Norton Healthcare Exceeds Financial Targets for Sixth Consecutive Year; System Contributes Record $67 Million to Support Charitable Care, Education and Community Services

 

LOUISVILLE, KY. (July 6, 2007): Norton Healthcare’s financial performance continued to improve in 2006, as the not-for-profit health care system exceeded financial operating targets for the sixth consecutive year and contributed a record $67 million to support charitable care, education and community programs and services.

“Norton Healthcare’s improved financial performance is allowing our organization to expand services, such as our new $100 million commitment to grow cancer programs and services, fund new facilities and technology, pay down debt, and provide charitable care and educational support consistent with our not-for-profit mission,” said Stephen A. Williams, president and chief executive officer. “Our improved financial performance, along with enhanced philanthropic support, is crucial if we are to achieve the growth necessary to meet the significant health care needs of our community and region.”

Williams said Norton Healthcare’s new five-year strategic plan will require considerable resources to fund new services, facilities and technology across the region – needs that will be met only through continued strong financial performance and increased philanthropic support.

Norton Healthcare officials said the organization continued to reap the benefits of recent investments in facilities, technology, clinical information systems and employees, along with expanded services. “This has allowed our health care system to provide patient care more efficiently and have more resources to reinvest in the organization,” said Russell F. Cox, chief operating officer. “In fact, since Norton Healthcare doubled in size in September 1998, we have invested $429 million in system facilities, equipment and technology to better serve our community.”     

Norton Healthcare recorded a positive $85.6 million in operating income (bottom line – patient service margin plus investment income) in 2006, including a $51.3 million, or 4.5 percent, patient service margin (financial result from the system’s core business, patient care services). The system’s patient service margin has improved each year from a negative 7.3 percent in 2000 to a positive 4.5 percent in 2006, Cox said.

Norton officials said that all of the key indicators of its financial performance and health continued to trend in a positive direction in 2006. The system’s audited financial numbers for its 2006 fiscal year (January through December) included these highlights:

• Norton contributed a record $67.2 million “community dividend," comprising charitable care, discounted services, community programs and services, and educational programs support. In 2006, Norton Healthcare provided some $22.3 million in direct support to the University of Louisville, and over the past five years has provided a total of $82.4 million to support U of L. Over the past five years, Norton has contributed a total community dividend of $307.4 million.
• Norton provided free or discounted health care services to more than 55,000 uninsured patients in 2006 – some $46 million worth of care, or $126,000 each day.
• Norton Healthcare’s operating income was a positive $85.6 million, a $42.6 million improvement (99 percent) from the positive $43 million recorded in FY 2005.
• Norton Healthcare’s patient service margin improved by $28 million (120 percent), with a positive $51.3 million, compared with a positive $23.3 million in 2005. The 2006 number represents a $99 million improvement from Norton’s performance in 2000.
• Norton recorded $3.2 billion in gross revenues and ended 2006 with $1.5 billion in total assets.
• Norton's net revenues grew by $96.3 million, or 9 percent. Since 1998, Norton's net revenues have grown from $417.9 million to $1.15 billion in 2006, an increase of 174 percent.
• Norton grew its cash reserves by $33 million to $540 million.
• Norton improved its days cash on hand to 209 days. Since 2002, the system’s days cash on hand has grown from 133 days to 209 days, a 57 percent improvement. Days cash on hand is a key indicator of an organization’s financial strength.
• Norton improved its maximum debt service coverage ratio from 2.5 in 2005 to 3.5 in 2006, a 40 percent increase. An improving ratio is an indicator of an organization’s ability to meet debt obligations.
•  Norton realized $34.4 million in investment income, compared with $19.7 million in 2005.

"Over the past five years, Norton Healthcare has been able to make substantial improvements in its financial performance, including operating income, while still adding more than 1,200 employees and $179 million in payroll to our organization,” said Michael W. Gough, senior vice president and chief financial officer. “We are very encouraged by our 2006 financial results and we will continue to work hard to ensure that we have the resources necessary to reinvest in our organization to help meet important community health care needs.” 

Gough said Norton’s improved financial performance in 2006 allowed the organization to issue $315.5 million in tax-exempt bonds to help meet growing community health care needs while reducing annual debt payments, and to achieve credit rating upgrades from BBB-plus to A-minus from the major credit rating agencies.

Gough added that the health care system’s financial performance in the first quarter of 2007 exceeded 2006 first quarter results.

Cox said the organization’s improved financial performance has helped meet some community health care needs, but that private philanthropic support remains a focus for the non-for-profit health care system to meet important growth needs. Private support given through the Children’s Hospital Foundation, the Norton Healthcare Foundation and from Kosair Charities totaled a record $14 million in 2006.

According to Williams, the organization’s strong and continually improving financial performance “makes Norton Healthcare the best-positioned health care organization in the Louisville area for growing and going forward successfully. We believe that Norton Healthcare has clearly established itself as the health care employer and provider of choice in the Louisville metropolitan area as we continue to build a stronger, mission-focused organization.”

View our 2006 Norton Financial Report.