Cleveland Clinic Health System Obligated Group - FMSbonds.com
Cleveland Clinic Health System Obligated Group - FMSbonds.com Cleveland Clinic Health System Obligated Group - FMSbonds.com
licensure requirements, there can be no assurance that AHCA will not challenge past, current or future activitiesunder these laws and regulations, or that each Obligated Issuer will be able to cost effectively comply with licensurerequirements that may be enacted or adopted in the future.Data Collection and PlanningThe State Center for Health Statistics was established in Florida to further data collection goals establishedby Florida law. AHCA requires certain types of health care facilities to submit data regarding case-mix, patientadmission or discharge data with patient and provider specific identifiers included, actual charge data by diagnosticgroups, financial data, accounting data, operating expenses, expenses incurred for rendering services to patients whocannot or do not pay, interest charges, depreciation expenses and demographic data. AHCA is charged with thedevelopment, endorsement, implementation and evaluation of practice parameters in order to reduce unwarrantedvariation in the delivery of medical treatment and improve the quality of medical care. To assist AHCA in itsmission, hospitals and medical staff are required to produce outcome data by diagnosis for each patient treated in ahospital and send the data to AHCA.The data collection and analysis activities of AHCA are financed by assessments on hospitals and otherhealth care facilities. Hospitals are assessed up to a maximum of .04% of their annual gross operating expenses topay for these data collection and analysis activities.Market DynamicsIn providing health care services, each Obligated Issuer competes with a number of other providers in itsservice area, including for profit and not for profit providers of acute health care services. See “PART II. THEOBLIGATED GROUP — D. MARKET DYNAMICS” in APPENDIX A for a description of the principalcompetitors of the Obligated Group in its northeast Ohio and Florida service areas and certain information regardingNortheast Ohio service area economics.In addition, other affiliations among health care providers in the Obligated Issuers’ service areas may beeither in a formative phase or under negotiation. Competition could also result from certain health care providersthat may be able to offer lower priced services to the population served by the Obligated Issuers. These servicescould be substituted for some of the revenue generating services currently offered by the Obligated Issuers. Theservices that could serve as substitutes for hospital treatment include skilled, specialized and residential nursingfacilities, home care, drug and alcohol abuse programs, ambulatory surgical centers, expanded preventive medicineand outpatient treatment, freestanding independent diagnostic testing facilities, and increasingly sophisticatedphysician group practices. Certain of such forms of health care delivery are designed to offer comparable services atlower prices, and the federal government and private third party payors may increase their efforts to encourage thedevelopment and use of such programs. The recent expiration of the moratorium on specialty hospitals could alsoresult in increased competition for certain hospital services. In addition, future changes in state and federal law mayhave the effect of increasing competition in the health care industry.The growth of e-commerce may result in a shift in the way that health care is delivered. Persons residing inthe Obligated Issuers’ service areas may be able to receive certain health services from remote providers. Forexample, physicians are increasingly able to provide certain services over the internet (e.g., teleradiology and secondopinions). Pharmaceuticals and other health services may also now be ordered on-line. Additionally, other serviceproviders in competition with the Obligated Issuers may now compete through this new medium by advertising theirservices and providing easy registration for competing services over the internet. Also, alternative forms of healthcare payment including managed care organizations and consumer-driven care, as well as expanded preventivemedicine and outpatient treatment, could affect the Obligated Issuers’ ability to maintain their market share atcurrent levels.Recent “pay for performance” initiatives designed to reward hospitals, physicians, medical groups andother providers for achieving improvements in quality and clinical outcomes will likely impact how health careservices are provided in the future. Quality benchmarks established by a number of industry organizations serve asthe basis for these reward programs. There are currently over 100 pay-for-performance programs operatednationwide by health plans, employer coalitions and public insurance programs. CMS is conducting several pay for40
performance demonstration programs and legislation was introduced in Congress in both the House and Senate onpay-for-performance for physicians. Because these initiatives are relatively new, it is unclear what the financialimpact will be of participating in these programs.Finally, the Obligated Issuers that raise significant revenues through sponsor-supported clinical research arefacing competition from newly formed companies such as clinical research organizations that market their servicesto drug and medical device companies. To the extent that these companies offer a faster development track thanacademic medical centers, they are likely to siphon off lucrative research support previously secured by thesehospitals.Management of the Cleveland Clinic believes that the Obligated Issuers have positioned themselves toeffectively provide community based health care throughout the areas served by the Cleveland Clinic HealthSystem, but no assurance can be given as to the effect on the future operational or financial condition of theObligated Issuers of any such affiliations or entry into the market by alternative providers of health care services.See “APPENDIX A — PART I. THE CLEVELAND CLINIC HEALTH SYSTEM.”AccreditationsEach Obligated Issuer is subject to periodic review by the JCAHO, and the various federal, state and localagencies created by the National Health Planning and Resources Development Act of 1974. From time to time,accrediting bodies may review their accreditations of members of the Obligated Issuers and recommend certainactions or impose conditions on an existing accreditation. Management of the Cleveland Clinic does not expect anysuch review to require actions or impose conditions that could not be satisfied or to adversely affect the continuingaccreditation of any Obligated Issuer. No assurance can be given that the JCAHO will not determine otherwise or asto the effect on future operations of existing laws, regulations and standards for certification or accreditation or ofany future changes in such laws, regulations and standards, or that such determination or laws, regulation orstandards will not have a material adverse effect on the future operations or financial condition of the ObligatedIssuer.Future LegislationLegislation is periodically introduced in the U.S. Congress, the Ohio General Assembly and the FloridaLegislature that could result in limitations on hospital revenues, reimbursement, costs or charges or that couldrequire an increase in the quantity of indigent care required to maintain charitable status. The effect of any suchproposals, if enacted, cannot be determined at this time.In addition to legislative proposals previously discussed herein, other legislative proposals that could havean adverse effect on the Obligated Issuers include: (a) any changes in the taxation of not for profit corporations or inthe scope of their exemption from income or property taxes; (b) limitations on the amount or availability of taxexempt financing for corporations described in Section 501(c)(3) of the Code; and (c) regulatory limitationsaffecting the ability of the Obligated Issuers to undertake capital projects or develop new services. Each ObligatedIssuer currently pays real estate taxes on those of its facilities (or portions of facilities) that are not used for its healthcare activities.Legislative bodies have considered legislation concerning the charity care standards that non-profit,charitable hospitals must meet to maintain their federal income tax-exempt status under the Code and legislationmandating that non-profit, charitable hospitals have an open-door policy toward Medicare and Medicaid patients aswell as offer, in a non-discriminatory manner, qualified charity care and community benefits. Excise tax penaltieson non-profit, charitable hospitals that violate these charity care and community benefit requirements could beimposed or their tax-exempt status under the Code could be revoked. The scope and effect of legislation, if any, thatmay be enacted at the federal or state levels with respect to charity care of non-profit hospitals cannot be predicted.Any such legislation or similar legislation, if enacted, could have the effect of subjecting a portion of the income ofan Obligated Issuer to federal or state income taxes or to other tax penalties and adversely affect the ability of theObligated Issuers, individually and, taken as a whole, to generate net revenues sufficient to meet their obligationsand to pay the debt service on the Series 2008 Bonds and their other obligations.41
- Page 1 and 2: NEW ISSUEBOOK ENTRY ONLYSee “RATI
- Page 3 and 4: TABLE OF CONTENTSINTRODUCTORY STATE
- Page 5 and 6: OFFERING CIRCULARRelating to$452,34
- Page 7 and 8: Security and Sources of Payment for
- Page 9 and 10: Upon issuance of the Series 2008A B
- Page 11 and 12: (ii) acquisition of magnetic resona
- Page 13 and 14: $147,200,000 Term Bonds Due January
- Page 15 and 16: that the redemption is conditional
- Page 17 and 18: Use of Certain Terms in Other Secti
- Page 19 and 20: County BondsThe Cleveland Clinic an
- Page 21 and 22: The Cleveland Clinic regularly revi
- Page 23 and 24: ESTIMATED SOURCES AND USES OF FUNDS
- Page 25 and 26: DEBT SERVICE COVERAGEThe following
- Page 27 and 28: MedicareGeneralApproximately 29% of
- Page 29 and 30: there is no assurance that the Obli
- Page 31 and 32: Medicare Conditions of Participatio
- Page 33 and 34: fiscal year’s budget that are in
- Page 35 and 36: Federal Regulatory and Contractual
- Page 37 and 38: Stark-type statutes have fewer exce
- Page 39 and 40: party or for any services rendered
- Page 41 and 42: typically in a position to refer pa
- Page 43: OhioOhio Certificate of Need Progra
- Page 47 and 48: manifest injustice would otherwise
- Page 49 and 50: and properties owned or operated by
- Page 51 and 52: plan of reorganization, with one ex
- Page 53 and 54: percentage may be composed wholly o
- Page 55 and 56: The Internal Revenue Service Form 9
- Page 57 and 58: Charity Care, Underinsured and Unin
- Page 59 and 60: • Proposals to eliminate the tax-
- Page 61 and 62: acting in the capacity of underwrit
- Page 63 and 64: Frederick R. Nance, Regional Managi
- Page 65 and 66: FINANCIAL POSITION — D. BALANCE S
- Page 67 and 68: The CommissionBecause the Series 20
- Page 69 and 70: APPENDIX ACLEVELAND CLINIC HEALTH S
- Page 71 and 72: TABLE OF CONTENTSPageINTRODUCTION .
- Page 73 and 74: This Appendix to the Offering Circu
- Page 75 and 76: A. ORIGINS AND FUNDAMENTAL MISSIONT
- Page 77 and 78: C. GOVERNANCE OF THE CLEVELAND CLIN
- Page 79 and 80: Voting Members of theBoard of Trust
- Page 81 and 82: Voting Members of theBoard of Trust
- Page 83 and 84: Principal Operating Officers. The d
- Page 85 and 86: In addition to the broad range of o
- Page 87 and 88: The main campus also includes a com
- Page 89 and 90: GovernanceThe Cleveland Clinic is t
- Page 91 and 92: E. UTILIZATIONThe following tables
- Page 93 and 94: Statistical Information. The follow
performance demonstration programs and legislation was introduced in Congress in both the House and Senate onpay-for-performance for physicians. Because these initiatives are relatively new, it is unclear what the financialimpact will be of participating in these programs.Finally, the <strong>Obligated</strong> Issuers that raise significant revenues through sponsor-supported clinical research arefacing <strong>com</strong>petition from newly formed <strong>com</strong>panies such as clinical research organizations that market their servicesto drug and medical device <strong>com</strong>panies. To the extent that these <strong>com</strong>panies offer a faster development track thanacademic medical centers, they are likely to siphon off lucrative research support previously secured by thesehospitals.Management of the <strong>Cleveland</strong> <strong>Clinic</strong> believes that the <strong>Obligated</strong> Issuers have positioned themselves toeffectively provide <strong>com</strong>munity based health care throughout the areas served by the <strong>Cleveland</strong> <strong>Clinic</strong> <strong>Health</strong><strong>System</strong>, but no assurance can be given as to the effect on the future operational or financial condition of the<strong>Obligated</strong> Issuers of any such affiliations or entry into the market by alternative providers of health care services.See “APPENDIX A — PART I. THE CLEVELAND CLINIC HEALTH SYSTEM.”AccreditationsEach <strong>Obligated</strong> Issuer is subject to periodic review by the JCAHO, and the various federal, state and localagencies created by the National <strong>Health</strong> Planning and Resources Development Act of 1974. From time to time,accrediting bodies may review their accreditations of members of the <strong>Obligated</strong> Issuers and re<strong>com</strong>mend certainactions or impose conditions on an existing accreditation. Management of the <strong>Cleveland</strong> <strong>Clinic</strong> does not expect anysuch review to require actions or impose conditions that could not be satisfied or to adversely affect the continuingaccreditation of any <strong>Obligated</strong> Issuer. No assurance can be given that the JCAHO will not determine otherwise or asto the effect on future operations of existing laws, regulations and standards for certification or accreditation or ofany future changes in such laws, regulations and standards, or that such determination or laws, regulation orstandards will not have a material adverse effect on the future operations or financial condition of the <strong>Obligated</strong>Issuer.Future LegislationLegislation is periodically introduced in the U.S. Congress, the Ohio General Assembly and the FloridaLegislature that could result in limitations on hospital revenues, reimbursement, costs or charges or that couldrequire an increase in the quantity of indigent care required to maintain charitable status. The effect of any suchproposals, if enacted, cannot be determined at this time.In addition to legislative proposals previously discussed herein, other legislative proposals that could havean adverse effect on the <strong>Obligated</strong> Issuers include: (a) any changes in the taxation of not for profit corporations or inthe scope of their exemption from in<strong>com</strong>e or property taxes; (b) limitations on the amount or availability of taxexempt financing for corporations described in Section 501(c)(3) of the Code; and (c) regulatory limitationsaffecting the ability of the <strong>Obligated</strong> Issuers to undertake capital projects or develop new services. Each <strong>Obligated</strong>Issuer currently pays real estate taxes on those of its facilities (or portions of facilities) that are not used for its healthcare activities.Legislative bodies have considered legislation concerning the charity care standards that non-profit,charitable hospitals must meet to maintain their federal in<strong>com</strong>e tax-exempt status under the Code and legislationmandating that non-profit, charitable hospitals have an open-door policy toward Medicare and Medicaid patients aswell as offer, in a non-discriminatory manner, qualified charity care and <strong>com</strong>munity benefits. Excise tax penaltieson non-profit, charitable hospitals that violate these charity care and <strong>com</strong>munity benefit requirements could beimposed or their tax-exempt status under the Code could be revoked. The scope and effect of legislation, if any, thatmay be enacted at the federal or state levels with respect to charity care of non-profit hospitals cannot be predicted.Any such legislation or similar legislation, if enacted, could have the effect of subjecting a portion of the in<strong>com</strong>e ofan <strong>Obligated</strong> Issuer to federal or state in<strong>com</strong>e taxes or to other tax penalties and adversely affect the ability of the<strong>Obligated</strong> Issuers, individually and, taken as a whole, to generate net revenues sufficient to meet their obligationsand to pay the debt service on the Series 2008 Bonds and their other obligations.41