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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 333-84755-53
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Dodge City Healthcare Group, L.P.
(Exact name of registrant as specified in its charter)
Kansas 10-1275266
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
3001 Avenue A 67801
Dodge City, Kansas (Zip Code)
(Address of Principal Executive Offices)
(316) 225-8401
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
-----------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months, (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES [ ] NO [X]
The Registrant meets the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q (as modified by grants of no-action relief) and
is therefore filing this form using the reduced disclosure format specified
therein.
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Part I: Financial Information
Item 1: Financial Statements
DODGE CITY HEALTHCARE GROUP, L.P.
CONDENSED STATEMENTS OF INCOME
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 7,688 $ 8,157 $ 24,302 $ 24,133
Allocation of personnel costs 2,676 2,780 8,471 8,970
Supplies 1,002 857 3,253 2,868
Other operating expenses 1,224 1,395 3,650 3,972
Provision for doubtful accounts 813 861 1,983 1,541
Depreciation and amortization 422 429 1,276 1,214
Interest expense 164 172 461 426
Management fees 153 162 484 480
--------- --------- --------- ---------
6,454 6,656 19,578 19,471
--------- --------- --------- ---------
Net income $ 1,234 $ 1,501 $ 4,724 $ 4,662
========= ========= ========= =========
</TABLE>
See accompanying notes
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DODGE CITY HEALTHCARE GROUP, L.P.
CONDENSED BALANCE SHEETS
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Accounts receivable, less allowance for doubtful accounts of $3,150
at September 30, 1999, and $3,185 at December 31, 1998 $ 5,247 $ 4,467
Inventories 982 966
Prepaid expenses and other 89 68
---------- ----------
6,318 5,501
Property and equipment, at cost:
Land 319 319
Buildings and improvements 9,484 9,481
Equipment 10,101 9,551
Construction in progress 553 22
---------- ----------
20,457 19,373
Accumulated depreciation (10,807) (9,838)
---------- ----------
9,650 9,535
Intangible assets, net of accumulated amortization of $1,369
at September 30, 1999, and $1,145 at December 31, 1998 10,578 10,802
---------- ----------
$ 26,546 $ 25,838
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 653 $ 791
Accrued expenses 288 336
Current maturities of long-term debt -- 19
---------- ----------
941 1,146
Intercompany balances payable to affiliate 12,713 11,515
Long-term debt -- 301
Partners' capital:
Limited partners (990 units authorized and 890 units issued
and outstanding) 12,750 12,732
General partner (10 units authorized, issued and outstanding) 142 144
---------- ----------
12,892 12,876
---------- ----------
$ 26,546 $ 25,838
========== ==========
</TABLE>
See accompanying notes.
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DODGE CITY HEALTHCARE GROUP, L.P.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,724 $ 4,662
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful accounts 1,983 1,541
Depreciation and amortization 1,276 1,214
Increase (decrease) in cash from operating
assets and liabilities:
Accounts receivable (1,446) (3,208)
Inventories, prepaid expenses and other current assets (37) 8
Accounts payable and accrued expenses (186) (408)
---------- ----------
Net cash provided by operating activities 6,314 3,809
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (1,166) (1,523)
---------- ----------
Net cash used in investing activities (1,166) (1,523)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in long-term debt, net (320) (935)
Increase in intercompany balances payable to
affiliate, net 1,198 6,117
Distributions (6,026) (7,468)
---------- ----------
Net cash used in financing activities (5,148) (2,286)
Change in cash $ -- $ --
Cash at beginning of period -- --
---------- ----------
Cash at end of period $ -- $ --
========== ==========
SUPPLEMENTAL INFORMATION:
Interest payments $ 461 $ 426
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS:
Contribution from Columbia/HCA $ 1,317 $ --
========== ==========
</TABLE>
See accompanying notes.
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DODGE CITY HEALTHCARE GROUP, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Dodge City Healthcare Group, L.P., a Kansas limited partnership (the
"Partnership"), was organized on March 1, 1995. Dodge City Healthcare Partner,
Inc., a Kansas corporation ("DCHP"), is the general partner of the Partnership
with a 1.1% partnership interest. The limited partners of the Partnership are
Western Plains Regional Hospital, LLC, a Delaware limited liability company
("WPRH"), and Dodge City Outpatient Surgical Facility Inc., a Kansas corporation
("DCOSF"), with partnership interests of 68.9% and 30.0%, respectively. DCHP and
WPRH are indirect wholly owned subsidiaries of LifePoint Hospitals, Inc., a
Delaware corporation ("LifePoint"), through its direct wholly owned subsidiary,
LifePoint Hospitals Holdings, Inc. ("Holdings").
On May 11, 1999, Columbia/HCA Healthcare Corporation ("Columbia/HCA")
completed the tax-free spin-off of its operations comprising the America Group
by distributing all outstanding shares of LifePoint to its shareholders (the
"Distribution"). As a result, Columbia/HCA's combined 70.0% interest in the
Partnership was transferred to LifePoint and LifePoint assumed the rights as
sole general partner of the Partnership. Information regarding Columbia/HCA
included in this report on Form 10-Q is derived from reports and other
information filed by Columbia/HCA with the Securities and Exchange Commission
(the "Commission").
The Partnership owns and operates Western Plains Regional Hospital, a
110-bed acute care hospital, and an outpatient surgery center which provide
health care services to patients in and around Dodge City, Kansas. The
Partnership receives payment for patient services from the federal government
primarily under the Medicare program, state governments under their respective
Medicaid programs, preferred provider organizations and other private insurers
and directly from patients.
The partnership agreement provides that the Partnership is to
distribute, in quarterly installments to the general and limited partners in
accordance with their respective ownership interests, an amount equal to 90% of
its annual income. The partnership agreement further provides that profits and
losses of the Partnership will be allocated to the partners in accordance with
their respective ownership interests.
As further defined in the partnership agreement, the general partner
is obligated to manage and supervise the Partnership business and affairs. The
Partnership shall be dissolved on December 31, 2050, unless sooner dissolved by
law or pursuant to the partnership agreement or unless extended by amendment to
the partnership agreement.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of Partnership management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three months and nine months ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1999.
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Certain estimates, assumptions and allocations were made in preparing
the unaudited condensed financial statements included herein. Therefore, such
financial statements may not necessarily be indicative of the results of
operations, financial position or cash flows that would have existed had the
Partnership been a separate, independent company throughout the periods
presented.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
NOTE 2 - INCOME TAXES
The Partnership is not an income tax paying entity. No provision is
made in the accounts of the Partnership since such taxes are liabilities of the
individual partners of the Partnership, and the amounts thereof depend on their
respective tax situations.
The Partnership's tax returns and the amounts of distributable
Partnership income or loss are subject to examination by the federal and state
taxing authorities. In the event of an examination of the Partnership's tax
return, the tax liability of the partners could be changed if any adjustment to
the Partnership taxable income or loss is ultimately sustained by the taxing
authorities.
NOTE 3 - TRANSACTIONS WITH AFFILIATE
INTERCOMPANY BALANCES PAYABLE TO AFFILIATE
Intercompany balances payable to affiliate represent the net excess of
funds transferred to or paid on behalf of the Partnership over funds
transferred to the centralized cash management account of LifePoint
post-Distribution and Columbia/HCA pre-Distribution. Generally, this balance is
increased by partnership distributions and disbursements made by LifePoint on
behalf of the Partnership for operating expenses and to pay the Partnership's
debt, completed construction project additions, fees and services provided by
LifePoint, including information systems services and other operating expenses,
such as personnel costs, interest and insurance. Generally, the balance is
decreased through daily cash deposits by the Partnership to the account. Prior
to the Distribution, the Partnership was charged interest on the outstanding
intercompany balance at each month end at various rates ranging from 6% to 10%.
For periods after the Distribution, the Partnership is being charged interest
at prime rates which approximated 8.25% at September 30, 1999. In the opinion
of LifePoint management, the interest rate charged has been at prevailing
market rates. Interest expense under this arrangement is included in the
Statements of Income.
MANAGEMENT FEES
In accordance with the terms of the partnership agreement, the general
partner receives a monthly management fee based upon the Partnership's net
patient revenues. The management fee charged to the Partnership is not
necessarily indicative of the actual costs which may have been incurred had the
Partnership operated as an entity unaffiliated with LifePoint
post-Distribution or Columbia/HCA pre-Distribution; however, in the opinion of
the Partnership management, the management fee charged is reasonable.
PERSONNEL COSTS
To facilitate payroll administration, all personnel assigned to
perform duties for the Partnership are employed by a LifePoint affiliate
post-Distribution and a Columbia/HCA affiliate pre-Distribution. The
Partnership
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reimburses the affiliate for the direct costs (i.e., salaries and related
benefits) associated with such personnel. Such reimbursements are recorded as
"Allocation of Personnel Costs" in the accompanying Statements of Income.
RETIREMENT PLANS
Personnel assigned to the Partnership subsequent to the Distribution
participate in LifePoint's employee stock ownership plan ("ESOP"). Under the
ESOP, shares of LifePoint common stock will be allocated ratably to
participants over the next ten years, beginning in fiscal year 1999. ESOP
expense is allocated to the Partnership based upon the average market price of
shares committed to be released during the allocation period.
Personnel assigned to the Partnership during the nine months ended
September 30, 1998 participated in Columbia/HCA's defined contribution
retirement plans which covered substantially all personnel assigned to the
Partnership. The Partnership reimbursed a Columbia/HCA affiliate for personnel
costs, including contributions to the plan. Benefits were determined primarily
as a percentage of a participant's earned income.
COST REPORT LIABILITIES
Pursuant to the terms of the distribution agreement between LifePoint
and Columbia/HCA, LifePoint and its subsidiaries, including the Partnership,
are responsible for the Medicare, Medicaid and Blue Cross cost reports, and
associated receivables and payables, for all periods ending after May 11, 1999.
Columbia/HCA agreed to indemnify LifePoint and its subsidiaries, including the
Partnership, with respect to cost reports relating to periods ending on or
prior to the Distribution. Net settlement liabilities of approximately
$1,317,000 recorded by the Partnership as of May 11, 1999 were deemed to be
assumed by Columbia/HCA and, accordingly, recorded as a contribution from
Columbia/HCA to the capital of the Partnership.
PROFESSIONAL AND GENERAL LIABILITY RISKS
The cost of professional and general liability coverage is allocated to
the Partnership by LifePoint post-Distribution, and by Columbia/HCA
pre-Distribution, based on actuarially determined estimates. The actuarially
determined estimate of cost allocated to the Partnership by LifePoint is
discounted to its present value using a rate of 6%. LifePoint, as well as
Columbia/HCA, maintains reserves for professional and general liability risks.
Accordingly, no reserve for liability risks is recorded on the accompanying
balance sheets. Columbia/HCA assumed the liability for all professional and
general liability claims incurred prior to the Distribution.
Personnel assigned to the Partnership participate in a self-insured
program for health insurance administered by LifePoint post-Distribution and by
Columbia/HCA pre-Distribution. Cost for health insurance is allocated to the
Partnership based upon claims paid and an estimate of claims incurred but not
reported. LifePoint, as well as Columbia/HCA, maintains reserves for incurred
but not reported health claims. Accordingly, no reserve for incurred but not
reported health claims is recorded on the accompanying balance sheets.
Columbia/HCA assumed the liability for all health claims incurred prior to the
Distribution.
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NOTE 4 - GUARANTEE OF LONG-TERM DEBT
On May 11, 1999, LifePoint assumed from Columbia/HCA $150 million in
Senior Subordinated Notes maturing on May 15, 2009. In November 1999, in a
registered exchange offer, LifePoint issued a like aggregate principal amount
of notes in exchange for these notes (the "Notes"). The Notes are unsecured
obligations and are subordinated in right of payment to all existing and future
senior indebtedness. The Notes are guaranteed jointly, severally and
unconditionally by all of LifePoint's operating subsidiaries including the
Partnership.
On May 11, 1999, LifePoint also assumed from Columbia/HCA the
obligations under a Bank Credit Agreement (the "Credit Agreement") with a group
of lenders with commitments aggregating $210 million. The Credit Agreement
consists of a $60 million term loan facility, an $85 million term loan
facility, and a $65 million revolving credit facility (collectively the "Bank
Facilities").
As of September 30, 1999, $25 million of the $60 million term loan
facility was drawn, with the remaining $35 million available for limited
purposes to be drawn by May 11, 2000. The final payment under this term loan
facility is due November 11, 2004.
The $85 million term loan facility was drawn in full at the time of
the Distribution. The final payment under this term loan is due November 11,
2005.
The $65 million revolving credit facility is available for working
capital and other general corporate purposes, and any outstanding amounts
thereunder will be due and payable on November 11, 2004. No amounts were
outstanding under this facility as of September 30, 1999.
LifePoint's obligations under the Bank Facilities are guaranteed by
its subsidiaries including the Partnership.
The subsidiary guarantees of the Notes and the Bank Facilities are
secured by a pledge of substantially all of the subsidiaries' assets including
all of the assets of the Partnership.
NOTE 5 - CONTINGENCIES
COLUMBIA/HCA INVESTIGATIONS, LITIGATION AND INDEMNIFICATION RIGHTS
Columbia/HCA is currently the subject of several federal investigations
into certain of its business practices, as well as governmental investigations
by various states. Management of the Partnership understands that Columbia/HCA
is cooperating in these investigations and that Columbia/HCA understands,
through written notice and other means, that it is a target in these
investigations. Given the breadth of the ongoing investigations, Columbia/HCA
expects additional investigative and prosecutorial activity to occur in these
and other jurisdictions in the future. Columbia/HCA is the subject of a formal
order of investigation by the Commission. The Commission investigation includes
the anti-fraud, periodic reporting and internal accounting control provisions of
the federal securities laws. According to published reports, on July 2, 1999, a
federal jury in Tampa, Florida found two Columbia/HCA employees guilty of
conspiracy and making false statements on Medicare and TRICARE cost reports for
the years 1992 and 1993 and on a Medicaid cost report for 1993. Both were found
not guilty of obstructing a federal auditor. One other employee was acquitted on
all counts for which he had been charged and the jury was unable to reach a
verdict with respect to another employee. This employee and the government
executed an agreement to defer prosecution for 18 months after which charges
will be dismissed. The two convicted employees were sentenced in December 1999
and both have appealed to the 11th Circuit.
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Columbia/HCA is a defendant in several qui tam actions brought by
private parties on behalf of the United States of America, which have been
unsealed and served on Columbia/HCA. The actions allege, in general, that
Columbia/HCA and certain subsidiaries and/or affiliated partnerships violated
the False Claims Act by submitting improper claims to the government for
reimbursement. The lawsuits seek damages of three times the amount of all
Medicare or Medicaid claims (involving false claims) presented by the defendants
to the federal government, civil penalties of not less than $5,000 nor more than
$10,000 for each such Medicare or Medicaid claim, attorneys' fees and costs. The
government has intervened in six unsealed qui tam actions against Columbia/HCA.
Columbia/HCA is aware of additional qui tam actions that remain under seal and
believes that there are other sealed qui tam cases of which it is unaware.
Columbia/HCA is a defendant in a number of other suits, which allege,
in general, improper and fraudulent billing, overcharging, coding and physician
referrals, as well as other violations of law. Certain of the suits have been
conditionally certified as class actions.
It is too early to predict the effect or outcome of any of the ongoing
investigations or qui tam and other actions, or whether any additional
investigations or litigations will be commenced. If Columbia/HCA is found to
have violated federal or state laws relating to Medicare, Medicaid or similar
programs, Columbia/HCA could be subject to substantial monetary fines, civil and
criminal penalties, and exclusion from participation in the Medicare and
Medicaid programs. Similarly, the amounts in question in the qui tam and other
actions are substantial, and Columbia/HCA could be subject to substantial costs
resulting from an adverse outcome of one or more of such actions. In addition, a
number of derivative actions have been brought by purported stockholders of
Columbia/HCA against certain current and former officers and directors of
Columbia/HCA alleging breach of fiduciary duty and failure to take reasonable
steps to ensure that Columbia/HCA did not engage in illegal practices.
Management believes that the ongoing governmental investigations and
related media coverage may have had a negative effect on Columbia/HCA's results
of operations (which include LifePoint for the periods prior to the date of the
Distribution which are presented herein). The extent to which LifePoint may or
may not continue to be affected after the Distribution by the ongoing
investigations of Columbia/HCA, the initiation of additional investigations, if
any, and the related media coverage cannot be predicted. It is possible that
these matters could have a material adverse effect on the financial condition or
results of operations of LifePoint in future periods.
In connection with the Distribution, Columbia/HCA has agreed to
indemnify LifePoint and its subsidiaries, including the Partnership, in respect
of any losses which it may incur arising from the proceedings described above.
Columbia/HCA has also agreed to indemnify LifePoint in respect of any losses,
which it may incur as a result of proceedings which may be commenced by
government authorities or by private parties in the future that arise from
acts, practices or omissions engaged in prior to the date of the Distribution
and relate to the proceedings described above. Columbia/HCA has also agreed
that, in the event that any hospital owned by LifePoint, including Western
Plains Regional Hospital, as of the date of the Distribution is permanently
excluded from participation in the Medicare and Medicaid programs as a result
of the proceedings described above, then Columbia/HCA will make cash payments
to LifePoint based on amounts as defined in the Distribution Agreement by and
among Columbia/HCA and LifePoint. LifePoint has agreed with Columbia/HCA that,
in connection with the pending governmental investigations, it will negotiate
with the government with respect to a compliance agreement setting forth
LifePoint's agreement to comply with applicable laws and regulations. If any of
such indemnified matters were successfully asserted against LifePoint, or any
of its facilities, including the Partnership, and Columbia/HCA failed to meet
its
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indemnification obligations, then such losses could have a material adverse
effect on the business, financial position, results of operations or prospects
of LifePoint and the Partnership. Columbia/HCA has not indemnified LifePoint or
the Partnership for losses relating to any acts, practices and omissions engaged
in by LifePoint or the Partnership after the Distribution, whether or not
LifePoint or the Partnership is indemnified for similar acts, practices and
omissions occurring prior to the date of the Distribution.
GENERAL LIABILITY CLAIMS
The Partnership is subject to claims and suits arising in the ordinary
course of business. The Partnership is currently not a party to any proceeding
which, in the opinion of management, would have a material adverse effect on the
Partnership's business, financial condition or results of operations.
OTHER
Final determination of amounts earned under prospective payment and
cost-reimbursement activities is subject to review by appropriate governmental
authorities or their agents.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion should be read in conjunction with the unaudited Condensed
Financial Statements included herein.
OVERVIEW
On May 11, 1999, Columbia/HCA Healthcare Corporation completed the
tax-free spin-off of its operations comprising the America Group by distributing
all outstanding shares of LifePoint Hospitals, Inc. to its shareholders (the
"Distribution"). As a result, Columbia/HCA's combined 70.0% interest in the
Partnership was transferred to LifePoint, and LifePoint assumed the rights as
sole general partner of the Partnership.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains disclosures which are forward-looking
statements. Forward-looking statements include all statements that do not
relate solely to historical or current facts, and can be identified by the use
of words such as "may", "believe", "will", "expect", "project", "estimate",
"anticipate", "plan" or "continue". These forward-looking statements are based
on the current plans and expectations of the Partnership and are subject to a
number of uncertainties and risks that could significantly affect current plans
and expectations and the Partnership's future financial condition and results.
These factors include, but are not limited to, (i) the highly competitive
nature of the health care business, (ii) the efforts of insurers, health care
providers and others to contain health care costs, (iii) possible changes in
the Medicare program that may further limit reimbursements to health care
providers and insurers, (iv) changes in Federal, state or local regulation
affecting the health care industry, (v) the possible enactment of Federal or
state health care reform, (vi) the ability to attract and retain qualified
management and personnel, including physicians, (vii) liabilities and other
claims asserted against the Partnership, (viii) changes in accounting
practices, (ix) changes in general economic conditions, and (x) other risk
factors. As a consequence, current plans, anticipated actions and future
financial condition and results may differ from those expressed in any
forward-looking statements made by or on behalf of the Partnership. You are
cautioned not to unduly rely on such forward-looking statements when evaluating
the information presented in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
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RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Revenues increased 0.7% to $24.3 million for the nine months ended
September 30, 1999 compared to $24.1 million for the nine months ended September
30, 1998 primarily resulting from increases in the volume of patients treated at
the Partnership's facility offset, in part, by decreases in revenues per
equivalent admission. Inpatient admissions increased 2.4% and equivalent
admissions (adjusted to reflect combined inpatient and outpatient
volume)increased 7.1% for the nine months ended September 30, 1999 compared to
the nine months ended September 30, 1998. Revenues per equivalent admission
decreased 5.5% for the nine months ended September 30, 1999 compared to the nine
months ended September 30, 1998. The decline in revenues per equivalent
admission was due to several factors, including decreases in Medicare
reimbursement rates mandated by the Balanced Budget Act which became effective
October 1, 1997 (such rates lowered revenues by approximately $0.3 million for
the nine months ended September 30, 1999 compared to the nine months ended
September 30, 1998), and continued increases in the number of managed care
payers (managed care as a percentage of total admissions increased to 30.1% for
the nine months ended September 30, 1999 compared to 26.7% for the nine months
ended September 30, 1998) which generally pay less per patient than traditional
indemnity insurance plans.
Allocation of personnel costs decreased as a percentage of revenues to
34.9% for the nine months ended September 30, 1999, from 37.2% for the nine
months ended September 30, 1998, primarily due to improvements in labor
productivity. Man-hours per equivalent admission decreased 13.7% over the same
period in the prior year.
Supplies expenses increased to 13.4% as a percentage of revenues for
the nine months ended September 30, 1999 from 11.9% for the nine months ended
September 30, 1998 primarily due to the 5.5% decrease in revenues per
equivalent admission, while the cost of supplies per equivalent admission
increased 5.9%. The higher cost of supplies per equivalent admission resulted
from significant increases in pharmaceutical costs and other increases in new
product development costs and general inflation.
Other operating expenses decreased as a percentage of revenues to
15.0% for the nine months ended September 30, 1999 from 16.5% for the nine
months ended September 30, 1998. Other operating expenses consist primarily of
contract services, physician recruitment, professional fees, repairs and
maintenance, rents and leases, utilities, insurance and non-income taxes. The
decrease was primarily due to a decrease in contract services.
Provision for doubtful accounts, as a percentage of revenues,
increased to 8.2% for the nine months ended September 30, 1999, from 6.4% for
the nine months ended September 30, 1998, due to turnover in the Partnership's
business office which delayed billings and negatively impacted cash
collections.
Depreciation and amortization expense increased to $1.3 million for
the nine months ended September 30, 1999, from $1.2 million for the nine months
ended September 30, 1998, primarily due to routine capital expenditures.
Interest expense increased to $0.5 million for the nine months ended
September 30, 1999, from $0.4 million for the nine months ended September 30,
1998. The increase in interest expense was directly attributable to an increase
in intercompany balances payable to affiliate.
Management fees were $0.5 million for the nine months ended September
30, 1999 and 1998. Management fees are charged to the Partnership by the
general partner based upon the Partnership's net patient revenues.
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Net income was $4.7 million for the nine months ended September 30,
1999 and 1998.
CONTINGENCIES
Columbia/HCA is currently the subject of several federal investigations
into certain of its business practices, as well as governmental investigations
by various states. Management of the Partnership understands that Columbia/HCA
is cooperating in these investigations and that Columbia/HCA understands,
through written notice and other means, that it is a target in these
investigations. Given the breadth of the ongoing investigations, Columbia/HCA
expects additional investigative and prosecutorial activity to occur in these
and other jurisdictions in the future. Columbia/HCA is the subject of a formal
order of investigation by the Commission. The Commission investigation includes
the anti-fraud, periodic reporting and internal accounting control provisions of
the federal securities laws. According to published reports, on July 2, 1999, a
federal jury in Tampa, Florida found two Columbia/HCA employees guilty of
conspiracy and making false statements on Medicare and TRICARE cost reports for
the years 1992 and 1993 and on a Medicaid cost report for 1993. Both were found
not guilty of obstructing a federal auditor. One other employee was acquitted on
all counts for which he had been charged and the jury was unable to reach a
verdict with respect to another employee. This employee and the government
executed an agreement to defer prosecution for 18 months after which charges
will be dismissed. The two convicted employees were sentenced in December 1999
and both have appealed to the 11th Circuit.
Columbia/HCA is a defendant in several qui tam actions brought by
private parties on behalf of the United States of America, which have been
unsealed and served on Columbia/HCA. The actions allege, in general, that
Columbia/HCA and certain subsidiaries and/or affiliated partnerships violated
the False Claims Act by submitting improper claims to the government for
reimbursement. The lawsuits seek damages of three times the amount of all
Medicare or Medicaid claims (involving false claims) presented by the defendants
to the federal government, civil penalties of not less than $5,000 nor more than
$10,000 for each such Medicare or Medicaid claim, attorneys' fees and costs. The
government has intervened in six unsealed qui tam actions against Columbia/HCA.
Columbia/HCA is aware of additional qui tam actions that remain under seal and
believes that there are other sealed qui tam cases of which it is unaware.
Columbia/HCA is a defendant in a number of other suits, which allege,
in general, improper and fraudulent billing, overcharging, coding and physician
referrals, as well as other violations of law. Certain of the suits have been
conditionally certified as class actions.
It is too early to predict the effect or outcome of any of the ongoing
investigations or qui tam and other actions, or whether any additional
investigations or litigations will be commenced. If Columbia/HCA is found to
have violated federal or state laws relating to Medicare, Medicaid or similar
programs, Columbia/HCA could be subject to substantial monetary fines, civil and
criminal penalties, and exclusion from participation in the Medicare and
Medicaid programs. Similarly, the amounts in question in the qui tam and other
actions are substantial, and Columbia/HCA could be subject to substantial costs
resulting from an adverse outcome of one or more of such actions. In addition, a
number of derivative actions have been brought by purported stockholders of
Columbia/HCA against certain current and former officers and directors of
Columbia/HCA alleging breach of fiduciary duty and failure to take reasonable
steps to ensure that Columbia/HCA did not engage in illegal practices.
Management believes that the ongoing governmental investigations and
related media coverage may have had a negative effect on Columbia/HCA's results
of operations (which include LifePoint for the periods prior to the date of the
Distribution which are presented herein). The extent to which LifePoint may or
may not continue to be affected after the Distribution by the ongoing
investigations of Columbia/HCA, the initiation of additional investigations, if
any, and the related media coverage cannot be predicted. It is possible that
these matters could have a material adverse effect on the financial condition
or results of operations of LifePoint in future periods.
In connection with the Distribution, Columbia/HCA has agreed to
indemnify LifePoint and its subsidiaries, including the Partnership, in respect
of any losses which it may incur arising from the proceedings described above.
Columbia/HCA has also agreed to indemnify LifePoint in respect of any losses,
which it may incur as a result of proceedings which may be commenced by
government authorities or by private parties in the future that arise from acts,
practices or omissions engaged in prior to the date of the Distribution and
relate to the proceedings described above. Columbia/HCA has also agreed that, in
the event that any hospital owned by LifePoint, including Western Plains
Regional Hospital, as of the date of the Distribution is permanently excluded
from participation in the Medicare and Medicaid programs as a result of the
proceedings described above, then Columbia/HCA will make cash payments to
LifePoint based on amounts as defined in the Distribution Agreement by and among
Columbia/HCA and LifePoint. LifePoint has agreed with Columbia/HCA that, in
connection with the pending governmental investigations, it will negotiate with
the government with respect to a compliance agreement setting forth LifePoint's
agreement to comply with applicable laws and regulations. If any of such
indemnified matters were successfully asserted against LifePoint, or any of its
facilities, including the Partnership, and Columbia/HCA failed to meet its
indemnification obligations, then such losses could have a material adverse
effect on the business, financial position, results of operations or prospects
of LifePoint and the Partnership. Columbia/HCA has not indemnified LifePoint or
the Partnership for losses relating to any acts, practices and omissions engaged
in by LifePoint or the Partnership after the Distribution, whether or not
LifePoint or the Partnership is indemnified for similar acts, practices and
omissions occurring prior to the date of the Distribution.
12
<PAGE> 13
YEAR 2000 COMPLIANCE
The Partnership did not experience any material disruptions or other
effects caused by the Year 2000 problem, nor does the Partnership expect to
experience any material disruptions or other effects caused by the Year 2000
problem in the future.
PART II. OTHER INFORMATION
ITEM 6
a. List of Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
3.1 - Certificate of Limited Partnership (a)
3.2 - Certificate of Amendment to Certificate of Limited Partnership (a)
3.3 - Amended and Restated Limited Partnership Agreement of
Dodge City Healthcare Group, L.P., dated March 1, 1995 (a)
3.4 - Amendment to Article 6.1 of Limited Partnership Agreement,
dated June 13, 1997 (a)
3.5 - Second Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated April 8, 1999 (a)
3.6 - Third Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated November 4, 1999 (a)
4.1 - Indenture (including form of 10 3/4% Senior Subordinated
Notes due 2009) dated as of May 11, 1999, between
HealthTrust, Inc.-The Hospital Company and Citibank N.A. as
Trustee (b)
4.2 - Form of 10 3/4% Senior Subordinated Notes due 2009 (filed as
part of Exhibit 4.1)(b)
27 - Financial Data Schedule (for SEC use only)
</TABLE>
- --------------
(a) Incorporated by reference from the Partnership's Annual Report on Form
10-K for the year ended December 31, 1999, File No. 333-84755-53.
(b) Incorporated by reference from LifePoint's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, File No. 0-29818.
b. Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dodge City Healthcare Group, L.P.
By: Dodge City Healthcare Partner, Inc.
its General Partner
/s/ Kenneth C. Donahey
-------------------------------------------
Senior Vice President and
Chief Financial Officer
March 31, 2000
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
No.
---
<S> <C>
3.1 - Certificate of Limited Partnership (a)
3.2 - Certificate of Amendment to Certificate of Limited Partnership (a)
3.3 - Amended and Restated Limited Partnership Agreement of Dodge
City Healthcare Group, L.P., dated March 1, 1995 (a)
3.4 - Amendment to Article 6.1 of Limited Partnership Agreement,
dated June 13, 1997 (a)
3.5 - Second Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated April 8, 1999 (a)
3.6 - Third Amendment to the Amended and Restated Limited
Partnership Agreement of Dodge City Healthcare Group, L.P.,
dated November 4, 1999 (a)
4.1 - Indenture (including form of 10 3/4% Senior Subordinated
Notes due 2009) dated as of May 11, 1999, between
HealthTrust, Inc.-The Hospital Company and Citibank N.A. as
Trustee (b)
4.2 - Form of 10 3/4% Senior Subordinated Notes due 2009 (filed as
part of Exhibit 4.1) (b)
27 - Financial Data Schedule (for SEC use only)
</TABLE>
- --------------
(a) Incorporated by reference from the Partnership's Annual Report on Form
10-K for the year ended December 31, 1999, File No. 333-84755-53.
(b) Incorporated by reference from LifePoint's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, File No. 0-29818.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DODGE CITY HEALTHCARE GROUP, L.P., FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 8,397
<ALLOWANCES> 3,150
<INVENTORY> 982
<CURRENT-ASSETS> 6,318
<PP&E> 20,457
<DEPRECIATION> 10,807
<TOTAL-ASSETS> 26,546
<CURRENT-LIABILITIES> 941
<BONDS> 12,713
0
0
<COMMON> 0
<OTHER-SE> 12,892
<TOTAL-LIABILITY-AND-EQUITY> 26,546
<SALES> 0
<TOTAL-REVENUES> 24,302
<CGS> 0
<TOTAL-COSTS> 11,724
<OTHER-EXPENSES> 3,650
<LOSS-PROVISION> 1,983
<INTEREST-EXPENSE> 461
<INCOME-PRETAX> 4,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,724
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
</FN>
</TABLE>
