• 2016 Report to the Community

Financials 2015/16


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Message from the Treasurer of the Board of Directors

I am pleased to report on the financial results of London Health Sciences Centre (LHSC) for the fiscal year ended March 31, 2016.

It has been a very challenging fiscal year as we dealt with an overall base funding reduction for the fourth straight consecutive year. As the year progressed, it became apparent that our approved savings strategies would require additional corporate resources to address a significant projected deficit. A financial recovery process was implemented in the third quarter to bring the hospital back to a balanced operating position. These efforts, along with the reconciliation of prior years’ post construction operating plan funding (PCOP) enabled LHSC to end the year with a small operating surplus of $2.6M.

Each year, there are additional pressures on our health care system and this past fiscal year was no exception. LHSC continues to navigate the complexities of Health System Funding Reform while balancing our budget for ten consecutive years. LHSC’s senior management team maintained its focus on unit cost reductions and expense mitigation, while also ensuring adequate liquidity to respond to unplanned events during the year. Fundamentally, the hospital has taken steps to ensure the financial sustainability of the organization and create an environment that can adapt to rapidly changing patient demographics, environmental demands and changes in the provincial funding formula.

The final planning phase of our decade-long redevelopment was realized this fiscal year, with plans now in place for the future demolition and decommissioning of the South Street Annex. As we look ahead, LHSC will turn its attention to further regional system-wide efficiencies and opportunities to lower costs, provide guidance and leadership to regional initiatives and enhance the patient care experience.

On behalf of the Finance and Audit Committee, I would like to thank the staff, physicians and management for their commitment to ensuring the financial health of the hospital and placing our patients first. Sincere thanks as well to the volunteer members of the Finance and Audit Committee for their dedication to our committee, our patients and our hospital during the past year.

Brenda Bird
Treasurer, Board of Directors
London Health Sciences Centre


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Independent Auditors' Report

To the Board of Directors of London Health Sciences Centre

Report on the summary financial statements

The accompanying summary financial statements, which comprise the summary statement of financial position as at March 31, 2016, and the summary statements of operations and cash flows for the year then ended, and related basis of presentation note, are derived from the audited financial statements of London Health Sciences Centre for the year ended March 31, 2016. We expressed an unmodified audit opinion on those financial statements in our auditors’ report dated June 1, 2016.

The summary financial statements do not contain all the disclosures required by Canadian public sector accounting standards. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of London Health Sciences Centre.

Management’s responsibility for the summary financial statements

Management is responsible for the preparation of a summary of the audited financial statements on the basis described in the basis of presentation note.

Auditors’ responsibility

Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard 810, “Engagements to Report on Summary Financial Statements.”

Opinion

In our opinion, the summary financial statements derived from the audited financial statements of London Health Sciences Centre for the year ended March 31, 2016 are a fair summary of those financial statements on the basis described in the basis of presentation note.


London, Canada
June 1,2016

(signed) Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants


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Management’s Summary Financial Results

Summary Statement of Financial Position

London Health Sciences Centre (LHSC) continued its strong financial performance during the past fiscal year. Liquidity remained above minimum thresholds despite a challenging funding environment. LHSC’s current ratio of 2.13 is the result of 10 consecutive surpluses and reflects a deliberate financial strategy of financial sustainability, flexibility and cost containment. Current and long-term obligations under various debt agreements are adequately covered and supported by sound business plans and cash flows.

Summary Statement of Operations

LHSC ended the year with a surplus of $2.6 million. This financial performance is the result of one-time funding and prior year recoveries from the MOHLTC/LHIN. Inflationary cost pressures from labour, medical/surgical supplies and drugs, along with increasing patient demands and demographics challenged the organization to course correct its projected expense run rate during the year. These cost mitigation strategies enabled LHSC to balance operations and end the year with a small operating surplus.

Summary Statement of Cash Flows

LHSC invested $32.5 million in clinical capital, building service equipment, information systems and buildings during the year. In addition, LHSC spent $10.8 million in externally funded or recoverable capital projects.

Capital spending is financed through a combination of operations and deferred contributions from both levels of government, the London Health Sciences Foundation and Children’s Health Foundation.

Current assets include cash and cash equivalents of $174.7 million, consisting of restricted cash and portfolio investments of $20.5 million in order to discharge certain future obligations and $154.2 million in unrestricted cash and cash equivalents.

Basis of Presentation

The information contained in the summary financial statements is in agreement with the related information in the complete audited financial statements. The summary financial statements contain major subtotals and totals from the complete audited financial statements. The complete audited financial statements can be obtained here http://www.lhsc.on.ca/About_Us/Accountability/Governance_and_Management/LHSC_AuditedFinancialStmt_2016.pdf.

Revenue and expense charts

Total Revenue (%) by Type
($1,188 Million)
  • MOHLTC and SW-LHIN - 81.1%
  • Non-patient - 10.4%
  • Patient - 4.7%
  • Amoritization of Deferred Capital Contributions - 2.5%
  • Preferred Accommodation - 1.2%
  • Interest - 0.1%
Total Expenses (%) by Cost Component ($1,185 Million)
  • Salaries and Wages - 54.2%
  • Supplies and Other - 11.7%
  • Employee Benefits - 10.9%
  • Drugs - 9.3%
  • Medical and Surgical Supplies - 7.7%
  • Amortization of Capital Assets - 5.5%
  • Interest and Other - 0.7%
Total Expenses (%) by Type
($1,185 Million)
  • Inpatient Services - 27.3%
  • Diagnostic & Therapeutic - 22.1%
  • Administration and support - 18%
  • Outpatient Services - 13.5%
  • Undistributed - 7.1%
  • Other Votes - 6.5%
  • Amortization of Capital Assets - 5.5%

SUMMARY STATEMENT OF FINANCIAL POSITION

As at March 31, 2016 March 31, 2015
(000's) (000's)
ASSETS
Current assets $ 274,463) $ 293,378)
Restricted cash and investments $ 15,166) $ 15,364)
Capital assets $ 951,431) $ 969,335)
$ 1,241,060) $ 1,287,077)
LIABILITIES, DEFERRED CONTRIBUTIONS,
UNRESTRICTED NET ASSETS AND REMEASUREMENT LOSSES
Current liabilities $ 128,948) $ 147,053)
Long-term liabilities and deferred contributions $ 808,840) $ 829,249)
Unrestricted net assets $ 324,173) $ 321,534)
Accumulated remeasurement losses $ (20,901) $ (19,759)
$ 1,241,060) $ 1,278,077)


SUMMARY STATEMENT OF OPERATIONS

Year ended March 31, 2016 March 31, 2015
(000's) (000's)
REVENUES
Ministry of Health and Long-Term Care and South West
     Local Health Integration Network		 $ 963,452 $ 956,628
Other $ 224,289 $ 196,647
$ 1,187,741 $ 1,153,275
EXPENSES
Salaries and benefits $ 771,805 $ 758,978
Other $ 413,297 $ 390,045
$ 1,185,102 $ 1,149,023
Excess of Revenue over Expenses $ 2,639 $ 4,252


SUMMARY STATEMENT OF CASH FLOWS

Year ended March 31, 2016 March 31, 2015
(000's) (000's)
CASH PROVIDED BY (USED IN):
Operating Activities $ 8,713) $ 22,443)
Financing Activities $ 3,144) $ 29,330)
Investing Activities $ 4,893) $ 12,873)
Capital Activities $ (43,033) $ (60,727)
Net increase (decrease) in cash $ (26,283) $ 3,919)
Cash, beginning of year $ 180,490) $ 176,571)
Cash, end of year $ 154,207) $ 180,490)