showing Tulane operating 
revenues and expenses, 2000-2008. The X axis represents the year, and 
the Y axis represents the dollars (in millions). The bars represent 
operating revenues and operating expenses. 

Year: 2000; 
Operating revenues: 235.9; 
Operating expenses: 244.4. 

Year: 2001; 
Operating revenues: 256.2; 
Operating expenses: 258.3. 

Year: 2002; 
Operating revenues: 271.5; 
Operating expenses: 267.9. 

Year: 2003; 
Operating revenues: 283.6; 
Operating expenses: 283.6. 

Year: 2004; 
Operating revenues: 283.2; 
Operating expenses: 287.6. 

Year: 2005[A]; 
Operating revenues: 265.1; 
Operating expenses: 284.0. 

Year: 2006; 
Operating revenues: 278.1; 
Operating expenses: 275.1. 

Year: 2007; 
Operating revenues: 310.3; 
Operating expenses: 352.5. 

Year: 2008[B]; 
Operating revenues: 342.7; 
Operating expenses: 380.3. 

Note: Amounts in figure may not reconcile to reported operating income 
(loss) amounts due to immaterial rounding differences. 

[A] Year of Hurricane Katrina. Tulane acquired Lakeside Hospital on 
July 1, 2005. 

[B] Year 2008 amounts are based on hospital budgeted financial 
statements. 

Notes: Operating revenues include net patient service revenues and 
other operating revenue. Operating revenues for 2005 through 2008 also 
include special payments that Tulane received including payments from 
private insurance, wage index grant payments, and uncompensated care 
funds. 

Operating expenses include direct operating costs, such as salaries and 
wages and benefits, other operating expenses (which include 
professional fees, and contract services), supplies, provision for 
doubtful accounts, depreciation and amortization, management fees, and 
interest expense (interest income, net). 

[End of figure] 

Figure 11: Tulane Operating Income (Loss), 2000-2008: 

This figure is a line graph showing Tulane operating income (loss), 
2000-2008. The X axis represents the year, and the Y axis represents 
the operating income (loss). 

Year: 2000; 
Dollars (in millions): -8.5. 

Year: 2001; 
Dollars (in millions): -2.1. 

Year: 2002; 
Dollars (in millions): 3.6. 

Year: 2003; 
Dollars (in millions): 0.1. 

Year: 2004; 
Dollars (in millions): -4.4. 

Year: 2005[A]; 
Dollars (in millions): -18.9. 

Year: 2006; 
Dollars (in millions): 3.1. 

Year: 2007; 
Dollars (in millions): -42.2. 

Year: 2008[B]; 
Dollars (in millions): -37.6. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted financial 
statements of Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 27: Tulane's Special Payments Received from 2005 to 2008 to Cover 
Hurricane Katrina Losses: 

Dollars in millions: 

Type of payment: Private insurance; 
2005: $56.4; 
2006: $74.0; 
2007: $4.6; 
2008[A]: ; 
Total all years: $135.0. 

Type of payment: Wage index grant payments; 
2005: [Empty]; 
2006: [Empty]; 
2007: 4.6; 
2008[A]: [Empty]; 
Total all years: 4.6. 

Type of payment: Uncompensated care funds; 
2005: [Empty]; 
2006: 5.6; 
2007: 20.2; 
2008[A]: 3.0; 
Total all years: 28.8. 

Total included in operating revenue; 
2005: $56.4; 
2006: $79.6; 
2007: $29.4; 
2008[A]: $3.0; 
Total all years: $168.4. 

FEMA reimbursements included in nonoperating revenue; 
2005: [Empty]; 
2006: [Empty]; 
2007: [Empty]; 
2008[A]: [Empty]; 
Total all years: [Empty]. 

Total; 
2005: $56.4; 
2006: $79.6; 
2007: $29.4; 
2008[A]: $3.0. 
Total all years: $168.4. 

Source: Tulane University Hospital and Clinic. 

[A] Year 2008 amounts are based on hospital budgeted financial 
statements. 

[End of table] 

Tulane Net Income (Loss): 

Tulane does not report amounts from nonoperating sources in its audited 
financial statements when calculating bottom-line net income or loss. 
Therefore, the net income or loss amounts are the same as the operating 
income or loss amounts. (See fig. 12.) 

Figure 12: Tulane Net Income (Loss), 2000-2008: 

This figure is a line graph showing Tulane net income (loss), 2000-
2008. The X axis represents the year, and the Y axis represents the 
dollars (in millions). 

Year: 2000; 
Dollars (in millions): -8.5. 

Year: 2001; 
Dollars (in millions): -2.1. 

Year: 2002; 
Dollars (in millions): 3.6. 

Year: 2003; 
Dollars (in millions): 0.1. 

Year: 2004; 
Dollars (in millions): -4.4. 

Year: 2005[A]; 
Dollars (in millions): -18.9. 

Year: 2006; 
Dollars (in millions): 3.1. 

Year: 2007; 
Dollars (in millions): -42.2. 

Year: 2008[B]; 
Dollars (in millions): -37.6. 

[See PDF for image]

Source: GAO analysis, based on audited and budgeted financial 
statements of Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Tulane EBIDA: 

Tulane had positive EBIDA in the 5 years before the hurricane, lowered 
but positive EBIDA in 2005, positive EBIDA in 2006, and negative EBIDA 
in 2007. Tulane estimates that it will also have negative EBIDA for 
2008. In calculating EBIDA, the interest, depreciation, and 
amortization amounts are added back to net income. (See table 28.) 

Table 28: Tulane Calculation of EBIDA, 2000-2008: 

Dollars in millions: 

Net income (loss); 
2000: (8.5); 
2001: (2.1); 
2002: 3.6; 
2003: 0.1; 
2004: (4.4); 
2005[A]: (18.9); 
2006: 3.1; 
2007: (42.2); 
2008[B]: (37.6). 

Interest, depreciation, and amortization; 
2000: 15.8; 
2001: 17.8; 
2002: 16.5; 
2003: 18.4; 
2004: 18.9; 
2005[A]: 20.7; 
2006: 19.6; 
2007: 26.1; 
2008[B]: 25.7. 

EBIDA; 
2000: 7.3; 
2001: 15.7; 
2002: 20.1; 
2003: 18.5; 
2004: 14.5; 
2005[A]: 1.8; 
2006: 22.7; 
2007: (16.1); 
2008[B]: (11.9). 

Source: GAO analysis, based on audited and budgeted financial 
statements of Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Summary of Operating Results before Hurricane Katrina: 

* 2000-2004. Tulane had operating losses in 3 of the 5 years before 
Hurricane Katrina. The largest one-year loss was $8.5 million. The 
hospital's operating revenue increased annually from 2000 to 2003 
primarily because of increased charges, increased patient days, and an 
increase in organ transplant volumes. Operating expenses also increased 
during this period for a variety of reasons, including increased costs 
of collecting fees, increased emergency room physician coverage, and 
increased transplant compatibility costs. As noted earlier, net income 
or loss for all years was the same as operating income or loss because 
Tulane does not have nonoperating sources of income, such as investment 
income. Also, Tulane had positive EBIDA in all 5 years before Hurricane 
Katrina. 

Summary of Operating Results after Hurricane Katrina: 

* 2005. Tulane had an operating and net loss of $18.9 million. Tulane 
recognized $56 million in special payments from insurance for damages 
and business interruption, allowing it to hold its losses to $18.9 
million. Tulane's operating expenses remained about the same as those 
in 2004 even though Tulane's main campus was closed after the 
hurricane. On July 1, 2005, Tulane acquired Lakeside Hospital in 
Metairie, Louisiana. Tulane had positive EBIDA of $1.8 million. 

* 2006. Tulane had operating income and net income of $3.1 million. The 
$74 million in insurance payments and $5.6 million in uncompensated 
care funds contributed to the positive results. Due to Hurricane 
Katrina and the resulting operating issues, Tulane entered into a line 
of credit with an HCA affiliate and had approximately $28 million in 
borrowings outstanding on December 31, 2006. 

* 2007. Tulane had an operating and net loss of $42.2 million, which 
was worse than the amounts for 2005 and 2006 mainly because Tulane 
received less in special payments. For example, in 2005 and 2006, 
Tulane received special payments from private insurers of $56.4 million 
and $74 million, respectively, but only $4.6 million in 2007. Tulane 
had increases in net patient service revenue due in part to increased 
patient volume. However, increases in operating expenses were greater. 
Increases in operating expenses were due in part to recruitment of 
medical staff, increases in the cost of oncology supplies, organ 
transplant services, and a $4.2 million transaction fee for a 
hemophilia drug. At the same time, the hospital continued to add staff, 
with physician FTEs rising from 66 to 91 in 2007 and nursing department 
FTEs also rising from 321 to 452. At the end of 2007, Tulane still owed 
the HCA affiliate approximately $24 million. 

* 2008. Tulane projected operating losses of $37.6 million. Operating 
revenues are estimated at $342.7 million for 2008, which represents an 
increase of 10 percent over 2007. Operating revenues include the lowest 
amount of special payments since 2005, including $3 million in 
uncompensated care payments as of March 2008. Tulane officials expect 
operating expenses to rise by 8 percent to $380.3 million. Projected 
increases in operating expenses include estimated increases of $11 
million in supplies for the continuing increase in the cost of oncology 
supplies, $7 million in salaries, and $7 million in bad debt. Contract 
labor is expected to drop by $1.3 million and contract services are 
also projected to drop by $5 million. Also, Tulane estimates that it 
will continue to experience a decline in gross charges to managed care/ 
commercial payers and an increase in uninsured patients as shown by its 
2008 payer mix amounts. 

Impact on Hospital Financial Position: 

Tulane has a weakened financial position since 2004, as shown by 
declines in its net asset balances. This indicates that the hospital 
has been using its assets, taking on additional debt, or both to 
continue operating. For example, Tulane had net assets of about $168 
million in 2004 before the hurricane and net assets of about $133 
million in 2007. 

Tulane Trends in Other Financial Information: 

Table 29: Tulane Staffed Beds, 2000-2007: 

Year: 2000; 
Beds: 342. 

Year: 2001; 
Beds: 353. 

Year: 2002; 
Beds: 353. 

Year: 2003; 
Beds: 341. 

Year: 2004; 
Beds: 341. 

Year: 2005[A]; 
Beds: 354. 

Year: 2006; 
Beds: 254. 

Year: 2007. 
Beds: 288. 

Source: Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 30: Tulane Occupancy Rates, 2000-2007: 

Percentages: 

Year: 2000; 
Rates: 65.7. 

Year: 2001; 
Rates: 63.6. 

Year: 2002; 
Rates: 67.0. 

Year: 2003; 
Rates: 68.1. 

Year: 2004; 
Rates: 64.5. 

Year: 2005[A]; 
Rates: 43.2. 

Year: 2006; 
Rates: 46.9; 

Year: 2007; 
Rates: 56.3. 
 
Source: Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[End of table] 

Table 31: Tulane Payer Mix, 2000-2008: 

Percentages: 

Payer: Managed care/commercial; 
2000: 43.2; 
2001: 41.7; 
2002: 37.1; 
2003: 34.2; 
2004: 36.1; 
2005[A]: 37.4; 
2006: 32.3; 
2007: 28.6; 
2008[B]: 27.0. 

Payer: Medicare; 
2000: 25.9; 
2001: 26.4; 
2002: 28.3; 
2003: 29.9; 
2004: 29.8; 
2005[A]: 27.9; 
2006: 26.0; 
2007: 23.9; 
2008[B]: 21.1. 

Payer: Medicare HMO; 
2000: 0.0; 
2001: 0.0; 
2002: 0.0; 
2003: 0.0; 
2004: 0.0; 
2005[A]: 0.0; 
2006: 3.1; 
2007: 4.1; 
2008[B]: 5.2. 

Payer: Medicaid; 
2000: 25.6; 
2001: 27.1; 
2002: 28.1; 
2003: 31.0; 
2004: 29.5; 
2005[A]: 29.3; 
2006: 25.6; 
2007: 30.2; 
2008[B]: 28.6. 

Payer: Self-pay/other; 
2000: 5.3; 
2001: 4.7; 
2002: 6.6; 
2003: 4.9; 
2004: 4.6; 
2005[A]: 5.4; 
2006: 12.9; 
2007: 13.2; 
2008[B]: 18.1. 

Source: Tulane University Hospital and Clinic. 

[A] Year of Hurricane Katrina. 

[B] Data is through February 29, 2008. 

[End of table] 

[End of section] 

Enclosure VII: Ochsner Health System (Ochsner): 

Hospital Description: 

On August 31, 2001, Alton Ochsner Medical Foundation merged with 
Ochsner Clinic, L.L.C to become Ochsner Clinic Foundation (OCF), which 
included Ochsner Health Plan, Inc. (OHP), a managed care organization 
that provided comprehensive medical services to members. Then in April 
2004, OCF sold OHP. Ochsner Community Hospitals (OCH) and Ochsner 
Health System (Ochsner) were created in 2006. Ochsner is the not-for- 
profit, parent company of the OCF and OCH. In October 2006, OCH 
acquired three former Tenet Healthcare Corporation hospitals in the 
greater New Orleans area: Ochsner Medical Center Kenner, L.L.C., 
formerly Kenner Regional Medical Center; Ochsner Medical Center 
Westbank, L.L.C., formerly Meadowcrest Hospital; and Ochsner Baptist 
Medical Center, L.L.C., formerly Memorial Medical Center. 

Ochsner is made up of six hospitals located on seven campuses and 
operates more than thirty clinics in the New Orleans and Baton Rouge 
areas. OCF also includes the Elmwood Fitness Center and its wholly 
owned not-for-profit subsidiaries, the Brent House Corporation, Ochsner 
Home Health Corporation, and Ochsner Bayou, LLC. OCF Hospital owns and 
operates a 510-bed acute care hospital known as Ochsner Medical Center/ 
Ochsner Foundation Hospital. The services offered by the Ochsner 
hospitals and clinics include cardiovascular, emergency, neurosciences, 
oncology, orthopedic, organ transplant, nuclear medicine, 
rehabilitation, wound care, intensive care, coronary intensive care, 
neonatal intensive care, and pediatric intensive care. 

Results of Review: 

Table 32: Ochsner Operating Income (Loss), Net Income (Loss), and EBIDA 
for 2000-2008: 

Dollars in millions: 

Operating income (loss); 
2000: $18.7; 
2001: ($1.1); 
2002: ($11.2); 
2003: ($13.3); 
2004: ($10.8); 
2005[A]: ($73.4); 
2006: ($8.9); 
2007: ($31.6); 
2008[B]: ($23.0). 

Net income (loss); 
2000: 16.3; 
2001: (7.8); 
2002: (71.2); 
2003: 41.3; 
2004: 102.6; 
2005[A]: (44.2); 
2006: 34.7; 
2007: 5.6; 
2008[B]: (18.1). 

EBIDA; 
2000: 51.8; 
2001: 37.8; 
2002: (10.0); 
2003: 99.1; 
2004: 162.4; 
2005[A]: 18.3; 
2006: 104.0; 
2007: 82.2; 
2008[B]: 64.8. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted financial 
statements of Ochsner Health System. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Ochsner Operating Income (Loss): 

Ochsner had operating losses in 4 of the 5 years before Hurricane 
Katrina and operating losses in all years from 2005 through 2007. 
Ochsner estimates that it will also have an operating loss in 2008. Our 
calculation of operating income or loss is the result of operating 
revenues minus operating expenses. Ochsner operating revenues for 2006 
to 2007 include special payments that the hospital received. In 2006 
and 2007, Ochsner received insurance payments to cover losses from the 
hurricane and also received wage index grant payments in 2007 to cover 
some of the increases in labor costs. Ochsner received uncompensated 
care funds to cover some of the costs associated with the increased 
volume of uninsured patients in 2006 and 2007. (See figs. 13 and 14 and 
table 33.) 

Figure 13: Ochsner Operating Revenues and Expenses, 2000-2008: 

This figure is a combination bar graph showing Ochsner operating 
revenues and expenses, 2000-2008. The X axis represents the year, and 
the Y axis represents the dollars in millions. The bars represent 
operating revenues and operating expenses. 

Year: 2000; 
Operating revenues: 333.7; 
Operating expenses: 315.0. 

Year: 2001; 
Operating revenues: 543.4; 
Operating expenses: 544.4. 

Year: 2002; 
Operating revenues: 1076.3; 
Operating expenses: 1087.5. 

Year: 2003; 
Operating revenues: 753.2; 
Operating expenses: 766.5. 

Year: 2004; 
Operating revenues: 762.2; 
Operating expenses: 772.7. 

Year: 2005[A]; 
Operating revenues: 739.2; 
Operating expenses: 812.7. 

Year: 2006; 
Operating revenues: 927.1; 
Operating expenses: 936. 

Year: 2007; 
Operating revenues: 1143.1; 
Operating expenses: 1174.7. 

Year: 2008[B]; 
Operating revenues: 1369.1; 
Operating expenses: 1392.0. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted financial 
statements of Ochsner Health System. 

Note: Amounts in figure may not reconcile to reported operating income 
(loss) amounts due to immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] Year 2008 amounts are based on hospital budgeted financial 
statements. 

Notes: Operating revenues include net patient service revenues, other 
operating revenues, and net assets released from restrictions for 
operations. Operating revenues for 2006 and 2007 also include special 
payments, including payments from private insurance, wage index grants, 
and uncompensated care funds. Ochsner's audited financial statements 
included FEMA and NFIP reimbursements in operating revenue. For 
consistency in presentation with the other hospitals in our study, 
these amounts were removed from operating revenue and reclassified as 
nonoperating revenues and gains. 

Operating expenses include direct operating costs, such as salaries, 
depreciation and amortization, provision for bad debt, medical 
services, interest expense, and other operating expenses. 

[End of figure] 

Figure 14: Ochsner Operating Income (Loss), 2000-2008[A]: 

This figure is a line graph showing Ochsner operating income (loss), 
2000-2008[A]. The X axis represents the year, and the Y axis represents 
the dollars (in millions). 

Year: 2000; 
Dollars (in millions): 18.7. 

Year: 2001; 
Dollars (in millions): -1.1. 

Year: 2002; 
Dollars (in millions): -11.2. 

Year: 2003; 
Dollars (in millions): -13.3. 

Year: 2004; 
Dollars (in millions): -10.8. 

Year: 2005[A]; 
Dollars (in millions): -73.4. 

Year: 2006; 
Dollars (in millions): -8.9. 

Year: 2007; 
Dollars (in millions): -31.6. 

Year: 2008[B]; 
Dollars (in millions): -23.0. 

[See PDF for image] 

Source: GAO analysis, based on audited financial statements of Ochsner 
Health System. 

[A] The financial statements report different operating income (loss) 
amounts for years 2005-2007 than our amounts in figure above due to our 
reclassification of certain operating and nonoperating amounts to 
calculate operating income (loss) for consistency with other hospitals 
in our study. 

[B] Year of Hurricane Katrina. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of figure] 

Table 33: Ochsner Special Payments Received from 2005 to 2008 to Cover 
Hurricane Katrina Losses Dollars in millions: 

Type of payment: Private insurance; 
2005[A]: [Empty]; 
2006: $4.2; 
2007: $10.1; 
2008: [Empty]; 
Total all years: $14.3. 

Type of payment: Wage index grant payments; 
2005[A]: [Empty]; 
2006: [Empty]; 
2007: 11.8; 
2008: [Empty]; 
Total all years: $11.8. 

Type of payment: Uncompensated care funds; 
2005[A]: [Empty]; 
2006: 13.1; 
2007: 22.3; 
2008: [Empty]; 
Total all years: $35.4. 

Total included in operating income (loss); 
2005[A]: [Empty]; 
2006: $17.3; 
2007: $44.2; 
2008: [Empty]; 
Total all years: $61.5. 

Type of payment: FEMA reimbursements included in nonoperating revenue; 
2005[A]: $3.4; 
2006: 3.5; 
2007: 6.2; 
2008: [Empty]; 
Total all years: $13.1. 

Total; 
2005[A]: $3.4; 
2006: $20.8; 
2007: $50.4; 
2008: [Empty]; 
Total all years: $74.6. 

Source: Ochsner Health System. 

Note: Wage index grant payments do not include payments made to 
Ochsner's Baton Rouge facility. 

[A] Year of Hurricane Katrina. 

[End of table] 

Ochsner Net Income (Loss): 

Ochsner had net income in 3 of the 5 years before Hurricane Katrina, 
but had a net loss in 2005, followed by net income in 2006 and 2007. 
Also, Ochsner expects that it will have a net loss for 2008. Net income 
or loss included nonoperating revenues including investments and 
reimbursements that Ochsner received from FEMA. (See fig. 15 and table 
34.) 

Figure 15: Ochsner Net Income (Loss), 2000-2008: 

This figure is a line graph is a line graph showing Ochsner net income 
(loss), 2000-2008. The X axis represents the year, and the Y axis 
represents the dollars (in millions). 

Year: 2000; 
Dollars (in millions): 16.3. 

Year: 2001; 
Dollars (in millions): -7.8. 

Year: 2002; 
Dollars (in millions): -71.2. 

Year: 2003; 
Dollars (in millions): 41.3. 

Year: 2004; 
Dollars (in millions): 102.6. 

Year: 2005[A]; 
Dollars (in millions): -44.2. 

Year: 2006; 
Dollars (in millions): 34.7. 

Year: 2007; 
Dollars (in millions): 5.6. 

Year: 2008[B]; 
Dollars (in millions): -18.1. 

[See PDF for image] 

Source: GAO analysis, based on audited and budgeted financial 
statements of Ochsner Health System. 

[A] The net income includes approximately $85 million recorded as 
nonoperating revenue/gain on the sale of OHP. 

[B] Year of Hurricane Katrina. 

[C] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

Table 34: Ochsner Calculation of Net Income (Loss), 2000-2008: 

Dollars in millions: 

Operating income (loss); 
2000: $18.7; 
2001: ($1.1); 
2002: ($11.2); 
2003: ($13.3); 
2004: ($10.8); 
2005[A]: ($73.4); 
2006: ($8.9); 
2007: ($31.6); 
2008[B]: ($23.0). 

Nonoperating revenues and gains (losses): Investment income; 
2000: $17.9; 
2001: $0.5; 
2002: ($2.6); 
2003: $2.8; 
2004: $28.2; 
2005[A]: $43.0; 
2006: $17.5; 
2007: $27.4; 
2008[B]: $4.9. 

Nonoperating revenues and gains (losses): FEMA reimbursements and NFIP 
proceeds; 
2000: 0.0; 
2001: 0.0; 
2002: 0.0; 
2003: 0.0; 
2004: 0.0; 
2005[A]: 3.4; 
2006: 3.5; 
2007: 6.2; 
2008[B]: 0.0 . 

Nonoperating revenues and gains (losses): Other nonoperating revenue 
and gains (Losses); 
2000: (20.3); 
2001: (7.2); 
2002: (57.4); 
2003: 51.8; 
2004: 85.2; 
2005[A]: (17.1); 
2006: 22.6; 
2007: 3.5; 
2008[B]: 0.0. 

Total nonoperating revenues and gains (losses); 
2000: ($2.4); 
2001: ($6.7); 
2002: ($60.0); 
2003: $54.6; 
2004: $113.4; 
2005[A]: $29.2; 
2006: $43.6; 
2007: $37.1; 
2008[B]: $4.9. 

Net income (loss); 
2000: $16.3; 
2001: ($7.8); 
2002: ($71.2); 
2003: $41.3; 
2004: $102.6; 
2005[A]: ($44.2); 
2006: $34.7; 
2007: $5.6; 
2008[B]: ($18.1). 

Source: GAO analysis, based on audited and budgeted financial 
statements of Ochsner Health System. 

Note: Amounts in table may not add to net income (loss) amounts due to 
immaterial rounding differences. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Ochsner EBIDA: 

Ochsner had positive EBIDA in the 4 of the 5 years before the Hurricane 
Katrina and also had positive EBIDA from 2005 to 2007. The hospital 
also projects positive EBIDA in 2008. In calculating EBIDA, interest, 
depreciation, and amortization are added back to net income. 

Table 35: Ochsner Calculation of EBIDA, 2000-2008: 

Dollars in Millions: 

Net income (loss); 
2000: $16.3; 
2001: ($7.8); 
2002: ($71.2); 
2003: $41.3; 
2004: $102.6; 
2005[A]: ($44.2); 
2006: $34.7; 
2007: $5.6; 
2008[B]: ($18.1). 

Interest, depreciation, and amortization; 
2000: 35.5; 
2001: 45.6; 
2002: 61.2; 
2003: 57.8; 
2004: 59.8; 
2005[A]: 62.5; 
2006: 69.3; 
2007: 76.6; 
2008[B]: 82.9. 

EBIDA; 
2000: 51.8; 
2001: 37.8; 
2002: (10.0); 
2003: 99.1; 
2004: 162.4; 
2005[A]: 18.3; 
2006: 104.0; 
2007: 82.2; 
2008[B]: 64.8. 

Source: GAO analysis, based on audited and budgeted financial 
statements of Ochsner Health System. 

[A] Year of Hurricane Katrina. 

[B] Calculations for 2008 are based on amounts from hospital budgeted 
financial statements. 

[End of table] 

Summary of Operating Results before Hurricane Katrina: 

* 2000-2004. Ochsner had operating losses in 4 of the 5 years before 
Hurricane Katrina. However, Ochsner had net income for 3 of the 5 years 
after considering nonoperating revenues, including investment income, 
gain on sale from the sale of OHP in 2004 of approximately $85.3 
million, and other nonoperating revenues and gains. Ochsner had 
positive EBIDA amounts in 4 of the 5 years before Hurricane Katrina. 

Summary of Operating Results after Hurricane Katrina: 

* 2005. Ochsner had an operating loss of approximately $73.4 million. 
Operating revenues declined 3 percent and operating expenses increased 
5 percent. The decline in revenues was primarily due to the closure of 
the Clinic operations around the metropolitan New Orleans area; the 
Clinic suffered minimal to extensive damage and business interruption. 
According to hospital officials, as a result of changes in its 
financial results post Hurricane Katrina, Ochsner was faced with 
challenges in meeting bond covenants to maintain a debt service 
coverage ratio of greater than 1. According to hospital officials, to 
remain current with bond interest payments and maintain compliance with 
its debt service coverage ratio, Ochsner sold investments, which 
approximated realized gains of $29.2 million and are included in 
nonoperating revenues. Nonoperating revenues, including investments and 
FEMA/NFIP reimbursements, contributed to Ochsner's bottom-line net loss 
of $44.2 million. Also, Ochsner had positive EBIDA of $18.3 million. 

* 2006. Ochsner acquired three hospitals in the greater New Orleans 
area from Tenet Healthcare Corporation-renamed Ochsner Medical Center 
Kenner, Ochsner Medical Center Westbank, and Ochsner Baptist Medical 
Center. On a consolidated basis, Ochsner's operating loss was 
approximately $8.9 million. Hospital officials told us the operating 
income (loss) for Ochsner Foundation Hospital and Ochsner Community 
Hospitals was approximately $23.8 and $(14.3) million, respectively for 
the year ending December 31, 2006. While the operating income of the 
Ochsner Foundation Hospital and other subsidiaries was offset by 
operating losses of the three new hospitals, operating results improved 
in 2006 over 2005. Operating revenues increased by about 26 percent. 
This increase included about $13 million in uncompensated care funds 
and $4.2 million in insurance payments. At the same time, operating 
expenses increased by about 15 percent. Ochsner also improved its 
bottom line net income or loss. Ochsner reported net income of $34.7 
million in 2006 versus a net loss of $44.2 million in 2005. The net 
income was due in part to non-operating revenues including investment 
income, FEMA reimbursements of $3.5 million, and other nonoperating 
revenues and gains. Also, Ochsner had positive EBIDA. 

* 2007. Ochsner's operating results were an improvement over 2005 
results. For 2007, Ochsner reported operating losses of $31.6 million 
and net income of $5.6 million, respectively. Hospital officials told 
us that the operating income (loss) for Ochsner Foundation Hospital and 
Ochsner Community Hospitals for the year ending December 31, 2007 was 
approximately $27.1 million and ($35.7) million, respectively. Ochsner 
had an operating loss of $31.6 million in 2007 compared to an operating 
loss of about $73.4 million in 2005. Ochsner operating revenues 
included about $44 million in special payments: $11.8 million in wage 
index grant payments; $22.3 million in uncompensated care funds; and 
$10.1 million in insurance payments. Ochsner operating revenues also 
increased because of increases in payment rates and outpatient services 
offset by weaknesses in inpatient volumes. However, operating expenses 
increased about 26 percent with a significant portion of the increase 
due to the replacement of staff who left the region during this period. 
Further, Ochsner continued using contract nurses. Ochsner reported net 
income of $5.6 million although it was lower than the net income amount 
for 2006. The net income was due to nonoperating revenues, including 
investments and FEMA/NFIP reimbursements of approximately $37.2 
million. Ochsner's net income amount is in the range of the net income 
or loss amounts for all years before the hurricane. Also, Ochsner had 
positive EBIDA. 

* 2008. Budgeted operating losses are projected at approximately $18.1 
million. This operating loss is an improvement over 2005 amounts. 
Operating revenues for 2008 are projected to increase by approximately 
20 percent over the prior year while operating expenses are projected 
increase by approximately 19 percent. Nonoperating revenues are 
expected to decline due to decreased investment income. Ochsner has a 
projected positive EBIDA of $64.8 million. 

Impact on Hospital Bonds: 

Ochsner met its bond agreements to maintain a debt service coverage 
ratio of greater than 1.0, from 2005 to 2007. The debt service coverage 
ratio is the ratio of net income to debt payments, interest and 
principal. If the ratio is 1.0 or greater than 1.0, it means that the 
hospital has sufficient income to cover its annual debt payments. A 
ratio below 1.0 indicates that there is not enough income to cover 
annual debt payments. 

Ochsner remained current with its bond payments and was in compliance 
with its bond covenants in the years after Hurricane Katrina. In 2006, 
Ochsner took on long-term debt in the form of the 2006 Ochsner 
Community Hospital Revenue Note Series 2006 to acquire the Ochsner 
Community Hospitals. In addition, according to Ochsner officials, 
during 2005 the company sold investments to meet its bond covenants. 

In 2007, Ochsner took on long-term debt in the 2007A and B series that 
will be used to refund outstanding 2002A and B bonds, fund capital 
expenditures, and refinance a portion of the $100 million loan to 
purchase the Tenet facilities in 2006. 

Impact on Hospital Financial Position: 

Ochsner's financial position has shown some improvement as evidenced by 
small increases in its net asset balances. Ochsner had net assets of 
$530 million in 2004 before the hurricane and net assets of $534 
million in 2007. 

Ochsner Trends in Other Financial Information: 

Table 36: Ochsner Foundation Hospital and Ochsner Community Hospitals 
Staffed Beds, 2000-2007: 

Ochsner Foundation Hospital; 
2000: 430; 
2001: 434; 
2002: 436; 
2003: 475; 
2004: 454; 
2005[A]: 404; 
2006[B]: 502; 
2007: 511. 

Ochsner-Kenner; 
2000: -; 
2001: -; 
2002: -; 
2003: -; 
2004: -; 
2005[A]: -; 
2006[B]: 63; 
2007: 57. 

Ochsner-Westbank; 
2000: -; 
2001: -; 
2002: -; 
2003: -; 
2004: -; 
2005[A]: -; 
2006[B]: 133; 
2007: 154. 

Ochsner-Baptist; 
2000: -; 
2001: -; 
2002: -; 
2003: -; 
2004: -; 
2005[A]: -; 
2006[B]: 10; 
2007: 15. 

Source: Ochsner Health System: 

[A] Year of Hurricane Katrina. 

[B] In October 2006, Ochsner acquired three New Orleans hospitals from 
Tenet Healthcare Corporation. 

[End of table] 

Table 37: Ochsner Foundation Hospital and Ochsner Community Hospitals 
Occupancy Rates, 2000-2007: 

Percentages: 

Facilities; 
2000; 
2001; 
2002; 
2003; 
2004; 
2005[A]; 
2006[B]; 
2007. 

Ochsner Foundation Hospital; 
2000: 67.1; 
2001:64.9; 
2002: 70.4; 
2003: 70.3; 
2004: 72.2; 
2005[A]: 64.4; 
2006[B]: 69.4; 
2007: 66.8. 

Ochsner-Kenner; 
2000: -; 
2001:-; 
2002: -; 
2003: -; 
2004: -; 
2005[A]: -; 
2006[B]: 60.0; 
2007: 52.9. 

Ochsner-Westbank; 
2000: -; 
2001:-; 
2002: -; 
2003: -; 
2004: -; 
2005[A]: -; 
2006[B]: 47.4; 
2007: 52.4. 

Ochsner-Baptist; 
2000: -; 
2001:-; 
2002: -; 
2003: -; 
2004: -; 
2005[A]: -; 
2006[B]: 8.9; 
2007: 22.7. 

Source: Ochsner Health System: 

[A] Year of Hurricane Katrina. 

[B] In October 2006, Ochsner acquired three New Orleans hospitals from 
Tenet Healthcare Corporation. 

[End of table] 

Table 38: Ochsner Payer Mix for Ochsner Foundation Hospital, 2000-2008: 

[See PDF for image] 

Source: Ochsner Health System. 

[A] N/A-Data were not available. 

[B] Year of Hurricane Katrina. 

[C] Data are through February 29, 2008. 

[End of table] 

Footnotes: 

[1] The five hospitals are West Jefferson Medical Center, East 
Jefferson General Hospital, Touro Infirmary, Tulane University Hospital 
and Clinic, and Ochsner Health System. 

[2] Auditors express an unqualified (clean) opinion on financial 
statements when they have determined that the financial statements are 
presented fairly in all material aspects, in accordance with U.S. 
generally accepted accounting principles. 

[3] We relied on the budgeted financial statements as provided by the 
hospitals for 2008. We did not independently verify the assumptions and 
amounts that these budgets were based upon. 

[4] Operating income or loss is the amount of profit or loss calculated 
as the hospital's operating revenues, such as revenues from patient 
services minus all operating expenses, for example, salaries and wages. 

[5] Net income or loss is the "bottom-line" profit or loss when all 
revenues from both operating and nonoperating sources minus all 
expenses and losses are considered. One of the five hospitals is a for- 
profit hospital and reports net income or loss in its Statement of 
Operations. The other four hospitals are not-for-profit hospitals and 
in accordance with financial reporting for not-for-profit entities, 
they use the terms changes in net assets or increase/decrease in 
unrestricted net assets in place of net income or loss. 

[6] GAO, Hurricane Katrina: Status of Hospital Inpatient and Emergency 
Departments in the Greater New Orleans Area, GAO-06-1003 (Washington, 
D.C.: Sept. 29, 2006). 

[7] The Centers for Medicare & Medicaid Services (CMS) adjusts the 
labor-related share of hospital Medicare Part A payments by the wage 
index applicable to the statistical area in which a hospital is 
located. To calculate wage indexes, CMS uses wage data collected from 
hospitals' Medicare cost reports 4 years earlier. For example, hospital 
wage amounts from 2005 will be used to calculate the 2009 wage index, 
2006 wage amounts will be used for the 2010 wage index, and so on. 

[8] Although the special payments were provided to address losses 
incurred in 2005, accounting principles allow recording of the payments 
on a cash basis in the year received. 

[9] Tulane net income and loss amounts are the same as its operating 
income or loss amounts because the hospital does not have additional 
nonoperating revenues and expenses that would be included when 
calculating net income or loss. 

[10] April 8, 2008 letter to Congressman Rodney Alexander requesting 
supplemental health care funds. 

[11] The hospital's 2006 and 2007 provision for bad debts decreased 
back to amounts more in line with its 2004 bad debt amounts because of 
uncompensated care funding that is recorded as a reduction of bad debt 
and other reasons, including assisting uninsured patients to apply and 
qualify for Medicaid benefits. 

[12] Auditors express an unqualified (clean) opinion on financial 
statements when they have determined that the financial statements are 
presented fairly in all material aspects, in accordance with U.S. 
generally accepted accounting principles. 

[13] We relied on the budgeted financial statements as provided by the 
hospitals for 2008. We did not independently verify the assumptions and 
amounts that these budgets were based upon. 

[14] The Statement of Operations also includes discontinued operations 
and an overall change in net assets. 

[15] Operating income or loss is the amount of profit or loss 
calculated as the hospital's operating revenues, such as revenues from 
patient services minus all operating expenses, for example, salaries 
and wages. 

[16] Net income or loss is the bottom-line profit or loss when all 
revenues from both operating and nonoperating sources minus all 
expenses and losses are considered. One of the five hospitals is a for- 
profit hospital and reports net income or loss in its Statement of 
Operations. The other four hospitals are not-for-profit hospitals and 
under accounting methods for not-for-profit entities, they use the 
terms changes in net assets or increase/decrease in unrestricted net 
assets in place of net income or loss.